STONE CONTAINER CORP, 10-K, 1996-03-27

STONE CONTAINER CORP
10-K, 1996-03-27
PAPERBOARD MILLS

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<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM 10-K

(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) of the Securities
Exchange Act of 1934

For the fiscal year ended December 31, 1995.

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) of the
Securities Exchange Act of 1934
For the transition period from ________________ to ________________.

Commission file number 1-3439

STONE CONTAINER CORPORATION

(Exact name of registrant as specified in its charter)
[LOGO]

<TABLE>
<S> <C>
DELAWARE 36-2041256
- -------------------------------------------------- --------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
(State or other jurisdiction of incorporation (I.R.S. employer identification no.)
or organization)
150 NORTH MICHIGAN AVENUE, CHICAGO, ILLINOIS 60601
- --------------------------------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
REGISTRANT'S TELEPHONE NUMBER: 312 346-6600
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) of the Act:
</TABLE>

<TABLE>
<S> <C>
NAME OF EACH EXCHANGE ON WHICH
TITLE OF EACH CLASS REGISTERED
- -------------------------------------------- ---------------------------------------
Common Stock New York Stock Exchange
Rights to purchase Series D Preferred Stock New York Stock Exchange
$1.75 Series E Cumulative Convertible
Exchangeable Preferred Stock New York Stock Exchange
10 3/4% Senior Subordinated Notes due June
15, 1997 New York Stock Exchange
12 5/8% Senior Notes due July 15, 1998 New York Stock Exchange
11 7/8% Senior Notes due December 1, 1998 New York Stock Exchange
11% Senior Subordinated Notes due August 15,
1999 New York Stock Exchange
11 1/2% Senior Subordinated Notes due
September 1, 1999 New York Stock Exchange
9 7/8% Senior Notes due February 1, 2001 New York Stock Exchange
10 3/4% Senior Subordinated Debentures due
April 1, 2002 New York Stock Exchange
10 3/4% First Mortgage Notes due October 1,
2002 New York Stock Exchange
11 1/2% Senior Notes due October 1, 2004 New York Stock Exchange
6 3/4% Convertible Subordinated Debentures
due February 15, 2007 New York Stock Exchange
</TABLE>

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) of the Act: None.

Indicate by check mark whether the Registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months, and (2) has been
subject to such filing requirements for the past 90 days.
YES _X_ NO ___

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

The aggregate market value as of March 22, 1996 of the voting common
stock held by non-affiliates of the Registrant was approximately
$1,221,000,000.

The number of shares of common stock outstanding at March 22, 1996 was
99,150,002.

The Proxy Statement, to be filed on or before April 30, 1996, for the
Annual Meeting of Stockholders scheduled May 14, 1996 is partially
incorporated by reference into Part III, Items 10, 11, 12 and 13; and
Part IV, Item 14, excluding the sections entitled "Compensation
Committee Report on Executive Compensation" and "Performance Graph."

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<PAGE>
PART I

ITEM 1. BUSINESS

(a) GENERAL DEVELOPMENT OF BUSINESS

The information relating to the general development of the Registrant's
business for the year ended December 31, 1995, is incorporated herein by
reference to Item 7--Management's Discussion and Analysis of Financial Condition
and Results of Operations ("MD&A") included in this report, under the sections
entitled "Financial Condition and Liquidity," pages 16-20, and to the Financial
Statements, included in this report, under Notes to the Consolidated Financial
Statements, "Note 2--Acquisitions/Dispositions," page 37, "Note 3--Subsidiary
Issuance of Stock," page 37, "Note 15--Related Party Transactions," pages 48-49,
and "Note 18--Segment Information," pages 51-53.

Except where the context clearly indicates otherwise, the terms "Registrant"
and "Company" as hereinafter used refer to Stone Container Corporation together
with its consolidated subsidiaries.

(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

Financial information relating to the Registrant's industry segments, for
the year ended December 31, 1995, is incorporated herein by reference to the
MD&A, included in this report, under the section entitled "Results of
Operations," pages 12-16, and to the Financial Statements, included in this
report, under Notes to the Consolidated Financial Statements, "Note 18--Segment
Information," pages 51-53.

Descriptive information relating to the Registrant's principal products,
markets and industry ranking is outlined in the table entitled "Profile" on page
2 of this report and is also incorporated herein by reference to the MD&A,
included in this report, under the sections entitled "Results of Operations,"
pages 12-16, "Investing Activities," page 19, and "Environmental Issues," pages
19-20, and to the Financial Statements, included in this report, under Notes to
the Consolidated Financial Statements, "Note 2--Acquisitions/Dispositions," page
37, and "Note 18--Segment Information," pages 51-53.

1
<PAGE>
PROFILE

<TABLE>
<CAPTION>
Industry Position
KEY PRODUCTS Markets
<S> <C> <C>
CONTAINERBOARD AND A broad range of manufacturers of consumable and Industry leader
CORRUGATED CONTAINERS durable goods and other manufacturers of
corrugated containers.

KRAFT PAPER AND BAGS AND Supermarket chains and other retailers of Industry leader
SACKS consumable products. Industrial and consumer bags
sold to the food, agricultural, chemical and
cement industries, among others.

BOXBOARD AND FOLDING Manufacturers of consumable goods, especially A major position in Europe; a nominal
CARTONS food, beverage and tobacco products, and other box position in North America
manufacturers.

NEWSPRINT Newspaper publishers and commercial printers. Industry leader, through its
non-consolidated affiliate,
Stone-Consolidated Corporation

UNCOATED GROUNDWOOD Producers of advertising materials, magazines, Industry leader, through its
PAPER directories and computer papers. non-consolidated affiliate,
Stone-Consolidated Corporation

MARKET PULP Manufacturers of paper products, including fine A major position
papers, photographic papers, tissue and newsprint.

LUMBER, PLYWOOD AND Construction and furniture industries. A moderate position in North America
VENEER
</TABLE>

1995 PRODUCTION AND SHIPMENT STATISTICS

<TABLE>
<S> <C>
MILL PRODUCTION* (thousands of short tons)
Containerboard................................................................................ 4,623
Kraft Paper................................................................................... 385
Market Pulp................................................................................... 1,083
Newsprint..................................................................................... 1,269
Groundwood Paper.............................................................................. 505
Boxboard and Other............................................................................ 115
---------
Total....................................................................................... 7,980
---------
---------
CONTAINERBOARD AND KRAFT PAPER CONVERTED* (thousands of short tons)............................. 4,355
WASTEPAPER RECOVERED AND RECYCLED (thousands of short tons)..................................... 2,615
CONVERTED PRODUCT SHIPMENTS*
Corrugated Containers (billions of square feet)............................................... 53.0
Paper Bags and Sacks (thousands of short tons)................................................ 574
Folding Cartons (thousands of short tons)..................................................... 94
Flexible Packaging (thousands of short tons).................................................. 16
Lumber (millions of board feet produced)...................................................... 446
Plywood and Veneer (millions of square feet produced)......................................... 244
NUMBER OF MANUFACTURING FACILITIES (including certain affiliates)
Paperboard, Paper and Pulp Mills.............................................................. 26
Converting Plants............................................................................. 159
Packaging Machinery Plants.................................................................... 2
---------
Total....................................................................................... 187
---------
---------
</TABLE>

*Includes certain affiliates on an equity ownership basis.

2
<PAGE>
The major markets in which the Company sells its principal products are
highly competitive. Its products compete with similar products manufactured by
others and, in some instances, with products manufactured from other materials.
Areas of competition include price, innovation, quality and service. The
Company's business is affected by cyclical industry conditions and economic
factors such as industry capacity, growth in the economy, interest rates,
unemployment levels and fluctuations in foreign currency exchange rates.

The Company purchases or cuts a variety of species of timber from which the
Company utilizes wood fibre depending upon the product being manufactured and
each mill's geographic location. A decrease in the supply of wood fibre has
caused, and will likely continue to cause, higher wood fibre costs in some of
the regions in which the Company procures wood. In addition, the increase in
demand for products manufactured, in whole or in part, from recycled fibre has
from time to time caused a tightness in the supply of recycled fibre and at
those times a significant increase in the cost of such fibre used in the
manufacture of recycled containerboard and related products. The Company's
paperboard and paper packaging products use a large volume of recycled fibre.
While the Company has not experienced any significant difficulty in obtaining
wood fibre and recycled fibre in economic proximity to its mills, there can be
no assurances that this will continue to be the case for any or all of its
mills.

At December 31, 1995, the Company owned approximately 9 thousand and 137
thousand acres of private fee timberland in the United States and Canada,
respectively.

The Company's business is not dependent upon a single customer or upon a
small number of major customers. The loss of any one customer would not have a
material adverse effect on the Company.

Backlogs are not a significant factor in the industry in which the Company
operates; most orders placed with the Company are for delivery within 60 days or
less.

The Company expenses research and development expenditures as incurred.
Research and development costs for 1995 and 1994 were $11 million for each year.

The Company owns patents, licenses, trademarks and tradenames on products.
The loss of any patent, license, trademark and tradename would not have a
material adverse effect on the Company's operations.

As of December 31, 1995, the Registrant had approximately 25,900 employees,
of whom approximately 21,700 were employees of U.S. operations and the remainder
were employees of foreign operations. Of those in the United States,
approximately 14,000 are union employees.

(d) FINANCIAL INFORMATION ABOUT FOREIGN AND
DOMESTIC OPERATIONS AND EXPORT SALES

Financial information relating to the Registrant's foreign and domestic
operations and export sales for the year ended December 31, 1995, is
incorporated herein by reference to the Financial Statements, included in this
report, under Notes to the Consolidated Financial Statements, "Note 18--Segment
Information," pages 51-53 . The Company's results are affected by economic
conditions in certain foreign countries and by fluctuations in foreign exchange
rates.

ITEM 2. PROPERTIES

The Registrant, including its subsidiaries and affiliates, maintains
manufacturing facilities and sales offices throughout North America, Europe,
Latin America, Australia and the Far East. A listing of such worldwide
facilities as of December 31, 1995 is provided on pages 5-6 of this report.

3
<PAGE>
The approximate annual production capacity of the Company's mills is
summarized in the following table:

<TABLE>
<CAPTION>
PAPERBOARD AND WHITE PAPER
PAPER PACKAGING AND OTHER TOTAL
---------------- -------------- ----------------
(IN THOUSANDS OF SHORT TONS) DECEMBER 31, 1995 1994 1995 1994 1995 1994
- -------------------------------------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
United States (1)................................. 4,711 4,665 900 873 5,611 5,538
Canada (2)(3)..................................... 440 434 1,724 1,923 2,164 2,357
Europe (3)........................................ 371 351 134 299 505 650
------ ------ ------ ------ ------ ------
5,522 5,450 2,758 3,095 8,280 8,545
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
</TABLE>

- ---------
(1) Includes 100 percent of the Seminole Kraft Corporation ("Seminole") mill.

(2) Includes 45 percent of the Celgar mill. Effective December 31, 1994, the
Company indirectly acquired an additional 20 percent of the Celgar mill,
thereby increasing its ownership interest from 25 percent to 45 percent.

(3) Includes 100 percent of Stone-Consolidated Corporation for 1994 and 46.6
percent for 1995. Effective November 1, 1995, Stone-Consolidated Corporation
became a non-consolidated affiliate as a result of the Company reducing its
equity ownership in Stone-Consolidated Corporation to 46.6 percent. See Note
3 to the Consolidated Financial Statements.

All mills and converting facilities are owned, or partially owned through
investments in other companies, by the Registrant, except for 46 converting
plants in the United States, which are leased.

The Registrant owns certain properties that have been mortgaged or otherwise
encumbered. These properties include 12 paper mills and 76 corrugated container
plants, including those subject to a leasehold mortgage.

The Registrant's properties and facilities are properly equipped with
machinery suitable for their use. Such facilities and related equipment are well
maintained and adequate for the Registrant's current operations.

Additional information relating to the Registrant's properties for the year
ended December 31, 1995 is incorporated herein by reference to the Financial
Statements, included in this report, under the Notes to the Consolidated
Financial Statements, "Note 2--Acquisitions/Dispositions," page 37, "Note
3--Subsidiary Issuance of Stock," page 37, "Note 10--Long-term Debt," pages
43-45, and "Note 12--Long-term Leases," page 46.

4
<PAGE>
WORLDWIDE FACILITIES

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

UNITED STATES

ALABAMA
Birmingham (corrugated container)

ARIZONA
Eagar (forest products)
Glendale (corrugated container)
Phoenix (bag)
Snowflake (paperboard/paper/pulp)
Snowflake (paperboard/paper/pulp)
The Apache Railway
Company

ARKANSAS
Jacksonville (bag)
(Little Rock)
Little Rock (corrugated container)
Rogers (corrugated container)

CALIFORNIA
City of Industry (corrugated container)
(Los Angeles)
Fullerton (corrugated container)
Los Angeles (bag)
Salinas (corrugated container)
San Jose (corrugated container)
Santa Fe Springs (corrugated container, 2)

COLORADO
Denver (corrugated container)
South Fork (forest products)

CONNECTICUT
Portland (corrugated container)
Torrington (corrugated container)
Uncasville (paperboard/paper/pulp)

FLORIDA
Cantonment (bag)
(Pensacola)
Graceville (forest products)
Jacksonville (paperboard/paper/pulp); (corrugated container)
Panama City (paperboard/paper/pulp)
Yulee (bag)
Orlando (corrugated container)
Packaging Systems
Jacksonville (corrugated container)
Preprint

GEORGIA
Atlanta (corrugated container, 3)
Port Wentworth (paperboard/paper/pulp)
Atlanta (paperboard/paper/pulp)
Technology and
Engineering Center

ILLINOIS
Bedford Park (corrugated container)
(Chicago)
Bloomington (corrugated container)
Cameo (corrugated container)
(Chicago)
Danville (corrugated container)
*Herrin (corrugated container)
Joliet (corrugated container)
Naperville (corrugated container)
(Chicago)
North Chicago (corrugated container)
Plainfield (bag)
Quincy (bag)
*Zion (corrugated container)
Burr Ridge (paperboard/paper/pulp)
Technology and Engineering
Center
Oakbrook (corrugated container)
Marketing and Technical
Center

INDIANA
Columbus (corrugated container)
Mishawaka (corrugated container)
South Bend (corrugated container)

IOWA
Des Moines (corrugated container); (bag)
Keokuk (corrugated container)
Sioux City (corrugated container)

KANSAS
Kansas City (corrugated container)

KENTUCKY
Louisville (corrugated container); (bag)

LOUISIANA
Arcadia (bag)
Hodge (bag); (paperboard/paper/pulp)
New Orleans (corrugated container)

MASSACHUSETTS
Mansfield (corrugated container)
Westfield (corrugated container)

MICHIGAN
*Detroit (corrugated container)
Grand Rapids (bag)
Ontonagon (paperboard/paper/pulp)
*Melvindale (corrugated container)
(Detroit)

MINNESOTA
Minneapolis (corrugated container)
Rochester (corrugated container)
St. Cloud (corrugated container)
St. Paul (corrugated container)
Minneapolis (corrugated container)
Preprint

MISSISSIPPI
Jackson (corrugated container)
Tupelo (corrugated container, 2)

MISSOURI
Blue Springs (corrugated container)
Kansas City (bag)
Liberty (corrugated container)
(Kansas City)
Springfield (corrugated container)
St. Joseph (corrugated container)
St. Louis (corrugated container)

MONTANA
Missoula (paperboard/paper/pulp)

NEBRASKA
Omaha (corrugated container)

NEW JERSEY
Elizabeth (bag)
Teterboro (corrugated container)

NEW MEXICO
Reserve (forest products)

NEW YORK
Buffalo (corrugated container)
*Walden (bag)

NORTH CAROLINA
Charlotte (corrugated container)
Lexington (corrugated container)
Raleigh (corrugated container)

NORTH DAKOTA
Fargo (corrugated container)

OHIO
Cincinnati (corrugated container)
Coshocton (paperboard/paper/pulp)
Jefferson (corrugated container)
Mansfield (corrugated container)
Marietta (corrugated container)
New Philadelphia (bag)

OKLAHOMA
Oklahoma City (corrugated container)
Sand Springs (corrugated container)
(Tulsa)

OREGON
Grants Pass (forest products)
Medford (forest products)
White City (forest products)

PENNSYLVANIA
Philadelphia (corrugated container, 2)
Williamsport (corrugated container)
York (paperboard/paper/pulp)

SOUTH CAROLINA
Columbia (corrugated container); (forest products)
Florence (paperboard/paper/pulp)
Fountain Inn (corrugated container)
Orangeburg (forest products)

SOUTH DAKOTA
Sioux Falls (corrugated container)

TENNESSEE
Chattanooga (corrugated container)
Collierville (corrugated container)
(Memphis)
Nashville (corrugated container)

TEXAS
Dallas (corrugated container)
El Paso (corrugated container, 2); (folding carton)
Grand Prairie (corrugated container)
(Dallas)
Houston (corrugated container)
Temple (corrugated container)
Tyler (corrugated container)

UTAH
Salt Lake City (bag)
Salt Lake City (bag)
Bag Packaging Systems

VIRGINIA
Hopewell (paperboard/paper/pulp)
Martinsville (corrugated container)
Richmond (corrugated container, 2); (bag)

WASHINGTON
*Tacoma (paperboard/paper/pulp)

WEST VIRGINIA
Wellsburg (bag)

WISCONSIN
Beloit (corrugated container)
Germantown (corrugated container)
(Milwaukee)
Neenah (corrugated container)

CANADA

ALBERTA
*Calgary (corrugated container)
*Edmonton (corrugated container)

BRITISH COLUMBIA
*Castlegar (paperboard/paper/pulp)
*New Westminster (corrugated container)

MANITOBA
*Winnipeg (corrugated container)

NEW BRUNSWICK
Bathurst (paperboard/paper/pulp); (forest products)
*Saint John (corrugated container)

NOVA SCOTIA
*Dartmouth (corrugated container)

ONTARIO
*Etobicoke (corrugated container)
*Ft. Frances (paperboard/paper/pulp)
*Guelph (corrugated container)
*Kenora (paperboard/paper/pulp)
*Pembroke (corrugated container)
*Rexdale (corrugated container)
*Whitby (corrugated container)

PRINCE EDWARD ISLAND
*Summerside (corrugated container)

5
<PAGE>

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

QUEBEC
*Grand-Mere (paperboard/paper/pulp)
*La Baie (paperboard/paper/pulp)
*La Tuque (forest products)
New Richmond (paperboard/paper/pulp)
Portage-du-Fort (paperboard/paper/pulp)
*Roberval (forest products)
*Saint-Fulgence (forest products)
*Saint-Laurent (forest products)
*Shawinigan (paperboard/paper/pulp)
*Trois-Rivieres (paperboard/paper/pulp)
*Ville Mont-Royal (corrugated container)
*Grand-Mere (paperboard/paper/pulp)
Research Center

SASKATCHEWAN
*Regina (corrugated container)

MEXICO
Monterrey (corrugated container)

EUROPE

GERMANY
*Augsburg (folding carton)
*Bremen (folding carton)
Delitzsch (corrugated container)
Dusseldorf (corrugated container)
*Frankfurt (folding carton)
Germersheim (corrugated container)
Hamburg (corrugated container)
Heppenheim (corrugated container)
Hoya (paperboard/paper/pulp)
Julich (corrugated container)
Lauenburg (corrugated container)
Lubbecke (corrugated container)
Neuburg (corrugated container)
Plattling (corrugated container)
Viersen (paperboard/paper/pulp)
Waren (corrugated container)
Hamburg
Institute for Package
and Corporate Design

UNITED KINGDOM
*Chesterfield (folding carton)
*Ellesmere Port (paperboard/paper/pulp)

NETHERLANDS
*Sneek (folding carton)

BELGIUM
Ghlin (corrugated container)
Groot-Bijgaarden (corrugated container)

FRANCE
*Bordeaux (folding carton)
*Cholet (folding carton)
Molieres-Sur-Ceze (corrugated container)
Nimes (corrugated container)
*Soissons (folding carton)
*Strasbourg (folding carton)
*Valenciennes (corrugated container)

AUSTRALIA
Melbourne (corrugated container)
Sydney (corrugated container)

ASIA

CHINA
*Shanghai (corrugated container)
*Beijing (joint venture office)

JAPAN
Tokyo, Japan (joint venture office)
*Stone Container Japan Company, Ltd.

CENTRAL AND SOUTH AMERICA

COSTA RICA
Palmar Norte (forest products)
San Jose (forest products)
Administrative Office

VENEZUELA
*Puerto Ordaz (joint venture office)

OTHER

CORPORATE HEADQUARTERS
Chicago, Illinois

*affiliates

6
<PAGE>
ITEM 3. LEGAL PROCEEDINGS

In November 1990, the U.S. Environmental Protection Agency ("EPA") announced
its decision to list two bodies of water in Arizona, Dry Lake and Twin Lakes, as
"waters of the United States" impacted by toxic pollutant discharges under
Section 304(l) of the federal Clean Water Act. These bodies of water have been
used by the Company's Snowflake, Arizona pulp and paperboard mill for the
evaporation of its process wastewater. The EPA is preparing a draft consent
decree to resolve the alleged past unpermitted discharges which will include the
EPA's proposal that the Company pay civil penalties in the amount of $900,000.
The Company has vigorously disputed the application of the Clean Water Act to
these two privately owned evaporation ponds. The Company has begun
implementation of a plan to use its wastewater to irrigate a biomass plantation
and discontinue using Dry Lake to evaporate wastewater. It is premature to
predict the amount of penalties, if any, that will eventually be assessed.

On October 27, 1992, the Florida Department of Environmental Regulation,
predecessor to the Department of Environmental Protection ("DEP"), filed a civil
complaint in the Fourteenth Judicial Circuit Court of Bay County, Florida
against the Company seeking injunctive relief, an unspecified amount of fines
and civil penalties, and other relief based on alleged groundwater contamination
at the Company's Panama City, Florida pulp and paperboard mill. In addition, the
complaint alleges operation of a solid waste facility without a permit and
discrepancies in hazardous waste shipping manifests. Because of uncertainties in
the interpretation and application of DEP's rules, it is premature to assess the
Company's potential liability, if any, in the event of an adverse ruling. At the
parties' request, the case has been placed in abeyance pending the conclusion of
a related administrative proceeding petitioned by the Company in June 1992
following DEP's proposal to deny the Company a permit renewal to continue
operating its wastewater pretreatment facility at the mill site. The
administrative proceeding has been referred to a hearing officer for an
administrative hearing on the consolidated issues of compliance with a prior
consent order, denial of the permit renewal, completion of a contamination
assessment and denial of a sodium exemption. The consolidated cases were abated
at the parties' request and extensive settlement negotiations are being
conducted between the parties. The Company intends to vigorously assert its
entitlement to the permit renewal and to defend against the groundwater
contamination and unpermitted facility allegations in the event that a
settlement cannot be reached.

As a result of the April 13, 1994 digester rupture at the Company's Panama
City, Florida pulp and paperboard mill (the "Panama City Mill"), the
Occupational Safety and Health Administration ("OSHA") conducted an
investigation at the Panama City Mill which resulted in the issuance by OSHA of
citations with fines totaling $1,072,000. In October 1994, Company
representatives met informally with OSHA representatives to discuss the
citations and related fines. As a result of that meeting, the Company filed a
notice of contest, and thereafter the Secretary of Labor filed a complaint with
the Occupational Safety and Health Review Commission to enforce the citations.
The matter was resolved on February 8, 1996, when the Company and OSHA entered
into a Stipulation and Notice of Dismissal whereby the Company agreed, without
admitting liability, to pay a reduced penalty of $690,000, and OSHA agreed to
withdraw and delete the characterization of the citations relating to the
digester violations at the Panama City Mill.

On April 20, 1994, Carolina Power & Light ("CP&L") commenced proceedings
against the Company before the Federal Energy Regulatory Commission ("FERC")
(the "FERC Proceeding") and in the United States District Court for the Eastern
District of North Carolina (the "Federal Court Action"). Both proceedings relate
to the Company's electric cogeneration facility located at its Florence, South
Carolina mill (the "Facility") and the Company's Electric Power Purchase
Agreement (the "Agreement") with CP&L.

In the FERC Proceeding, CP&L alleges that the Facility lost its qualifying
facility ("QF") certification under the Public Utility Regulatory Policy Act of
1978 on August 13, 1991, when the Agreement, pursuant to which CP&L purchases
electricity generated by the Facility, was amended to reflect the Company's
election under the Agreement to switch to a "buy-all/sell-all mode of
operation." As a result, CP&L alleges the Company became a "public utility" on
August 13, 1991 subject to FERC regulation under the Federal Power Act. CP&L has
also requested that the FERC determine the "just and reasonable rate" for sales
of electric energy and capacity from the Facility since August 13, 1991 and to
order the Company to refund any amounts paid in excess of that rate, plus
interest and penalties.

In its answer filed with the FERC on June 2, 1994, the Company stated that
its power sales to CP&L fully complied with the FERC's regulations. The Company
also requested that the FERC waive compliance with any applicable FERC
regulations in the event that the FERC should determine, contrary to the
Company's position, that the Company has not complied with the FERC's
regulations in any respect. CP&L has also filed several other pleadings to which
the Company has responded. If the FERC were to determine that the Company had
become a "public utility," the Company's issuance of securities and incurrence
of debt after the date that it became a "public utility" could be subject to the
jurisdiction and approval of the FERC unless the FERC granted a waiver. In the
absence of such a waiver,

7
<PAGE>
certain other activities and contracts of the Company after such date could also
be subject to additional federal and state regulatory requirements, and defaults
might be created under certain existing agreements. Based on past administrative
practice of the FERC in granting waivers of certain other regulations, the
Company believes that it is likely that such a waiver would be granted by the
FERC in the event that such a waiver became necessary.

In the Federal Court Action, CP&L has requested declaratory judgements that
sales of electric energy and capacity under the Agreement since August 13, 1991
are subject to a just and reasonable rate to be determined by the FERC and that
the Agreement has been terminated as a result of the Company's failure to
maintain the Facility's QF status and the invalidity of the Agreement's rate
provisions. CP&L has also sought damages for breach of contract and for
purchases in excess of the just and reasonable rate to be determined by the
FERC. On June 9, 1994, the Company moved to dismiss CP&L's Federal Court Action
on the principal grounds that any proceedings in the United States District
Court are premature unless and until the FERC Proceeding is finally resolved. On
September 20, 1994, the United States District Court stayed the Federal Court
action pending the outcome of the FERC proceeding.

The two proceedings are in their preliminary stages and no assurance can be
provided as to the timing of the decisions or the outcome of either of them. The
Company intends to contest these actions vigorously.

On September 30, 1994, the EPA, Region IV, issued an Administrative Order
("Order") to the Company's Panama City Mill pursuant to Section 3008(h) of the
Federal Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C.
Section6928(h)(l). The Order requires the Company to perform a RCRA Facility
Investigation at the Panama City Mill together with confirmatory sampling,
interim corrective measures and any other activities necessary to correct
alleged actual or threatened releases of hazardous substances or hazardous
constituents at or from the Panama City Mill. The Company has filed a protest
and requested a hearing to contest the EPA's RCRA Section 3008(h) jurisdiction
over the Panama City Mill and the parties have been engaged in extensive
settlement negotiations. The Company believes that the Panama City Mill is not
currently a RCRA facility. The corrective measures mandated by the Order would
require the Company to conduct extensive groundwater and soil sampling and
analyses. The Company does not know at this time the likelihood of success in
challenging the Order. Notwithstanding the success in challenging the Order, an
owner of property adjacent to the Panama City Mill is currently subject to
extensive clean-up under RCRA, and the EPA is empowered to require clean-up for
materials discharged from the property which may have migrated onto the Panama
City Mill's property. The Company does not yet know the extent, if any, of such
adjacent property owner's responsibility to remediate contamination, if any, at
the Panama City Mill site.

In July 1994, the State of Ohio Environmental Protection Agency ("OEPA")
informed the Company of OEPA's intent to initiate an enforcement action against
the Company's paperboard mill in Coshocton, Ohio (the "Coshocton Mill") for
alleged violations of the Coshocton Mill's wastewater discharge permit. The
matter was settled on October 18, 1995 by way of an administrative consent order
pursuant to which the Company, without admitting liability, agreed to pay a
civil penalty in the amount of $100,000 and to perform certain supplemental
environmental projects.

On January 22, 1996, the United States of America filed a suit against the
Company in the United States District Court for the District of Montana seeking
injunctive relief and an unspecified amount in civil penalties based on the
alleged failure of the Company to comply with certain provisions of the Clean
Air Act ("CAA"), its implementing regulations, and the Montana State
Implementation Plan at the Company's Missoula, Montana kraft pulp mill, (the
"Missoula Mill"). The complaint specifically alleges that the Company exceeded
the 20% opacity limitation for recovery boiler emissions; failed to properly set
the span on a recovery boiler continuous emissions monitor; and concealed the
emission of an air contaminant by improperly venting non-condensible gasses. The
statutory penalty for violations of the CAA is $25,000 per day for each day of
violation. The Company is reviewing the matter with counsel to assess its
potential liability. It is premature to predict the outcome of this matter at
this time.

In a related matter, on November 27, 1995, the Company received notice from
several environmental groups that they intended to file citizens suits under the
CAA, the Federal Water Pollution Control Act ("CWA") and the Emergency Planning
and Community Right-to-Know Act ("EPCRA") against the Company based on alleged
violations of those Acts at the Missoula Mill. In December, 1995,
representatives of the Company met with representatives of the groups that sent
the notice to discuss the Company's position that the majority of the alleged
violations were not in excess of applicable permit limits or were excused
because they occurred during reported malfunctions, start-up or shutdown
conditions. On January 29, 1996, a Complaint was filed by the Montana Coalition
for Health, Environmental and Economic Rights Inc., Cold Mountain, Cold Rivers,
Inc. and Native Forest Network, Inc. (collectively "Plaintiffs") in the United
States District Court for the District of Montana alleging numerous violations
of the provisions of the CAA, the CWA and the EPCRA. On February 7, 1996,
Plaintiffs filed an Amended Complaint seeking (1) a declaratory judgement that
the Company has violated Section 301(a) of the CWA, Section 502(a) of the CAA
and Section 313 of the

8
<PAGE>
EPCRA; (2) injunctive relief enjoining the Company from operating the Missoula
Mill in a manner as will result in further violations of the CAA, CWA and EPCRA;
and (3) civil penalties of $25,000 per day for each day of alleged violation.
The Company intends to vigorously contest the allegations.

In December 1992, Environment Canada promulgated regulations under the
Fisheries Act which required pulp and paper mills to meet certain effluent
quality standards by December 31, 1995. The Company's Bathurst, New Brunswick
mill was required to upgrade its secondary treatment system in order to meet the
new effluent standards with respect to toxicity levels. Because of the shutdown
of the mill from January 28, 1996 to February 25, 1996, the Company has been
unable to conduct tests to confirm its compliance with the regulations. The
Company intends to conduct the necessary tests to demonstrate compliance after a
sufficient build up of biomass in the mill's effluent has been achieved
following the most recent start-up of the mill.

In addition, the Registrant is from time to time subject to litigation and
governmental proceedings regarding environmental matters in which injunctive
and/or monetary relief is sought. The Company has been named as a potentially
responsible party ("PRP") at a number of sites which are the subject of remedial
activity under the federal Comprehensive Environmental Response, Compensation
and Liability Act of 1980 ("CERCLA" or "Superfund") or comparable state laws.
Although the Company is subject to joint and several liability imposed under
Superfund, at most of the multi-PRP sites there are organized groups of PRPs and
costs are being shared among PRPs.

The Registrant is involved in contractual disputes, administrative and legal
proceedings and investigations of various types. Although any litigation,
proceeding or investigation has an element of uncertainty, the Registrant
believes that the outcome of any proceeding, lawsuit or claim which is pending
or threatened, or all of them combined, would not have a material adverse effect
on its consolidated financial position, results of operations or liquidity.

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

None.

PART II

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

(a) PRINCIPAL MARKET, STOCK PRICE AND DIVIDEND INFORMATION

Information relating to the principal market, stock price and dividend
information for the Registrant's Common and Preferred Stock and related
stockholder matters, for the year ended December 31, 1995, is incorporated
herein by reference to the MD&A, included in this report, under the sections
entitled "Common and Series E Cumulative Preferred Stock--Cash Dividends, Market
and Price Range," pages 20-21 and "Financial Condition and Liquidity," pages
16-20, and to the Financial Statements, included in this report, under Notes to
the Consolidated Financial Statements, "Note 10--Long-term Debt," pages 43-45,
"Note 13--Preferred Stock," pages 46-47, "Note 14--Common Stock," pages 47-48
and "Note 19--Summary of Quarterly Data (unaudited)," page 54.

(b) APPROXIMATE NUMBER OF HOLDERS OF COMMON STOCK

There were approximately 6,515 holders of record of the Registrant's common
stock, as of March 22, 1996.

ITEM 6. SELECTED FINANCIAL DATA

In addition to the table set forth on pages 10-11 of this report, selected
financial data of the Registrant is incorporated herein by reference to the
Financial Statements, included in this report, under Notes to the Consolidated
Financial Statements, "Note 1--Summary of Significant Accounting Policies,"
pages 35-37, and "Note 2--Acquisitions/Dispositions," page 37.

9
<PAGE>
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS EXCEPT PER SHARE) 1995(b) 1994 1993 1992 1991 1990 1989(c)
- ---------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net sales............................... $7,351.2 $ 5,748.7 $ 5,059.6 $ 5,520.7 $ 5,384.3 $ 5,755.9 $5,329.7
Cost of products sold................... 5,168.9 4,564.3 4,223.5 4,473.7 4,287.2 4,421.9 3,893.8
Selling, general and administrative
expenses............................... 608.5 568.2 512.2 543.5 522.8 495.5 474.5
Depreciation and amortization........... 371.8 358.9 346.8 329.2 273.5 257.0 237.1
Interest expense........................ 460.3 456.0 426.7 386.1 397.4 421.7 344.7
Income (loss) before income taxes,
minority interest, extraordinary
charges and cumulative effects of
accounting changes..................... 794.7 (163.1) (463.3) (224.0) (12.2) 194.1 481.8
(Provision) credit for income taxes..... (320.9) 35.5 147.7 59.4 (31.1) (92.8) (195.2)
Minority interest....................... (29.3) (1.2) (3.6) (5.3) (5.8) (5.9) (.8)
Income (loss) before extraordinary
charges and cumulative effects of
accounting changes..................... 444.5 (128.8) (319.2) (169.9) (49.1) 95.4 285.8
Extraordinary charges from early
extinguishments of debt................ (189.0) (61.6) -- -- -- -- --
Cumulative effects of accounting
changes................................ -- (14.2) (39.5) (99.5) -- -- --
Net income (loss)....................... 255.5 (204.6) (358.7) (269.4) (49.1) 95.4 285.8
---------- ---------- ---------- ---------- ---------- ---------- ----------

PER SHARE OF COMMON STOCK (a)
PRIMARY:
Income (loss) before extraordinary
charges and cumulative effects of
accounting changes..................... 4.64 (1.60) (4.59) (2.49) (.78) 1.56 4.67
Extraordinary charges from early
extinguishments of debt................ (2.01) (.70) -- -- -- -- --
Cumulative effects of accounting
changes................................ -- (.16) (.56) (1.40) -- -- --
Net income (loss)--Primary.............. 2.63 (2.46) (5.15) (3.89) (.78) 1.56 4.67
FULLY DILUTED:
Income (loss) before extraordinary
charges and cumulative effects of
accounting changes..................... 3.89 (j) (j) (j) (j) (j) (j)
Extraordinary charges from early
extinguishments of debt................ (1.65) (j) (j) (j) (j) (j) (j)
Cumulative effects of accounting
changes................................ -- (j) (j) (j) (j) (j) (j)
Net income--Fully diluted............... 2.24 (j) (j) (j) (j) (j) (j)
Dividends and distributions paid........ .30 -- -- .35 .71 .71 .70
Common stockholders' equity (end of
year).................................. 8.98 5.90 6.91 13.91 22.12 24.34 22.50
Price range of common shares--N.Y.S.E.
High.................................. 24.63 21.13 19.50 32.63 26.00 25.25 36.38
Low................................... 12.50 9.63 6.38 12.50 9.00 8.13 22.13
Average common shares outstanding (in
millions):
Primary............................... 94.1 88.2 71.2 71.0 63.2 61.3 61.2
Fully diluted......................... 114.7 (j) (j) (j) (j) (j) (j)
---------- ---------- ---------- ---------- ---------- ---------- ----------
FINANCIAL POSITION AT END OF YEAR
Current assets.......................... $1,682.9 $ 1,816.9 $ 1,753.2 $ 1,701.8 $ 1,685.3 $ 1,586.0 $1,687.0
Current liabilities..................... 701.7 1,031.5 943.5 944.8 914.8 1,146.5 1,072.6
Working capital......................... 981.2 785.4 809.7 757.0 770.5 439.5 614.4
Property, plant and equipment--net...... 2,635.8 3,359.0 3,386.4 3,703.2 3,520.2 3,364.0 2,977.9
Total assets............................ 6,398.9 7,004.9 6,836.7 7,027.0 6,902.9 6,690.0 6,253.7
Long-term debt.......................... 3,885.1 4,431.9 4,268.4 4,105.1 4,046.4 3,680.5 3,536.9
Deferred taxes.......................... 493.1 381.4 470.6 685.2 263.9 262.7 185.6
Redeemable preferred stock.............. -- -- 42.3 36.3 31.1 26.6 22.7
Minority interest (i)................... .7 221.8 234.5 .2 3.8 8.0 9.7
Stockholders' equity.................... 1,005.3 648.1 607.1 1,102.7 1,537.5 1,460.5 1,347.6
---------- ---------- ---------- ---------- ---------- ---------- ----------
ADDITIONAL INFORMATION
Paperboard, paper and market pulp:
Produced (thousand short tons) (e).... 7,980 7,928 7,475 7,517 7,365 7,447 6,772
Converted (thousand short tons) (e)... 4,355 4,477 4,354 4,373 4,228 4,241 3,930
Corrugated shipments (billion square
feet) (e).............................. 53.0 54.10 52.48 51.67 49.18 47.16 41.56
Employees (end of year-in thousands).... 25.9 29.1 29.0 31.2 31.8 32.3 32.6
Capital expenditures.................... $ 386.5 $ 232.6 $ 149.7 $ 281.4 $ 430.1 $ 552.0 $ 501.7
Net cash/funds provided by (used in)
operating activities (f)............... $ 961.7 $ 72.3 $ (129.1) $ 120.9 $ 247.2 $ 468.6 $ 370.9
Working capital ratio................... 2.4/1 1.8/1 1.9/1 1.8/1 1.8/1 1.4/1 1.6/1
Percent long-term debt/total
capitalization (g)..................... 72.2% 78.0% 75.9% 69.2% 68.8% 67.7% 69.3%
Return on beginning common stockholders'
equity (h)............................. 83.4% (26.2%) (32.3%) (11.1%) (3.4%) 7.1% 26.9%
Pretax margin........................... 10.4% (2.9%) (9.2%) (4.2%) (.3%) 3.3% 9.0%
After-tax margin........................ 3.5% (3.6%) (7.1%) (4.9%) (.9%) 1.7% 5.4%
---------- ---------- ---------- ---------- ---------- ---------- ----------

<CAPTION>
(DOLLARS IN MILLIONS EXCEPT PER SHARE) 1988 1987(c) 1986(c) 1985
- ---------------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net sales............................... $ 3,742.5 $3,232.9 $2,032.3 $ 1,229.1
Cost of products sold................... 2,618.0 2,347.8 1,564.6 944.1
Selling, general and administrative
expenses............................... 351.1 343.8 241.2 157.0
Depreciation and amortization........... 148.1 138.7 92.3 67.8
Interest expense........................ 108.3 131.1 85.3 63.3
Income (loss) before income taxes,
minority interest, extraordinary
charges and cumulative effects of
accounting changes..................... 549.7 283.5 59.7 1.5
(Provision) credit for income taxes..... (207.7) (122.1) (24.3) 2.3
Minority interest....................... (.2) (.1) -- --
Income (loss) before extraordinary
charges and cumulative effects of
accounting changes..................... 341.8 161.3 35.4 3.8
Extraordinary charges from early
extinguishments of debt................ -- -- -- --
Cumulative effects of accounting
changes................................ -- -- -- --
Net income (loss)....................... 341.8 161.3 35.4 3.8
---------- ---------- ---------- ----------
PER SHARE OF COMMON STOCK (a)
PRIMARY:
Income (loss) before extraordinary
charges and cumulative effects of
accounting changes..................... 5.58 2.79 .73 .09
Extraordinary charges from early
extinguishments of debt................ -- -- -- --
Cumulative effects of accounting
changes................................ -- -- -- --
Net income (loss)--Primary.............. 5.58 2.79 .73 .09
FULLY DILUTED:
Income (loss) before extraordinary
charges and cumulative effects of
accounting changes..................... (j) 2.65 (j) (j)
Extraordinary charges from early
extinguishments of debt................ (j) -- (j) (j)
Cumulative effects of accounting
changes................................ (j) -- (j) (j)
Net income--Fully diluted............... (j) 2.65 (j) (j)
Dividends and distributions paid........ .35 .25 .19 .19
Common stockholders' equity (end of
year).................................. 17.73 12.40 9.92(d) 7.08
Price range of common shares--N.Y.S.E.
High.................................. 39.50 39.83 20.00 13.17
Low................................... 20.67 15.33 11.38 8.00
Average common shares outstanding (in
millions):
Primary............................... 61.3 57.9 48.8 42.3
Fully diluted......................... (j) 60.9 (j) (j)
---------- ---------- ---------- ----------
FINANCIAL POSITION AT END OF YEAR
Current assets.......................... $ 865.7 $ 737.4 $ 530.4 $ 320.2
Current liabilities..................... 408.3 334.9 203.4 165.1
Working capital......................... 457.4 402.5 327.0 155.1
Property, plant and equipment--net...... 1,276.0 1,300.0 924.4 642.6
Total assets............................ 2,395.0 2,286.1 1,523.6 1,010.3
Long-term debt.......................... 765.1 1,070.5 767.0 493.3
Deferred taxes.......................... 140.3 120.4 69.9 49.2
Redeemable preferred stock.............. -- 1.5 1.5 8.0
Minority interest (i)................... .3 .2 -- --
Stockholders' equity.................... 1,063.6 740.3 481.8 294.7
---------- ---------- ---------- ----------
ADDITIONAL INFORMATION
Paperboard, paper and market pulp:
Produced (thousand short tons) (e).... 4,729 4,373 3,154 2,168
Converted (thousand short tons) (e)... 3,344 2,998 2,495 1,530
Corrugated shipments (billion square
feet) (e).............................. 34.47 32.09 25.95 15.19
Employees (end of year-in thousands).... 20.7 18.8 15.5 9.4
Capital expenditures.................... $ 136.6 $ 105.7 $ 63.3 $ 47.1
Net cash/funds provided by (used in)
operating activities (f)............... $ 454.1 $ 298.3 $ 166.7 $ 79.6
Working capital ratio................... 2.1/1 2.2/1 2.6/1 1.9/1
Percent long-term debt/total
capitalization (g)..................... 38.9% 55.4% 58.1% 58.4%
Return on beginning common stockholders'
equity (h)............................. 46.2% 41.8% 10.2% 1.1%
Pretax margin........................... 14.7% 8.8% 2.9% .1%
After-tax margin........................ 9.1% 5.0% 1.7% .3%
---------- ---------- ---------- ----------
</TABLE>

10
<PAGE>
- ------------
NOTES TO SELECTED FINANCIAL DATA

(a) Amounts per average common share and average common shares outstanding have
been adjusted to reflect the 2 percent stock dividend in 1992, the 3-for-2
stock split in 1988 and the 2-for-1 stock split in 1987. The price range of
common shares outstanding has been adjusted only to reflect the previously
mentioned stock splits.

(b) On November 1, 1995, Stone-Consolidated Corporation, a Canadian subsidiary
of the Company, amalgamated its operations with Rainy River Forest Products,
Inc. a Toronto-based Canadian pulp and paper company. As a result of the
amalgamation, the Company's equity ownership in Stone-Consolidated
Corporation was reduced from 74.6 percent to 46.6 percent and accordingly,
effective November 1, 1995, the Company began reporting Stone-Consolidated
Corporation as a non-consolidated affiliate in accordance with the equity
method of accounting.

(d) For 1986, calculation assumes conversion of convertible preferred stock and
convertible subordinated debentures which were converted/redeemed in 1987.

(e) Includes certain non-consolidated affiliates.

(f) In accordance with Statement of Financial Accounting Standards No. 95,
"Statements of Cash Flows," the Company now discloses "Net cash provided by
(used in) operating activities." For years prior to 1986, "Net funds
provided by operations" are presented in this summary. Certain prior year
amounts have been restated to conform to current year presentation.

(g) Represents the percentage of long-term debt to the sum of long-term debt,
stockholders' equity, redeemable preferred stock, minority interest and
deferred taxes.

(h) 1995, 1994, 1993 and 1992 return on beginning common stockholders' equity
calculated using the income (loss) before the extraordinary charges and
cumulative effects of accounting changes.

(i) For 1994 and 1993, includes the Company's 25.4 percent minority interest
liability in the common shares of Stone-Consolidated.

(j) Fully diluted amounts and average common shares outstanding have not been
presented as amounts are either anti-dilutive or, when compared to primary
earnings per share, the potential dilution effect is less than 3 percent.
Furthermore, from 1988 through 1991, fully diluted amounts were not
applicable because the Company did not have any convertible securities
outstanding.

11
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

On November 1, 1995, Stone-Consolidated Corporation, a Canadian subsidiary
of the Company, amalgamated its operations (the "Amalgamation") with Rainy River
Forest Products, Inc. ("Rainy River"), a Toronto-based Canadian pulp and paper
company. The amalgamated company will continue under the name of
Stone-Consolidated Corporation ("Stone-Consolidated"). As a result of the
Amalgamation, the Company's equity ownership in Stone-Consolidated was reduced
from 74.6 percent to 46.6 percent, and accordingly, effective November 1, 1995,
the Company began reporting Stone-Consolidated as a non-consolidated affiliate
in accordance with the equity method of accounting (the "SCI de-consolidation").
Prior to such date the Company reported Stone-Consolidated Corporation as a
consolidated subsidiary. See also Note 3 to the Consolidated Financial
Statements.

RESULTS OF OPERATIONS

COMPARATIVE RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1995 1994 1993
--------------- --------------- ---------------
PERCENT PERCENT PERCENT
OF NET OF NET OF NET
(DOLLARS IN MILLIONS) AMOUNT SALES AMOUNT SALES AMOUNT SALES
- -------------------------------------------------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Net sales......................................... $7,351 100.0% $5,749 100.0% $5,060 100.0%
Cost of products sold............................. 5,169 70.3 4,564 79.4 4,223 83.5
Selling, general and administrative expenses...... 608 8.3 568 9.9 512 10.1
Depreciation and amortization..................... 372 5.1 359 6.2 347 6.9
Equity (income) loss from affiliates.............. (20) (.3) 8 .1 12 .2
Other operating (income) expense--net............. -- -- (34) (.6) 5 .1
Other (income) expense--net....................... (33) (.5) (9) (.1) (3) (.1)
------ ------- ------ ------- ------ -------
Income (loss) before interest expense, income
taxes, minority interest, extraordinary charges
and cumulative effects of accounting changes..... 1,255 17.1 293 5.1 (36) (.7)
Interest expense.................................. (460) (6.3) (456) (7.9) (427) (8.4)
------ ------- ------ ------- ------ -------
Income (loss) before income taxes, minority
interest, extraordinary charges and cumulative
effects of accounting changes.................... 795 10.8 (163) (2.8) (463) (9.1)
(Provision) credit for income taxes............... (321) (4.3) 35 .6 148 2.9
Minority interest................................. (29) (.4) (1) -- (4) (.1)
------ ------- ------ ------- ------ -------
Income (loss) before extraordinary charges and
cumulative effects of accounting changes......... 445 6.1 (129) (2.2) (319) (6.3)
Extraordinary charges from early extinguishments
of debt.......................................... (189) (2.6) (62) (1.1) -- --
Cumulative effects of accounting changes.......... -- -- (14) (.3) (40) (.8)
------ ------- ------ ------- ------ -------
Net income (loss)................................. $ 256 3.5 $ (205) (3.6) $ (359) (7.1)
------ ------- ------ ------- ------ -------
------ ------- ------ ------- ------ -------
</TABLE>

1995 COMPARED WITH 1994

In 1995, the Company reported income before extraordinary charges from the
early extinguishments of debt of $445 million, or $4.64 per share of common
stock on a primary basis and $3.89 per share of common stock on a fully diluted
basis. The Company recorded extraordinary charges from the extinguishments of
debt totaling $189 million, net of income tax benefit, or $2.01 per share on a
primary basis and $1.65 per share on a fully diluted basis, resulting in net
income for 1995 of $256 million, or $2.63 per share of common stock on a primary
basis and $2.24 per share of common stock on a fully diluted basis. See
"Financial Condition and Liquidity--Financing Activities" for a further
discussion of the extraordinary charges from the early extinguishments of debt.
In 1994, the Company incurred a loss before extraordinary charges from the early
extinguishments of debt and the cumulative effect of a change in the accounting
for postemployment benefits of $129 million, or $1.60 per share of common stock.
The Company recorded extraordinary charges from the early extinguishment of debt
totaling $62 million, net of income tax benefits, or $.70 per share of common
stock and a one-time, non-cash charge of $14 million, net of income tax benefit,
or $.16 per share of

12
<PAGE>
common stock, to reflect the cumulative effect of adopting Statement of
Financial Accounting Standard No. 112, "Employers' Accounting for Postemployment
Benefits" ("SFAS 112"), resulting in a net loss for 1994 of $205 million, or
$2.46 per share of common stock.

The improved results for 1995 over 1994 primarily reflect significantly
higher average selling prices for the Company's products. As a result of the
higher average selling prices, net sales increased to $7.4 billion in 1995, a 28
percent increase over 1994 net sales of $5.7 billion. Partially offsetting the
effect on earnings of the higher average selling prices, however, was an
increase in recycled fibre costs of approximately $145 million which occurred
primarily as a result of an industry shortage for this raw material. The 1995
results were also unfavorably impacted by an after-tax charge of approximately
$8 million related to Stone-Consolidated Corporation's acquisition of Rainy
River and by an increase in interest expense primarily as a result of higher
interest rates associated with the Company's indebtedness. The 1995 results
include foreign currency transaction gains of $8 million, whereas the 1994
results included a non-recurring $22 million involuntary conversion gain related
to a digester accident at the Company's Panama City, Florida, pulp and
paperboard mill and foreign currency transaction losses of $16 million.
Additionally, the Company recorded an income tax provision of $321 million in
1995 compared to a 1994 income tax benefit of $35 million reflecting the tax
effect of the increased pretax earnings for 1995 over 1994.

SEGMENT DATA

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------
1994
------------------------
INCOME 1993
(LOSS) ------------------------
BEFORE INCOME INCOME
TAXES, (LOSS)
1995 MINORITY BEFORE INCOME
----------------------------- INTEREST, TAXES,
INCOME EXTRAORDINARY MINORITY
BEFORE INCOME CHARGES AND INTEREST AND
TAXES, MINORITY CUMULATIVE CUMULATIVE
INTEREST AND EFFECT OF AN EFFECT OF AN
NET EXTRAORDINARY NET ACCOUNTING NET ACCOUNTING
(IN MILLIONS) SALES CHARGES SALES CHANGE SALES CHANGE
- --------------------------------------------- ------ --------------------- ------- -------------- ------- --------------
<S> <C> <C> <C> <C> <C> <C>
Paperboard and paper packaging............... $5,406 $ 944 $ 4,241 $ 354 $ 3,810 $ 207
White paper and other........................ 2,010 367 1,550 26 1,296 (158)
Intersegment................................. (65) -- (42) -- (46) --
------ ------ ------- ------ ------- ------
7,351 1,311 5,749 380 5,060 49
Interest expense............................. (460) (456) (427)
Foreign currency transaction gains
(losses)................................... 8 (16) (12)
General corporate and miscellaneous (net).... (64) (71) (73)
------ ------ ------- ------ ------- ------
Total........................................ $7,351 $ 795 $ 5,749 $ (163) $ 5,060 $ (463)
------ ------ ------- ------ ------- ------
------ ------ ------- ------ ------- ------
</TABLE>

13
<PAGE>
SEGMENT AND PRODUCT LINE SALES DATA

<TABLE>
<CAPTION>
NET SALES
-------------------------------
(DOLLARS IN MILLIONS) YEAR ENDED DECEMBER 31, 1995 1994 1993
- -------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Paperboard and paper packaging:
Corrugated containers................................. $ 3,078 $ 2,433 $ 2,155
Paperboard and kraft paper............................ 1,426 1,055 901
Paper bags and sacks.................................. 743 641 579
Folding cartons....................................... -- -- 60
Other................................................. 159 112 115
--------- --------- ---------
Total paperboard and paper packaging................ 5,406 4,241 3,810
--------- --------- ---------
White paper and other:
Newsprint and groundwood paper........................ 1,012 883 770
Market pulp........................................... 750 305 187
Other................................................. 248 362 339
--------- --------- ---------
Total white paper and other......................... 2,010 1,550 1,296
--------- --------- ---------
Intersegment............................................ (65) (42) (46)
--------- --------- ---------
Total net sales..................................... $ 7,351 $ 5,749 $ 5,060
--------- --------- ---------
--------- --------- ---------
</TABLE>

See Note 18 of the Consolidated Financial Statements included in this report
for additional segment information.

PAPERBOARD AND PAPER PACKAGING:

The 1995 net sales for the paperboard and paper packaging segment increased
27.5 percent over 1994 reflecting sales increases for all product lines within
this segment. These sales increases primarily resulted from significantly higher
average selling prices which more than offset reduced volume.

Net sales of corrugated containers, paperboard and paper bags and sacks
increased 26.5 percent, 34.3 percent and 15.9 percent, respectively, over 1994.
These increases reflect significantly higher average selling prices which more
than offset a reduction in sales volume for these products. Sales volumes for
containerboard, corrugated containers and for paper bags and sacks decreased
approximately 8 percent, 2 percent and 12 percent, respectively, from 1994. Net
sales of kraft paper increased 58.2 percent over 1994 reflecting both increased
sales volume and higher average selling prices.

Operating income for the paperboard and paper packaging segment for 1995
increased $590 million over 1994 due to improved operating margins primarily as
a result of the higher average selling prices for the Company's paperboard and
paper packaging products. Operating income for 1994 includes a pretax gain of
approximately $11 million which represented the segment's portion of the
previously mentioned involuntary conversion gain.

WHITE PAPER AND OTHER:

The 1995 net sales for the white paper and other segment increased 29.7
percent over 1994 despite the fact that only ten months of sales of
Stone-Consolidated are included in the 1995 amounts as a result of the SCI de-
consolidation. Net sales of newsprint and groundwood paper for 1995 increased
14.6 percent over 1994 as significantly higher average selling prices more than
offset a decrease in volume mainly attributable to the SCI de-consolidation. Net
sales of market pulp increased to $750 million in 1995 from $305 million in
1994. Approximately $163 million of the market pulp sales increase resulted from
the inclusion of sales for Stone Venepal (Celgar) Pulp, Inc. ("SVCPI"), which,
effective December 31, 1994, became a consolidated subsidiary when the Company
increased its ownership in SVCPI's common stock from 50 percent to 90 percent.
SVCPI had previously been accounted for in accordance with the equity method of
accounting. Excluding the effect of SVCPI, sales of market pulp increased $282
million over 1994 mainly due to significantly higher average selling prices,
although a 22 percent volume improvement also contributed to the sales increase.

Operating income for the white paper and other segment for 1995 increased
$341 million over 1994 due to improved operating margins resulting primarily
from the significantly higher average selling prices for market pulp and for
newsprint and groundwood paper. Operating income for 1994 included a pretax gain
of approximately $11 million which represented the segment's portion of the
previously mentioned involuntary conversion gain.

14
<PAGE>
1994 COMPARED WITH 1993

Net sales for 1994 were $5.7 billion, an increase of 13.6 percent over 1993
net sales of $5.1 billion. Net sales increased as a result of both increased
sales volume and higher average selling prices for most of the Company's
products. In 1994, the Company incurred a loss before extraordinary charges from
the early extinguishments of debt and the cumulative effect of a change in the
accounting for postemployment benefits of $129 million, or $1.60 per share of
common stock. The Company recorded extraordinary charges from the early
extinguishments of debt totaling $62 million, net of income tax benefits, or
$.70 per share of common stock and a one-time, non-cash charge of $14 million,
net of income tax benefit, or $.16 per share of common stock, to reflect the
cumulative effect of adopting SFAS 112, resulting in a net loss for 1994 of $205
million, or $2.46 per share of common stock. In 1993, the Company incurred a
loss before the cumulative effect of a change in the accounting for
postretirement benefits other than pensions of $319 million, or $4.59 per share
of common stock. The Company adopted Statement of Financial Accounting Standards
No. 106, "Accounting for Postretirement Benefits Other than Pensions" ("SFAS
106"), effective January 1, 1993 and recorded a one-time, non-cash cumulative
effect charge of $40 million, net of income tax benefit, or $.56 per share of
common stock, resulting in a net loss of $359 million, or $5.15 per share of
common stock.

The improved results for 1994 over 1993 primarily reflect improved product
pricing for most of the Company's products which more than offset a substantial
increase in recycled fibre costs, higher interest expense and a decrease in the
income tax benefit. The Company incurred a significant increase in recycled
fibre costs for 1994 over 1993 mainly as a result of a shortage for this raw
material. The 1994 results were also unfavorably impacted by an increase in
interest expense, primarily as a result of higher interest rates, and by foreign
currency transaction losses of $16 million. The 1993 results included foreign
currency transaction losses of $12 million. The 1994 results included the
previously mentioned $22 million pretax involuntary conversion gain, whereas the
1993 results included a $35 million pretax gain from the sale of the Company's
49 percent equity interest in Empaques de Carton Titan, S.A. ("Titan") and the
favorable effect of a reduction in an accrual relating to a change in the
Company's vacation pay policy. The Company recorded an income tax benefit of $35
million in 1994 as compared with an income tax benefit of $148 million in 1993.
The decrease in the income tax benefit primarily reflects the tax effect
associated with the lower pretax loss for 1994 as compared with 1993.

PAPERBOARD AND PAPER PACKAGING:

The 1994 net sales for the paperboard and paper packaging segment increased
11.3 percent over 1993 reflecting sales increases for virtually every product
line within the segment. Net sales for 1993 included sales for the Company's
European folding carton operations, which in the early part of 1993 were merged
into a joint venture and, accordingly, are now accounted for under the equity
method of accounting. Sales from these operations prior to the merger in May of
1993 were approximately $60 million. Excluding the effect of the folding carton
operations, 1994 net sales increased 13.1 percent from the prior year.

Net sales of corrugated containers and paperboard increased 12.9 percent and
17.7 percent, respectively, over 1993. These increases reflect both increased
sales volume and higher average selling prices.

Also, reflecting volume increases and higher average selling prices, net
sales for paper bags and sacks increased 10.7 percent over 1993. Additionally,
net sales of kraft paper increased 2.2 percent over 1993 solely as a result of
increased sales volume.

Operating income for the paperboard and paper packaging segment for 1994
increased $147 million, or 70.8 percent over 1993, due to improved operating
margins primarily as a result of higher average selling prices and improved
sales volumes for corrugated containers, containerboard and paper bags and
sacks. Operating income for 1994 included a pretax gain of approximately $11
million which represents the segment's portion of the previously mentioned
involuntary conversion gain. Operating income for 1993 included a $35 million
pretax gain from the sale of Titan and a favorable effect of a reduction in an
accrual resulting from a change in the Company's vacation policy. The earnings
impact from these 1993 non-recurring items were partially offset by the
writedowns of the carrying values of certain Company assets.

WHITE PAPER AND OTHER:

The 1994 net sales for the white paper and other segment increased 19.6
percent as a result of sales increases for market pulp and for newsprint and
groundwood paper. The sales increase for market pulp of 63.1 percent over 1993
primarily reflects significantly higher average selling prices, although
improved volume also contributed to the increase. Net sales of newsprint and
groundwood paper increased 14.7 percent in 1994 over 1993 primarily as a result

15
<PAGE>
of increased sales volume, with higher average selling prices also contributing
to the increase. The increased sales volume and higher average selling prices
for newsprint and groundwood paper more than offset unfavorable foreign exchange
translation effects attributable to the stronger U.S. dollar.

Operating income for the white paper and other segment for 1994 was $25
million compared to an operating loss in 1993 of $159 million. This significant
improvement in operating income was mainly attributable to improved operating
margins primarily resulting from the significantly higher average selling prices
for market pulp and, to a lesser extent, to the increased volume and higher
average selling prices for newsprint and groundwood paper. Additionally,
operating income for 1994 included a pretax gain of approximately $11 million
which represents the segment's portion of the previously mentioned involuntary
conversion gain.

FINANCIAL CONDITION AND LIQUIDITY

The Company's working capital ratio was 2.4 to 1 at December 31, 1995 and
1.8 to 1 at December 31, 1994. The Company's long-term debt to total
capitalization ratio was 72.2 percent at December 31, 1995 and 78.0 percent at
December 31, 1994. Capitalization, for purposes of this ratio, includes
long-term debt (which includes debt of certain consolidated affiliates which is
non-recourse to the Company), deferred income taxes, minority interest and
stockholders' equity.

The Company's primary capital requirements consist of debt service and
capital expenditures, including capital investment for compliance with certain
environmental legislation requirements and ongoing maintenance expenditures and
improvements. The Company is highly leveraged, and while highly leveraged, will
incur substantial ongoing interest expense. No significant debt maturities or
amortization obligations are due until June 1997.

On March 22, 1996, the Company and its bank group amended the Company's bank
credit agreement to, among other things, provide for an additional senior
secured term loan facility of $190 million maturing through October 1, 2003 and
a supplemental revolving credit facility of $110 million maturing May 15, 1999.
Additionally, the Company received a waiver from the requirement to make
mandatory repayment of its term loans from excess cash flow (as defined) until
September 1997. The amended credit agreement also removed the cross-acceleration
provisions to the non-recourse debt of SVCPI. The additional funds provided by
these new facilities were used to repay indebtedness outstanding under the
Company's $450 million revolving credit facility under the bank credit
agreement. The Company's bank credit agreement, as amended, consists of a $400
million senior secured term loan facility maturing through April 1, 2000, a $200
million senior secured term loan facility maturing through October 1, 2003, the
$190 million senior secured term loan facility, a $450 million senior secured
revolving credit facility commitment maturing May 15, 1999, which includes a $25
million swing-line sub-facility, and the supplemental $110 million revolving
credit facility (the "Credit Agreement"). At March 22, 1996, the Company had
borrowing availability of approximately $442 million (net of letters of credit
which reduce the amount available to be borrowed) under its revolving credit
facilities. The term loans and the $450 million revolving credit facility had
weighted average interest rates for the year ended December 31, 1995 of 9.2
percent and 9.4 percent, respectively. The weighted average rates do not include
the effect of the amortization of deferred debt issuance costs. In March of
1995, the Company refinanced its accounts receivable securitization program with
a new $310 million facility comprised of $260 million of floating-rate notes due
in 2000 and a five-year $50 million revolving credit facility. As of March 22,
1996, the Company had no outstanding borrowings under this revolving credit
facility. See also "Financing Activities."

The Credit Agreement contains covenants that include, among other things,
the maintenance of certain financial tests and ratios. Additionally, the term
loan portions of the Credit Agreement provide for mandatory prepayments from
sales of certain assets, certain debt financings and a percentage of excess cash
flow (as defined). The Company's bank lenders, at the Company's optional
request, may at their option, waive the receipt of certain mandatory
prepayments. Any mandatory and voluntary prepayments are allocated against the
term loan amortizations in inverse order of maturity. Mandatory prepayments from
sales of collateral, unless replacement collateral is provided, will be applied
ratably to the term loans and revolving credit facility, permanently reducing
the loan commitments under the Credit Agreement. The Credit Agreement also
contains cross-default provisions to the indebtedness of $10 million or more of
the Company and certain subsidiaries.

OUTLOOK:

The Company's current year operations provided significant cash flow from
which $440 million of indebtedness was repaid. As a result, the Company has
improved its liquidity and financial flexibility. The increased cash flow
occurred primarily as a result of prices for the Company's products increasing
to historically high levels with a correspondingly high capacity utilization
rate. Beginning in late 1995, demand for containerboard and market pulp
dramatically diminished and the Company, in order to prevent excessive increases
in inventory, took downtime at

16
<PAGE>
various of its mills in the third and fourth quarters of 1995. Currently,
conditions have not improved and the Company is forecasting further downtime for
its mills in the first and second quarters of 1996. Pricing for the Company's
products has continued to decline from historical highs as a result of further
reduction in demand and the introduction of new industry capacity, particularly
for containerboard. It is anticipated that economic activity will increase to a
level to absorb this new capacity. Prices and shipments for market pulp,
however, have declined significantly since the beginning of the year and it is
expected that these declines will have a substantial, adverse impact on the
Company's operating results for the first quarter of 1996. The Company cannot at
this time forecast when demand will increase to offset the current excess supply
in the containerboard and market pulp industry. Notwithstanding the improvement
in the Company's liquidity and financial flexibility, the Company will be
required in the future to generate sufficient cash flows to fully meet the
Company's debt service requirements. The Company has debt amortizations of $260
million in 1997 and $487 million in 1998, with an additional $532 million of
debt maturing in each of 1999 and 2000. In the event that the Company is unable
to generate sufficient operating cash flows to fully meet such debt service
requirements, it is anticipated that the Company would refinance portions of
this indebtedness and/or use a substantial portion of its cash resources and
borrowing availabilities under its revolving credit facilities to repay such
indebtedness. No assurances can be given that such sources will be available in
sufficient amounts for such requirements.

Wood fibre and recycled fibre, the principal raw materials used in the
manufacture of the Company's products, are purchased in highly competitive,
price sensitive markets. These raw materials have historically exhibited price
and demand cyclicality. In addition, the supply and price of wood fibre in
particular, is dependent upon a variety of factors over which the Company has no
control, including environmental and conservation regulations, natural
disasters, such as forest fires and hurricanes, and weather. The Company
purchases or cuts a variety of species of timber from which the Company utilizes
wood fibre depending upon the product being manufactured and each mill's
geographic location. A decrease in the supply of wood fibre has caused, and will
likely continue to cause, higher wood fibre costs in some of the regions in
which the Company procures wood. In addition, the increase in demand of products
manufactured, in whole or in part, from recycled fibre has from time to time
caused a tightness in supply of recycled fibre and at those times a significant
increase in the cost of such fibre used in the manufacture of recycled
containerboard and related products. As a result, the cost of recycled fibre
increased significantly in 1995 and, although it has moderated from the peak
levels of 1995, such costs are likely to continue to fluctuate based upon
demand/supply characteristics. Given the volatility of the recycled fibre
market, there can be no assurance that such costs will not reach the peak levels
of 1995. The Company's paperboard and paper packaging products use a large
volume of recycled fibre. While the Company has not experienced any significant
difficulty in obtaining wood fibre and recycled fibre in economic proximity to
its mills, there can be no assurances that this will continue to be the case for
any or all of its mills.

On November 2, 1995, the Company announced that it has agreed to enter into
a joint venture agreement with Four M Corporation (Box USA) to purchase a
paperboard mill located in Port St. Joe, Florida, from St. Joe Paper Company for
$185 million plus applicable working capital. Under the joint venture agreement,
the Company would make a 50 percent common equity investment in the joint
venture with a commitment to purchase equity of the joint venture. It is
anticipated that the purchase by the joint venture would close in the second
quarter of 1996. The completion of the transaction is contingent upon a number
of conditions, including the termination of the Hart-Scott-Rodino waiting period
and the placement of non-recourse financing anticipated to approximate $165
million. Upon completion of the transaction, the joint venture would be highly
leveraged. The mill has the capacity to produce approximately 500,000 short tons
per year, split almost evenly between mottled white and kraft linerboard.

17
<PAGE>
CASH FLOWS FROM OPERATIONS:

The following table shows, for the last three years, the net cash provided
by (used in) operating activities:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
(IN MILLIONS) 1995 1994 1993
- ------------------------------------------------------------------------------------- --------- ------ ------
<S> <C> <C> <C>
Net income (loss).................................................................... $ 256 $ (205) $ (359)
Depreciation and amortization........................................................ 372 359 347
Deferred taxes....................................................................... 214 (55) (134)
Extraordinary charges from early extinguishments of debt............................. 189 62 --
Cumulative effects of accounting changes............................................. -- 14 39
Payment on settlement of interest rate swaps......................................... -- -- (33)
(Increase) decrease in accounts and notes receivable--net............................ (81) (176) 45
(Increase) decrease in inventories................................................... (146) 30 29
(Increase) decrease in other current assets.......................................... 22 (46) (9)
Increase (decrease) in accounts payable and other current liabilities................ 62 87 (60)
Other................................................................................ 74(a) 2 6
--------- ------ ------
Net cash provided by (used in) operating activities.................................. $ 962 $ 72 $ (129)
--------- ------ ------
--------- ------ ------
</TABLE>

- ---------
(a) Includes minority interest expense of $29 million.

The Company generated significant operating cash flow during 1995 which,
among other things, allowed for the Company to repay $440 million of
indebtedness. In 1994 and 1993 operating cash flows were insufficient requiring
the Company to increase its indebtedness in order to meet cash needs.

The SCI de-consolidation reduced the Company's consolidated working capital
accounts by approximately $250 million, including a reduction in cash of
approximately $113 million. The working capital changes in the above table have
been adjusted to eliminate the impact of the SCI de-consolidation. Additionally,
certain of the non-current asset and liability accounts included in the
consolidated balance sheet decreased substantially from December 31, 1994 as a
result of the SCI de-consolidation. Significant related decreases include
reductions in the property, plant and equipment--net, goodwill and non-recourse
debt of consolidated affiliates accounts of approximately $864 million, $339
million and $397 million, respectively. The following explanations focus on
variations that were not attributable to the SCI de-consolidation.

The 1995 increase in accounts and notes receivable primarily reflects higher
average selling prices for the Company's products. The 1994 increase in accounts
and notes receivable primarily reflects increased sales volume and higher
average selling prices for the majority of the Company's products.

The increase in inventories for 1995 primarily reflects higher costs and an
increase in the quantity of paperstock levels as a result of recent weakening in
demand. The decrease in inventories for 1994 primarily reflects a reduction in
quantities of certain paperstock levels due to increased sales volume.

The 1995 decrease in other current assets resulted mainly from the
collection of a portion of the insurance claim receivable associated with the
1994 digester accident. The 1994 increase in other current assets resulted
mainly from the recording of the previously mentioned insurance claim, partially
offset by the receipt of an income tax refund.

The increase in accounts payable and other current liabilities in 1995 was
due primarily to the timing of payments. The increase in accounts payable for
1994 was due primarily to the timing of payments, while the increase in accrued
and other current liabilities mainly reflects an increase in accrued interest
primarily associated with interest on the Company's 9 7/8 percent Senior Notes,
10 3/4 percent First Mortgage Notes and the 11 1/2 percent Senior Notes, which
is payable semiannually at various dates throughout the year.

FINANCING ACTIVITIES:

The Company reduced its total indebtedness during 1995 by $803 million, $397
million of which resulted from the SCI de-consolidation. The following
summarizes the Company's significant financing activities in 1995:

- In August 1995, the Company and its bank group amended and restated its
Credit Agreement to provide for an additional $200 million senior secured
term loan facility, the proceeds of which were used to partially fund the
repurchase of certain indebtedness.

18
<PAGE>
- During the 1995 third and fourth quarters, in separate, independently
negotiated transactions, the Company purchased and retired $190 million
principal amount of its Convertible Senior Subordinated Notes. The
aggregate value paid by the Company to purchase and retire the $190
million Convertible Senior Subordinated Notes was approximately $370
million comprised of approximately $190 million cash (which was equal to
the face value of the Convertible Senior Subordinated Notes purchased) and
the issuance of approximately 8.5 million shares of common stock valued at
approximately $180 million. The Convertible Senior Subordinated Notes
purchased and retired were convertible into approximately 16.5 million
common shares. Although the Company issued approximately 8.5 million
shares of common stock, total common shares on a fully diluted basis were
reduced by approximately 8 million common shares. Funding for the cash
portion of the purchases of the Convertible Senior Subordinated Notes and
the other open market purchases was financed primarily from bank
borrowings. Also in 1995, the Company repurchased approximately $136
million of its 9 7/8 percent Senior Notes and $70 million of its 6 3/4
percent Convertible Subordinated Debentures and redeemed the remaining $90
million principal amount of its 12 1/8 percent Subordinated Debentures.

- During the second quarter of 1995, the Company repaid all the indebtedness
outstanding under and terminated Seminole Kraft Corporation's ("Seminole")
bank credit agreement and redeemed Seminole's 13 1/2 percent Subordinated
Notes for approximately $123 million. The Company had previously acquired
the remaining 1 percent of the common stock of Seminole in March 1995,
thereby making it a wholly owned subsidiary of the Company.

- In March 1995, the Company, through its wholly owned subsidiary Stone
Receivables Corporation, completed the refinancing of the obligations
relating to its account receivable securitization program with a new $310
million accounts receivable securitization program consisting of $260
million of floating-rate notes due in 2000 (the "Notes") together with a
five-year $50 million revolving credit facility (collectively, the "March
1995 Refinancing"). The March 1995 Refinancing permits the Company to sell
certain of its accounts receivable to Stone Receivables Corporation, which
purchases such receivables under the program. The initial accounts
receivable under the program were purchased with the net proceeds received
from the issuance of the Notes. The purchased accounts receivable are
solely the assets of Stone Receivables Corporation, a wholly owned
subsidiary of the Company, with its own borrowings. In the event of a
liquidation of Stone Receivables Corporation, such borrowings would be
satisfied from the assets of Stone Receivables Corporation prior to any
distribution to the Company. At December 31, 1995, the Company's
Consolidated Balance Sheet included approximately $302 million of accounts
receivable under the program and $260 million of borrowings under the
program.

Primarily as a result of the debt repurchases and prepayments mentioned
above, the Company recorded extraordinary charges from the early extinguishments
of debt of $189 million in 1995 as compared with extraordinary charges of $62
million associated with early extinguishments of debt in 1994.

INVESTING ACTIVITIES:

The following summarizes the Company's primary 1995 investing activities:

- Capital expenditures for 1995 totaled approximately $387 million. The
Company's capital expenditures for 1996 are budgeted at approximately $270
million.

- In November 1995, the Company acquired approximately 32 percent of the
outstanding voting common stock (approximately 21 percent of the total
outstanding common stock) of Venepal, S.A.C.A., a Venezuelan pulp, paper
and paper products company. The Company's investment is accounted for
under the equity method of accounting. Also in 1995, the Company acquired
100 percent of the outstanding common stock of River House Packaging Pty.,
Ltd. (which was subsequently renamed Stone Container Australia Pty.,
Ltd.), an Australia-based corrugated container company.

ENVIRONMENTAL ISSUES:

The Company's operations are subject to extensive environmental regulation
by federal, state and local authorities in the United States and regulatory
authorities with jurisdiction over its foreign operations. The Company has, in
the past, made significant capital expenditures to comply with water, air and
solid and hazardous waste regulations and expects to make significant
expenditures in the future. Capital expenditures for environmental control
equipment and facilities were approximately $36 million in 1995, and the Company
anticipates that 1996 and 1997 environmental capital expenditures will
approximate $61 million and $16 million, respectively (exclusive of any
potential expenditures which may be required if the proposed "cluster rules"
described below are adopted). Although capital expenditures

19
<PAGE>
for environmental control equipment and facilities and compliance costs in
future years will depend on legislative and technological developments which
cannot be predicted at this time, the Company anticipates that these costs will
increase when final "cluster rules," as described below, are adopted and as
other environmental regulations become more stringent. Environmental control
expenditures include projects which, in addition to meeting environmental
concerns, yield certain benefits to the Company in the form of increased
capacity and production cost savings. In addition to capital expenditures for
environmental control equipment and facilities, other expenditures incurred to
maintain environmental regulatory compliance (including any remediation)
represent ongoing costs to the Company.

In December 1993, the U.S. Environmental Protection Agency (the "EPA")
issued a proposed rule affecting the pulp and paper industry. These proposed
regulations, informally known as the "cluster rules," would make more stringent
requirements for discharge of wastewaters under the Clean Water Act and would
impose new requirements on air emissions under the Clean Air Act. Pulp and paper
manufacturers (including the Company) have submitted extensive comments to the
EPA on the proposed regulations in support of the position that requirements
under the proposed regulations are unnecessarily complex, burdensome and
environmentally unjustified. The EPA has indicated that it may reopen the
comment period on the proposed regulations to allow review and comment on new
data that the industry will submit to the agency on the industry's air toxic
emissions. It cannot be predicted at this time whether the EPA will modify the
requirements in the final regulations which are currently scheduled to be issued
in 1996, with compliance required within three years from such date. The Company
is considering and evaluating the potential impact of the rules, as proposed, on
its operating and capital expenditures over the next several years. Estimates,
based on currently proposed regulations, indicate that the Company could be
required to make capital expenditures of $350-$450 million during the period of
1996 through 1998 in order to meet the requirements of the regulations, although
it is possible this range could decrease upon finalization of the rules. In
addition, annual operating expenses would increase by as much as $20 million
beginning in 1998. The ultimate financial impact of the regulations cannot be
accurately estimated at this time but will be affected by several factors,
including the actual requirements imposed under the final rule, advancements in
control process technologies, possible reconfiguration of mills and inflation.

On January 22, 1996, the United States of America filed a suit against the
Company in the United States District Court for the District of Montana seeking
injunctive relief and an unspecified amount in civil penalties based on the
alleged failure of the Company to comply with certain provisions of the Clean
Air Act ("CAA"), its implementing regulations and the Montana State
Implementation Plan at the Company's Missoula, Montana, kraft pulp mill (the
"Missoula Mill"). The complaint specifically alleges that the Company exceeded
the 20 percent opacity limitation for recovery boiler emissions; failed to
properly set the span on a recovery boiler continuous emissions monitor; and
concealed the emission of an air contaminant by improperly venting
non-condensible gasses. The statutory penalty for violations of the CAA is
$25,000 per day for each day of violation. The Company is reviewing the matter
with counsel to assess its potential liability. It is premature to predict the
outcome of this matter at this time.

In addition, the Company is from time to time subject to litigation and
governmental proceedings regarding environmental matters in which injunctive
and/or monetary relief is sought. The Company has been named as a potentially
responsible party ("PRP") at a number of sites which are the subject of remedial
activity under the federal Comprehensive Environmental Response, Compensation
and Liability Act of 1980 ("CERCLA" or "Superfund") or comparable state laws.
Although the Company is subject to joint and several liability imposed under
Superfund, at most of the multi-PRP sites there are organized groups of PRPs and
costs are being shared among PRPs. Future environmental regulations, including
the final "cluster rules," may have an unpredictable adverse effect on the
Company's operations and earnings, but they are not expected to adversely affect
the Company's competitive position.

COMMON AND SERIES E CUMULATIVE PREFERRED STOCK -- CASH DIVIDENDS, MARKET AND
PRICE RANGE

The Company has restrictions on the payment of cash dividends on its common
stock under certain of the Company's indentures and under its Credit Agreement.
Common stock cash dividends cannot be declared and paid in the event the Company
has any accumulated preferred stock dividend arrearage or there is no
availability in the dividend pool under the Senior Subordinated Indentures dated
March 15, 1992 (the "Senior Subordinated Indenture") relating to the Company's
10 3/4 percent Senior Subordinated Notes due June 15, 1997, its 11 percent
Senior Subordinated Notes due August 15, 1999 and its 10 3/4 percent Senior
Subordinated Debentures due April 1, 2002. On September 13, 1995 and December
13, 1995, the Company paid quarterly cash dividends of $0.15 per share on the
Company's common stock. On January 22, 1996, the Company's Board of Directors
declared a quarterly cash dividend of $0.15 per share on the Company's common
stock which was paid on March 13, 1996 to shareholders of record on February 23,
1996.

20
<PAGE>
The Company paid cash dividends of $2.625 and $1.75 per share on the Series
E Cumulative Preferred Stock during 1995 and 1994, respectively, bringing the
Company current on its dividend requirements for these securities at December
31, 1995. The declaration of dividends by the Board of Directors is subject to,
among other things, the Company's ability to comply with financial covenants
contained in the Company's Credit Agreement and in its Senior Subordinated
Indenture. In the event the Company has six quarterly dividends which remain
unpaid on the Series E Cumulative Preferred Stock, the holders of the Series E
Cumulative Preferred Stock would have the right to elect two members to the
Company's Board of Directors until the accumulated dividends on such Series E
Cumulative Preferred Stock have been declared and paid or set apart for payment.
Irrespective of the amount available in the dividend pool under the Credit
Agreement, the Credit Agreement permits dividends to be paid on the Series E
Cumulative Preferred Stock if there is an available dividend pool under the
Senior Subordinated Indenture.
<TABLE>
<CAPTION>
COMMON STOCK
------------------------------
1995 1994
-------------- --------------
Quarter High Low High Low
- --------------------------------------------------------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
1st........................................................................ $24.50 $16.88 $16.88 $ 9.63
2nd........................................................................ 24.00 16.25 16.63 12.25
3rd........................................................................ 24.63 18.88 21.13 14.50
4th........................................................................ 19.00 12.50 20.50 14.63
Year....................................................................... 24.63 12.50 21.13 9.63
------ ------ ------ ------

<CAPTION>
SERIES E CUMULATIVE
PREFERRED STOCK
------------------------------

1995 1994
-------------- --------------
Quarter High Low High Low
- --------------------------------------------------------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
1st........................................................................ $22.63 $16.88 $19.50 $15.25
2nd........................................................................ 24.25 21.00 20.63 17.38
3rd........................................................................ 24.88 20.63 20.88 17.50
4th........................................................................ 21.88 17.13 19.88 16.63
Year....................................................................... 24.88 16.88 20.88 15.25
------ ------ ------ ------
</TABLE>

There were approximately 6,395 common stockholders and 366 preferred
stockholders of record at December 31, 1995.

ACCOUNTING STANDARDS CHANGES

In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
("SFAS 121"), which requires that long-lived assets be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. SFAS 121 stipulates that in the event the
carrying amount of any asset in question exceeds the future undiscounted cash
flows expected from the use and eventual disposition of the asset, then an
impairment loss represented by any excess carrying value over the fair value of
the asset must be recognized. As required, the Company will adopt SFAS 121
effective January 1, 1996. Based on preliminary analysis, management currently
believes that the adoption of SFAS 121 will not materially affect the Company's
results of operations or financial position. See also Note 1--"Summary of
Significant Accounting Policies" to the Consolidated Financial Statements.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Registrant's financial statements required by Item 8, together with the
report thereon of the independent
accountants dated February 5, 1996 are set forth on pages 30-54 of this report.
The financial statement schedules listed under Item 14(a)2, together with the
report thereon of the independent accountants dated February 5, 1996 are set
forth on pages 55 and 57 of this report and should be read in conjunction with
the financial statements.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information relating to the Registrant's Directors and Executive Officers is
incorporated herein by reference to the Proxy Statement, to be filed on or
before April 30, 1996, for the Annual Meeting of Stockholders scheduled May 14,
1996, under the captions "Nominees for Directors," "Information as to Directors
and Executive Officers" and "Directors--Certain Transactions."

ITEM 11. EXECUTIVE COMPENSATION

Information relating to the Registrant's executive compensation is
incorporated herein by reference to the Proxy Statement, to be filed on or
before April 30, 1996, for the Annual Meeting of Stockholders scheduled May 14,
1996, under the caption "Compensation," excluding the section thereunder
entitled "Compensation Committee Report on Executive Compensation."

21
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

Information relating to certain beneficial ownership of the Registrant's
common stock is incorporated herein by reference to the Proxy Statement, to be
filed on or before April 30, 1996, for the Annual Meeting of Stockholders
scheduled May 14, 1996, under the captions "Nominees for Directors" and
"Security Ownership by Certain Beneficial Owners and Management--Security
Ownership by Certain Beneficial Owners."

(b) SECURITY OWNERSHIP OF MANAGEMENT

Information relating to ownership of the Registrant's equity securities by
Directors and Executive Officers is incorporated herein by reference to the
Proxy Statement, to be filed on or before April 30, 1996, for the Annual Meeting
of Stockholders scheduled May 14, 1996, under the captions "Nominees for
Directors" and "Security Ownership by Certain Beneficial Owners and
Management--Security Ownership by Management."

The Registrant knows of no contractual arrangements which may, at a
subsequent date, result in a change in control of the Registrant.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information related to certain relationships and related transactions is
incorporated herein by reference to the Proxy Statement, to be filed on or
before April 30, 1996, for the Annual Meeting of Stockholders scheduled May 14,
1996, under the caption "Directors--Certain Transactions."

PART IV

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

(a) DOCUMENTS FILED AS PART OF THIS REPORT

1. FINANCIAL STATEMENTS. The Registrant's financial statements, for
the year ended December 31, 1995, together with the Report of Independent
Accountants are set forth on pages 30-54 of this report. The supplemental
financial information listed and appearing hereafter should be read in
conjunction with the Financial Statements included in this report. Separate
financial statements of 50 percent or less owned persons accounted for by
the equity method have been omitted because the registrant's proportionate
share of the income from continuing operations before income taxes of each
such company is less than 20 percent of the consolidated amount, and the
investment in and advances to each company is less than 20 percent of
consolidated total assets.

2. FINANCIAL STATEMENT SCHEDULES. The following are included in Part
IV of this report for each of the years ended December 31, 1995, 1994 and
1993 as applicable:

<TABLE>
<CAPTION>
Page
------
<S> <C>
Report of Independent Accountants on Financial Statement
Schedule................................................... 55
Valuation and Qualifying Accounts and Reserves (Schedule
II)........................................................ 57
</TABLE>

Financial statement schedules not included in this report have been omitted,
either because they are not applicable or because the required information is
shown in the financial statements or notes thereto, included in this report. At
December 31, 1995, the Company had outstanding loans receivable of $275,000 and
$175,000, respectively, to James Doughan, President and Chief Executive Officer
of Stone-Consolidated Corporation, and to James B. Heider, Senior Vice President
and General Manager, Containerboard and Paper Division. Upon the resignation of
Mr. Heider in 1996, his loan due to the Company was repaid. The remaining loan
bears no interest and is repayable on demand pursuant to request by the Company.

3. EXHIBITS. The exhibits required to be filed by Item 601 of
Regulation S-K are listed under the caption "Exhibits" in Item 14(c).

22
<PAGE>
(b) REPORTS ON FORM 8-K

A Report on Form 8-K dated February 16, 1995 was filed reporting under Item
5--Other Events, stating that the Company issued a press release on February 6,
1995 announcing its financial results for the fourth quarter of 1994 and for the
year ended December 31, 1994.

A Report on Form 8-K dated September 8, 1995 was filed under Item 5--Other
Events, stating that the Company issued a press release on August 31, 1995
announcing the removal of 180,000 tons of production from seven mills during the
third quarter.

A Report on Form 8-K dated November 7, 1995 was filed under Item 5--Other
Events, stating that the Company issued a press release on October 23, 1995
announcing its financial results for the third quarter of 1995 and for the nine
months ended September 30, 1995.

A Report on Form 8-K dated November 9, 1995 was filed reporting under Item
2--Acquisition or Disposition of Assets, stating that Stone-Consolidated
Corporation, a previous 74.6 percent owned Canadian subsidiary of the Company,
amalgamated its operations with Rainy River Forest Products Inc., a
Toronto-based Canadian pulp and paper company. The amalgamated entity ("Amalco")
will continue under the name Stone-Consolidated Corporation. As a result of the
amalgamation, the Company's equity ownership in Stone-Consolidated Corporation
was reduced from 74.6 percent to approximately 46.6 percent. Stone-Consolidated
Corporation will begin to be reported by the Company under the equity method of
accounting effective November 1, 1995.

<TABLE>
<C> <S>
3(a) Restated Certificate of Incorporation of the Company, filed as Exhibit
3(a) to the Company's Registration Statement on Form S-1, Registration
Number 33-54769, is hereby incorporated by reference.

3(b) By-laws of the Company, as amended October 2, 1995, filed as Exhibit 3
to the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995, is hereby incorporated by reference.

4(a) Specimen certificate representing Common Stock, $.01 par value, filed
as Exhibit 4(a) to the Company's Annual Report on Form 10-K for the
year ended December 31, 1987, is hereby incorporated by reference.

4(b) Specimen certificate representing the $1.75 Series E Cumulative
Convertible Exchangeable Preferred Stock, filed as Exhibit 4(g) to the
Company's Registration Statement on Form S-3, Registration Number
33-45374, is hereby incorporated by reference.

4(c) Rights Agreement, dated as of July 25, 1988, between the Company and
The First National Bank of Chicago, filed as Exhibit 1 to the
Company's Registration Statement on Form 8-A dated July 27, 1988, is
hereby incorporated by reference.

4(d) Amendment to Rights Agreement, dated as of July 23, 1990, between the
Company and The First National Bank of Chicago, filed as Exhibit 1A to
the Company's Form 8 dated August 2, 1990 amending the Company's
Registration Statement on Form 8-A dated July 27, 1988, is hereby
incorporated by reference.

4(e) Amended and Restated Credit Agreement ("Credit Agreement") dated as of
March 22, 1996 among the Company, the financial institutions signatory
thereto, Bankers Trust Company, as agent (the "Agent"), and Bank of
America National Trust & Savings Association, The Bank of New York,
The Bank of Nova Scotia, Caisse Nationale de Credit Agricole, Chemical
Bank, The Chase Manhattan Bank, N.A., Dresdner Bank AG-Chicago and
Grand Cayman Branches, The First National Bank of Chicago, The
Long-Term Credit Bank of Japan, Ltd., NationsBank of North Carolina,
N.A., The Sumitomo Bank, Ltd., Chicago Branch and The Toronto-Dominion
Bank, as co-agents (the "Co-Agents").**
</TABLE>

- ---------
** Filed herewith

23
<PAGE>

<TABLE>
<C> <S>
4(f) Indenture dated as of October 12, 1994 between the Company and Norwest
Bank Minnesota, N.A., as Trustee, relating to the 10 3/4 percent First
Mortgage Notes due October 1, 2002, filed as Exhibit 4(b) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1994, is hereby incorporated by reference.

4(g) Indenture dated as of October 12, 1994 between the Company and The
Bank of New York, as Trustee, relating to the 11 1/2 percent Senior
Notes due October 1, 2004, filed as Exhibit 4(c) to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1994, is hereby incorporated by reference.

4(h) Indenture, dated as of September 1, 1989, between the Company and
Bankers Trust Company, as Trustee, relating to the Company's 11 1/2%
Senior Subordinated Notes due September 1, 1999, filed as Exhibit 4(n)
to the Company's Registration Statement on Form S-3, Registration
Number 33-46764, is hereby incorporated by reference.

4(i) Indenture, dated as of February 15, 1992, between the Company and The
Bank of New York, as Trustee, relating to the Company's 6 3/4%
Convertible Subordinated Debentures due February 15, 2007, filed as
Exhibit 4(p) to the Company's Registration Statement on Form S-3,
Registration Number 33-45978, is hereby incorporated by reference.

4(j) Senior Subordinated Indenture, dated as of March 15, 1992, between the
Company, and The Bank of New York, as Trustee, filed as Exhibit 4(a)
to the Company's Registration Statement Form S-3, Registration Number
33-46764, is hereby incorporated by reference.

4(k) Indenture dated as of June 15, 1993, between the Company and Norwest
Bank Minnesota, National Association, as Trustee, relating to the
Company's 8 7/8% Convertible Senior Subordinated Notes due 2000, filed
as Exhibit 4(a) to the Company's Registration Statement on Form S-3,
Registration Number 33-66086, is hereby incorporated by reference.

4(l) Indenture, dated as of November 1, 1991, between the Company and The
Bank of New York, as Trustee, relating to the Company's Senior Debt
Securities, filed as Exhibit 4(u) to the Company's Registration
Statement on Form S-3, Registration Number 33-45374, is hereby
incorporated by reference.

4(m) First Supplemental Indenture dated as of June 23, 1993, between the
Company and The Bank of New York, as Trustee, relating to the
Indenture, dated as of November 1, 1991, between the Company and The
Bank of New York, as Trustee, filed as Exhibit 4(aa) to the Company's
Registration Statement on Form S-3, Registration Number 33-66086, is
hereby incorporated by reference.

4(n) Second Supplemental Indenture dated as of February 1, 1994, between
the Company and the Bank of New York, as Trustee, relating to the
Indenture, dated as of November 1, 1991, as amended, filed as Exhibit
4.2 to the Company's Current Report on Form 8-K, dated January 24,
1994, is hereby incorporated by reference.

4(o) Master Trust Indenture and Security Agreement dated as of March 14,
1995, among Stone Receivables Corporation, the Company, as Servicer,
Marine Midland Bank, as Trustee, and Bankers Trust Company, as
Administrative Agent, relating to the accounts receivable
securitization program.**

4(p) Series 1995-1 Supplement dated as of March 14, 1995, to the Master
Trust Indenture and Security Agreement dated as of March 14, 1995,
among Stone Receivables Corporation, the Company, as Servicer, Marine
Midland Bank, as Trustee, and Bankers Trust Company, as Administrative
Agent, relating to the accounts receivable securitization program.**

Indentures with respect to other long-term debt, none of which exceeds
10 percent of the total assets of the Company and its subsidiaries on
a consolidated basis, are not attached. (The Registrant agrees to
furnish a copy of such documents to the Commission upon request).
</TABLE>

- ---------
** Filed herewith

24
<PAGE>

<TABLE>
<C> <S>
4(q) Guaranty, dated October 7, 1983, between the Company and The
Continental Group, Inc., filed as Exhibit 4(h) to the Company's
Registration Statement on Form S-3, Registration Number 33-36218, is
hereby incorporated by reference.

10(a) Management Incentive Plan, filed as Exhibit 10(b) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1980, is
hereby incorporated by reference.*

10(b) Unfunded Deferred Director Fee Plan, filed as Exhibit 10(d) to the
Company's Annual Report on Form 10-K for the year ended December 31,
1981, is hereby incorporated by reference.*

10(c) Form of "Stone Container Corporation Compensation Agreement" between
the Company and its directors that elect to participate, filed as
Exhibit 10(e) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1988, is hereby incorporated by reference.*

10(d) Stone Container Corporation 1982 Incentive Stock Option Plan, filed as
Appendix A to the Prospectus included in the Company's Form S-8
Registration Statement, Registration Number 2-79221, effective
September 27, 1982, is hereby incorporated by reference.*

10(e) Stone Container Corporation 1993 Stock Option Plan, filed as Appendix
A to the Company's Proxy Statement dated as of April 10, 1992, is
hereby incorporated by reference.*

10(f) Stone Container Corporation Deferred Income Savings Plan, conformed to
reflect amendment effective as of January 1, 1990, filed as Exhibit
4(i) to the Company's Form S-8 Registration Statement, Registration
Number 33-33784, filed March 9, 1990, is hereby incorporated by
reference.*

10(g) Form of "Employee Continuity Agreement in the Event of a Change of
Control" entered into with all officers with 5 or more years of
service with the Company, filed as Exhibit 10(j) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1988, is
hereby incorporated by reference.*

10(h) Stone Container Corporation 1986 Long-Term Incentive Program, filed as
Exhibit A to the Company's Proxy Statement dated as of April 5, 1985,
is hereby incorporated by reference.*

10(i) Stone Container Corporation 1992 Long-Term Incentive Program, filed as
Exhibit A to the Company's Proxy Statement dated as of April 11, 1991,
is hereby incorporated by reference.*

10(j) Supplemental Retirement Income Agreement between Company and James
Doughan dated as of February 10, 1989, filed as Exhibit 10(q) to the
Company's Annual Report on Form 10-K for the year ended December 31,
1988, is hereby incorporated by reference.*

10(k) Stone Container Corporation 1995 Long-term Incentive Plan, filed as
Exhibit A to the Company's Proxy Statement dated as of April 7, 1995,
is hereby incorporated by reference.*

10(l) Stone Container Corporation 1995 Key Executive Officer Short-term
Incentive Plan, filed as Exhibit B to the Company's Proxy Statement
dated as of April 7, 1995, is hereby incorporated by reference.*

11 Computation of Primary and Fully Diluted Net Income (Loss) Per Common
Share.**

12 Computation of Ratios of Earnings to Fixed Charges.**

21 Subsidiaries of the Company.**

27 Financial Data Schedule.**
<FN>
- ---------
* Management contract or compensatory plan or arrangement
** Filed herewith
</TABLE>

25
<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

<TABLE>
<S> <C> <C>
STONE CONTAINER CORPORATION

By: ROGER W. STONE
------------------------------------------------------- March 27, 1996
Roger W. Stone
CHAIRMAN OF THE BOARD OF DIRECTORS AND PRESIDENT
(CHIEF EXECUTIVE OFFICER)

RANDOLPH C. READ
------------------------------------------------------- March 27, 1996
Randolph C. Read
SENIOR VICE PRESIDENT
(CHIEF FINANCIAL AND PLANNING OFFICER)

THOMAS P. CUTILLETTA
------------------------------------------------------- March 27, 1996
Thomas P. Cutilletta
SENIOR VICE PRESIDENT, ADMINISTRATION AND CORPORATE CONTROLLER (PRINCIPAL
ACCOUNTING OFFICER)
</TABLE>

26
<PAGE>
SIGNATURES--(CONTINUED)

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

<TABLE>
<S> <C>
WILLIAM F. ALDINGER, III JERRY K. PEARLMAN
- ------------------------------------------ ------------------------------------------
William F. Aldinger, III Jerry K. Pearlman
DIRECTOR March 27, 1996 DIRECTOR March 27, 1996

RICHARD A. GIESEN RICHARD J. RASKIN
- ------------------------------------------ ------------------------------------------
Richard A. Giesen Richard J. Raskin
DIRECTOR March 27, 1996 DIRECTOR March 27, 1996

JAMES J. GLASSER ALAN STONE
- ------------------------------------------ ------------------------------------------
James J. Glasser Alan Stone
DIRECTOR March 27, 1996 DIRECTOR March 27, 1996

JACK M. GREENBERG AVERY J. STONE
- ------------------------------------------ ------------------------------------------
Jack M. Greenberg Avery J. Stone
DIRECTOR March 27, 1996 DIRECTOR March 27, 1996

GEORGE D. KENNEDY IRA N. STONE
- ------------------------------------------ ------------------------------------------
George D. Kennedy Ira N. Stone
DIRECTOR March 27, 1996 DIRECTOR March 27, 1996

HOWARD C. MILLER, JR. JAMES H. STONE
- ------------------------------------------ ------------------------------------------
Howard C. Miller, Jr. James H. Stone
DIRECTOR March 27, 1996 DIRECTOR March 27, 1996

JOHN D. NICHOLS ROGER W. STONE
- ------------------------------------------ ------------------------------------------
John D. Nichols Roger W. Stone
DIRECTOR March 27, 1996 DIRECTOR March 27, 1996
</TABLE>

27
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

<TABLE>
<CAPTION>
ITEM: PAGE
- ---------------------------------------------------------------------- -----
<S> <C>
Financial Statements:
Management's Responsibility for the Financial Statements............ 29
Report of Independent Accountants................................... 30
Consolidated Statements of Operations............................... 31
Consolidated Balance Sheets......................................... 32
Consolidated Statements of Cash Flows............................... 33
Consolidated Statements of Stockholders' Equity..................... 34
Notes to the Consolidated Financial Statements...................... 35

Financial Statement Schedules:
Report of Independent Accountants on Financial Statement Schedule... 55
Consent of Independent Accountants.................................. 56
Valuation and Qualifying Accounts and Reserves (Schedule II)........ 57
</TABLE>

28
<PAGE>
Management's Responsibility for the Financial Statements

The management of Stone Container Corporation is responsible for insuring that
the financial statements and other information in this report give a fair and
accurate financial picture of the Company. In preparing this material, we make
informed judgments and estimates that conform with generally accepted accounting
principles.

We have developed a system of internal controls which is designed to provide
reasonable assurance that the books and records accurately reflect the
transactions of the Company and that the Company's established policies and
procedures are followed properly. The concept of reasonable assurance recognizes
that the cost of a control procedure should not exceed the expected benefits.
Our system is augmented by written policies and procedures, a comprehensive
internal audit program, and the selection and training of qualified personnel.

The Company engages Price Waterhouse LLP, who are responsible for performing an
independent audit of the financial statements. Their report, which appears
herein, is based on obtaining an understanding of the Company's accounting
systems and procedures to the extent required by generally accepted auditing
standards and testing them as they deem necessary.

An audit committee of Stone Container's directors, who are not employees of the
Company, meet periodically to review internal financial controls and procedures.
The audit committee and our independent accountants have unrestricted access to
each other, with or without the presence of management representatives.

ROGER W. STONE
Chairman of the Board of Directors and President
(Chief Executive Officer)

RANDOLPH C. READ
Senior Vice President
(Chief Financial and Planning Officer)

THOMAS P. CUTILLETTA
Senior Vice President, Administration and Corporate Controller
(Principal Accounting Officer)

29
<PAGE>
Report of Independent Accountants

To the Board of Directors
and Stockholders of
Stone Container Corporation

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of cash flows and of stockholders' equity
present fairly, in all material respects, the financial position of Stone
Container Corporation and its subsidiaries at December 31, 1995 and 1994, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1995, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

As discussed in Note 1 to the consolidated financial statements, the Company
changed its methods of accounting for postretirement benefits other than
pensions and for postemployment benefits effective January 1, 1993 and 1994,
respectively.

PRICE WATERHOUSE LLP

Chicago, Illinois
February 5, 1996

30
<PAGE>
STONE CONTAINER CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions except per share)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
SALES
Net sales................................................................ $ 7,351.2 $ 5,748.7 $ 5,059.6
---------- ---------- ----------
COST AND EXPENSES
Cost of products sold.................................................... 5,168.9 4,564.3 4,223.5
Selling, general and administrative expenses............................. 608.5 568.2 512.2
Depreciation and amortization............................................ 371.8 358.9 346.8
Equity (income) loss from affiliates..................................... (19.9) 7.7 11.7
Other operating (income) expense--net.................................... -- (34.4) 4.7
Other (income) expense--net.............................................. (33.1) (8.9) (2.7)
---------- ---------- ----------
Income (loss) before interest expense, income taxes, minority interest,
extraordinary charges and cumulative effects of accounting changes...... 1,255.0 292.9 (36.6)
Interest expense......................................................... (460.3) (456.0) (426.7)
---------- ---------- ----------
Income (loss) before income taxes, minority interest, extraordinary
charges and cumulative effects of accounting changes.................... 794.7 (163.1) (463.3)
(Provision) credit for income taxes...................................... (320.9) 35.5 147.7
Minority interest........................................................ (29.3) (1.2) (3.6)
---------- ---------- ----------
NET INCOME (LOSS)
Income (loss) before extraordinary charges and cumulative effects of
accounting changes...................................................... 444.5 (128.8) (319.2)
Extraordinary charges from early extinguishments of debt (net of income
tax benefits)........................................................... (189.0) (61.6) --
Cumulative effects of accounting changes (net of income tax benefits).... -- (14.2) (39.5)
---------- ---------- ----------
Net income (loss)........................................................ 255.5 (204.6) (358.7)
Preferred stock dividends................................................ (8.1) (8.1) (8.1)
Redemption premium of redeemable preferred stock of a consolidated
affiliate............................................................... -- (4.0) --
---------- ---------- ----------
Net income (loss) applicable to common shares............................ $ 247.4 $ (216.7) $ (366.8)
---------- ---------- ----------
---------- ---------- ----------
PER SHARE OF COMMON STOCK:
PRIMARY:
Income (loss) before extraordinary charges and cumulative effects of
accounting changes...................................................... $ 4.64 $ (1.60) $ (4.59)
Extraordinary charges from early extinguishments of debt................. (2.01) (.70) --
Cumulative effects of accounting changes................................. -- (.16) (.56)
---------- ---------- ----------
Net income (loss)........................................................ $ 2.63 $ (2.46) $ (5.15)
---------- ---------- ----------
---------- ---------- ----------
FULLY DILUTED:
Income (loss) before extraordinary charges and cumulative effects of
accounting changes...................................................... $ 3.89 $ * $ *
Extraordinary charges from early extinguishments of debt................. (1.65) * *
Cumulative effects of accounting changes................................. -- * *
---------- ---------- ----------
Net income (loss)........................................................ $ 2.24 $ * $ *
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

- ---------
* Fully diluted earnings per share not applicable because the amounts are
anti-dilutive.

The accompanying notes are an integral part of these statements.

31
<PAGE>
STONE CONTAINER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in millions)

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1994
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................................................. $ 40.3 $ 108.6
Accounts and notes receivable (less allowances of $22.1 and $20.2).................................... 743.0 824.5
Inventories........................................................................................... 733.3 673.1
Other................................................................................................. 166.3 210.7
---------- ----------
Total current assets................................................................................ 1,682.9 1,816.9
---------- ----------
Property, plant and equipment......................................................................... 4,750.0 5,465.5
Accumulated depreciation and amortization............................................................. (2,114.2) (2,106.5)
---------- ----------
Property, plant and equipment--net.................................................................. 2,635.8 3,359.0
Timberlands........................................................................................... 57.7 75.1
Goodwill.............................................................................................. 545.5 860.2
Investment in non-consolidated affiliates............................................................. 1,096.2 345.8
Other................................................................................................. 380.8 547.9
---------- ----------
Total assets........................................................................................ $ 6,398.9 $ 7,004.9
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...................................................................................... $ 347.9 $ 328.0
Current maturities of senior and subordinated long-term debt.......................................... 27.1 276.1
Notes payable and current maturities of non-recourse debt of consolidated affiliates.................. 29.3 36.5
Income taxes.......................................................................................... .8 35.2
Accrued and other current liabilities................................................................. 296.6 355.7
---------- ----------
Total current liabilities........................................................................... 701.7 1,031.5
---------- ----------
Senior long-term debt................................................................................. 2,807.3 2,488.5
Subordinated debt..................................................................................... 809.2 1,159.6
Non-recourse debt of consolidated affiliates.......................................................... 268.6 783.8
Other long-term liabilities........................................................................... 313.0 290.2
Deferred taxes........................................................................................ 493.1 381.4
Minority interest..................................................................................... .7 221.8
Commitments and contingencies (Note 17)...............................................................
Stockholders' equity:
Series E preferred stock.............................................................................. 115.0 115.0
Common stock (99.1 and 90.4 shares outstanding)....................................................... 953.1 849.1
Retained earnings (accumulated deficit)............................................................... 97.8 (96.3)
Foreign currency translation adjustment............................................................... (156.9) (215.2)
Unamortized expense of restricted stock plan.......................................................... (3.7) (4.5)
---------- ----------
Total stockholders' equity.......................................................................... 1,005.3 648.1
---------- ----------
Total liabilities and stockholders' equity.......................................................... $ 6,398.9 $ 7,004.9
---------- ----------
---------- ----------
</TABLE>

The accompanying notes are an integral part of these statements.

32
<PAGE>
STONE CONTAINER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1995 1994 1993
--------- ----------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)............................................................................ $ 255.5 $ (204.6) $ (358.7)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating
activities:
Depreciation and amortization............................................................ 371.8 358.9 346.8
Deferred taxes........................................................................... 213.6 (54.6) (133.9)
Foreign currency transaction (gains) losses.............................................. (8.1) 15.8 11.8
Payment on settlement of interest-rate swaps............................................. -- -- (33.0)
Extraordinary charges from early extinguishments of debt................................. 189.0 61.6 --
Cumulative effects of accounting changes................................................. -- 14.2 39.5
Other--net............................................................................... 82.2 (13.6) (5.7)
Changes in current assets and liabilities--net of adjustments for acquisitions and
dispositions:
(Increase) decrease in accounts and notes receivable--net................................ (80.8) (175.7) 44.9
(Increase) decrease in inventories....................................................... (145.5) 29.7 28.9
(Increase) decrease in other current assets.............................................. 21.7 (45.9) (9.3)
Increase (decrease) in accounts payable and other current liabilities.................... 62.3 86.5 (60.4)
--------- ----------- ---------
Net cash provided by (used in) operating activities.......................................... 961.7 72.3 (129.1)
--------- ----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Debt repayments.............................................................................. (826.3) (1,655.8) (698.1)
Payments by consolidated affiliates on non-recourse debt..................................... (146.1) (429.3) (55.0)
Borrowings................................................................................... 515.8 1,871.0 527.8
Non-recourse borrowings of consolidated affiliates........................................... 4.2 8.4 400.6
Proceeds from issuance of common stock....................................................... 1.7 276.3 --
Proceeds from issuance of common stock of a consolidated subsidiary.......................... -- -- 161.8
Redemption of redeemable preferred stock of a consolidated affiliate......................... -- (52.6) --
Refund of letter of credit................................................................... -- 13.5 --
Proceeds from the settlement of cross currency swaps......................................... -- -- 67.9
Cash dividends............................................................................... (41.5) (8.1) (4.0)
--------- ----------- ---------
Net cash (used in) provided by financing activities.......................................... (492.2) 23.4 401.0
--------- ----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures......................................................................... (386.5) (232.6) (149.7)
Payments made for businesses acquired........................................................ (56.7) (24.5) (.1)
Proceeds from sales of assets................................................................ 20.3 36.5 106.0
Effect on cash of de-consolidation of Stone-Consolidated..................................... (113.1) -- --
Other--net................................................................................... (9.1) (14.4) (40.7)
--------- ----------- ---------
Net cash used in investing activities........................................................ (545.1) (235.0) (84.5)
--------- ----------- ---------
Effect of exchange rate changes on cash...................................................... 7.3 .5 1.1
--------- ----------- ---------
NET CASH FLOWS
Net increase (decrease) in cash and cash equivalents......................................... (68.3) (138.8) 188.5
Cash and cash equivalents, beginning of period............................................... 108.6 247.4 58.9
--------- ----------- ---------
Cash and cash equivalents, end of period..................................................... $ 40.3 $ 108.6 $ 247.4
--------- ----------- ---------
--------- ----------- ---------
</TABLE>

- ---------
See Note 4 regarding non-cash financing and investing activities and
supplemental cash flow information.

The accompanying notes are an integral part of these statements.

33
<PAGE>
STONE CONTAINER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in millions except per share)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1995 1994 1993
--------------- --------------- ----------------
AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
------- ------ ------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
PREFERRED STOCK
Balance at January 1 and December 31.................................. $ 115.0 4.6 $ 115.0 4.6 $ 115.0 4.6
------ ------ ------
------ ------ ------
COMMON STOCK
Balance at January 1.................................................. 849.1 90.4 574.3 71.2 645.7 71.0
Issuance of common stock:
Debt conversions.................................................... 180.4 8.5 -- -- -- --
Public offering..................................................... -- -- 276.3 19.0 -- --
Exercise of stock options........................................... 1.8 .1 .1 -- .1 --
Restricted stock plan............................................... 2.0 .1 2.4 .2 2.9 .2
Redemption premium of redeemable preferred stock of a consolidated
affiliate.......................................................... -- -- (4.0) -- -- --
Subsidiary issuance of stock.......................................... (80.2) -- -- -- (74.4) --
------- ------ ------- ------ -------- ------
Balance at December 31................................................ 953.1 99.1 849.1 90.4 574.3 71.2
------- ------ ------- ------ -------- ------
------ ------ ------
RETAINED EARNINGS (ACCUMULATED DEFICIT)
Balance at January 1.................................................. (96.3) 101.6 496.0
Net income (loss)..................................................... 255.5 (204.6) (358.7)
Cash dividends:
Preferred stock*.................................................... (12.1) (8.1) (4.0)
Common stock*....................................................... (29.4) -- --
Decrease (increase) in minimum pension liability in excess of
unrecognized prior service cost...................................... (19.9) 14.8 (31.7)
------- ------- --------
Balance at December 31................................................ 97.8 (96.3) 101.6
------- ------- --------
FOREIGN CURRENCY TRANSLATION ADJUSTMENT
Balance at January 1.................................................. (215.2) (179.0) (149.3)
Adjustment from translation of foreign currency statements............ 58.3 (36.2) (29.7)
------- ------- --------
Balance at December 31................................................ (156.9) (215.2) (179.0)
------- ------- --------
UNAMORTIZED EXPENSE OF RESTRICTED STOCK PLAN
Balance at January 1.................................................. (4.5) (4.8) (4.7)
Issuance of shares.................................................... (2.0) (2.4) (2.9)
Amortization of expense............................................... 2.8 2.7 2.8
------- ------- --------
Balance at December 31................................................ (3.7) (4.5) (4.8)
------- ------- --------
Total stockholders' equity at December 31............................. $1,005.3 $ 648.1 $ 607.1
------- ------- --------
------- ------- --------
</TABLE>

- ---------
* Cash dividends paid on common stock were $.30 per share in 1995. No cash
dividends on common stock were paid in 1994 or in 1993. Cash dividends paid on
preferred stock were $2.625 per share in 1995, $1.75 per share in 1994 and
$.875 per share in 1993.

The accompanying notes are an integral part of these statements.

34
<PAGE>
STONE CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION:

The consolidated financial statements include the accounts of the Company
and all subsidiaries that are more than 50 percent owned. All significant
intercompany accounts and transactions have been eliminated. Investments in
non-consolidated affiliated companies are primarily accounted for by the equity
method. The consolidated financial statements are prepared in conformity with
generally accepted accounting principles which require the use of management
estimates. Changes in such estimates may affect amounts reported in future
periods.

PER SHARE DATA:

Net income (loss) per common share is computed by dividing the net income
(loss) applicable to common shares by the weighted average number of common
shares outstanding during each year. The weighted average number of common
shares outstanding on a primary basis was 94,131,569 in 1995, 88,195,190 in 1994
and 71,162,646 in 1993.

Net income per fully diluted common share is computed after making the
necessary adjustments to net income and to the weighted average number of common
shares outstanding to reflect the assumed conversion of any dilutive convertible
securities not considered common stock equivalents. The weighted average number
of common shares outstanding on a fully diluted basis in 1995 was 114,674,021.

RECLASSIFICATIONS:

Certain prior year amounts have been reclassified to conform with the
current year presentation in the Consolidated Balance Sheets and Consolidated
Statements of Cash Flows.

CASH AND CASH EQUIVALENTS:

The Company considers all highly liquid short-term investments with original
maturities of three months or less to be cash equivalents and, therefore,
includes such investments as cash and cash equivalents in its financial
statements.

INVENTORIES:

Inventories are stated at the lower of cost or market. The primary methods
used to determine inventory costs are the last-in-first-out ("LIFO") method and
the average cost method.

PROPERTY, PLANT, EQUIPMENT AND DEPRECIATION:

Property, plant and equipment is stated at cost. Expenditures for
maintenance and repairs are charged to income as incurred. Additions,
improvements and major replacements are capitalized. The cost and accumulated
depreciation related to assets sold or retired are removed from the accounts and
any gain or loss is credited or charged to income.

For financial reporting purposes, depreciation and amortization is provided
on the straight-line method over the estimated useful lives of depreciable
assets, or over the duration of the lease for certain capitalized leases, based
on the following annual rates:

<TABLE>
<CAPTION>
TYPE OF ASSET RATES
- --------------------------------------------- -------------
<S> <C>
Machinery and equipment...................... 5% to 33%
Buildings and leasehold improvements......... 2% to 10%
Land improvements............................ 4% to 7%
</TABLE>

TIMBERLANDS:

Timberlands are stated at cost less accumulated cost of timber harvested.
The Company amortizes its private fee timber costs over the estimated total
fibre that will be available during the estimated growth cycle. Cost of non-fee
timber harvested is determined on the basis of timber removal rates and the
estimated volume of recoverable timber. The Company capitalizes interest costs
related to pre-merchantable timber.

GOODWILL AND OTHER ASSETS:

Goodwill is amortized on a straight-line basis over 40 years and is recorded
net of accumulated amortization of approximately $116 million and $147 million
at December 31, 1995 and 1994, respectively. The Company assesses at

35
<PAGE>
STONE CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
each balance sheet date whether there has been a permanent impairment in the
value of goodwill. This is accomplished by determining whether projected
undiscounted future cash flows from operations exceed the net book value of
goodwill as of the assessment date. Such projections reflect price, volume and
cost assumptions.

Deferred debt issuance costs are amortized over the expected life of the
related debt using the interest method. Start-up costs on major projects are
capitalized and amortized over a five-year period. Other long-term assets
include approximately $47 million and $68 million of unamortized deferred
start-up costs at December 31, 1995 and 1994, respectively.

SUBSIDIARY ISSUANCE OF STOCK:

When a subsidiary issues stock, the Company records the difference relating
to the carrying amount per share and the issuance price per share as an
adjustment to common stock in those instances in which the Company has
determined that the difference does not represent a permanent impairment.

FOREIGN CURRENCY TRANSLATION:

The functional currency for the Company's foreign operations is the
applicable local currency. Accordingly, assets and liabilities are translated at
the exchange rate in effect at the balance sheet date, and income and expenses
are translated at average exchange rates prevailing during the year. Translation
gains or losses are accumulated as a separate component of stockholders' equity
entitled Foreign Currency Translation Adjustment. Foreign currency transaction
gains or losses are credited or charged to income.

FOREIGN CURRENCY AND FINANCIAL INSTRUMENTS:

The Company has utilized various financial instruments to reduce certain of
its foreign currency and/or interest rate exposures. The Company does not hold
or issue financial instruments for trading purposes. Premiums received and fees
paid on the financial instruments are deferred and amortized over the period of
the agreements. Gains and losses or interest received and paid on the
instruments are recorded as foreign exchange transaction gains or losses or as
interest in the Consolidated Statements of Operations.

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS:

Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106 and recorded its catch-up accumulated
postretirement benefit obligation (approximately $63 million) by recognizing a
one-time, non-cash charge of $39.5 million, net of income tax benefit, as a
cumulative effect of an accounting change.

POSTEMPLOYMENT BENEFITS:

Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 112 and recorded its catch-up obligation (approximately
$24 million) by recognizing a one-time, non-cash charge of $14.2 million, net of
income tax benefit, as a cumulative effect of an accounting change.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:

In October 1995, the FASB issued Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), which
encourages companies to apply a fair value based method of accounting for
stock-based compensation plans. Alternatively, companies are permitted to apply
the intrinsic value-based method currently prescribed under Accounting
Principles Board Opinion No. 25, provided certain pro forma disclosures are

36
<PAGE>
STONE CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
made. SFAS 123 is required to be adopted in 1996. The Company intends to
continue to apply the intrinsic value-based method of accounting and provide the
pro forma disclosure requirements in the notes to the 1996 consolidated
financial statements.

NOTE 2--ACQUISITIONS/DISPOSITIONS
In November 1995, the Company acquired approximately 32 percent of the
outstanding voting common stock (approximately 21 percent of the total
outstanding common stock) of Venepal, S.A.C.A., a Venezuelan pulp, paper and
paper products company. The Company's investment is accounted for under the
equity method of accounting. Additionally, in 1995 the Company acquired 100
percent of the outstanding common stock of River House Packaging Pty., Ltd.
(which was subsequently renamed Stone Container Australia Pty., Ltd.), an
Australia-based corrugated container company.

In December 1994, the Company acquired an additional 40 percent of the
common stock of Stone Venepal (Celgar) Pulp Inc. ("SVCPI"), previously a 50
percent-owned nonconsolidated affiliate, thereby increasing the Company's
ownership interest to 90 percent. As a result of this transaction, SVCPI is now
accounted for as a consolidated subsidiary. Additionally, this transaction
indirectly increased the Company's ownership interest in the Celgar pulp mill
located in Castlegar, British Columbia, from 25 percent to 45 percent, as SVCPI
has a 50 percent joint venture interest in the Celgar pulp mill. In December
1993, the Company sold its 49 percent equity interest in Empaques de Carton
Titan.

NOTE 3--SUBSIDIARY ISSUANCE OF STOCK
On November 1, 1995, Stone-Consolidated Corporation, a Canadian subsidiary
of the Company, amalgamated its operations (the "Amalgamation") with Rainy River
Forest Products Inc. ("Rainy River"), a Toronto-based Canadian pulp and paper
company. The combination of Stone-Consolidated Corporation and Rainy River to
form the amalgamated entity ("Amalco") was accounted for as the acquisition of
Rainy River by Stone-Consolidated Corporation. Therefore, the purchase method of
accounting was used by Stone-Consolidated Corporation to account for the
business combination. Amalco will continue under the name of Stone-Consolidated
Corporation ("Stone-Consolidated"). As a result of the issuance of common shares
by Stone-Consolidated associated with the Amalgamation, the Company's equity
ownership in Stone-Consolidated was reduced from 74.6 percent to 46.6 percent.
The Company recorded in 1995 a charge of approximately $80 million to common
stock related to the excess carrying value per common share over the issuance
price per common share associated with the shares issued. Effective November 1,
1995, the Company began reporting Stone-Consolidated as a non-consolidated
affiliate in accordance with the equity method of accounting.

In December 1993, Stone-Consolidated Corporation, then a newly created
Canadian subsidiary, acquired the newsprint and uncoated groundwood papers
business of Stone Container (Canada) Inc. and sold $346.5 million of units in an
initial public offering comprised of both common stock and convertible
subordinated debentures (the "Units Offering"). As a result of the Units
Offering, the Company recorded in 1993 a charge of approximately $74 million to
common stock related to the excess carrying value per common share over the
issuance price per common share associated with the shares issued.

37
<PAGE>
STONE CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 4--ADDITIONAL CASH FLOW STATEMENT INFORMATION
The Company's non-cash investing and financing activities and cash payments
(receipts) for interest and income taxes were as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
(IN MILLIONS) 1995 1994 1993
- ---------------------------------------------------------------------- ------- ------- -------
<S> <C> <C> <C>
Issuance of common stock as partial consideration to extinguish
debt................................................................. $ 180.4 $ -- $ --
Assumption of non-recourse debt of affiliates......................... 15.0 115.0 --
Capital lease obligations incurred.................................... 2.3 2.4 .3
Short-term note receivable recorded as partial consideration from sale
of an investment..................................................... -- 7.8 --
Preferred stock dividends issued by a consolidated affiliate.......... -- -- 6.0
Conversion of investment in an affiliate into a note receivable....... -- 3.2 --
Note receivable received from sale of assets.......................... -- 1.3 --
------- ------- -------
------- ------- -------
Cash paid (received) during the year for:
Interest (net of capitalization).................................... $ 443.7 $ 373.7 $ 375.9
Income taxes (net of refunds)....................................... 125.5 (4.1) (11.7)
------- ------- -------
------- ------- -------
</TABLE>

In 1995, the other-net component of net cash provided from operating
activities included minority interest expense of $29.3 million.

NOTE 5--INVENTORIES
Inventories are summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
(IN MILLIONS) 1995 1994
- ------------------------------------------------------------ ------- -------
<S> <C> <C>
Raw materials and supplies.................................. $ 287.5 $ 306.9
Paperstock.................................................. 358.8 263.4
Work in process............................................. 23.1 21.4
Finished products........................................... 123.1 116.1
------- -------
792.5 707.8
Excess of current cost over LIFO inventory value............ (59.2) (34.7)
------- -------
Total inventories........................................... $ 733.3 $ 673.1
------- -------
------- -------
</TABLE>

Inventories costed by the LIFO, FIFO and average cost methods represented
approximately 42 percent, 8 percent and 50 percent, respectively, of total
inventories at December 31, 1995 and approximately 42 percent, 7 percent and 51
percent, respectively, of total inventories at December 31, 1994.

NOTE 6--PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
(IN MILLIONS) 1995 1994
- ------------------------------------------------------------ --------- ---------
<S> <C> <C>
Machinery and equipment..................................... $ 3,888.4 $ 4,554.1
Buildings and leasehold improvements........................ 630.7 687.0
Land and land improvements.................................. 107.0 102.0
Construction in progress.................................... 123.9 122.4
--------- ---------
Total property, plant and equipment......................... 4,750.0 5,465.5
Accumulated depreciation and amortization................... (2,114.2) (2,106.5)
--------- ---------
Total property, plant and equipment--net.................... $ 2,635.8 $ 3,359.0
--------- ---------
--------- ---------
</TABLE>

38
<PAGE>
STONE CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 6--PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Property, plant and equipment includes capitalized leases of $10.5 million
and $13.8 million and related accumulated amortization of $7.0 million and $5.3
million at December 31, 1995 and 1994, respectively.

NOTE 7--SUMMARIZED FINANCIAL INFORMATION OF NON-CONSOLIDATED AFFILIATES

At December 31, 1995, the Company's share of the total combined assets of
its non-consolidated affiliates accounted for under the equity method of
accounting were greater than 10 percent of the Company's consolidated total
assets. Therefore, summarized 1995 financial information for these
non-consolidated affiliates is presented below. At December 31, 1994 and 1993,
combined financial information of the Company's non-consolidated affiliates did
not meet the required thresholds and therefore summarized financial information
is not presented.

Combined summarized financial information for the Company's non-consolidated
affiliates which are 50 percent or less owned and accounted for under the equity
method of accounting is as follows:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
(IN MILLIONS) 1995
- ---------------------------------------------------------------------------------------------- -------------
<S> <C>
Results of operations:
Net sales................................................................................... $ 1,472.9
Income before extraordinary charges......................................................... 68.5
Net income.................................................................................. 46.1
-------------
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
(IN MILLIONS) 1995
- ---------------------------------------------------------------------------------------------- -------------
<S> <C>
Financial position:
Current assets.............................................................................. $ 924.8
Non-current assets.......................................................................... 3,102.7
Current liabilities......................................................................... 619.6
Non-current liabilities..................................................................... 794.8
Stockholders' equity........................................................................ 2,613.1
-------------
</TABLE>

NOTE 8--INCOME TAXES

The Company provides for income taxes in accordance with the liability
method of accounting for income taxes. Under the liability method, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.

The (provision) credit for income taxes consists of the following:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
(IN MILLIONS) 1995 1994 1993
- -------------------------------------------------- -------- ------- --------
<S> <C> <C> <C>
Currently (payable) refundable:
Federal......................................... $ (59.6) $ -- $ 28.4
State........................................... (10.5) (1.1) (4.0)
Foreign......................................... (37.2) (18.0) (10.6)
-------- ------- --------
(107.3) (19.1) 13.8
Deferred:
Federal......................................... (80.9) 45.3 45.4
State........................................... (26.2) 1.1 31.3
Foreign......................................... (106.5) 8.2 57.2
-------- ------- --------
(213.6) 54.6 133.9
-------- ------- --------
Total (provision) credit for income taxes......... $ (320.9) $ 35.5 $ 147.7
-------- ------- --------
-------- ------- --------
</TABLE>

39
<PAGE>
STONE CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 8--INCOME TAXES (CONTINUED)
The income tax (provision) credit at the federal statutory rate is
reconciled to the (provision) credit for income taxes as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
(IN MILLIONS) 1995 1994 1993
- ---------------------------------------------------------------------- -------- ------- --------
<S> <C> <C> <C>
Federal income tax (provision) credit at federal statutory rate....... $ (278.1) $ 57.1 $ 162.2
Additional (taxes) credits resulting from:
Non-deductible depreciation and amortization of intangibles......... (8.8) (9.0) (9.5)
Expenses not deductible in foreign jurisdictions.................... -- (4.3) (.7)
Foreign statutory rate (increase) decreases......................... -- (1.8) 11.2
U.S. statutory rate increase........................................ -- -- (8.7)
State income taxes, net of federal income tax effect................ (23.8) -- 17.7
Minimum taxes-foreign jurisdictions................................. (7.8) (5.8) (3.6)
Other-net........................................................... (2.4) (.7) (20.9)
-------- ------- --------
(Provision) credit for income taxes................................... $ (320.9) $ 35.5 $ 147.7
-------- ------- --------
-------- ------- --------
</TABLE>

The components of the net deferred tax liability as of December 31, 1995 and
1994 were as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
(IN MILLIONS) 1995 1994
- ---------------------------------------------------------------------- -------- --------
<S> <C> <C>
Deferred tax assets:
Carryforwards....................................................... $ 127.3 $ 280.5
Compensation-related accruals....................................... 39.5 49.1
Extraordinary charges from early extinguishments of debt............ 4.9 35.9
Reserves............................................................ 43.7 38.3
Deferred gain....................................................... 23.0 24.8
Other............................................................... 27.3 21.8
-------- --------
265.7 450.4
Valuation allowance................................................... (1.2) (1.2)
-------- --------
Total deferred tax asset.............................................. 264.5 449.2
Deferred tax liabilities:
Depreciation and amortization....................................... (652.1) (715.2)
Start-up costs...................................................... (11.5) (20.7)
LIFO reserve........................................................ (15.8) (19.6)
Pension............................................................. (7.8) (16.0)
Other............................................................... (54.2) (52.6)
-------- --------
Total deferred tax liability.......................................... (741.4) (824.1)
-------- --------
Deferred tax liability--net........................................... $ (476.9) $ (374.9)
-------- --------
-------- --------
</TABLE>

The components of the income (loss) before income taxes, minority interest,
extraordinary charges and cumulative effects of accounting changes are:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
(IN MILLIONS) 1995 1994 1993
- ---------------------------------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
United States......................................................... $ 455.8 $ (126.6) $ (310.8)
Foreign............................................................... 338.9 (36.5) (152.5)
-------- -------- --------
Income (loss) before income taxes, minority interest, extraordinary
charges and cumulative effects of accounting changes................. $ 794.7 $ (163.1) $ (463.3)
-------- -------- --------
-------- -------- --------
</TABLE>

At December 31, 1995, the Company had approximately $44 million of net
operating loss carryforwards for U.S. federal tax purposes and, additionally,
approximately $42 million of net operating loss carryforwards for Canadian tax
purposes. To the extent not utilized, the U.S. federal net operating losses will
expire in 2009, and the Canadian net operating losses will expire in 2000.
Further, the Company had approximately $737 million of net operating loss

40
<PAGE>
STONE CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 8--INCOME TAXES (CONTINUED)
carryforwards for U.S. state tax purposes (which represents approximately $39
million of deferred tax assets), which to the extent not utilized, expire in
1996 through 2009. The Company also had approximately $64 million of alternative
minimum tax credit carryforwards for U.S. federal tax purposes which are
available indefinitely.

NOTE 9--PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
The Company has contributory and noncontributory pension plans for the
benefit of most salaried and certain hourly employees. The funding policy for
the plans, with the exception of the Company's salaried supplemental unfunded
plans and the Company's German subsidiary's unfunded plan, is to annually
contribute the statutory required minimum. The salaried pension plans provide
benefits based on a formula that takes into account each participant's estimated
final average earnings. The hourly pension plans provide benefits under a flat
benefit formula. The salaried and hourly plans provide reduced benefits for
early retirement. The salaried plans take into account offsets for governmental
benefits.

Net pension expense for the combined pension plans includes the following
components:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
(IN MILLIONS) 1995 1994 1993
- ---------------------------------------------------------------------- ------- ------- -------
<S> <C> <C> <C>
Service cost--benefits earned during the period....................... $ 17.0 $ 21.5 $ 17.4
Interest cost on projected benefit obligations........................ 63.5 63.5 63.7
Actual return on plan assets.......................................... (100.0) (13.7) (91.9)
Net amortization and deferral......................................... 51.7 (37.5) 40.4
------- ------- -------
Net pension expense................................................... $ 32.2 $ 33.8 $ 29.6
------- ------- -------
------- ------- -------
</TABLE>

The following table sets forth the funded status of the Company's pension
plans and the amounts recorded in the Consolidated Balance Sheets:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------------
1995 1994
------------------------------- -------------------------------
ASSETS EXCEED ACCUMULATED ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS EXCEED ACCUMULATED BENEFITS EXCEED
(IN MILLIONS) BENEFITS ASSETS BENEFITS ASSETS
- -------------------------------------------------- ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits................................. $ (59.5) $ (422.1) $ (167.7) $ (469.1)
Non-vested benefits............................. (2.1) (32.4) (7.3) (40.8)
------------- ------- ------------- -------
Accumulated benefit obligation.................. (61.6) (454.5) (175.0) (509.9)
Effect of increase in compensation levels....... (2.3) (59.6) (19.9) (57.5)
------------- ------- ------------- -------
Projected benefit obligation for service rendered
through December 31.............................. (63.9) (514.1) (194.9) (567.4)
Plan assets at fair value, primarily stocks,
bonds, guaranteed investment contracts, real
estate and mutual funds which invest in listed
stocks
and bonds........................................ 64.4 286.6 192.9 385.2
------------- ------- ------------- -------
Plan assets in excess of (less than) projected
benefits obligation.............................. .5 (227.5) (2.0) (182.2)
Unrecognized prior service cost................... 2.8 22.1 8.3 29.0
Unrecognized net actuarial loss................... 14.4 96.2 36.3 70.8
Adjustment required to recognize minimum
liability........................................ -- (68.3) -- (63.4)
------------- ------- ------------- -------
Net prepaid (accrual)............................. $ 17.7 $ (177.5) $ 42.6 $ (145.8)
------------- ------- ------------- -------
------------- ------- ------------- -------
</TABLE>

The Company has recorded an additional minimum liability for underfunded
plans representing the excess of the unfunded accumulated benefit obligation
over previously recorded liabilities. The additional minimum liability at
December 31, 1995 of $68.3 million is recorded as a long-term liability with an
offsetting intangible asset of $21.6 million and a charge to stockholders'
equity of $29.0 million, net of a tax benefit of $17.7 million. In addition, the
Company

41
<PAGE>
STONE CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 9--PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)
recorded a charge to retained earnings of $4.7 million representing its share of
the charges to retained earnings associated with the additional minimum pension
liabilities recorded by certain non-consolidated affiliates. At December 31,
1994, the additional minimum liability of $63.4 million was recorded as a
long-term liability with an offsetting intangible asset of $25.8 million and a
charge to stockholders' equity of $23.7 million, net of a tax benefit of $13.9
million.

The weighted average discount rates used in determining the actuarial
present value of the projected benefit obligations at December 31, 1995 and 1994
were 7.5 percent and 9.0 percent, respectively. The rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligations was 4.0 percent for 1995 and 1994. The expected
long-term rate of return on assets was 11 percent for 1995 and 1994. The change
in the weighted average discount rates during 1995 had the effect of increasing
the total projected benefit obligation at December 31, 1995 by $89.7 million.

Certain domestic operations of the Company participate in various
multi-employer union-administered defined benefit pension plans that principally
cover production workers. Pension expense under these plans was $5.5 million,
$5.2 million and $5.1 million for 1995, 1994 and 1993, respectively.

In addition to providing pension benefits, the Company provides certain
retiree health care and life insurance benefits covering substantially all U.S.
salaried and hourly employees and certain Canadian employees. Net periodic
postretirement benefit costs for 1995, 1994 and 1993 included the following
components:

<TABLE>
<CAPTION>
(IN MILLIONS) 1995 1994 1993
- ---------------------------------------------------------------- ----- ----- -----
<S> <C> <C> <C>
Service cost-benefits attributed to service during the period... $ .8 $ 1.5 $ 1.0
Interest cost on accumulated postretirement benefit
obligation..................................................... 6.6 6.0 5.5
Net amortization and deferral................................... .7 .9 --
----- ----- -----
Net periodic postretirement benefit cost........................ $ 8.1 $ 8.4 $ 6.5
----- ----- -----
----- ----- -----
</TABLE>

The following table sets forth the components of the Company's accumulated
postretirement benefit obligation and the amount recorded in the Consolidated
Balance Sheets:

<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
------------------------ ---------------------------
(IN MILLIONS) U.S. FOREIGN TOTAL U.S. FOREIGN TOTAL
- ---------------------------------------------------------------------- ----- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Accumulated postretirement benefit obligation:
Retirees............................................................ $31.6 $10.6 $ 42.2 $ 15.9 $21.5 $ 37.4
Active employees--fully eligible.................................... 16.0 .8 16.8 14.7 2.0 16.7
Other active employees.............................................. 15.8 1.2 17.0 14.7 3.7 18.4
----- ------- ------- ------- ------- -------
Total accumulated postretirement benefit obligation................... 63.4 12.6 76.0 45.3 27.2 72.5
Unrecognized net loss................................................. (21.5) (1.2) (22.7) (5.5) (2.1) (7.6)
----- ------- ------- ------- ------- -------
Postretirement benefit obligation..................................... $41.9 $11.4 $ 53.3 $ 39.8 $25.1 $ 64.9
----- ------- ------- ------- ------- -------
----- ------- ------- ------- ------- -------
</TABLE>

The Company has not currently funded any of its accumulated postretirement
benefit obligation.

The discount rates used in determining the accumulated postretirement
benefit obligation were 7.5 percent at December 31, 1995 and 9.0 percent at
December 31, 1994. The change in the discount rate had the effect of increasing
the total accumulated postretirement benefit obligation at December 31, 1995 by
$9.3 million. The assumed health care cost trend rates for substantially all
employees used in measuring the accumulated postretirement benefit obligation
ranged from 7.0 percent to 12.0 percent at December 31, 1995 and 7.0 percent to
13.0 percent at December 31, 1994, decreasing to ultimate rates of 5.5 percent
to 8.0 percent. If the health care cost trend rate assumptions were increased by
1 percent, the total accumulated postretirement benefit obligation at December
31, 1995 and 1994 would have increased by $6.8 million and $5.6 million,
respectively. The effect of a 1 percent increase in the health care cost trend
rate assumptions on the net periodic postretirement benefit costs for 1995 and
1994 would be immaterial.

At December 31, 1995, the Company had approximately 6,800 retirees and
25,900 active employees of which approximately 3,700 and 21,700, respectively,
were employees of U.S. operations.

42
<PAGE>
STONE CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10--LONG-TERM DEBT
Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
(IN MILLIONS) 1995 1994
- ----------------------------------------------------------------------------------------------------------- ---------- ----------
<S> <C> <C>
SENIOR DEBT:
9.875% senior notes due February 1, 2001................................................................... $ 573.7 $ 710.0
10.75% first mortgage notes due October 1, 2002 (less unamortized debt discount of $2.9 and $3.2).......... 497.1 496.8
Term loan (9.2% and 8.6% weighted average rates) payable in nine semiannual installments of $2.0 on April 1
and October 1 of each year through April 1, 1999, $190.0 on October 1, 1999 and $176.0 on April 1, 2000... 380.0 400.0
Additional term loan (9.3% weighted average rate) payable in fourteen semiannual payments of $1.0 on April
1 and October 1 of each year through 2002, $93.0 on April 1, 2003 and $93.0 on October 1, 2003............ 200.0 --
Revolving credit facility (9.4% and 8.3% weighted average rates) due May 15, 1999.......................... 53.0 23.0
11.875% senior notes due December 1, 1998 (less unamortized discount of $.7 and $.9)....................... 239.3 239.1
11.5% senior notes due October 1, 2004 (less unamortized debt discount of $1.3 and $1.4)................... 198.7 198.6
12.625% senior notes due July 15, 1998..................................................................... 150.0 150.0
5.375% to 11.625% fixed rate utility systems and pollution control revenue bonds, payable in varying annual
sinking fund payments through the year 2010 and varying principal payments through the year 2016 (less
unamortized debt discount of $6.4 and $7.2)............................................................... 199.1 206.2
Floating rate receivables-backed notes (6.4% weighted average rate) due December 15, 2000.................. 260.0 --
Obligations under accounts receivable securitization programs (7.0% and 5.6% weighted average rates)....... -- 253.8
4.0% to 7.96% term loans payable in varying amounts through 1999........................................... 31.1 37.2
Other (including obligations under capitalized leases of $10.5 and $9.0)................................... 52.4 49.9
---------- ----------
2,834.4 2,764.6
Less: current maturities................................................................................... (27.1) (276.1)
---------- ----------
Total senior long-term debt.............................................................................. 2,807.3 2,488.5
---------- ----------
SUBORDINATED DEBT:
11.5% senior subordinated notes, payable in two annual sinking fund payments of $57.5 commencing September
1, 1997 and maturing on September 1, 1999 with a lump sum payment of $115.0............................... 230.0 230.0
10.75% senior subordinated debentures maturing on April 1, 2002 (less unamortized debt discount of $.7 and
$.8)...................................................................................................... 199.3 199.2
8.875% convertible senior subordinated notes (convertible at $11.55 per share) maturing on July 15, 2000
(less unamortized debt discount of $.3 and $1.4).......................................................... 59.7 248.6
10.75% senior subordinated notes maturing on June 15, 1997................................................. 150.0 150.0
11.0% senior subordinated notes maturing on August 15, 1999................................................ 125.0 125.0
6.75% convertible subordinated debentures (convertible at $33.94 per share) maturing on February 15,
2007...................................................................................................... 45.2 115.0
12.125% subordinated debentures............................................................................ -- 91.8
---------- ----------
809.2 1,159.6
Less: current maturities................................................................................... -- --
---------- ----------
Total subordinated debt................................................................................ 809.2 1,159.6
---------- ----------
NON-RECOURSE DEBT OF CONSOLIDATED AFFILIATES:
SVCPI credit facilities (7.7% and 7.1% weighted average rates) payable in semiannual installments of $8.5
through July 31, 1998 and $14.2 thereafter through January 31, 2002 with a final payment of $126.5 on
December 31, 2002......................................................................................... 276.6 280.2
Other...................................................................................................... 12.0 532.8
---------- ----------
288.6 813.0
Less: current maturities................................................................................... (20.0) (29.2)
---------- ----------
Total non-recourse debt of consolidated affiliates..................................................... 268.6 783.8
---------- ----------
Total long-term debt....................................................................................... $ 3,885.1 $ 4,431.9
---------- ----------
---------- ----------
</TABLE>

43
<PAGE>
STONE CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 10--LONG-TERM DEBT (CONTINUED)
During the third and fourth quarters of 1995, in separate, independently
negotiated transactions, the Company purchased and retired $190 million
principal amounts of its 8 7/8 percent Convertible Senior Subordinated Notes
(the "Convertible Senior Subordinated Notes"). The aggregate value paid by the
Company to purchase and retire the $190 million Convertible Senior Subordinated
Notes was approximately $370 million comprised of approximately $190 million
cash (which was equal to the face value of the Convertible Senior Subordinated
Notes purchased) and the issuance of approximately 8.5 million shares of common
stock valued at approximately $180 million. The Convertible Senior Subordinated
Notes purchased and retired were convertible into approximately 16.5 million
common shares. Although the Company issued approximately 8.5 million shares of
common stock, total common shares on a fully diluted basis were reduced by
approximately 8 million common shares. Funding for the cash portion of the
purchases of the Convertible Senior Subordinated Notes was financed primarily
from bank borrowings.

Supplemental primary earnings per share before extraordinary charges for the
year ended December 31, 1995 was $4.43 per share of common stock, and
supplemental primary net income per share for the year ended December 31, 1995
was $2.53 per share of common stock, assuming the common stock issued pursuant
to the purchases of the Convertible Senior Subordinated Notes existed as of the
beginning of the year.

In August 1995, the Company and its bank group amended and restated its bank
credit agreement (the "Credit Agreement") to provide for an additional $200
million senior secured term loan facility. The Credit Agreement also consists of
a $400 million senior secured term loan maturing through April 1, 2000 and a
$450 million senior secured revolving credit facility commitment maturing May
15, 1999, which includes a $25 million swing-line sub-facility maturing May 15,
1999 (any borrowings under the swing-line sub-facility would reduce the
borrowing availability under the revolving credit facility). Permitted uses for
the borrowings under the additional term loan were to partially fund the
repurchase of various of the Company's debt securities.

During the second quarter of 1995, the Company repaid all the indebtedness
outstanding under and terminated Seminole's bank credit agreement and redeemed
Seminole's 13 1/2 percent Subordinated Notes aggregating approximately $123
million. The Company had previously acquired the remaining 1 percent of the
common stock of Seminole in March 1995, thereby making it a wholly owned
subsidiary of the Company.

In March 1995, the Company, through its wholly owned subsidiary Stone
Receivables Corporation, completed the refinancing of the obligations relating
to its accounts receivable securitization program with a new $310 million
accounts receivable securitization program consisting of $260 million of
floating-rate notes due in 2000 (the "Notes") together with a five-year $50
million revolving credit facility. In accordance with the program, Stone
Receivables Corporation purchases, on an ongoing basis, certain of the accounts
receivable of the Company. The initial accounts receivable under the program
were purchased with the net proceeds received from the issuance of the Notes.
The purchased accounts receivables are solely the assets of Stone Receivables
Corporation, which is wholly owned but a separate corporate entity of the
Company with its own separate creditors. In the event of a liquidation of Stone
Receivables Corporation, such creditors would be entitled to satisfy their
claims from Stone Receivables Corporation prior to any distribution to the
Company. At December 31, 1995, the Company's Consolidated Balance Sheet included
$302 million of Stone Receivables Corporation accounts receivable under the
program and $260 million of borrowings under the program. At December 31, 1994,
the Company's Consolidated Balance Sheet included $226 million and $100 million,
respectively, of Stone Financial Corporation and Stone Fin II Receivables
Corporation accounts receivable under the program and $188 million and $66
million, respectively, of borrowings under the program.

As a result of certain debt prepayments and repurchases (including the 1995
purchase of $190 million principal amount of Convertible Senior Subordinated
Notes), the Company's results reflect extraordinary charges from the early
extinguishments of debt of $189.0 million (net of income tax benefit of $4.9
million) and $61.6 million (net of income tax benefit of $36.5 million) for 1995
and 1994, respectively.

At December 31, 1995, the $640.6 million of borrowings and accrued interest
outstanding under the Credit Agreement were secured by property, plant and
equipment with a net book value of $1.3 billion, and by a lien on certain of the
Company's inventories. Additionally, other loan agreements with a balance of
$1.1 billion were collateralized by approximately $507.7 million of property,
plant and equipment--net and an investment and by $343.6 million of cash,
accounts receivable and inventories.

44
<PAGE>
STONE CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 10--LONG-TERM DEBT (CONTINUED)
The Company pays a 1/2 percent commitment fee on the unused portions of its
revolving credit facility. The Credit Agreement contains covenants that include,
among other things, the maintenance of certain financial tests and ratios.
Additionally, the term loan portions of the Credit Agreement provide for
mandatory prepayments from sales of certain assets, certain debt financings and
a percentage of excess cash flow (as defined). The Company's bank lenders, at
the Company's optional request, may at their option waive the receipt of certain
mandatory prepayments. In July 1995, the Company received a waiver of its
mandatory prepayments of excess cash flow (as defined) for required payments
under its initial term loan for four quarters beginning with the 1995 second
quarter payment. Any mandatory and voluntary prepayments are allocated against
the term loan amortizations in inverse order of maturity. Mandatory prepayments
from sales of collateral, unless replacement collateral is provided, will be
applied ratably to the term loans and revolving credit facility, permanently
reducing the loan commitments under the Credit Agreement. The Credit Agreement
also contains cross-default provisions to the indebtedness of $10 million or
more of the Company and certain subsidiaries, as well as cross-acceleration
provisions to the non-recourse debt of $10 million or more of SVCPI. At December
31, 1995, SVCPI had approximately $286 million in secured indebtedness owed to
bank lenders, including short-term notes payable. Such debt is solely the
obligation of SVCPI and is without recourse to the Company. The Credit Agreement
allows, under certain specific circumstances, for the Company to make further
investments in SVCPI.

The amounts of long-term debt outstanding at December 31, 1995 maturing
during the next five years are as follows:

<TABLE>
<CAPTION>
(IN MILLIONS)
- ------------------------------------------------------------------------------------------------------
<S> <C>
1996.................................................................................................. $ 43.8
1997.................................................................................................. 259.7
1998.................................................................................................. 487.2
1999.................................................................................................. 532.3
2000.................................................................................................. 532.5
Thereafter............................................................................................ 2,066.2
</TABLE>

Amounts payable under capitalized lease agreements are excluded from the
above tabulation. See Note 12-- "Long-term Leases" for capitalized lease
maturities.

NOTE 11--FINANCIAL INSTRUMENTS
At December 31, 1995 and 1994, the carrying values and fair values of the
Company's financial instruments are listed below:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------
1995 1994
----------------- ------------------
CARRYING FAIR CARRYING FAIR
(IN MILLIONS) AMOUNT VALUE AMOUNT VALUE
- ---------------------------------------- ------- -------- -------- --------
<S> <C> <C> <C> <C>
Notes receivable and long-term
investments............................ $ 112.9 $ 102.9 $ 149.5 $ 138.6
Indebtedness............................ 3,921.6 3,985.3 4,728.2 4,871.2
Interest rate swaps in receivable
(payable) position..................... (.2) (1.9) .4 (33.3)
</TABLE>

The fair values of notes receivable and certain investments are based on
discounted future cash flows or the applicable quoted market price. The fair
value of the Company's debt is estimated based on the quoted market price for
the same or similar issues. The fair value of interest-rate swap agreements are
obtained from dealer quotes. These values represent the estimated amount the
Company would pay to terminate agreements, taking into consideration the current
interest rate and market conditions. The Company does not hold or issue
financial instruments for trading purposes.

The Company is party to two interest-rate swap contracts with a duration of
five and ten years to manage interest rate exposures on $250 million of certain
fixed rate indebtedness. The separate contracts have the effect of converting
the fixed rate of interest into a floating interest rate on $100 million of the
9 7/8 percent Senior Notes and on $150 million of the 11 1/2 percent Senior
Notes. These interest-rate swap contracts were entered into in order to balance
the Company's fixed-rate and floating-rate debt portfolios. Under the
interest-rate swaps, the Company agrees with the other party to exchange, at
specified intervals, the difference between fixed-rate and floating-rate
interest amounts

45
<PAGE>
STONE CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 11--FINANCIAL INSTRUMENTS (CONTINUED)
calculated by reference to an agreed notional principal amount. While the
Company is exposed to credit loss on its interest-rate swaps in the event of
nonperformance by the counterparties to such swaps, management believes that
such nonperformance is unlikely to occur given the financial resources of the
counterparties.

The following table indicates the weighted average receive rate and pay rate
during 1995 relating to the interest-rate swaps outstanding at December 31, 1995
and 1994:

<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Interest-rate swap--notional amount (in
millions).............................. $ 150.0 $ 150.0
Average receive rate (fixed by
contract terms)...................... 5.9% 6.0%
Average pay rate...................... 6.2% 4.4%

Interest-rate swap--notional amount (in
millions).............................. $ 100.0 $ 100.0
Average receive rate (fixed by
contract terms)...................... 5.6% 5.6%
Average pay rate...................... 5.8% 4.5%
</TABLE>

The average pay rate for both interest-rate swaps is the six month LIBOR.

NOTE 12--LONG-TERM LEASES
The Company leases certain of its facilities and equipment under leases
expiring through the year 2023.

Future minimum lease payments under capitalized leases and their present
value at December 31, 1995 and future minimum rental commitments (net of
sublease rental income and exclusive of real estate taxes and other expenses)
under operating leases having initial or remaining non-cancellable terms in
excess of one year are reflected below:

<TABLE>
<CAPTION>
CAPITALIZED OPERATING
(IN MILLIONS) LEASES LEASES
- ---------------------------------------- ------------ ---------
<S> <C> <C>
1996.................................... $ 4.0 $ 76.3
1997.................................... 3.2 68.3
1998.................................... 1.8 57.0
1999.................................... 1.9 47.1
2000.................................... .3 38.1
Thereafter.............................. 1.4 190.6
------ ---------
Total minimum lease payments............ 12.6 $ 477.4
---------
---------
Less: Imputed interest.................. 2.1
------
Present value of future minimum lease
payments............................... $ 10.5
------
------
</TABLE>

Rent expense for operating leases, including leases having a duration of
less than one year, was approximately $103 million in 1995, $87 million in 1994
and $83 million in 1993.

NOTE 13--PREFERRED STOCK
The Company has authorized 10,000,000 shares of Preferred Stock. At December
31, 1995, the Company has issued and outstanding 4.6 million shares of $1.75
Series E Cumulative Convertible Exchangeable Preferred Stock (the "Series E
Cumulative Preferred Stock"), $.01 par value. Shares of preferred stock can be
issued in series with varying terms as determined by the Board of Directors.
Dividends on the Series E Cumulative Preferred Stock are payable quarterly when
declared by the Company's Board of Directors. The Series E Cumulative Preferred
Stock is convertible, at the option of the holder at any time, into shares of
the Company's common stock at a conversion price of $33.94 per share of common
stock, subject to adjustment under certain conditions. The Series E Cumulative
Preferred Stock may alternatively be exchanged, at the option of the Company,
for the Company's 7 percent Convertible Subordinated Exchange Debentures due
February 15, 2007 in a principal amount equal to $25.00 per share of Series E
Cumulative Preferred Stock so exchanged. Additionally, the Series E Cumulative
Preferred Stock is redeemable at the option of the Company, in whole or from
time to time in part, commencing February 16, 1996.

46
<PAGE>
STONE CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 13--PREFERRED STOCK (CONTINUED)
The Company paid cash dividends of $2.625 and $1.75 per share on the Series
E Cumulative Preferred Stock during 1995 and 1994, respectively, bringing the
Company current on its dividend requirements for these securities at December
31, 1995. The declaration of dividends by the Board of Directors is subject to,
among other things, the Company's ability to comply with financial covenants
contained in the Company's Credit Agreement and in its Senior Subordinated
Indenture dated March 15, 1992 (the "Senior Subordinated Indenture") relating to
its 10 3/4 percent Senior Subordinated Notes, its 11 percent Senior Subordinated
Notes and its 10 3/4 percent Senior Subordinated Debentures. In the event the
Company has six quarterly dividends that remain unpaid on the Series E
Cumulative Preferred Stock, the holders of the Series E Cumulative Preferred
Stock would have the right to elect two members to the Company's Board of
Directors until the accumulated dividends on such Series E Cumulative Preferred
Stock have been declared and paid or set apart for payment. Irrespective of the
amount available in the dividend pool under the Credit Agreement, the Credit
Agreement permits dividends to be paid on the Series E Cumulative Preferred
Stock if there is an available dividend pool under the Senior Subordinated
Indenture.

NOTE 14--COMMON STOCK
The Company has authorized 200,000,000 shares of common stock, $.01 par
value, of which 99,135,771 shares were outstanding at December 31, 1995.

In 1995 the Company issued approximately 8.5 million shares of common stock
related to the extinguishment of debt and in 1994 sold approximately 19 million
shares of common stock.

The Company has restrictions on the payment of cash dividends on its common
stock under certain of the Company's Indentures and under its Credit Agreement.
Common stock cash dividends cannot be declared and paid in the event the Company
has any accumulated preferred stock dividend arrearages. On September 13, 1995
and December 13, 1995, the Company paid quarterly cash dividends of $0.15 per
share on its common stock.

STOCK RIGHTS:

Each outstanding share of the Company's common stock carries a stock
purchase right ("Right"). Each Right entitles the holder to purchase from the
Company one one-hundredth of a share of Series D Junior Participating Preferred
Stock, par value $.01 per share, at a purchase price of $130 subject to
adjustment under certain circumstances. The Rights expire August 8, 1998 unless
extended or earlier redeemed by the Company.

The Rights will be exercisable only if a person or group, subject to certain
exceptions, acquires 15 percent or more of the Company's common stock or
announces a tender offer, the consummation of which would result in ownership by
such person or group of 15 percent or more of the Company's common stock. The
Company can redeem the Rights at the rate of $.01 per Right at any time before
the tenth business day (subject to extension) after a 15 percent position is
acquired.

If the Company is acquired in a merger or other business combination
transaction, each Right will entitle its holder (other than the acquiring person
or group) to purchase, at the Right's then-current exercise price, a number of
the acquiring company's shares of common stock having a market value at that
time of twice the Right's then-current exercise price.

In addition, in the event that a 15 percent or greater stockholder acquires
the Company by means of a reverse merger in which the Company and its common
stock survive, or engages in self-dealing transactions with the Company, each
holder of a Right (other than the acquiring person or group) will be entitled to
purchase the number of shares of the Company's common stock having a market
value of twice the then-current exercise price of the Right.

STOCK OWNERSHIP AND OPTION PLANS:

The Company's stockholders approved a Stock Option Plan, effective January
1, 1993 (the "1993 Plan"), which authorized 1,530,000 shares of common stock and
provided for the issuance of either incentive stock options or non-qualified
stock options for the purchase of common shares at prices not less than 100
percent of the market value of such shares on the date of grant. Options granted
under the 1993 Plan are exercisable, in whole or in part, after one year but no
later than ten years from the date of the respective grant. On May 9, 1995, the
stockholders approved the 1995 Long-term Incentive Plan (the "1995 Plan") which
permits the Company to issue incentive stock options, non-qualified stock
options, stock appreciation rights, restricted stock, bonus stock and
performance shares. Under the

47
<PAGE>
STONE CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 14--COMMON STOCK (CONTINUED)
1995 Plan, the annual amount of common stock available for grant, other than for
incentive stock options, will be limited to 1 1/2 percent of the outstanding
shares of common stock as of the beginning of each year plus a carryover from
prior years if such 1 1/2 percent is not granted. In no event shall any stock
options be exercised later than ten years from the respective grant date. No
accounting recognition is given to stock options until they are exercised, at
which time the option price received is credited to common stock.

Transactions under the stock option plans are summarized as follows:

<TABLE>
<CAPTION>
OPTION OPTION PRICE
SHARES PER SHARE
--------- ------------
<S> <C> <C>
Outstanding January 1, 1993............................ 546,031 $ 8.74-29.29
Granted.............................................. -- --
Exercised............................................ -- --
Cancelled............................................ -- --
--------- ------------
Outstanding December 31, 1993.......................... 546,031 8.74-29.29
Granted.............................................. 670,000 13.38
Exercised............................................ (9,691) 8.74-13.38
Cancelled............................................ (162,528) 8.74-29.29
--------- ------------
Outstanding December 31, 1994.......................... 1,043,812 8.74-29.29
Granted.............................................. 1,037,900 18.00-22.13
Exercised............................................ (134,860) 8.74-21.20
Cancelled............................................ (49,890) 13.38-29.29
--------- ------------
Outstanding December 31, 1995.......................... 1,896,962 13.38-29.29
---------
---------
Options exercisable at December 31,
1995................................................. 881,262 13.38-29.29
1994................................................. 395,285 8.74-29.29
Options available for grant at December 31,
1995................................................. 1,227,066
1994................................................. 882,000
</TABLE>

The Company's previous Long-Term Incentive Plan, which had been adopted in
1992 (the "1992 Plan") and provided for contingent awards of restricted shares
of common stock and cash to certain key employees, was replaced by the 1995
Plan. The payment of the cash portion of awards granted under the 1992 Plan will
depend on the extent to which the Company has met certain long-term performance
goals as established by a committee of outside directors. The compensation
related to this program is amortized over the related five-year restricted
periods. The charge (credit) to compensation expense under this plan was $3.8
million, $3.6 million and $(1.2) million for 1995, 1994 and 1993, respectively.
In 1993, prior cash awards that were accrued have been deemed to be not payable
due to the financial results of the Company. Under the 1992 Plan, 1,800,000
shares had been reserved for issuance, of which 133,176, 249,655 and 186,253
shares were granted in 1995, 1994 and 1993, respectively.

NOTE 15--RELATED PARTY TRANSACTIONS
The Company sold paperboard, market pulp and waste paper to various
non-consolidated affiliates. Additionally, the Company purchased kraft paper
from and sold market pulp to Stone-Consolidated. Such transactions were
primarily at market prices. The Company also paid a commission fee to
Stone-Consolidated pursuant to a sales agency agreement expiring December 31,
2004 and paid fees for services rendered by Stone-Consolidated. The amounts
included in the following table include transactions with Stone-Consolidated
since November 1, 1995.

48
<PAGE>
STONE CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15--RELATED PARTY TRANSACTIONS (CONTINUED)
The following table summarizes the Company's related party transactions with
its non-consolidated affiliates for each year presented.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
(IN MILLIONS) 1995 1994 1993
- ---------------------------------------- ------- ------- -------
<S> <C> <C> <C>
Net sales to/(purchases from)........... $ 211.2 $ 147.1 $ 120.3
Net receivable from/(payable to)........ 40.5 37.9 18.2
Commissions and fees for services
rendered............................... 1.1 -- --
</TABLE>

The Company had outstanding loans and interest receivable from a
non-consolidated affiliate of approximately $9.9 million and $4.0 million at
December 31, 1995 and 1994, respectively.

NOTE 16--ADDITIONAL INFORMATION RELATING TO THE CONSOLIDATED FINANCIAL
STATEMENTS

OTHER OPERATING (INCOME) EXPENSE, NET:

The major components of other operating (income) expense--net are as
follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
(IN MILLIONS) 1995 1994 1993
- ---------------------------------------- ------- ------- -------
<S> <C> <C> <C>
Gain from an involuntary conversion at a
paper mill............................. $ -- $ (22.0) $ --
Gains on sales of investments or
assets................................. -- (13.8) (40.7)
Writedown of decommissioned assets...... -- -- 19.2
Writedown of certain receivables to net
realizable value....................... -- -- 14.2
Other................................... -- 1.4 12.0
------- ------- -------
Total other operating (income)
expense--net........................... $ -- $ (34.4) $ 4.7
------- ------- -------
------- ------- -------
</TABLE>

OTHER (INCOME) EXPENSE, NET:

The major components of other (income) expense--net are as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
(IN MILLIONS) 1995 1994 1993
- --------------------------------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Interest income........................................................................ $ (15.5) $ (20.9) $ (11.2)
Foreign currency transaction (gains) losses............................................ (8.1) 15.8 11.8
Other.................................................................................. (9.5) (3.8) (3.3)
--------- --------- ---------
Total other (income) expense--net...................................................... $ (33.1) $ (8.9) $ (2.7)
--------- --------- ---------
--------- --------- ---------
</TABLE>

INTEREST EXPENSE:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
(IN MILLIONS) 1995 1994 1993
- ---------------------------------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Total interest cost incurred............................................................ $ 473.5 $ 460.7 $ 437.5
Interest capitalized.................................................................... (13.2) (4.7) (10.8)
--------- --------- ---------
Interest expense........................................................................ $ 460.3 $ 456.0 $ 426.7
--------- --------- ---------
--------- --------- ---------
</TABLE>

PROVISION FOR DOUBTFUL ACCOUNTS AND NOTES RECEIVABLE:

Selling, general and administrative expenses include provisions for doubtful
accounts and notes receivable of $6.7 million for 1995, $6.6 million for 1994
and $12.2 million for 1993.

ASSETS HELD FOR SALE:

The Company ceased operations of certain wood products facilities in the
Pacific Northwest during 1994 and is in the process of divesting the assets of
these facilities. Accordingly, such net assets of approximately $32 million and
$56 million are included in other current assets within the December 31, 1995
and 1994 Consolidated Balance Sheets, respectively.

49
<PAGE>
STONE CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 16--ADDITIONAL INFORMATION RELATING TO THE CONSOLIDATED FINANCIAL
STATEMENTS (CONTINUED)
INSURANCE RECEIVABLE:

As a result of the 1994 Panama City digester accident, the Company is
seeking recovery from its insurance carriers for both the losses to property and
the losses as result of business interruption. A partial recovery of
approximately $31 million has been received by the Company from certain
carriers, claims of approximately $9 million have been committed to be paid and
claims of approximately $43 million covering the remaining portion of such
losses are still pending.

Management believes the receivable recorded on the Company's Consolidated
Balance Sheet is fully recoverable.

LONG-TERM NOTE RECEIVABLE:

The Company had a net receivable from a domestic customer of approximately
$74 million and $90 million at December 31, 1995 and 1994, respectively. Of
these amounts, approximately $61 million and $77 million, respectively, are
included in other long-term assets with the remaining amounts reflected in
accounts and notes receivable in the Company's Consolidated Balance Sheets. This
seven year interest bearing note receivable requires quarterly payments which
commenced in the first quarter of 1995. The Company believes this note
receivable, which is partially guaranteed by a third party, is fully
recoverable.

ACCRUED AND OTHER CURRENT LIABILITIES:

The major components of accrued and other current liabilities are as
follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
(IN MILLIONS) 1995 1994
- ------------------------------------------------------------------------------------------------ --------- ---------
<S> <C> <C>
Accrued interest................................................................................ $ 88.1 $ 110.8
Accrued payroll, related taxes and employee benefits............................................ 87.7 98.8
Other........................................................................................... 120.8 146.1
--------- ---------
Total accrued and other current liabilities..................................................... $ 296.6 $ 355.7
--------- ---------
--------- ---------
</TABLE>

OTHER LONG-TERM LIABILITIES:

Included in other long-term liabilities at December 31, 1995 and 1994 is
approximately $42.0 million and $47.0 million, respectively, of deferred income
relating to the October 1992 sale of an energy contract at the Company's
Hopewell mill. This amount is being amortized over a 12-year period.

NOTE 17--COMMITMENTS AND CONTINGENCIES
At December 31, 1995, the Company had commitments outstanding for capital
expenditures under purchase orders and contracts of approximately $51 million.

On May 6, 1993, the Company's wholly owned German subsidiary, Europa Carton
A.G., ("Europa Carton"), completed a joint venture with Financiere Carton
Papier, a French company, to merge the folding carton operations of Europa
Carton with those of Financiere Carton Papier (collectively "FCP"). Under the
joint venture, FCP is owned equally by Europa Carton and the former shareholders
of Financiere Carton Papier. The Company's investment in the joint venture is
being accounted for under the equity method of accounting. The Company has
entered into an agreement with FCP whereby the Company will loan up to $40
million to FCP in the form of convertible securities. The securities would not
be convertible into FCP common stock until three years from the date of
issuance. In the event that the Company would convert the securities into common
stock, the Company would own approximately 80 percent of the outstanding shares
of FCP.

The Company's operations are subject to extensive environmental regulation
by federal, state and local authorities in the United States and regulatory
authorities with jurisdiction over its foreign operations. The Company has in
the past made significant capital expenditures to comply with water, air and
solid and hazardous waste regulations and expects to make significant
expenditures in the future. Capital expenditures for environmental control
equipment and facilities were approximately $36 million in 1995, and the Company
anticipates that 1996 and 1997 environmental capital expenditures will
approximate $61 million and $16 million, respectively (exclusive of any
potential expenditures which may be required if the proposed "cluster rules"
described in "Environmental Issues" on pages 19-20 of the

50
<PAGE>
STONE CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 17--COMMITMENTS AND CONTINGENCIES (CONTINUED)
MD&A are adopted). Although capital expenditures for environmental control
equipment and facilities and compliance costs in future years will depend on
legislative and technological developments which cannot be predicted at this
time, the Company anticipates that these costs will increase when final "cluster
rules" are adopted and as other environmental regulations become more stringent.
See also "Environmental Issues" on pages 19-20 of the MD&A for further
environmental matters.

Refer to Notes 10, 11 and 12 for further discussion of the Company's debt,
hedging and lease commitments.

Additionally, the Company is involved in certain litigation primarily
arising in the normal course of business. In the opinion of management, the
Company's liability under any pending litigation would not materially affect its
financial condition, results of operations or liquidity.

NOTE 18--SEGMENT INFORMATION

BUSINESS SEGMENTS:

The Company operates principally in two business segments. The paperboard
and paper packaging segment is comprised primarily of facilities that produce
containerboard, kraft paper, boxboard, corrugated containers and paper bags and
sacks. The white paper and other segment consists primarily of facilities that
manufacture and sell newsprint, groundwood paper and market pulp. Intersegment
sales are accounted for at transfer prices which approximate market prices.

Operating profit includes all costs and expenses directly related to the
segment involved. The corporate portion of operating profit includes corporate
general and administrative expenses and equity income (loss) of non-consolidated
affiliates.

Assets are assigned to segments based on use. Corporate assets primarily
consist of cash and cash equivalents, fixed assets, certain deferred charges and
investments in non-consolidated affiliates.

51
<PAGE>
STONE CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 18--SEGMENT INFORMATION (CONTINUED)
Financial information by business segment is summarized as follows:

<TABLE>
<CAPTION>
(IN MILLIONS) 1995 1994 1993
- ---------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
SALES:
Paperboard and paper packaging.......... $5,405.8 $4,241.5 $3,810.1
White paper and other................... 2,010.6 1,549.6 1,295.6
Intersegment............................ (65.2) (42.4) (46.1)
----------- ----------- -----------
Total sales........................... $7,351.2 $5,748.7 $5,059.6
----------- ----------- -----------
----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES,
MINORITY INTEREST, EXTRAORDINARY
CHARGES AND CUMULATIVE EFFECTS OF
ACCOUNTING CHANGES:
Paperboard and paper packaging.......... $ 943.6 $ 354.2 $ 207.4
White paper and other................... 367.7 25.4 (158.8)
----------- ----------- -----------
1,311.3 379.6 48.6
Interest expense........................ (460.3) (456.0) (426.7)
Foreign currency transaction gains
(losses)............................... 8.1 (15.8) (11.8)
General corporate....................... (64.4)(1) (70.9)(1) (73.4)(1)
----------- ----------- -----------
Income (loss) before income taxes,
minority interest, extraordinary
charges and cumulative effects of
accounting changes................... $ 794.7 $ (163.1) $ (463.3)
----------- ----------- -----------
----------- ----------- -----------
DEPRECIATION AND AMORTIZATION:
Paperboard and paper packaging.......... $ 203.5 $ 199.1 $ 179.5
White paper and other................... 158.4 147.3 156.7
General corporate....................... 9.9 12.5 10.6
----------- ----------- -----------
Total depreciation and amortization... $ 371.8 $ 358.9 $ 346.8
----------- ----------- -----------
----------- ----------- -----------
ASSETS:
Paperboard and paper packaging.......... $3,536.2 $3,440.1 $3,436.5
White paper and other................... 1,347.2 2,884.4 2,977.4
General corporate....................... 1,515.5(2) 680.4(2) 422.8(2)
----------- ----------- -----------
Total assets.......................... $6,398.9 $7,004.9 $6,836.7
----------- ----------- -----------
----------- ----------- -----------
CAPITAL EXPENDITURES:
Paperboard and paper packaging.......... $ 198.3 $ 114.6 $ 100.7
White paper and other................... 183.2 114.0 45.7
General corporate....................... 5.0 4.0 3.3
----------- ----------- -----------
Total capital expenditures............ $ 386.5 $ 232.6 $ 149.7
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

- ---------
(1) Includes equity in net income (loss) of non-consolidated vertically
integrated affiliates as follows: Paperboard and paper packaging segment
$4.2 in 1995, $(1.4) in 1994 and $(9.2) in 1993 and White paper and other
segment $15.7 in 1995, $(6.3) in 1994 and $(2.5) in 1993.

(2) Includes investments in non-consolidated vertically integrated affiliates as
follows: Paperboard and paper packaging segment $85.8 in 1995, $82.7 in 1994
and $77.7 in 1993 and White paper and other segment $1,010.4 in 1995, $263.1
in 1994 and $29.5 in 1993.

52
<PAGE>
STONE CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 18--SEGMENT INFORMATION (CONTINUED)
GEOGRAPHIC SEGMENTS:

The chart below provides financial information for the Company's operations
based on the region in which the operations are located.
<TABLE>
<CAPTION>
INCOME BEFORE INCOME
TAXES, MINORITY
TRADE INTER-AREA INTEREST AND
(IN MILLIONS) SALES SALES TOTAL SALES EXTRAORDINARY CHARGES ASSETS
- ------------------------------------------------------ --------- ----------- ------------ --------------------- ------------
<S> <C> <C> <C> <C> <C>
1995
- ------------------------------------------------------
United States......................................... $ 5,238.7 $ 46.1 $ 5,284.8 $ 941.9 $ 3,313.4
Canada................................................ 1,276.8 60.2 1,337.0 334.3 942.5
Europe and other...................................... 835.7 -- 835.7 35.1 627.5
--------- ----------- ------------ ---------- ------------
7,351.2 106.3 7,457.5 1,311.3 4,883.4
Interest expense...................................... (460.3)
Foreign currency transaction gains.................... 8.1
General corporate..................................... (64.4)(1) 1,515.5(2)
Inter-area eliminations............................... (106.3) (106.3) --
--------- ----------- ------------ ---------- ------------
Total................................................. $ 7,351.2 $ -- $ 7,351.2 $ 794.7 $ 6,398.9
--------- ----------- ------------ ---------- ------------
--------- ----------- ------------ ---------- ------------

INCOME (LOSS) BEFORE
INCOME TAXES,
MINORITY INTEREST,
EXTRAORDINARY CHARGES
AND CUMULATIVE EFFECT
TRADE INTER-AREA OF AN ACCOUNTING
(IN MILLIONS) SALES SALES TOTAL SALES CHANGE ASSETS
- ------------------------------------------------------ --------- ----------- ------------ --------------------- ------------
<S> <C> <C> <C> <C> <C>
1994
- ------------------------------------------------------
United States......................................... $ 4,187.7 $ 23.9 $ 4,211.6 $ 344.0 $ 3,393.8
Canada................................................ 942.0 36.0 978.0 20.3 2,152.8
Europe................................................ 619.0 -- 619.0 15.3 777.9
--------- ----------- ------------ ---------- ------------
5,748.7 59.9 5,808.6 379.6 6,324.5
Interest expense...................................... (456.0)
Foreign currency transaction losses................... (15.8)
General corporate..................................... (70.9)(1) 680.4(2)
Inter-area eliminations............................... (59.9) (59.9) --
--------- ----------- ------------ ---------- ------------
Total................................................. $ 5,748.7 $ -- $ 5,748.7 $ (163.1) $ 7,004.9
--------- ----------- ------------ ---------- ------------
--------- ----------- ------------ ---------- ------------
<CAPTION>

INCOME (LOSS)
BEFORE INCOME TAXES,
MINORITY INTEREST AND
TRADE INTER-AREA CUMULATIVE EFFECT OF
(IN MILLIONS) SALES SALES TOTAL SALES AN ACCOUNTING CHANGE ASSETS
- ------------------------------------------------------ --------- ----------- ------------ --------------------- ------------
<S> <C> <C> <C> <C> <C>
1993
- ------------------------------------------------------
United States......................................... $ 3,678.2 $ 16.4 $ 3,694.6 $ 107.1 $ 3,256.8
Canada................................................ 756.2 16.9 773.1 (62.3) 2,374.8
Europe................................................ 625.2 1.7 626.9 3.8 782.3
--------- ----------- ------------ ---------- ------------
5,059.6 35.0 5,094.6 48.6 6,413.9
Interest expense...................................... (426.7)
Foreign currency transaction losses................... (11.8)
General corporate..................................... (73.4)(1) 422.8(2)
Inter-area eliminations............................... (35.0) (35.0) --
--------- ----------- ------------ ---------- ------------
Total................................................. $ 5,059.6 $ -- $ 5,059.6 $ (463.3) $ 6,836.7
--------- ----------- ------------ ---------- ------------
--------- ----------- ------------ ---------- ------------
</TABLE>

- ------------
(1) Includes equity in net income (loss) of non-consolidated vertically
integrated affiliates as follows: United States $3.5 in 1995, $.6 in 1994
and $(1.0) in 1993; Canada $28.6 in 1995, $(2.3) in 1994 and $(3.0) in 1993;
and other $(12.2) in 1995, $(6.0) in 1994 and $(7.7) in 1993.

(2) Includes investments in non-consolidated vertically integrated affiliates as
follows: United States $9.8 in 1995, $1.5 in 1994 and $--in 1993; Canada
$1,048.1 in 1995, $295.2 in 1994 and $63.0 in 1993; and other $38.3 in 1995,
$49.1 in 1994 and $44.2 in 1993.

The Company's export sales from the United States were approximately $839
million, $476 million and $341 million for 1995, 1994 and 1993, respectively.

53
<PAGE>
STONE CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 19--SUMMARY OF QUARTERLY DATA (UNAUDITED)
The following table summarizes quarterly financial data for 1995 and 1994:
<TABLE>
<CAPTION>
QUARTER
----------------------------------------------
(IN MILLIONS EXCEPT PER SHARE) FIRST SECOND THIRD FOURTH(1) YEAR
- -------------------------------------------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1995
- --------------------------------------------------------------------
Net sales........................................................... $ 1,819.3 $ 1,963.6 $ 1,924.0 $ 1,644.4 $ 7,351.2
Cost of products sold............................................... 1,288.7 1,382.8 1,330.4 1,167.0 5,168.9
Depreciation and amortization....................................... 96.0 92.7 97.1 86.1 371.8
Income before extraordinary charges................................. 96.8 131.0 129.0 87.7 444.5
Extraordinary charges from early extinguishments of debt............ -- (3.1) (177.9) (8.0) (189.0)
Net income (loss)................................................... 96.8 127.9 (48.9) 79.7 255.5
---------- ---------- ---------- ---------- ----------
Per share of common stock--primary:
Income before extraordinary charges................................. 1.04 1.42 1.32 .86 4.64
Extraordinary charges from early extinguishments of debt............ -- (.03) (1.85) (.08) (2.01)
Net income (loss)--primary.......................................... 1.04 1.39 (.53) .78 2.63
---------- ---------- ---------- ---------- ----------
Per share of common stock--fully diluted:
Income before extraordinary charges................................. .85 1.12 1.12 .80 3.89
Extraordinary charges from early extinguishments of debt............ -- (.03) (1.57) (.07) (1.65)
Net income (loss)--fully diluted.................................... .85 1.09 (.45) .73 2.24
---------- ---------- ---------- ---------- ----------
Cash dividends per common share..................................... -- -- .15 .15 .30
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------

FIRST(2) SECOND THIRD(3) FOURTH
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1994
- --------------------------------------------------------------------
Net sales........................................................... $ 1,290.8 $ 1,354.3 $ 1,482.2 $ 1,621.4 $ 5,748.7
Cost of products sold............................................... 1,067.1 1,116.9 1,183.4 1,197.0 4,564.3
Depreciation and amortization....................................... 89.3 88.5 89.7 91.3 358.9
Income (loss) before extraordinary charges and cumulative effect of
an accounting change............................................... (78.9) (50.8) (28.9) 29.8 (128.8)
Extraordinary charges from early extinguishments of debt............ (16.8) -- (44.8) -- (61.6)
Cumulative effect of change in accounting for postemployment
benefits........................................................... (14.2) -- -- -- (14.2)
Net income (loss)................................................... (109.9) (50.8) (73.7) 29.8 (204.6)
---------- ---------- ---------- ---------- ----------
Per share of common stock:
Income (loss) before extraordinary charges and cumulative effect of
an accounting change............................................... (.99) (.58) (.38) .31 (1.60)
Extraordinary charges from early extinguishments of debt............ (.21) -- (.50) -- (.70)
Cumulative effect of change in accounting for postemployment
benefits........................................................... (.17) -- -- -- (.16)
---------- ---------- ---------- ---------- ----------
Net income (loss)--primary.......................................... (1.37) (.58) (.88) .31 (2.46)
---------- ---------- ---------- ---------- ----------
Net income (loss)--fully diluted.................................... * * * .28 *
---------- ---------- ---------- ---------- ----------
Cash dividends per common share..................................... -- -- -- -- --
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>

- ---------
(1) As a result of the Amalgamation discussed in Note 3, the Company, effective
November 1, 1995, began reporting Stone-Consolidated under the equity method
of accounting.

(2) The Company adopted SFAS 112 effective January 1, 1994.

(3) Amounts per share of common stock have been adjusted for the redemption
premium on redeemable preferred stock of a consolidated affiliate.

* Fully diluted earnings per share are not disclosed because the amounts are
anti-dilutive.

54
<PAGE>
Report of Independent Accountants on
Financial Statement Schedule
-----------------------------------

To the Board of Directors of
Stone Container Corporation

Our audits of the consolidated financial statements referred to in our report
dated February 5, 1996 appearing on page 30 of this Annual Report on Form 10-K
(such report contains an explanatory paragraph referring to the change in
accounting methods discussed in Note 1 to the Company's consolidated financial
statements) also included an audit of the Financial Statement Schedule listed
and appearing in Item 14(a)2 of this Form 10-K. In our opinion, the Financial
Statement Schedule presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements.

PRICE WATERHOUSE LLP

Chicago, Illinois
February 5, 1996

55
<PAGE>
Consent of Independent Accountants
---------------------------------

We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (No. 33-66086) and
in the Registration Statements on Form S-8 (Nos. 2-79221, 33-33784, 33-56345,
33-59189 and 33-66132) of Stone Container Corporation of our report dated
February 5, 1996 appearing on page 30 of this Annual Report on Form 10-K. We
also consent to the incorporation by reference of our report on the Financial
Statement Schedule, which appears on page 55 of this Form 10-K.

PRICE WATERHOUSE LLP

Chicago, Illinois
March 27, 1996

56
<PAGE>
STONE CONTAINER CORPORATION AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN MILLIONS)

<TABLE>
<CAPTION>
COLUMN C
COLUMN B ----------- COLUMN E
----------- ADDITIONS -----------
COLUMN A BALANCE AT CHARGED TO COLUMN D BALANCE AT
- -------------------------------------------------------------------------------- BEGINNING COSTS AND ----------- END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS PERIOD
- -------------------------------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts and notes and sales returns and allowances:
Year ended December 31, 1995.................................................. $ 20.2 $ 14.6 $ 12.7 $ 22.1
Year ended December 31, 1994.................................................. $ 19.3 $ 13.0 $ 12.1 $ 20.2
Year ended December 31, 1993.................................................. $ 19.3 $ 29.2 $ 29.2 $ 19.3
</TABLE>

<PAGE>

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

STONE CONTAINER CORPORATION

AMENDED AND RESTATED CREDIT AGREEMENT

DATED AS OF MARCH 22, 1996

WITH

THE FINANCIAL INSTITUTIONS SIGNATORY HERETO,

BANKERS TRUST COMPANY,
AS AGENT,

AND

BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION,
THE BANK OF NEW YORK,
THE BANK OF NOVA SCOTIA,
CAISSE NATIONALE DE CREDIT AGRICOLE,
CHEMICAL BANK,
THE CHASE MANHATTAN BANK, N.A.,
DRESDNER BANK AG-CHICAGO AND GRAND CAYMAN BRANCHES,
THE FIRST NATIONAL BANK OF CHICAGO,
THE LONG-TERM CREDIT BANK OF JAPAN, LTD.,
NATIONSBANK, N.A. (CAROLINAS),
THE SUMITOMO BANK, LTD., CHICAGO BRANCH AND
TORONTO DOMINION (TEXAS), INC.,
AS CO-AGENTS

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

<PAGE>

TABLE OF CONTENTS

Page

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS . . . . . . . .3
Section 1.1 Definitional Appendix . . . . . . . . . . . . . .3
Section 1.2 Accounting Terms; Financial Statements. . . . . .3

ARTICLE II

LOAN PROVISIONS. . . . . . . . . . .4
Section 2.1 Loan Commitments. . . . . . . . . . . . . . . . .4
(a) Term Loan. . . . . . . . . . . . . . . . . . . . . . .4
(b) Revolving Loans. . . . . . . . . . . . . . . . . . . .4
(c) Additional Term Loan . . . . . . . . . . . . . . . . .5
(d) Supplemental Revolving Loans . . . . . . . . . . . . .5
(e) D Tranche Term Loan. . . . . . . . . . . . . . . . . .6
Section 2.2 Obligations; Notes. . . . . . . . . . . . . . . .6
(a) Term Loan Obligations. . . . . . . . . . . . . . . . .6
(b) Revolving Loan Obligations . . . . . . . . . . . . . .7
(c) Swing Line Loan Obligations. . . . . . . . . . . . . .8
(d) Additional Term Loan Obligations . . . . . . . . . . .9
(e) Supplemental Revolving Loan Obligations. . . . . . . 10
(f) D Tranche Term Loan Obligations. . . . . . . . . . . 11
Section 2.3 Borrowing Options . . . . . . . . . . . . . . . 12
Section 2.4 Minimum Amount of Each Borrowing. . . . . . . . 12
Section 2.5 Notice of Borrowing . . . . . . . . . . . . . . 12
Section 2.6 Conversion or Continuation. . . . . . . . . . . 13
Section 2.7 Disbursement of Funds . . . . . . . . . . . . . 14
Section 2.8 Interest. . . . . . . . . . . . . . . . . . . . 16
(a) Prime Rate Revolving Loans . . . . . . . . . . . . . 16
(b) Eurodollar Rate Revolving Loans. . . . . . . . . . . 16
(c) Prime Rate Term Loans. . . . . . . . . . . . . . . . 16
(d) Eurodollar Rate Term Loans . . . . . . . . . . . . . 16
(e) Swing Line Loans . . . . . . . . . . . . . . . . . . 16
(f) Prime Rate Additional Term Loans . . . . . . . . . . 17
(g) Eurodollar Rate Additional Term Loans. . . . . . . . 17
(h) Prime Rate Supplemental Revolving Loans. . . . . . . 17
(i) Eurodollar Rate Supplemental Revolving Loans . . . . 17
(j) Prime Rate D Tranche Term Loans. . . . . . . . . . . 17
(k) Eurodollar Rate D Tranche Term Loans . . . . . . . . 18
(l) Default Rate Interest. . . . . . . . . . . . . . . . 18
(m) Accrual and Payment of Interest. . . . . . . . . . . 18
(n) Notification of Rate . . . . . . . . . . . . . . . . 18
(o) Maximum Interest . . . . . . . . . . . . . . . . . . 19
(p) Reference Banks. . . . . . . . . . . . . . . . . . . 19
Section 2.9 Interest Rate Adjustments . . . . . . . . . . . 19
Section 2.10 Interest Periods. . . . . . . . . . . . . . . . 19
Section 2.11 Swing Line Loans. . . . . . . . . . . . . . . . 20
(a) Swing Line Commitment. . . . . . . . . . . . . . . . 20

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(b) Procedure for Swing Line Borrowing . . . . . . . . . 20
(c) Refunding of Swing Line Loans. . . . . . . . . . . . 21
(d) Participation in Swing Line Loans. . . . . . . . . . 21
(e) Obligations Unconditional. . . . . . . . . . . . . . 21
Section 2.12 Letters of Credit . . . . . . . . . . . . . . . 22
(a) Issuance by Facing Agent . . . . . . . . . . . . . . 22
(b) Participation of Revolving Lenders . . . . . . . . . 23
(c) Requests for Issuance. . . . . . . . . . . . . . . . 24
(d) Reimbursement of Drawings. . . . . . . . . . . . . . 24
(e) Failure to Reimburse . . . . . . . . . . . . . . . . 25
(f) Letter of Credit Fees . . . . . . . . . . . . . . . 26
(g) Reimbursement Obligation Unconditional . . . . . . . 27
(h) Increased Costs. . . . . . . . . . . . . . . . . . . 27
(i) Indemnification. . . . . . . . . . . . . . . . . . . 28
(j) Letter of Credit Beneficiaries . . . . . . . . . . . 29
(k) Facing Agent . . . . . . . . . . . . . . . . . . . . 29
(l) No Indemnification for Certain Acts. . . . . . . . . 29
Section 2.13 Increased Costs, Illegality, Etc. . . . . . . . 30
Section 2.14 Replacement of Affected Lenders . . . . . . . . 33
Section 2.15 Change of Lending Office. . . . . . . . . . . . 34
Section 2.16 Funding Losses. . . . . . . . . . . . . . . . . 34
Section 2.17 Pro Rata Borrowings . . . . . . . . . . . . . . 35
Section 2.18 Florence Letters of Credit. . . . . . . . . . . 35

ARTICLE III

TERMINATION OF COMMITMENTS, PREPAYMENTS AND FEES . . . 36
Section 3.1 Mandatory Revolving Loan, Supplemental Revolving
Loan and Swing Line Loan Prepayments and
Commitment Reductions . . . . . . . . . . . . . 36
Section 3.2 Voluntary Prepayments . . . . . . . . . . . . . 36
Section 3.3 Voluntary Commitment Reductions . . . . . . . . 38
Section 3.4 Mandatory Prepayments . . . . . . . . . . . . . 39
(a) Prepayments From Excess Cash Flow. . . . . . . . . . 39
(b) Prepayments From Incurrence of Indebtedness. . . . . 40
(c) Prepayments From Asset Sales . . . . . . . . . . . . 41
Section 3.5 Other Provisions With Respect to the Loans. . . 43
Section 3.6 Order of Prepayment and Payment . . . . . . . . 43
Section 3.7 Commitment Fees . . . . . . . . . . . . . . . . 46
Section 3.8 Amendment Fee . . . . . . . . . . . . . . . . . 46
Section 3.9 Waiver Fee. . . . . . . . . . . . . . . . . . . 47
Section 3.10 Additional Fees.. . . . . . . . . . . . . . . . 47
Section 3.11 Agent's Administrative Fee. . . . . . . . . . . 47
Section 3.12 Payments. . . . . . . . . . . . . . . . . . . . 47

ARTICLE IV

REPRESENTATIONS AND WARRANTIES. . . . . . . . 49
Section 4.1 Due Organization and Standing . . . . . . . . . 50
Section 4.2 Power and Authority . . . . . . . . . . . . . . 50
Section 4.3 Subsidiaries. . . . . . . . . . . . . . . . . . 50
Section 4.4 No Violation of Agreements. . . . . . . . . . . 51

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Section 4.5 Due Authorization, etc. . . . . . . . . . . . . 51
Section 4.6 Indebtedness for Money Borrowed . . . . . . . . 52
Section 4.7 Fiscal Quarters and Year. . . . . . . . . . . . 53
Section 4.8 Title to and Conditions of Properties . . . . . 53
Section 4.9 Litigation, Proceedings, Licenses, Permits. . . 53
Section 4.10 Governmental Consents, etc. . . . . . . . . . . 54
Section 4.11 Financial Statements. . . . . . . . . . . . . . 54
Section 4.12 No Material Adverse Change. . . . . . . . . . . 55
Section 4.13 Tax Returns and Payments. . . . . . . . . . . . 56
Section 4.14 Patents, etc. . . . . . . . . . . . . . . . . . 56
Section 4.15 ERISA . . . . . . . . . . . . . . . . . . . . . 56
Section 4.16 Governmental Regulation . . . . . . . . . . . . 58
Section 4.17 Federal Reserve Regulations . . . . . . . . . . 58
Section 4.18 Transaction Documents . . . . . . . . . . . . . 58
Section 4.19 Solvency of the Borrower. . . . . . . . . . . . 59
Section 4.20 Certain Fees. . . . . . . . . . . . . . . . . . 59
Section 4.21 Environmental Matters . . . . . . . . . . . . . 59
Section 4.22 Disclosure. . . . . . . . . . . . . . . . . . . 60
Section 4.23 Survival of Warranties; Covenant Regarding
Disclosure. . . . . . . . . . . . . . . . . . . 61

ARTICLE V

COVENANTS. . . . . . . . . . . . . 61
Section 5.1 Affirmative Covenants of the Borrower . . . . . 61
5.1.1 Financial Data. . . . . . . . . . . . . . . . . 61
5.1.2 Discharge of Taxes, etc.. . . . . . . . . . . . 66
5.1.3 Corporate Existence; Business . . . . . . . . . 66
5.1.4 Compliance With Laws. . . . . . . . . . . . . . 66
5.1.5 Performance of Basic Agreements . . . . . . . . 67
5.1.6 Inspection of Books and Properties. . . . . . . 67
5.1.7 Maintenance of Books and Records. . . . . . . . 68
5.1.8 ERISA . . . . . . . . . . . . . . . . . . . . . 68
5.1.9 Insurance . . . . . . . . . . . . . . . . . . . 69
5.1.10 Maintenance of Properties . . . . . . . . . . . 69
5.1.11 Use of Proceeds . . . . . . . . . . . . . . . . 70
5.1.12 Lender Meeting. . . . . . . . . . . . . . . . . 71
5.1.13 Redemption of Senior Subordinated Notes and
Stone Savannah Stock. . . . . . . . . . . . . . 71
5.1.14 Environmental Notification. . . . . . . . . . . 71
5.1.15 Environmental Compliance. . . . . . . . . . . . 72
5.1.16 Additional Subsidiary Guarantees. . . . . . . . 72
5.1.17 Delayed Collateral. . . . . . . . . . . . . . . 73
5.1.18 Merger of Stone Southwest.. . . . . . . . . . . 74
Section 5.2 Negative Covenants of the Borrower. . . . . . . 74
5.2.1 Liens . . . . . . . . . . . . . . . . . . . . . 74
5.2.2 Indebtedness for Money Borrowed . . . . . . . . 74
5.2.3 Guarantees. . . . . . . . . . . . . . . . . . . 83
5.2.4 Affiliate Transactions. . . . . . . . . . . . . 84
5.2.5 Dividends . . . . . . . . . . . . . . . . . . . 84
5.2.6 Negative Debt Covenants . . . . . . . . . . . . 86
5.2.7 Investments . . . . . . . . . . . . . . . . . . 87
5.2.8 Mergers . . . . . . . . . . . . . . . . . . . . 89

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<PAGE>

5.2.9 Purchase of Stock or Assets . . . . . . . . . . 91
5.2.10 Prepayment of Indebtedness; Certain Amendments. 92
5.2.11 Capital Expenditures. . . . . . . . . . . . . . 95
5.2.12 Sale of Assets. . . . . . . . . . . . . . . . . 96
5.2.13 Sale of Accounts Receivable . . . . . . . . . . 97
5.2.14 Subsidiaries. . . . . . . . . . . . . . . . . . 97
5.2.15 Lease Payments. . . . . . . . . . . . . . . . . 98
5.2.16 Accounts Receivable Financing Program . . . . . 98
Section 5.3 Financial Covenants of the Borrower . . . . . . 98
5.3.1 Interest Coverage Ratio . . . . . . . . . . . . 98
5.3.2 Indebtedness Ratio. . . . . . . . . . . . . . . 99

ARTICLE VI

CONDITIONS OF CREDIT. . . . . . . . . . 99
Section 6.1 Conditions Precedent to the Borrowing of
Initial Loans . . . . . . . . . . . . . . . . . 99
Section 6.2 Conditions Precedent to all Credit Events . . .103
(a) Representations and Warranties . . . . . . . . . . .103
(b) No Default . . . . . . . . . . . . . . . . . . . . .103
(c) Notice of Borrowing; Letter of Credit Request . . .103
(d) Other Information. . . . . . . . . . . . . . . . . .103
Section 6.3 Conditions Precedent to Effectiveness of
Agreement, Initial Funding of Supplemental
Revolving Loans and Funding of D Tranche Term
Loan. . . . . . . . . . . . . . . . . . . . . .104

ARTICLE VII

EVENTS OF DEFAULT. . . . . . . . . . .106
Section 7.1 Events of Default . . . . . . . . . . . . . . .106
(a) Payments . . . . . . . . . . . . . . . . . . . . . .106
(b) Representations and Warranties . . . . . . . . . . .106
(c) Certain Covenants. . . . . . . . . . . . . . . . . .107
(d) Other Covenants. . . . . . . . . . . . . . . . . . .107
(e) Bankruptcy . . . . . . . . . . . . . . . . . . . . .107
(f) Involuntary Proceedings. . . . . . . . . . . . . . .107
(g) Indebtedness for Money Borrowed. . . . . . . . . . .108
(h) Judgments. . . . . . . . . . . . . . . . . . . . . .108
(i) Basic Agreements . . . . . . . . . . . . . . . . . .108
(j) ERISA. . . . . . . . . . . . . . . . . . . . . . . .109
(k) Other ERISA. . . . . . . . . . . . . . . . . . . . .109
(l) Cross-Defaults . . . . . . . . . . . . . . . . . . .109
(m) Change of Control. . . . . . . . . . . . . . . . . .109
Section 7.2 Remedies. . . . . . . . . . . . . . . . . . . .109

ARTICLE VIII

THE AGENT . . . . . . . . . . . .111
Section 8.1 Appointment . . . . . . . . . . . . . . . . . .111
Section 8.2 Nature of Duties. . . . . . . . . . . . . . . .111
Section 8.3 Rights, Exculpation, Etc. . . . . . . . . . . .112

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Section 8.4 Employment of Agents and Counsel. . . . . . . .113
Section 8.5 Reliance. . . . . . . . . . . . . . . . . . . .113
Section 8.6 Indemnification . . . . . . . . . . . . . . . .113
Section 8.7 Notice of Default . . . . . . . . . . . . . . .114
Section 8.8 The Agent . . . . . . . . . . . . . . . . . . .114
Section 8.9 Resignation by the Agent. . . . . . . . . . . .114
Section 8.10 Holders of Obligations. . . . . . . . . . . . .115
Section 8.11 Co-Agents . . . . . . . . . . . . . . . . . . .115

ARTICLE IX

MISCELLANEOUS . . . . . . . . . . .115
Section 9.1 No Waiver; Modifications in Writing . . . . . .115
Section 9.2 Amendments. . . . . . . . . . . . . . . . . . .115
Section 9.3 Certain Other Amendments; Amendments Affecting
Additional Lenders, Supplemental Revolving
Lenders and D Tranche Lenders . . . . . . . . .117
Section 9.4 Notices, etc. . . . . . . . . . . . . . . . . .118
Section 9.5 Costs, Expenses and Taxes . . . . . . . . . . .119
Section 9.6 Indemnification . . . . . . . . . . . . . . . .120
Section 9.7 Special Expenditures. . . . . . . . . . . . . .121
Section 9.8 Confirmations . . . . . . . . . . . . . . . . .122
Section 9.9 Adjustment. . . . . . . . . . . . . . . . . . .122
Section 9.10 Right of Setoff . . . . . . . . . . . . . . . .123
Section 9.11 Execution in Counterparts . . . . . . . . . . .124
Section 9.12 Binding Effect; Assignment. . . . . . . . . . .124
Section 9.13 Release of Collateral . . . . . . . . . . . . .129
Section 9.14 Consent to Jurisdiction . . . . . . . . . . . .132
Section 9.15 Governing Law . . . . . . . . . . . . . . . . .132
Section 9.16 Severability of Provisions. . . . . . . . . . .132
Section 9.17 Headings. . . . . . . . . . . . . . . . . . . .133
Section 9.18 Time. . . . . . . . . . . . . . . . . . . . . .133
Section 9.19 Further Assurances. . . . . . . . . . . . . . .133
Section 9.20 Florida Real Property . . . . . . . . . . . . .133
Section 9.21 Effect of Restatement . . . . . . . . . . . . .133

DEFINITIONAL APPENDIX. . . . . . . . . . . . . . . . . . . . . .1

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<PAGE>

INDEX OF EXHIBITS AND SCHEDULES

EXHIBITS

Exhibit 1.1(a) Form of Stone Container Security Agreement
Exhibit 1.1(b)-A Form of Stone Savannah Security Agreement
Exhibit 1.1(b)-B Form of Stone Southwest Security Agreement
Exhibit 1.1(c) Form of Subsidiary Guarantee
Exhibit 1.1(d)-A Form of Mortgage
Exhibit 1.1(d)-B Form of Leasehold Mortgage
Exhibit 1.1(e) Recourse Receivables Financings
Exhibit 2.2(a) Form of Term Note
Exhibit 2.2(b) Form of Revolving Note
Exhibit 2.2(c) Form of Swing Line Note
Exhibit 2.2(d) Form of Additional Term Note
Exhibit 2.2(e) Form of Supplemental Revolving Note
Exhibit 2.2(f) Form of D Tranche Term Note
Exhibit 2.5 Form of Notice of Borrowing
Exhibit 2.6 Form of Notice of Conversion or Continuation
Exhibit 2.11(d) Form of Swing Line Loan Participation Certificate
Exhibit 2.12 Form of Request for Issuance/Amendment of
Letter of Credit
Exhibit 3.12(c) Form of Tax Certificate
Exhibit 4.11(b) Pro Forma Consolidated Balance Sheet
Exhibit 4.11(c) Forecasts
Exhibit 5.1.1 Form of Officer's Certificate pursuant to Section 5.1.1
Exhibit 6.1(h) Form of Opinion of Sidley & Austin
Exhibit 6.1(m) Form of Certificate of Responsible Officer
pursuant to Section 6.1(m)
Exhibit 6.1(o)-A Form of Gelco Corporation L/C Agreement Amendment
Exhibit 6.1(o)-B Form of Westinghouse Electric Corporation L/C
Agreement Amendment
Exhibit 6.3(g) Form of Opinion of Sidley & Austin
Exhibit 6.3(l) Form of Certificate of Responsible Officer
Exhibit 9.12(d) Form of Assignment Agreement

SCHEDULES

Schedule 1.1(a) Revolving Loan and Term Loan Commitments
Schedule 1.1(b) Performance Tests
Schedule 1.1(c) Mortgaged Properties
Schedule 1.1(d) Permitted Liens
Schedule 1.1(e) Additional Term Loan Commitments
Schedule 1.1(f) Supplemental Revolving Loan Commitments and D
Tranche Term Loan Commitments
Schedule 3.4 Existing Contractual Restrictions
Schedule 4.3 Subsidiaries of the Borrower
Schedule 4.4 Consents and Approvals

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Schedule 4.6 Indebtedness for Money Borrowed
Schedule 4.8 Title to and Conditions of Properties
Schedule 4.10 Governmental Consents
Schedule 4.11(d) Material Liabilities
Schedule 4.12 Public Filings
Schedule 4.15 Pension Liabilities Relating to Stone-Canada
and Subsidiaries of Stone-Canada
Schedule 4.21 Environmental Matters
Schedule 5.2.2 IRBs and IRB Put Contracts
Schedule 5.2.3 Guarantees
Schedule 5.2.4 Affiliate Transactions
Schedule 5.2.6 Encumbrances and Restrictions
Schedule 5.2.7 Investments
Schedule 5.2.7-A Commitments and Contracts
Schedule 5.2.8(g) Permitted Seminole Kraft Indebtedness
Schedule 6.1(g) Title Insurance relating to Mortgaged
Properties
Schedule 9.13(a) Collateral Subject to Release Upon Revolver
Termination

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<PAGE>

AMENDED AND RESTATED CREDIT AGREEMENT

THIS AMENDED AND RESTATED CREDIT AGREEMENT is dated as of March 22,
1996 and is made by and among Stone Container Corporation, a Delaware
corporation (the "BORROWER"), the undersigned financial institutions in their
capacities as lenders hereunder (hereinafter collectively, the "LENDERS," and
each individually, a "LENDER"), Bankers Trust Company, as agent (the "AGENT")
for the Lenders hereunder, and Bank of America National Trust & Savings
Association, The Bank of New York, The Bank of Nova Scotia, Caisse Nationale
de Credit Agricole, Chemical Bank, The Chase Manhattan Bank, N.A., Dresdner
Bank AG-Chicago and Grand Cayman Branches, The First National Bank of
Chicago, The Long-Term Credit Bank of Japan, Ltd., NationsBank, N.A.
(Carolinas), The Sumitomo Bank, Ltd., Chicago Branch and Toronto Dominion
(Texas), Inc., as co-agents for the Lenders (collectively, the "CO-AGENTS,"
and each individually, a "CO-AGENT").

RECITALS:

A. The Borrower, the Agent, the Co-Agents and certain financial
institutions (the "ORIGINAL LENDERS") previously entered into that certain
Credit Agreement dated as of October 12, 1994, as amended by the First
Amendment, Consent and Waiver of Credit Agreement dated as of January 30,
1995, the Second Amendment of Credit Agreement dated as of April 12, 1995 and
the Third Amendment of Credit Agreement and Waiver Request dated as of June
30, 1995 (as so amended, the "ORIGINAL CREDIT AGREEMENT") whereunder the
Original Lenders agreed to make a Term Loan to the Borrower in the original
aggregate principal amount of $400,000,000 and to make available Revolving
Loans to the Borrower under a revolving credit facility (including a letter
of credit subfacility and a swing line facility), subject to certain
restrictions set forth therein, in an aggregate principal amount not to
exceed $450,000,000 at any time outstanding.

B. The Borrower, the Agent, the Co-Agents and certain financial
institutions (the "EXISTING LENDERS") have entered into that certain Amended
and Restated Credit Agreement dated as of August 29, 1995 (the "EXISTING
CREDIT AGREEMENT") whereunder the Borrower, the Agent, the Co-Agents and the
Existing Lenders amended and restated the Original Credit Agreement and the
Additional Lenders agreed to make an Additional Term Loan to the Borrower in
the original aggregate principal amount of $200,000,000.

C. The proceeds of the Term Loan, Revolving Loans, Letters of
Credit and Swing Line Loans made or issued under the Original Credit
Agreement and the Existing Credit Agreement were used by the Borrower (i) to
provide all or a portion of the funds necessary to repay in full all of the
indebtedness outstanding under the U.S. Credit Agreement on the Closing Date,
(ii) to make loans and/or capital contributions on the Closing Date to
Stone-Canada, which, concurrently therewith, repaid all of the indebtedness
outstanding under the Canadian Credit Agreements,

<PAGE>

(iii) to provide all or a portion of the funds necessary to repay all of the
indebtedness outstanding under the Stone Savannah Credit Agreement on the
Closing Date and to consummate the Stone Savannah Transactions, (iv) in the
case of Letters of Credit, to meet the ordinary course of business letter of
credit needs of the Borrower and its Subsidiaries and (v) for ongoing working
capital and general corporate purposes of the Borrower and its Subsidiaries.

D. The proceeds of the Additional Term Loan made under the
Existing Credit Agreement by the Additional Lenders were used by the Borrower
to (i) voluntarily repurchase, prepay, redeem or otherwise extinguish
Indebtedness of the Borrower consisting of (A) all or any portion of the
8-7/8% Notes (including the payment of principal and interest thereon), (B)
all or any portion of the 12-1/8% Subordinated Debentures (including the
payment of principal and interest thereon) and/or (C) Senior Indebtedness
(including the payment of principal and interest thereon), (ii) pay certain
fees and expenses incurred in connection with the execution and delivery of
the Existing Credit Agreement and/or (iii) repay outstanding Revolving Loans
under the Original Credit Agreement.

E. The Borrower has requested the Supplemental Revolving Lenders
to make available Supplemental Revolving Loans to the Borrower under a
supplemental revolving credit facility, subject to certain restrictions set
forth herein, in an aggregate principal amount not to exceed $110,000,000 at
any time outstanding, the proceeds of which Supplemental Revolving Loans will
be used by the Borrower for ongoing working capital and general corporate
purposes of the Borrower and its Subsidiaries.

F. The Borrower has requested the D Tranche Lenders to make a D
Tranche Term Loan to the Borrower in the aggregate principal amount of
$190,000,000, subject to certain restrictions set forth herein, the proceeds
of which D Tranche Term Loan will be used by the Borrower (i) directly or
indirectly to voluntarily repurchase, prepay, redeem or otherwise extinguish
other senior and/or subordinated Indebtedness for Money Borrowed of the
Borrower (including the payment of principal, contractual premium, if any,
and interest thereon) and (ii) to pay certain fees and expenses incurred in
connection with the execution and delivery of this Agreement.

G. The Existing Lenders are willing to continue to make the Term
Loan and the Additional Term Loan, and to continue to extend commitments to
continue to make the Revolving Loans and Swing Line Loans, and to continue to
issue or participate, as the case may be, in Letters of Credit, to the
Borrower, in each case for the respective purposes stated above and on the
terms and subject to the conditions hereinafter set forth.

H. The Supplemental Revolving Lenders are willing to extend
commitments to make the Supplemental Revolving Loans and the D Tranche
Lenders are willing to make the D Tranche Term Loan, to

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<PAGE>

the Borrower, in each case for the respective purposes stated above and on
the terms and subject to the conditions hereinafter set forth.

I. The Borrower, the Existing Lenders, the Supplemental Revolving
Lenders, the D Tranche Lenders, the Agent and the Co-Agents now desire to
amend and restate the Existing Credit Agreement to, among other things, set
forth the terms and conditions under which the Supplemental Revolving Lenders
hereafter will make Supplemental Revolving Loans to the Borrower and which
the D Tranche Lenders hereafter will make the D Tranche Term Loan to the
Borrower, and to restate the Existing Credit Agreement to reflect the
amendments thereto.

J. This Agreement shall become effective upon the date (the
"RESTATEMENT DATE") on which, after it has been executed by the Borrower, the
Agent, the Required Lenders (as defined in the Existing Credit Agreement),
the Majority Revolving Lenders (as defined in the Existing Credit Agreement),
the Majority Term Lenders (as defined in the Existing Credit Agreement) the
Majority Additional Term Lenders (as defined in the Existing Credit
Agreement), the Supplemental Revolving Lenders and the D Tranche Lenders, the
Borrower has satisfied all of the conditions precedent more particularly set
forth in SECTION 6.3 (but in the event such conditions have not been
satisfied or waived on or before April 15, 1996, this Agreement (other than
SECTION 3.10) shall be of no force or effect and the Existing Credit
Agreement shall continue in full force and effect).

NOW THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

Section 1.1 DEFINITIONAL APPENDIX. Unless the context otherwise
requires, each capitalized term used herein, including the preamble and
recitals above, and defined in the attached Definitional Appendix (which
shall be deemed to be a part of this Agreement) shall have the meaning
ascribed to such term in the Definitional Appendix.

Section 1.2 ACCOUNTING TERMS; FINANCIAL STATEMENTS. All
accounting terms used herein and not expressly defined in this Agreement
shall have the respective meanings given to them in accordance with generally
accepted accounting principles in the United States of America or Canada, as
applicable, as in effect on the Closing Date (as applicable, the "AGREEMENT
ACCOUNTING PRINCIPLES"); and except as otherwise expressly provided herein,
all computations and determinations for purposes of determining compliance
with the financial requirements of this Agreement shall

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<PAGE>

be made in accordance with such generally accepted accounting principles.
Notwithstanding the foregoing sentence, the financial statements required to
be delivered pursuant to SECTION 5.1.1 shall be prepared in accordance with
generally accepted accounting principles in the United States or Canada, as
applicable, as in effect on the respective dates of their preparation. Where
the Handbook of the Canadian Institute of Chartered Accountants includes a
statement on a method of accounting relating to a Canadian Subsidiary of the
Borrower, such statement shall be regarded as the only generally accepted
accounting principle in effect in Canada applicable to the circumstances that
it covers. Notwithstanding the foregoing, other than for purposes of the
financial statements referenced in SECTIONS 5.1.1(B)(I) and 5.1.1(C)(I), in
all computations of Capital Expenditures, Consolidated Current Assets,
Consolidated Current Liabilities, Consolidated Net Income, Consolidated Net
Loss, Consolidated Net Worth, Consolidated Tangible Net Worth, Total
Consolidated Indebtedness for Borrowed Money and all other "consolidated"
amounts, and in all computations referred to in the third sentence of SECTION
5.1.1(B) and clause (z) of the second sentence of SECTION 5.1.1(C), the
assets, liabilities, income, losses, net worth and other relevant amounts
concerning S-CC and SVCPI shall not be consolidated but shall instead, as
applicable, be excluded or accounted for utilizing the equity method.

ARTICLE II

LOAN PROVISIONS

Section 2.1 LOAN COMMITMENTS.

(a) TERM LOAN. The Borrower and the Term Lenders acknowledge the
making of the Term Loan in accordance with the terms of the Existing Credit
Agreement and agree that the Term Loan shall continue to be outstanding
pursuant to the terms and conditions of this Agreement and the other Loan
Documents.

(b) REVOLVING LOANS. Each Revolving Lender severally, and for
itself alone, agrees, on the terms and subject to the conditions hereinafter
set forth and in reliance upon the representations and warranties set forth
herein and in the other Loan Documents, to continue to make loans to the
Borrower on a revolving basis from time to time from and after the
Restatement Date to, but not including, the Revolver Termination Date, in its
Revolving Loan Pro Rata Share of such aggregate amount as the Borrower may
request, but not exceeding in an aggregate principal amount at any one time
outstanding (giving effect to the contemporaneous application of any
Revolving Loan proceeds to the payment of any L/C Obligations, Florence L/C
Obligations or Swing Line Loans) the applicable Revolving Loan Commitment of
such Revolving Lender at such time MINUS (i) such Revolving Lender's
Revolving Loan Pro Rata Share of the L/C Obligations outstanding at

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such time, (ii) such Revolving Lender's Revolving Loan Pro Rata Share of
Florence L/C Obligations outstanding at such time and (iii) such Revolving
Lender's Revolving Loan Pro Rata Share of Swing Line Loans outstanding at
such time. The Borrower and the Revolving Lenders acknowledge the making of
the Revolving Loans which are outstanding on the Restatement Date in
accordance with the terms of the Existing Credit Agreement and agree that
such Revolving Loans shall continue to be outstanding pursuant to the terms
and conditions of this Agreement and the other Loan Documents. Prior to the
Revolver Termination Date, Revolving Loans may be repaid and reborrowed by
the Borrower in accordance with the provisions hereof. Notwithstanding the
foregoing, in the event that the Borrower repays Revolving Loans with
proceeds from the Additional Term Loan and/or the issuance or incurrence of
Indebtedness permitted by SECTION 5.2.2(W), the Borrower shall maintain a
Total Available Revolving Commitment in an amount not less than (i) the
aggregate amount of Revolving Loans repaid with proceeds from the Additional
Term Loan and/or the issuance or incurrence of Indebtedness permitted by
SECTION 5.2.2(W) MINUS (ii) the aggregate amount of Revolving Loans incurred
by the Borrower after June 30, 1995, the proceeds of which are used by the
Borrower to repurchase, prepay, redeem or otherwise extinguish any 8-7/8%
Notes, any 12-1/8% Subordinated Debentures or any Indebtedness for Money
Borrowed of the Borrower constituting Senior Indebtedness, in each case as
permitted by SECTION 5.2.10(A)(XIV), until the earlier to occur of (A) the
repurchase, prepayment or conversion in full of all of the 8-7/8% Notes or
(B) the repurchase, prepayment, redemption or other extinguishment of 12-1/8%
Subordinated Debentures and/or Indebtedness for Money Borrowed of the
Borrower constituting Senior Indebtedness in an aggregate amount equal to, if
positive, (1) the aggregate amount of proceeds received by the Borrower from
the Additional Term Loan and the issuance or incurrence of Indebtedness
permitted by SECTION 5.2.2(W) MINUS (2) the aggregate cash consideration paid
by or on behalf of the Borrower to repurchase or prepay the 8-7/8% Notes as
permitted by SECTION 5.2.10(A)(XIV).

(c) ADDITIONAL TERM LOAN. The Borrower and the Additional Lenders
acknowledge the making of the Additional Term Loan in accordance with the
terms of the Existing Credit Agreement and agree that the Additional Term
Loan shall continue to be outstanding pursuant to the terms and conditions of
this Agreement and the other Loan Documents.

(d) SUPPLEMENTAL REVOLVING LOANS. Each Supplemental Revolving
Lender severally, and for itself alone, agrees, on the terms and subject to
the conditions hereinafter set forth and in reliance upon the representations
and warranties set forth herein and in the other Loan Documents, to make
loans to the Borrower on a revolving basis from time to time from and after
the Restatement Date, in its Supplemental Revolving Loan Pro Rata Share of
such aggregate amount as the Borrower may request, but not exceeding in an
aggregate principal amount at any one time outstanding the

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applicable Supplemental Revolving Loan Commitment of such Supplemental
Revolving Lender at such time. Prior to the Supplemental Revolver
Termination Date, Supplemental Revolving Loans may be repaid and reborrowed
by the Borrower in accordance with the provisions hereof. Supplemental
Revolving Loans constituting Eurodollar Rate Loans shall only have Interest
Periods of one month during the first ninety (90) days following the
Restatement Date.

(e) D TRANCHE TERM LOAN. Each D Tranche Lender severally, and for
itself alone, hereby agrees, on the terms and subject to the conditions
hereinafter set forth and in reliance upon the representations and warranties
set forth herein and in the other Loan Documents, to make a loan to the
Borrower on the Restatement Date to, but not including, the D Tranche Term
Loan Maturity Date, in an aggregate principal amount equal to the D Tranche
Term Loan Commitment of such Lender. Each D Tranche Lender's D Tranche Term
Loan Commitment shall expire immediately and without further action on the
Restatement Date if the D Tranche Term Loan is not made on the Restatement
Date. The Borrower may only make a Borrowing under the D Tranche Term Loan
Commitments on the Restatement Date. No amount of the D Tranche Term Loan
which is repaid or prepaid by the Borrower may be reborrowed hereunder. The D
Tranche Term Loan shall be a Prime Rate Loan unless and until converted, in
whole or in part, to a Eurodollar Rate Loan pursuant to this Agreement;
PROVIDED, HOWEVER, that D Tranche Term Loans constituting Eurodollar Rate
Loans shall only have Interest Periods of one month during the first ninety
(90) days following the Restatement Date.

Section 2.2 OBLIGATIONS; NOTES

(a) TERM LOAN OBLIGATIONS. The Borrower's obligation to each Term
Lender to repay the principal of, and interest on, the Term Loan made
hereunder shall be evidenced by a promissory note (each a "TERM NOTE" and
collectively the "TERM NOTES") duly executed and delivered by the Borrower
substantially in the form of EXHIBIT 2.2(A) hereto, the terms of which are
incorporated herein by reference in their entirety and made a part hereof and
shall (i) be payable to the order of each Term Lender (except in the case of
a Registered Note which shall be made payable to such Term Lender or
registered assigns) in the amount of such Lender's Term Loan Commitment, (ii)
be dated the Closing Date, (iii) provide that the Term Loan evidenced thereby
shall mature on the Term Loan Maturity Date, (iv) bear interest as provided
in this Agreement and (v) have attached thereto a principal payments schedule
substantially in the form of the Schedule to EXHIBIT 2.2(A). Each Term
Lender shall, and is hereby authorized to, make a notation on the principal
payments schedule of the date and the amount of any principal payments. Such
schedules as maintained by each Term Lender shall, absent manifest error,
constitute PRIMA FACIE evidence of the amount outstanding under the Term
Loan. Notwithstanding the foregoing, the failure to make a notation with
respect to any

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principal payment shall not limit or otherwise affect the obligation of the
Borrower hereunder or under any Term Note with respect to the Term Loan and
payments of principal or interest by the Borrower shall not be affected by
the failure by any Term Lender to make a notation thereof on the principal
payments schedule nor shall such failure or error affect any rights of the
Borrower hereunder or under applicable law. Subject to the earlier
acceleration or prepayment of the Term Loan as permitted or required by this
Agreement, the Borrower shall repay the outstanding principal balance of the
Term Loan in semi-annual installments payable to the order of the respective
Term Lenders (according to their Term Loan Pro Rata Shares) on the dates and
in the respective aggregate amounts as follows:

PAYMENT DATE AMOUNT
------------ ------

April 1, 1995 $2,000,000
October 1, 1995 $2,000,000
April 1, 1996 $2,000,000
October 1, 1996 $2,000,000
April 1, 1997 $2,000,000
October 1, 1997 $2,000,000
April 1, 1998 $2,000,000
October 1, 1998 $2,000,000
April 1, 1999 $2,000,000
October 1, 1999 $190,000,000
April 1, 2000 $192,000,000

(b) REVOLVING LOAN OBLIGATIONS. The Borrower's obligations to
each Revolving Lender to repay the principal of, and interest on, all of the
Revolving Loans made by each Revolving Lender hereunder shall be evidenced by
a promissory note (each a "REVOLVING NOTE" and collectively the "REVOLVING
NOTES") duly executed and delivered by the Borrower substantially in the form
of EXHIBIT 2.2(B) hereto, the terms of which are incorporated herein by
reference in their entirety and made a part hereof and shall (i) be payable
to the order of each Revolving Lender in the amount of such Lender's
Revolving Loan Commitment, (ii) be dated the Closing Date, (iii) provide that
each Revolving Loan evidenced thereby shall be repaid on the Revolver
Termination Date as provided herein, (iv) bear interest as provided in this
Agreement and (v) have attached thereto a principal payments schedule
substantially in the form of the Schedule to EXHIBIT 2.2(B). On the Closing
Date and at the time of the making of each Revolving Loan or principal
payment, as the case may be, such Revolving Lender shall, and is hereby
authorized to, make a notation on the principal payments schedule with
respect to such Lender's Revolving Note of the date and the amount of each
Revolving Loan or payment, as the case may be. Such schedule as maintained
by each Revolving Lender shall, absent manifest error, constitute PRIMA FACIE
evidence of the amounts outstanding under the Revolving Loans.
Notwithstanding the foregoing, the failure by any Revolving Lender to make a
notation

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<PAGE>

with respect to any Revolving Loan shall not limit or otherwise affect the
obligation of the Borrower hereunder or under such Lender's Revolving Note
with respect to such Revolving Loan and payments of principal by the Borrower
shall not be affected by the failure to make a notation thereof on the
principal payments schedule nor shall such failure or error affect any rights
of the Borrower hereunder or under applicable law. Although the Revolving
Notes shall be dated the Closing Date, interest in respect thereof shall be
payable only for the periods during which the Revolving Loans evidenced
thereby are outstanding and although the stated amount of the Revolving Notes
shall be equal to each Revolving Lender's Revolving Loan Commitment, each
Revolving Note shall be enforceable with respect to the Borrower's obligation
to pay the principal amount thereof only to the extent of the unpaid
principal amount of the Revolving Loans at the time evidenced thereby.
Subject to the earlier acceleration or prepayment of the Revolving Loans as
permitted or required by this Agreement, the Borrower shall repay all
Revolving Loans then outstanding on the Revolver Termination Date.

(c) SWING LINE LOAN OBLIGATIONS. The Borrower's obligation to the
Swing Line Lender to repay the principal of, and interest on, all of the
Swing Line Loans made by the Swing Line Lender hereunder shall be evidenced
by a promissory note (the "SWING LINE NOTE") duly executed and delivered by
the Borrower substantially in the form of EXHIBIT 2.2(C) hereto, the terms of
which are incorporated herein by reference in their entirety and made a part
hereof and shall (i) be payable to the order of the Swing Line Lender in the
amount of the Swing Line Commitment, (ii) be dated the Closing Date, (iii)
provide that each Swing Line Loan evidenced thereby shall be repaid as
provided herein, (iv) bear interest as provided in this Agreement and (v)
have attached thereto a principal payments schedule substantially in the form
of the schedule to EXHIBIT 2.2(C). On the Closing Date and at the time of
the making of each Swing Line Loan or principal payment, as the case may be,
the Swing Line Lender shall, and is hereby authorized to, make a notation on
the principal payments schedule to the Swing Line Note of the date and the
amount of each Swing Line Loan or payment, as the case may be. Such schedule
as maintained by the Swing Line Lender shall, absent manifest error,
constitute PRIMA FACIE evidence of the amounts outstanding under the Swing
Line Loans. Notwithstanding the foregoing, the failure by the Swing Line
Lender to make a notation with respect to any Swing Line Loan shall not limit
or otherwise affect the obligation of the Borrower hereunder or under the
Swing Line Lender's Swing Line Note with respect to such Swing Line Loan and
payments of principal by the Borrower shall not be affected by the failure to
make a notation thereof on the principal payments schedule nor shall such
failure or error affect any rights of the Borrower hereunder or under
applicable law. Although the Swing Line Note shall be dated the Closing
Date, interest in respect thereof shall be payable only for the periods
during which the Swing Line Loans evidenced thereby are outstanding and
although the stated amount of the Swing Line Note shall be equal to the Swing
Line Commitment,

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<PAGE>

the Swing Line Note shall be enforceable with respect to the
Borrower's obligation to pay the principal amount thereof only to
the extent of the unpaid principal amount of the Swing Line Loans
at the time evidenced thereby. Subject to the earlier acceleration
or prepayment of the Swing Line Loans as permitted or required by
this Agreement, the Borrower shall repay all Swing Line Loans
outstanding on the Revolver Termination Date.

(d) ADDITIONAL TERM LOAN OBLIGATIONS. The Borrower's obligation
to each Additional Lender to repay the principal of, and interest on, the
Additional Term Loan made hereunder shall be evidenced by a promissory note
(each an "ADDITIONAL TERM NOTE" and collectively the "ADDITIONAL TERM NOTES")
duly executed and delivered by the Borrower substantially in the form of
EXHIBIT 2.2(D) hereto, the terms of which are incorporated herein by
reference in their entirety and made a part hereof and shall (i) be payable
to the order of each Additional Lender (except in the case of a Registered
Note which shall be made payable to such Additional Lender or registered
assigns) in the amount of such Lender's Additional Term Loan Commitment, (ii)
be dated the First Restatement Date, (iii) provide that the Additional Term
Loan evidenced thereby shall mature on the Additional Term Loan Maturity
Date, (iv) bear interest as provided in this Agreement and (v) have attached
thereto a principal payments schedule substantially in the form of the
Schedule to EXHIBIT 2.2(D). Each Additional Lender shall, and is hereby
authorized to, make a notation on the principal payments schedule of the date
and the amount of any principal payments. Such schedules as maintained by
each Additional Lender shall, absent manifest error, constitute PRIMA FACIE
evidence of the amount outstanding under the Additional Term Loan.
Notwithstanding the foregoing, the failure to make a notation with respect to
any principal payment shall not limit or otherwise affect the obligation of
the Borrower hereunder or under any Additional Term Note with respect to the
Additional Term Loan and payments of principal or interest by the Borrower
shall not be affected by the failure by any Additional Lender to make a
notation thereof on the principal payments schedule nor shall such failure or
error affect any rights of the Borrower hereunder or under applicable law.
Subject to the earlier acceleration or prepayment of the Additional Term Loan
as permitted or required by this Agreement, the Borrower shall repay the
outstanding principal balance of the Additional Term Loan in semi-annual
installments payable to the order of the respective Additional Lenders
(according to their Additional Term Loan Pro Rata Shares) on the dates and in
the respective aggregate amounts as follows:

PAYMENT DATE AMOUNT
------------ ------
April 1, 1996 $1,000,000
October 1, 1996 $1,000,000
April 1, 1997 $1,000,000
October 1, 1997 $1,000,000
April 1, 1998 $1,000,000

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October 1, 1998 $1,000,000
April 1, 1999 $1,000,000
October 1, 1999 $1,000,000
April 1, 2000 $1,000,000
October 1, 2000 $1,000,000
April 1, 2001 $1,000,000
October 1, 2001 $1,000,000
April 1, 2002 $1,000,000
October 1, 2002 $1,000,000
April 1, 2003 $93,000,000
October 1, 2003 $93,000,000

(e) SUPPLEMENTAL REVOLVING LOAN OBLIGATIONS. The Borrower's
obligations to each Supplemental Revolving Lender to repay the principal of,
and interest on, all of the Supplemental Revolving Loans made by each
Supplemental Revolving Lender hereunder shall be evidenced by a promissory
note (each a "SUPPLEMENTAL REVOLVING NOTE" and collectively the "SUPPLEMENTAL
REVOLVING NOTES") duly executed and delivered by the Borrower substantially
in the form of EXHIBIT 2.2(E) hereto, the terms of which are incorporated
herein by reference in their entirety and made a part hereof and shall (i) be
payable to the order of each Supplemental Revolving Lender in the amount of
such Lender's Supplemental Revolving Loan Commitment, (ii) be dated the
Restatement Date, (iii) provide that each Supplemental Revolving Loan
evidenced thereby shall be repaid on the Supplemental Revolver Termination
Date as provided herein, (iv) bear interest as provided in this Agreement and
(v) have attached thereto a principal payments schedule substantially in the
form of the Schedule to EXHIBIT 2.2(E). At the time of the making of each
Supplemental Revolving Loan or principal payment, as the case may be, such
Supplemental Revolving Lender shall, and is hereby authorized to, make a
notation on the principal payments schedule with respect to such Lender's
Supplemental Revolving Note of the date and the amount of each Supplemental
Revolving Loan or payment, as the case may be. Such schedule as maintained
by each Supplemental Revolving Lender shall, absent manifest error,
constitute PRIMA FACIE evidence of the amounts outstanding under the
Supplemental Revolving Loans. Notwithstanding the foregoing, the failure by
any Supplemental Revolving Lender to make a notation with respect to any
Supplemental Revolving Loan shall not limit or otherwise affect the
obligation of the Borrower hereunder or under such Lender's Supplemental
Revolving Note with respect to such Supplemental Revolving Loan and payments
of principal by the Borrower shall not be affected by the failure to make a
notation thereof on the principal payments schedule nor shall such failure or
error affect any rights of the Borrower hereunder or under applicable law.
Although the Supplemental Revolving Notes shall be dated the Restatement
Date, interest in respect thereof shall be payable only for the periods
during which the Supplemental Revolving Loans evidenced thereby are
outstanding and although the stated amount of the Supplemental Revolving
Notes shall be equal to each

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Supplemental Revolving Lender's Supplemental Revolving Loan
Commitment, each Supplemental Revolving Note shall be enforceable
with respect to the Borrower's obligation to pay the principal
amount thereof only to the extent of the unpaid principal amount of
the Supplemental Revolving Loans at the time evidenced thereby.
Subject to the earlier acceleration or prepayment of the
Supplemental Revolving Loans as permitted or required by this
Agreement, the Borrower shall repay all Supplemental Revolving
Loans then outstanding on the Supplemental Revolver Termination
Date.

(f) D TRANCHE TERM LOAN OBLIGATIONS. The Borrower's
obligation to each D Tranche Lender to repay the principal of, and
interest on, the D Tranche Term Loan made hereunder shall be
evidenced by a promissory note (each a "D TRANCHE TERM NOTE" and
collectively the "D TRANCHE TERM NOTES") duly executed and
delivered by the Borrower substantially in the form of EXHIBIT
2.2(F) hereto, the terms of which are incorporated herein by
reference in their entirety and made a part hereof and shall (i) be
payable to the order of each D Tranche Lender (except in the case
of a Registered Note which shall be made payable to such D Tranche
Lender or registered assigns) in the amount of such Lender's
D Tranche Term Loan Commitment, (ii) be dated the Restatement Date,
(iii) provide that the D Tranche Term Loan evidenced thereby shall
mature on the D Tranche Term Loan Maturity Date, (iv) bear interest
as provided in this Agreement and (v) have attached thereto a
principal payments schedule substantially in the form of the
Schedule to EXHIBIT 2.2(F). Each D Tranche Lender shall, and is
hereby authorized to, make a notation on the principal payments
schedule of the date and the amount of any principal payments.
Such schedules as maintained by each D Tranche Lender shall, absent
manifest error, constitute PRIMA FACIE evidence of the amount
outstanding under the D Tranche Term Loan. Notwithstanding the
foregoing, the failure to make a notation with respect to any
principal payment shall not limit or otherwise affect the
obligation of the Borrower hereunder or under any D Tranche Term
Note with respect to the D Tranche Term Loan and payments of
principal or interest by the Borrower shall not be affected by the
failure by any D Tranche Lender to make a notation thereof on the
principal payments schedule nor shall such failure or error affect
any rights of the Borrower hereunder or under applicable law.
Subject to the earlier acceleration or prepayment of the D Tranche
Term Loan as permitted or required by this Agreement, the Borrower
shall repay the outstanding principal balance of the D Tranche Term
Loan in semi-annual installments payable to the order of the
respective D Tranche Lenders (according to their D Tranche Term
Loan Pro Rata Shares) on the dates and in the respective aggregate
amounts as follows:

Payment Date Amount
--------------- -----------
October 1, 1996 $ 950,000
April 1, 1997 $ 950,000

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October 1, 1997 $ 950,000
April 1, 1998 $ 950,000
October 1, 1998 $ 950,000
April 1, 1999 $ 950,000
October 1, 1999 $ 950,000
April 1, 2000 $ 950,000
October 1, 2000 $ 950,000
April 1, 2001 $ 950,000
October 1, 2001 $ 950,000
April 1, 2002 $ 950,000
October 1, 2002 $ 950,000
April 1, 2003 $88,350,000
October 1, 2003 $89,300,000

Section 2.3 BORROWING OPTIONS. The Term Loan, the
Revolving Loans, the Additional Term Loan, the Supplemental
Revolving Loans and the D Tranche Term Loan shall, at the option of
the Borrower and except as otherwise provided in this Agreement,
consist of (i) Prime Rate Loans, (ii) Eurodollar Rate Loans or
(iii) part Prime Rate Loans and part Eurodollar Rate Loans,
provided that all Loans made pursuant to the same Borrowing shall
be of the same Type. As to any Eurodollar Rate Loan, any Lender
may, if it so elects, fulfill its commitment to make such Loan by
causing a foreign branch or affiliate of such Lender to make or
continue such Loan, provided that in such event such Lender's
Revolving Loan Pro Rata Share, Term Loan Pro Rata Share, Additional
Term Loan Pro Rata Share, Supplemental Revolving Loan Pro Rata
Share or D Tranche Term Loan Pro Rata Share, as the case may be, of
the Loan shall, for purposes of this Agreement, be considered to
have been made by such Lender and the obligation of the Borrower to
repay such Lender's Revolving Loan Pro Rata Share, Term Loan Pro
Rata Share, Additional Term Loan Pro Rata Share, Supplemental
Revolving Loan Pro Rata Share or D Tranche Term Loan Pro Rata
Share, as the case may be, of the Loan shall nevertheless be to
such Lender and shall be deemed held by such Lender for the account
of such branch or affiliate.

Section 2.4 MINIMUM AMOUNT OF EACH BORROWING. The
aggregate principal amount of each Borrowing by the Borrower
hereunder shall be not less than $5 million ($1 million in the case
of Swing Line Loans) and, in each case, if greater, shall be in an
integral multiple of $1 million above such minimum; PROVIDED,
HOWEVER, that (i) any Borrowing consisting of Revolving Loans made
pursuant to SECTION 2.11(C) may be in the amount of the Swing Line
Loan(s) refunded thereby and (ii) such Revolving Loans shall be
Prime Rate Revolving Loans unless and until converted into
Eurodollar Rate Revolving Loans pursuant to the terms of SECTION
2.6.

Section 2.5 NOTICE OF BORROWING. Whenever the
Borrower desires to make a Borrowing hereunder, it shall give the
Agent at its office located at One Bankers Trust Plaza, 130 Liberty

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Street, New York, New York 10006 at least one (1) Business Day's
prior written notice (or telephonic notice promptly confirmed in
writing) of each Prime Rate Loan, and at least (3) three Business
Days' prior written notice (or telephonic notice promptly confirmed
in writing) of each Eurodollar Rate Loan, to be made hereunder. In
each case such notice shall be given prior to 1:00 p.m. (New York
City time) on the date specified. Each such notice (a "NOTICE OF
BORROWING"), which shall be in the form of EXHIBIT 2.5 hereto,
shall be irrevocable, shall be deemed a representation by the
Borrower that all conditions precedent to such Borrowing have been
satisfied and shall specify (i) the aggregate principal amount of
the Loans to be made pursuant to such Borrowing, (ii) the date of
Borrowing (which shall be a Business Day) and (iii) whether the
Loans being made pursuant to such Borrowing are to be Prime Rate
Loans or Eurodollar Rate Loans and, with respect to Eurodollar Rate
Loans, the Interest Period to be applicable thereto. The Agent
shall as promptly as practicable give each Revolving Lender and
Supplemental Revolving Lender written notice (or telephonic notice
confirmed in writing) of each proposed Borrowing with respect to
Revolving Loans and Supplemental Revolving Loans, of such Revolving
Lender's Revolving Loan Pro Rata Share thereof, of such
Supplemental Revolving Lender's Supplemental Revolving Loan Pro
Rata Share thereof and of the other matters covered by the Notice
of Borrowing. The Agent shall promptly give the Borrower written
or telephonic notice as to the aggregate principal amount of
Revolving Loans and Supplemental Revolving Loans for each Borrowing
as determined by the Agent pursuant to SECTION 2.17. Without in
any way limiting the Borrower's obligation to confirm in writing
any telephonic notice, the Agent may act without liability upon the
basis of telephonic notice believed by the Agent in good faith to
be from the Borrower prior to receipt of written confirmation, with
the Agent's records being, absent manifest error, conclusive and
binding on all parties hereto.

Section 2.6 CONVERSION OR CONTINUATION. The Borrower
may elect (i) at any time to convert Prime Rate Loans or any
portion thereof to Eurodollar Rate Loans and (ii) at the end of any
Interest Period with respect thereto, to convert Eurodollar Rate
Loans or any portion thereof into Prime Rate Loans or to continue
such Eurodollar Rate Loans or any portion thereof for an additional
Interest Period; PROVIDED, HOWEVER, that the aggregate principal
amount of the Eurodollar Rate Loans for each Interest Period
therefor must be in an aggregate principal amount of $5,000,000 or
an integral multiple of $1,000,000 in excess thereof. Each
conversion or continuation of Term Loans shall be allocated among
the Term Loans of the Term Lenders in accordance with their
respective Term Loan Pro Rata Shares. Each conversion or
continuation of Revolving Loans shall be allocated among the
Revolving Loans of the Revolving Lenders in accordance with their
respective Revolving Loan Pro Rata Shares. Each conversion or
continuation of Additional Term Loans shall be allocated among the
Additional Term Loans of the Additional Lenders in accordance with
their respective Additional Term Loan Pro Rata Shares. Each

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conversion or continuation of Supplemental Revolving Loans shall be
allocated among the Supplemental Revolving Loans of the
Supplemental Revolving Lenders in accordance with their respective
Supplemental Revolving Loan Pro Rata Shares. Each conversion or
continuation of D Tranche Term Loans shall be allocated among the
D Tranche Term Loans of the D Tranche Lenders in accordance with
their respective D Tranche Term Loan Pro Rata Shares. Each such
election shall be in substantially the form of EXHIBIT 2.6 hereto
(a "NOTICE OF CONVERSION OR CONTINUATION") and shall be made by
giving the Agent at least three Business Days' prior written notice
thereof, given not later than 1:00 p.m. (New York City time) on
such third prior Business Day, specifying the amount and type of
conversion or continuation, in the case of a conversion to or a
continuation of Eurodollar Rate Loans, the Interest Period
therefor, and in the case of a conversion, the date of conversion
(which date shall be a Business Day and, if a conversion from
Eurodollar Rate Loans, shall also be the last day of the Interest
Period therefor). The Agent shall promptly notify each Revolving
Lender, Term Lender, Additional Lender, Supplemental Revolving
Lender or D Tranche Lender, as applicable, of its receipt of a
Notice of Conversion or Continuation and of the contents thereof.
Notwithstanding the foregoing, no conversion in whole or in part of
Prime Rate Loans to Eurodollar Rate Loans, and no continuation in
whole or in part of Eurodollar Rate Loans upon the expiration of
any Interest Period therefor, shall be permitted at any time at
which an Unmatured Event of Default or an Event of Default shall
have occurred and be continuing. If, within the time period
required under the terms of this SECTION 2.6, the Agent does not
receive a Notice of Conversion or Continuation from the Borrower
containing a permitted election to continue any Eurodollar Rate
Loans for an additional Interest Period or to convert any such
Loans, then, upon the expiration of the Interest Period therefor,
such Loans will automatically convert to Prime Rate Loans. Each
Notice of Conversion or Continuation shall be irrevocable.

Section 2.7 DISBURSEMENT OF FUNDS. No later than
12:00 noon (New York City time) on the date specified in the
applicable Notice of Borrowing, so long as the Agent has notified
such Lender of such Notice of Borrowing, each Lender will make
available its Revolving Loan Pro Rata Share, Term Loan Pro Rata
Share, Additional Term Loan Pro Rata Share, Supplemental Revolving
Loan Pro Rata Share or D Tranche Term Loan Pro Rata Share, as the
case may be, of the Borrowing requested to be made on such date in
Dollars and in immediately available funds, at the office (the
"PAYMENT OFFICE") of the Agent located at One Bankers Trust Plaza,
130 Liberty Street, New York, New York 10006 (for the account of
such non-U.S. office of the Agent as the Agent may direct in the
case of Eurodollar Rate Loans), and the Agent will promptly make
available to the Borrower at the Payment Office the aggregate of
the amounts so made available by the applicable Lenders. Unless
the Agent shall have been notified by any Lender prior to the date
of a Borrowing that such Lender does not intend to make available
to the Agent such Lender's Revolving Loan Pro Rata Share, Term Loan

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Pro Rata Share, Additional Term Loan Pro Rata Share, Supplemental
Revolving Loan Pro Rata Share or D Tranche Term Loan Pro Rata
Share, as the case may be, of such Borrowing, the Agent may assume
that such Lender has made such amount available to the Agent on
such date of Borrowing and the Agent may, in reliance upon such
assumption, make available to the Borrower a corresponding amount.
If such corresponding amount is not in fact made available to the
Agent by such Lender on the date of Borrowing, the Agent shall be
entitled to recover such corresponding amount on demand from such
Lender. If such Lender does not pay such corresponding amount
forthwith upon the Agent's demand therefor, the Agent shall
promptly notify the Borrower and the Borrower shall immediately pay
such corresponding amount to the Agent. The Agent shall also be
entitled to recover from the Borrower interest on such
corresponding amount, in respect of each day from the date such
corresponding amount was made available by the Agent to the
Borrower to but excluding the date such corresponding amount is
recovered by the Agent, at a rate per annum equal to the rate
applicable to Prime Rate Loans or Eurodollar Rate Loans, as the
case may be, applicable during the period in question and, upon
payment of such amounts to the Agent, the Borrower shall be
entitled to recover such amounts from such Lender. Any amounts due
hereunder to the Agent from the Lenders which are not paid when due
shall bear interest payable by such Lender, from the date due until
the date paid, at the Federal Funds Rate for the first three days
after the date such amount is due and thereafter at the Prime Rate,
together with the Agent's standard interbank processing fee.
Further, such Lender shall be deemed to have assigned any and all
payments of principal and interest made on its Loans, amounts due
with respect to Letters of Credit (or its participations therein)
and any other amounts due to it hereunder first to the Agent to
fund any outstanding Loans made available on behalf of such Lender
by the Agent pursuant to this SECTION 2.7 until such Loans have
been funded (as a result of such assignment or otherwise) and then
to fund Loans of all Lenders other than such Lender until each
Lender has outstanding Loans equal to its Revolving Loan Pro Rata
Share, Term Loan Pro Rata Share, Additional Term Loan Pro Rata
Share, Supplemental Revolving Loan Pro Rata Share or D Tranche Term
Loan Pro Rata Share, as the case may be, of all Loans (as a result
of such assignment or otherwise). Such Lender shall not have
recourse against the Borrower with respect to any amounts paid to
the Agent or any Lender with respect to the preceding sentence;
PROVIDED, HOWEVER, that such Lender shall have full recourse
against the Borrower to the extent of the amount of such Loans it
has so been deemed to have made. Nothing herein shall be deemed to
relieve any Lender from its obligation to fulfill its Commitment
hereunder or to prejudice any rights which the Borrower may have
against any Lender as a result of any default by such Lender
hereunder.

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Section 2.8 INTEREST.

(a) PRIME RATE REVOLVING LOANS. The Borrower agrees to
pay interest in respect of the unpaid principal amount of each
Prime Rate Revolving Loan from the date the proceeds thereof are
made available to the Borrower (whether pursuant to a new Borrowing
or upon a conversion pursuant to SECTION 2.6) until maturity
(whether by acceleration or otherwise) of such Prime Rate Revolving
Loan or until such Prime Rate Revolving Loan is converted into a
Eurodollar Rate Revolving Loan, at a rate per annum equal to the
Prime Rate in effect from time to time plus a Borrowing Margin of
1-5/8%, as such Borrowing Margin may from time to time be adjusted
pursuant to SECTION 2.9.

(b) EURODOLLAR RATE REVOLVING LOANS. The Borrower
agrees to pay interest in respect of the unpaid principal amount of
each Eurodollar Rate Revolving Loan from the date the proceeds
thereof are made available to the Borrower (whether pursuant to a
new Borrowing or upon a conversion pursuant to SECTION 2.6) until
maturity (whether by acceleration or otherwise) of such Eurodollar
Rate Revolving Loan at a rate per annum equal to the relevant
Eurodollar Rate plus a Borrowing Margin of 2-5/8%, as such
Borrowing Margin may from time to time be adjusted pursuant to
SECTION 2.9.

(c) PRIME RATE TERM LOANS. The Borrower agrees to pay
interest in respect of the unpaid principal amount of each Prime
Rate Term Loan from the date the proceeds thereof are made
available to the Borrower (whether pursuant to a new Borrowing or
upon a conversion pursuant to SECTION 2.6) until maturity (whether
by acceleration or otherwise) of such Prime Rate Term Loan or until
such Prime Rate Term Loan is converted into a Eurodollar Rate Term
Loan, at a rate per annum equal to the Prime Rate in effect from
time to time plus a Borrowing Margin of 2-1/8%.

(d) EURODOLLAR RATE TERM LOANS. The Borrower agrees to
pay interest in respect of the unpaid principal amount of each
Eurodollar Rate Term Loan from the date the proceeds thereof are
made available to the Borrower (whether pursuant to a new Borrowing
or upon a conversion pursuant to SECTION 2.6) until maturity
(whether by acceleration or otherwise) of such Eurodollar Rate Term
Loan at a rate per annum equal to the relevant Eurodollar Rate plus
a Borrowing Margin of 3-1/8%.

(e) SWING LINE LOANS. The Borrower agrees to pay
interest in respect of the unpaid principal amount of each Swing
Line Loan from the date the proceeds thereof are made available to
the Borrower until maturity (whether by acceleration or otherwise)
of such Swing Line Loan or until such Swing Line Loan is converted
to Revolving Loans at a rate per annum equal to the Prime Rate in
effect from time to time plus a Borrowing Margin of 1-5/8%, as such
Borrowing Margin may from time to time be adjusted pursuant to
SECTION 2.9.

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(f) PRIME RATE ADDITIONAL TERM LOANS. The Borrower
agrees to pay interest in respect of the unpaid principal amount of
each Prime Rate Additional Term Loan from the date the proceeds
thereof are made available to the Borrower (whether pursuant to a
new Borrowing or upon a conversion pursuant to SECTION 2.6) until
maturity (whether by acceleration or otherwise) of such Prime Rate
Additional Term Loan or until such Prime Rate Additional Term Loan
is converted into a Eurodollar Rate Additional Term Loan, at a rate
per annum equal to the Prime Rate in effect from time to time plus
a Borrowing Margin of 2-3/8%.

(g) EURODOLLAR RATE ADDITIONAL TERM LOANS. The Borrower
agrees to pay interest in respect of the unpaid principal amount of
each Eurodollar Rate Additional Term Loan from the date the
proceeds thereof are made available to the Borrower (whether
pursuant to a new Borrowing or upon a conversion pursuant to
SECTION 2.6) until maturity (whether by acceleration or otherwise)
of such Eurodollar Rate Additional Term Loan at a rate per annum
equal to the relevant Eurodollar Rate plus a Borrowing Margin of 3-3/8%.

(h) PRIME RATE SUPPLEMENTAL REVOLVING LOANS. The
Borrower agrees to pay interest in respect of the unpaid principal
amount of each Prime Rate Supplemental Revolving Loan from the date
the proceeds thereof are made available to the Borrower (whether
pursuant to a new Borrowing or upon a conversion pursuant to
SECTION 2.6) until maturity (whether by acceleration or otherwise)
of such Prime Rate Supplemental Revolving Loan or until such Prime
Rate Supplemental Revolving Loan is converted into a Eurodollar
Rate Supplemental Revolving Loan, at a rate per annum equal to the
Prime Rate in effect from time to time plus a Borrowing Margin of
1-5/8%, as such Borrowing Margin may from time to time be adjusted
pursuant to SECTION 2.9.

(i) EURODOLLAR RATE SUPPLEMENTAL REVOLVING LOANS. The
Borrower agrees to pay interest in respect of the unpaid principal
amount of each Eurodollar Rate Supplemental Revolving Loan from the
date the proceeds thereof are made available to the Borrower
(whether pursuant to a new Borrowing or upon a conversion pursuant
to SECTION 2.6) until maturity (whether by acceleration or
otherwise) of such Eurodollar Rate Supplemental Revolving Loan at
a rate per annum equal to the relevant Eurodollar Rate plus a
Borrowing Margin of 2-5/8%, as such Borrowing Margin may from time
to time be adjusted pursuant to SECTION 2.9.

(j) PRIME RATE D TRANCHE TERM LOANS. The Borrower
agrees to pay interest in respect of the unpaid principal amount of
each Prime Rate D Tranche Term Loan from the date the proceeds
thereof are made available to the Borrower (whether pursuant to a
new Borrowing or upon a conversion pursuant to SECTION 2.6) until
maturity (whether by acceleration or otherwise) of such Prime Rate
D Tranche Term Loan or until such Prime Rate D Tranche Term Loan is
converted into a Eurodollar Rate D Tranche Term Loan, at a rate per

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annum equal to the Prime Rate in effect from time to time plus a
Borrowing Margin of 2-3/8%.

(k) EURODOLLAR RATE D TRANCHE TERM LOANS. The Borrower
agrees to pay interest in respect of the unpaid principal amount of
each Eurodollar Rate D Tranche Term Loan from the date the proceeds
thereof are made available to the Borrower (whether pursuant to a
new Borrowing or upon a conversion pursuant to SECTION 2.6) until
maturity (whether by acceleration or otherwise) of such Eurodollar
Rate D Tranche Term Loan at a rate per annum equal to the relevant
Eurodollar Rate plus a Borrowing Margin of 3-3/8%.

(l) DEFAULT RATE INTEREST. Overdue principal and (to
the extent permitted by applicable law) overdue interest in respect
of each Loan shall bear interest, payable on demand, after as well
as before judgment, at a rate per annum equal to (i) if such Loan
is a Prime Rate Loan, the Prime Rate plus the applicable Borrowing
Margin set forth in SECTION 2.8(A), (C), (E), (F), (H) OR (J) (as
the same may be adjusted pursuant to SECTION 2.9), as the case may
be, plus 2% per annum or (ii) if such Loan is a Eurodollar Rate
Loan, the Eurodollar Rate then in effect plus the applicable
Borrowing Margin set forth in SECTION 2.8(B), (D), (G), (I) OR (K)
(as the same may be adjusted pursuant to SECTION 2.9), as the case
may be, plus 2% per annum (any such applicable rate of interest in
the foregoing clauses (i) and (ii) being the "DEFAULT RATE").

(m) ACCRUAL AND PAYMENT OF INTEREST. Interest shall
accrue from and including the date of any Borrowing (whether
pursuant to a new Borrowing or upon a conversion pursuant to
SECTION 2.6) to but excluding the date of any repayment thereof.
Interest on Eurodollar Rate Loans shall be payable by the Borrower
in arrears on the last day of each Interest Period and, in the case
of an Interest Period in excess of three months, at intervals of
every three months after the initial date of such Interest Period.
Notwithstanding the above, interest shall be due and payable on any
amount repaid or reborrowed, as the case may be, on the date of
such repayment or reborrowing, as the case may be, and upon final
maturity of such Loan (whether by acceleration or otherwise) and
after such maturity, on demand. Interest on Prime Rate Loans shall
be due and payable quarterly in arrears on the Quarterly Payment
Date of each year, on maturity (whether by acceleration or
otherwise) and after such maturity, on demand. Interest on all
Eurodollar Rate Loans shall be computed on the basis of a year
consisting of 360 days and actual days elapsed. Interest on all
Prime Rate Loans shall be computed on the basis of a year
consisting of 365 or 366 days, as the case may be, and actual days
elapsed.

(n) NOTIFICATION OF RATE. The Agent, upon determining
the Eurodollar Rate for any Interest Period, shall promptly give
the Borrower and the other Lenders written or telephonic notice
thereof. Such determination shall, absent manifest error and

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subject to the provisions of SECTION 2.13, be final, conclusive and
binding upon all parties hereto.

(o) MAXIMUM INTEREST. If any interest payment or other
charge or fee payable hereunder exceeds the maximum amount then
permitted by applicable law, the Borrower shall be obligated to pay
the maximum amount then permitted by applicable law and the
Borrower shall continue to pay the maximum amount from time to time
permitted by applicable law until all such interest payments and
other charges and fees otherwise due hereunder (in the absence of
such restraint imposed by applicable law) have been paid in full.

(p) REFERENCE BANKS. If any Reference Bank shall for
any reason no longer have a Commitment or a Loan, such Reference
Bank shall thereupon cease to be a Reference Bank, and if, as a
result thereof, there shall only be one Reference Bank remaining,
the Borrower and the Agent (after consultation with the Lenders)
shall, by notice to the Lenders, designate another Lender as a
Reference Bank so that there shall at all time be at least two
Reference Banks. Each Reference Bank shall use its best efforts to
furnish quotations of rates to the Agent as contemplated hereby.
If any of the Reference Banks shall be unable or shall otherwise
fail to supply such rates to the Agent upon its request, the rate
of interest shall, subject to the provisions of SECTION 2.13, be
determined on the basis of the quotations of the remaining
Reference Banks.

Section 2.9 INTEREST RATE ADJUSTMENTS.

(a) Subject to SECTION 2.9(B), the Borrowing Margins set
forth in SECTIONS 2.8(A), (B), (E), (H) AND (I) shall be subject to
adjustment pursuant to the terms and conditions set forth on
SCHEDULE 1.1(B) hereto. Subject to SECTION 2.9(B), any such upward
or downward adjustment shall be effective immediately upon receipt
by the Lenders of the officer's certificate delivered pursuant to
SECTION 5.1.1(B) OR (C) which gives rise to such adjustment.

(b) The Borrowing Margin for any Eurodollar Rate
Revolving Loan or any Eurodollar Rate Supplemental Revolving Loan
shall be the Borrowing Margin in effect on the first day of the
Interest Period with respect to such Eurodollar Rate Revolving Loan
or such Eurodollar Rate Supplemental Revolving Loan. The Borrowing
Margin for any Eurodollar Rate Revolving Loan or any Eurodollar
Rate Supplemental Revolving Loan shall not change during the
Interest Period applicable to such Borrowing.

Section 2.10 INTEREST PERIODS. At the time it gives
any Notice of Borrowing or a Notice of Conversion or Continuation
with respect to Eurodollar Rate Loans, the Borrower shall elect, by
giving the Agent written notice, the interest period (each an
"INTEREST PERIOD") applicable to the related Eurodollar Rate
Borrowing, which Interest Period shall, at the option of the
Borrower, be a one, two, three or six month period, provided that:

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(i) the Interest Period for any Eurodollar Rate Loan shall commence
on the date of such Borrowing and each Interest Period occurring
thereafter in respect of a continuation of such Eurodollar Rate
Loan shall commence on the day on which the immediately preceding
Interest Period for such Loan expires; (ii) if any Interest Period
would otherwise expire on a day which is not a Business Day, such
Interest Period shall expire on the next succeeding Business Day,
PROVIDED, HOWEVER, that if any Interest Period in respect of a
Eurodollar Rate Loan would otherwise expire on a day which is not
a Business Day and after which no Business Day occurs in the same
month, such Interest Period shall expire on the immediately
preceding Business Day; (iii) if an Interest Period begins on the
last Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at the
end of such Interest Period), such Interest Period shall end on the
last Business Day of the first, second, third or sixth, as
applicable, succeeding calendar month; and (iv) no Interest Period
shall extend beyond the Revolver Termination Date for any Revolving
Loans, the Term Loan Maturity Date for the Term Loan, the
Additional Term Loan Maturity Date for the Additional Term Loan the
Supplemental Revolver Termination Date for any Supplemental
Revolving Loans or the D Tranche Term Loan Maturity Date for the D
Tranche Term Loan.

Section 2.11 SWING LINE LOANS.

(a) SWING LINE COMMITMENT. Subject to the terms and
conditions hereof, the Swing Line Lender agrees to make swing line
loans ("SWING LINE LOANS") to the Borrower on any Business Day from
time to time from and after the Closing Date to, but not including,
the Revolver Termination Date in an aggregate principal amount at
any one time outstanding not to exceed $25,000,000; PROVIDED,
HOWEVER, that in no event may the amount of any Borrowing of Swing
Line Loans cause the outstanding Revolving Loans of any Lender
(other than the Swing Line Lender), when added to such Lender's
Revolving Loan Pro Rata Share of the then outstanding Swing Line
Loans, L/C Obligations and Florence L/C Obligations (after giving
effect to the use of proceeds of such Swing Line Loans) to exceed
such Lender's Revolving Loan Commitment. Amounts borrowed by the
Borrower under this SECTION 2.11(a) may be repaid and, to but
excluding the Revolver Termination Date, reborrowed.

(b) PROCEDURE FOR SWING LINE BORROWING. The Swing Line
Loans shall be made and maintained as Prime Rate Loans and,
notwithstanding SECTION 2.6, shall not be entitled to be converted
into Eurodollar Rate Loans. The Borrower shall give the Agent and
the Swing Line Lender irrevocable notice (which notice must be
received by the Agent and the Swing Line Lender prior to 1:00 p.m.,
New York City time), on the requested borrowing date (which shall
be a Business Day) specifying the amount of each requested Swing
Line Loan, which shall be in a minimum amount of $1,000,000 or an
integral multiple thereof. The proceeds of each Swing Line Loan
will then be made available to the Borrower by the Swing Line

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Lender by crediting the account of the Borrower on the books of the
office of the Swing Line Lender specified in SECTION 2.7 with such
proceeds.

(c) REFUNDING OF SWING LINE LOANS. The Swing Line
Lender, at any time in its sole and absolute discretion, may on
behalf of the Borrower (which hereby irrevocably authorizes the
Swing Line Lender to so act on its behalf) request each Revolving
Lender (including the Swing Line Lender) to make a Revolving Loan
in an amount equal to such Revolving Lender's Revolving Loan Pro
Rata Share of the principal amount of the Swing Line Loans (the
"REFUNDED SWING LINE LOANS") outstanding on the date such notice is
given. Unless any of the events described in SECTION 7.1(e) OR
7.1(f) shall have occurred (in which event the procedures of
paragraph (d) of this SECTION 2.11 shall apply) and regardless of
whether the conditions precedent set forth in this Agreement to the
making of a Revolving Loan are then satisfied, each Revolving
Lender shall make the proceeds of its Revolving Loan available to
the Agent at its office specified in SECTION 2.7 prior to 1:00
p.m., New York City time, in funds immediately available on the
Business Day next succeeding the date such notice is given. The
proceeds of such Revolving Loans shall be made immediately
available to the Swing Line Lender and immediately applied to repay
the Refunded Swing Line Loans, and, until converted into Eurodollar
Rate Loans, shall constitute Prime Rate Revolving Loans.

(d) PARTICIPATION IN SWING LINE LOANS. If, prior to the
making of Prime Rate Revolving Loans pursuant to paragraph (c) of
this SECTION 2.11, one of the events described in SECTIONS 7.1(e)
OR 7.1(f) shall have occurred, then, subject to the provisions of
clause (e) below, each Revolving Lender will, on the date such
Revolving Loans were to have been made, purchase from the Swing
Line Lender an undivided participating interest in the Refunded
Swing Line Loan in an amount equal to its Revolving Loan Pro Rata
Share of such Refunded Swing Line Loan. Upon request, each
Revolving Lender will immediately transfer to the Swing Line
Lender, in immediately available funds, the amount of its
participation and upon receipt thereof the Swing Line Lender will
deliver to such Lender a Swing Line Loan Participation Certificate
dated the date of receipt of such funds and in such amount.

(e) OBLIGATIONS UNCONDITIONAL. Each Revolving Lender's
obligation to make Revolving Loans in accordance with clause (c)
above and to purchase participating interests in accordance with
clause (d) above shall be absolute and unconditional and shall not
be affected by any circumstance, including, without limitation, (i)
any set-off, counterclaim, recoupment, defense or other right which
such Lender may have against the Swing Line Lender, the Borrower or
any other Person for any reason whatsoever; (ii) the occurrence or
continuance of any Event of Default or Unmatured Event of Default;
(iii) any adverse change in the condition (financial or otherwise)
of the Borrower or any other Person; (iv) any breach of this
Agreement by the Borrower or any other Person; (v) any inability of

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the Borrower to satisfy the conditions precedent to Borrowing set
forth in this Agreement on the date upon which such participating
interest is to be purchased or (vi) any other circumstance,
happening or event whatsoever, whether or not similar to any of the
foregoing. If any Revolving Lender does not make available to the
Swing Line Lender the amount required pursuant to clause (c) or (d)
above, as the case may be, the Swing Line Lender shall be entitled
to recover such amount on demand from such Lender, together with
interest thereon for each day from the date of non-payment until
such amount is paid in full at the Federal Funds Rate for the first
three days and at the Prime Rate thereafter. Notwithstanding the
foregoing provisions of this SECTION 2.11(e), no Revolving Lender
shall be required to make a Revolving Loan to the Borrower for the
purpose of refunding a Swing Line Loan pursuant to clause (c) above
or to purchase a participating interest in a Swing Line Loan
pursuant to clause (d) above if an Event of Default or Unmatured
Event of Default has occurred and is continuing and, prior to the
making by the Swing Line Lender of such Swing Line Loan, the Swing
Line Lender has received written notice from such Revolving Lender
specifying that such Event of Default or Unmatured Event of Default
has occurred and is continuing, describing the nature thereof and
stating that, as a result thereof, such Revolving Lender shall
cease to make such Refunded Swing Line Loans and purchase such
participating interests, as the case may be; PROVIDED, HOWEVER,
that the obligation of such Revolving Lender to make such Refunded
Swing Line Loans and to purchase such participating interests shall
be reinstated upon the earlier to occur of (i) the date upon which
such Revolving Lender notifies the Swing Line Lender that its prior
notice has been withdrawn and (ii) the date upon which the Event of
Default or Unmatured Event of Default specified in such notice no
longer is continuing.

Section 2.12 LETTERS OF CREDIT.

(a) ISSUANCE BY FACING AGENT. Subject to the terms and
conditions hereof and provided that no Event of Default or
Unmatured Event of Default shall have occurred and be continuing,
the Borrower may request, in accordance with this SECTION 2.12,
that the Facing Agent issue on behalf of the Revolving Lenders
Letters of Credit denominated in Dollars for the account of the
Borrower with the face amount of each Letter of Credit in a minimum
amount of $250,000 or such lesser amount as the Facing Agent may
approve; PROVIDED, HOWEVER, that (i) each Letter of Credit shall be
issued in favor of a Permitted Beneficiary; (ii) the Borrower shall
not request the Facing Agent to issue any Letter of Credit if,
after giving effect to such issuance, the sum of the aggregate
Stated Amounts and unreimbursed drawings of the Letters of Credit
then outstanding would exceed $62,000,000 or if the face amount of
such requested Letter of Credit exceeds the Total Available
Revolving Commitment then in effect, and (iii) in no event shall
the Facing Agent issue any Letter of Credit having an expiration
date later than one year from the date of issuance (or in any event

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later than thirty (30) days prior to the Revolver Termination
Date), provided that any such Letter of Credit may be automatically
extended to a date not later than one year from its expiration date
(but in no event later than thirty (30) days prior to the Revolver
Termination Date) on an annual basis upon the satisfaction of the
applicable conditions set forth in SECTIONS 6.2(a),(b) and (d)
hereof with respect to the issuance of any Letter of Credit, which
satisfaction the Facing Agent may require the Borrower to certify
in writing as a condition of any such extension. For each such
automatic extension of a Letter of Credit, the Borrower shall
deliver a written request to the Facing Agent (with a copy to the
Agent) no earlier than 150 days and no later than 120 days prior to
the expiration date thereof. Such request shall affirm that as of
the date thereof the conditions for the issuance of a Letter of
Credit set forth in SECTION 6.2 are satisfied. After receipt by
the Facing Agent of such extension request, each such Letter of
Credit shall be automatically extended under the terms and
conditions provided above. Each request for an issuance of, or an
amendment to, a Letter of Credit shall be in the form of EXHIBIT
2.12 hereto, appropriately completed. The issuance of a Letter of
Credit pursuant to this SECTION 2.12 shall be deemed (A) to be a
Borrowing for purposes of, without limitation, the satisfaction of
the applicable conditions set forth in ARTICLE VI hereof and (B) to
reduce availability under the Revolving Loan Commitments of the
Revolving Lenders (except for purposes of SECTION 3.7 with respect
to the calculation of Revolving Loan Commitment Fees) then in
effect by an amount equal to the sum of the aggregate Stated
Amounts and unreimbursed drawings of such Letter of Credit until
such time as such Letter of Credit is no longer outstanding and any
amounts drawn thereunder have been reimbursed. The Borrower, each
Facing Agent and the Revolving Lenders acknowledge the issuance of
the Letters of Credit which are outstanding on the Restatement Date
in accordance with the terms of the Existing Credit Agreement and
agree that such Letters of Credit shall continue to be outstanding
pursuant to the terms and conditions of this Agreement and the
other Loan Documents.

(b) PARTICIPATION OF REVOLVING LENDERS. Immediately
upon the issuance of each Letter of Credit, each Revolving Lender
shall be deemed to, and hereby agrees to, have irrevocably
purchased from the Facing Agent a participation in such Letter of
Credit and drawings thereunder in an amount equal to such Lender's
Revolving Loan Pro Rata Share of the maximum amount which is or at
any time may become available to be drawn thereunder. The Facing
Agent shall give the Agent written notice of the issuance or
amendment of a Letter of Credit on the date of issuance or
amendment thereof and provide the Agent with a copy of each Letter
of Credit and amendment thereto. The Agent shall give each
Revolving Lender written notice of the issuance and amendment of a
Letter of Credit within five (5) Business Days after each such
Letter of Credit has been issued or amended pursuant to the terms
hereof.

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(c) REQUESTS FOR ISSUANCE. Whenever the Borrower
desires the issuance or extension (other than an automatic
extension) of a Letter of Credit, it shall deliver to the Facing
Agent and the Agent (with a duplicate copy to the Agent's Letter of
Credit department at One Bankers Trust Plaza, 130 Liberty Street,
New York, New York 10006, Attn: Commercial Loan Division, Standby
L/C Unit, 14th Floor for Standby Letters of Credit and to the
Agent's Global Assets Letter of Credit Division, 130 Liberty
Street, New York, New York 10006, Attn: Trade Letter of Credit,
12th Floor for Commercial Letters of Credit) a written notice in
the form of EXHIBIT 2.12 hereto no later than 1:00 p.m., (New York
City time) at least five (5) Business Days (or such shorter period
as may be agreed to by the Facing Agent in any particular instance)
in advance of the proposed date of issuance or extension. That
notice shall specify (i) the proposed date of issuance or extension
(which shall be a Business Day), (ii) the type of Letter of Credit,
(iii) the Stated Amount of the Letter of Credit, (iv) the
expiration date of the Letter of Credit, (v) the name and address
of the beneficiary (which shall be a Permitted Beneficiary) and
(vi) such other information as the Facing Agent may reasonably
request. Prior to the date of issuance, the Borrower shall specify
a precise description of the documents and the verbatim text of any
certificate to be presented by the beneficiary which, if presented
by the beneficiary on or prior to the expiration date of the Letter
of Credit, would require the Facing Agent to make payment under the
Letter of Credit; PROVIDED, HOWEVER, that the Facing Agent, in its
sole judgment, may require changes in any such documents and
certificates. In determining whether to pay under any Letter of
Credit, the Facing Agent shall be responsible only to determine
that the documents and certificates required to be delivered under
that Letter of Credit have been delivered and that they comply on
their face with the requirements of that Letter of Credit. In the
event that any terms or conditions of such written notice of
issuance or amendment or any other document delivered in connection
therewith are inconsistent with the terms and conditions of this
Agreement, the terms and conditions of this Agreement shall
control.

(d) REIMBURSEMENT OF DRAWINGS. In the event of any
request for drawing under any Letter of Credit by the beneficiary
thereof, the Facing Agent shall notify the Borrower, the Agent and
the Revolving Lenders prior to the date on which the Facing Agent
intends to honor such drawing, and the Borrower shall reimburse the
Facing Agent on the day on which such drawing is honored in an
amount in same day funds equal to the amount of such drawing,
provided that, anything contained in this Agreement to the contrary
notwithstanding, (i) unless the Borrower shall have notified the
Facing Agent and the Agent prior to 1:00 p.m. (New York City time)
one Business Day prior to such drawing that the Borrower intends to
reimburse the Facing Agent for the amount of such drawing with
funds other than the proceeds of Revolving Loans, the Borrower
shall be deemed to have timely given a Notice of Borrowing to the
Agent requesting the Revolving Lenders to make a Prime Rate

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Revolving Loan on the date on which such drawing is honored in an
amount equal to the amount of such drawing, and (ii) subject to
satisfaction or waiver of the conditions specified in SECTION 6.2,
the Revolving Lenders shall, on the date of such drawing, make a
Prime Rate Revolving Loan in the amount of such drawing, the
proceeds of which shall be made available to the Facing Agent by
the Agent and applied directly by the Facing Agent for the amount
of such drawing; and PROVIDED FURTHER, that, if for any reason,
proceeds of Revolving Loans are not received by the Facing Agent on
such date in an amount equal to the amount of such drawing, the
Borrower shall reimburse the Facing Agent, on the Business Day
immediately following the date of such drawing, in an amount in
same day funds equal to the excess of the amount of such drawing
over the amount of such Revolving Loans, if any, which are so
received, plus accrued interest on such amount at the rate set
forth in SECTION 2.12(f)(iii).

(e) FAILURE TO REIMBURSE. In the event that the
Borrower shall fail to reimburse the Facing Agent as provided in
SECTION 2.12(d) in an amount equal to the amount of any drawing
honored by the Facing Agent under a Letter of Credit issued by it,
the Facing Agent shall promptly notify the Agent and each Revolving
Lender of the unreimbursed amount of such drawing and of such
Lender's respective participation therein. Each Revolving Lender
shall make available to the Agent for distribution to the Facing
Agent an amount equal to its respective participation in same day
funds at the office of the Agent specified in such notice not later
than 1:00 p.m. (New York City time) on the Business Day after the
date notified by the Facing Agent. In the event that any Revolving
Lender fails to make available to the Facing Agent the amount of
such Lender's participation in such Letter of Credit as provided in
this SECTION 2.12(e), the Agent shall be entitled on behalf of the
Facing Agent to recover such amount on demand from the Lender
together with interest at the Federal Funds Rate until three days
after the date on which the Facing Agent gives notice of payment
and at the Prime Rate for each day thereafter until such amount is
paid. Further, such Lender shall be deemed to have assigned any
and all payments made of principal and interest on its Loans,
amounts due with respect to its Letters of Credit and any other
amounts due to it hereunder to the Facing Agent to fund the amount
of any drawn Letter of Credit which such Lender was required to
fund pursuant to this SECTION 2.12(e) until such amount has been
funded (as a result of such assignment or otherwise). The failure
of any Lender to make funds available to the Facing Agent of such
amount shall not relieve any other Lender of its obligation
hereunder to make funds available to the Facing Agent pursuant to
this SECTION 2.12(e). The Agent shall distribute to each
Revolving Lender which has paid all amounts payable by it under
this SECTION 2.12(e) with respect to any Letter of Credit issued by
the Facing Agent such Lender's Revolving Loan Pro Rata Share of all
payments received by the Facing Agent from the Borrower in
reimbursement of drawings honored by the Facing Agent under such
Letter of Credit when such payments are received.

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(f) LETTER OF CREDIT FEES. The Borrower agrees to pay
to the Agent or the Facing Agent, as specified below, the following
amounts with respect to each Letter of Credit issued by the Facing
Agent:

(i) a facing fee to the Facing Agent in an amount
separately agreed to by the Borrower and the Facing
Agent;

(ii) a Letter of Credit fee (the "LETTER OF CREDIT
FEE") per annum to the Agent equal to the greater of (A)
the applicable Borrowing Margin for Eurodollar Rate
Revolving Loans determined pursuant to SECTION 2.8(b) and
SECTION 2.9 as in effect from time to time MINUS one-half
percent (.50%) per annum, and (B) one percent (1.0%) per
annum, of the Stated Amount of such Letter of Credit,
payable quarterly in arrears on April 1, July 1, October
1 and January 1 of each year (or if such day is not a
Business Day, then on and through the immediately
preceding Business Day), on the expiration date and after
the expiration date, on demand, commencing on the first
such day of the issuance of such Letter of Credit, and
calculated on the basis of a 360-day year and the actual
number of days elapsed;

(iii) to the Agent with respect to drawings made
under any such Letter of Credit, interest, payable on
demand, on the amount paid by the Facing Agent in respect
of each such drawing from the date of the drawing through
the date such amount is reimbursed by the Borrower
(including any such reimbursement out of the proceeds of
Revolving Loans pursuant to SECTION 2.1(b)) at a rate
that is at all times equal to 2.0% per annum in excess of
the greatest interest rate otherwise payable under this
Agreement for Prime Rate Loans as then in effect; and

(iv) to the Facing Agent with respect to the
issuance, amendment or transfer of any such Letter of
Credit and each drawing made thereunder, documentary and
processing charges in accordance with the Facing Agent's
standard schedule for such charges in effect at the time
of such issuance, amendment, transfer or drawing, as the
case may be.

Promptly upon receipt by the Agent of any amount
described in clause (ii) or (iii) of this SECTION 2.12(f), the
Agent shall distribute to each Revolving Lender its Revolving Loan
Pro Rata Share of such amount; PROVIDED, HOWEVER, that amounts
described in clause (iii) above that accrue prior to the date upon
which Revolving Lenders are required (x) to fund Prime Rate
Revolving Loans pursuant to SECTION 2.12(d)(ii) or (y) to make
available to the Facing Agent the amount of such Lender's
participation in such Letter of Credit, as the case may be, in

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respect of any unreimbursed drawings under any Letter of Credit may
be retained by the Agent.

(g) REIMBURSEMENT OBLIGATION UNCONDITIONAL. The
obligation of the Borrower to reimburse the Facing Agent for
drawings made under the Letters of Credit issued by the Facing
Agent shall be unconditional and irrevocable and shall be paid
strictly in accordance with the terms of this Agreement under all
circumstances including, without limitation, the following
circumstances:

(i) any lack of validity or enforceability of any Letter
of Credit;

(ii) the existence of any claim, set-off, defense or
other right which the Borrower may have at any time against a
beneficiary or any transferee of any Letter of Credit (or any
persons or entities for whom any such transferee may be
acting), the Facing Agent or any other Person, whether in
connection with this Agreement, the transactions contemplated
herein or any unrelated transaction (including any underlying
transaction between the Borrower or one of its Subsidiaries
and the beneficiary for which the Letter of Credit was
procured);

(iii) any draft, demand, certificate or any other document
presented under any Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect;

(iv) payment by the Facing Agent under any Letter of
Credit against presentation of a demand, draft or certificate
or other document which does not comply with the terms of such
Letter of Credit, provided that such payment does not
constitute gross negligence or willful misconduct of the
Facing Agent;

(v) any other circumstance or happening whatsoever
which is similar to any of the foregoing; or

(vi) the fact that an Event of Default shall have
occurred and be continuing.

(h) INCREASED COSTS. If, after the Closing Date, by
reason of (i) any change in applicable law, regulation, rule,
decree or regulatory requirement or any change in the
interpretation or application by any judicial or regulatory
authority of any law, regulation, rule, decree or regulatory
requirement or (ii) compliance by the Facing Agent, the Agent or
any Revolving Lender with any direction, request or requirement
(whether or not having the force of law) of any governmental or
monetary authority including, without limitation, Regulation D:

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(A) the Facing Agent, the Agent or any Revolving Lender
shall be subject to any tax, levy, charge or withholding of
any nature or to any variation thereof or to any penalty with
respect to the maintenance or fulfillment of its
obligations under this SECTION 2.12, whether directly or by
such being imposed on or suffered by the Facing Agent, the
Agent or such Revolving Lender (except for (x) changes in the
rate of tax on, or determined by reference to, the net income
or profits of such Lender imposed by the jurisdiction in which
such Lender's principal office or applicable lending office is
located and (y) United States withholding taxes, which shall
be governed by the provisions of SECTION 3.11);

(B) any reserve, deposit or similar requirement of any
Governmental Authority is or shall be applicable, imposed or
modified in respect of any Letters of Credit issued by the
Facing Agent and participated in by the Revolving Lenders; or

(C) there shall be imposed on the Facing Agent by any
Governmental Authority any other condition regarding any
Letter of Credit issued pursuant to this SECTION 2.12;

and the result of the foregoing is to directly or indirectly
increase the cost to the Facing Agent, the Agent or any Revolving
Lender of issuing, making or maintaining any Letter of Credit, or
to reduce the amount receivable in respect thereof by the Facing
Agent, the Agent or any Revolving Lender, then and in any case the
Agent may, notify the Borrower and the Borrower shall pay on demand
such amounts as the Agent may reasonably specify to be necessary to
compensate the Facing Agent, the Agent or any Revolving Lender for
such additional cost or reduced receipt together with interest on
such amount from the date demanded until payment in full thereof at
a rate equal at all times to the Default Rate. The determination
by the Facing Agent, the Agent or any Revolving Lender of any
amount due pursuant to this SECTION 2.12(h) shall be set forth in
a certificate delivered to the Agent (which certificate the Agent
shall promptly deliver to the Borrower) setting forth the
calculation thereof in reasonable detail, and shall, in the absence
of manifest error, be final, conclusive and binding on all of the
parties hereto.

(i) INDEMNIFICATION. In addition to amounts payable as
elsewhere provided in this SECTION 2.12, the Borrower hereby agrees
to protect, indemnify, pay and hold the Facing Agent, the Agent and
the Revolving Lenders harmless from and against any and all claims,
demands, liabilities, damages, losses, costs, charges and expenses
(including reasonable attorneys' fees and allocated costs of
internal counsel) which the Facing Agent, the Agent and the
Revolving Lenders may incur or be subject to as a consequence,
direct or indirect, of (i) the issuance of or payment of any
drawing under, any Letter of Credit, other than as a result of the
gross negligence or willful misconduct of the Facing Agent, the
Agent or any Revolving Lender as determined by a court of competent

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jurisdiction, or (ii) the failure of the Facing Agent to honor a
drawing under any Letter of Credit as a result of any act or
omission, whether rightful or wrongful, of any present or future
DE JURE or DE FACTO government or governmental authority (all such
acts or omissions herein called "GOVERNMENT ACTS").

(j) LETTER OF CREDIT BENEFICIARIES. As between (i) the
Borrower and (ii) the Facing Agent, the Agent and the Revolving
Lenders, the Borrower assumes all risks of the acts and omissions
of, or misuse of the Letters of Credit issued by the Facing Agent
by, the respective beneficiaries of such Letters of Credit. In
furtherance and not in limitation of the foregoing, the Facing
Agent shall not be responsible: (A) for the form, validity,
sufficiency, accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for and
issuance of such Letters of Credit, even if it should in fact prove
to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (B) for the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or
assign any such Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may
prove to be invalid or ineffective for any reason; (C) for failure
of any such Letter of Credit to comply fully with conditions
required in order to draw on such Letter of Credit; (D) for errors,
omissions, interruptions or delays in transmission or delivery of
any messages, by mail, cable, telegraph, telex or otherwise,
whether or not they be in cipher; (E) for errors in interpretation
of technical terms; (F) for any loss or delay in the transmission
or otherwise of any document required in order to make a drawing
under any such Letter of Credit or of the proceeds thereof; (G) for
the misapplication by the beneficiary of any such Letter of Credit
of the proceeds of any drawing under such Letter of Credit; and
(H) for any consequences arising from causes beyond the control of
the Facing Agent including, without limitation, any Government
Acts, in each case other than as a result of the gross negligence
or willful misconduct of the Facing Agent. None of the above shall
affect, impair, or prevent the vesting of any of the Facing Agent's
rights or powers hereunder.

(k) FACING AGENT. In furtherance and extension and not
in limitation of the specific provisions hereinabove set forth, any
action taken or omitted by the Facing Agent under or in connection
with the Letters of Credit issued by it or the related
certificates, if taken or omitted in good faith and not with gross
negligence or willful misconduct as determined by a court of
competent jurisdiction, shall not put the Facing Agent under any
resulting liability to the Borrower or any Revolving Lender.

(l) NO INDEMNIFICATION FOR CERTAIN ACTS. Notwithstanding
anything to the contrary contained in this SECTION 2.12, the
Borrower shall have no obligation to indemnify the Agent, the
Facing Agent or any Revolving Lender in respect of any liability
incurred by the Agent, the Facing Agent or any Revolving Lender

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arising out of the gross negligence or willful misconduct of the
Agent, the Facing Agent or any Revolving Lender, as determined by
a court of competent jurisdiction, or out of the wrongful dishonor
by the Facing Agent of a proper demand for payment made under the
Letters of Credit issued by it.

Section 2.13 INCREASED COSTS, ILLEGALITY, ETC.

(a) In the event that any Lender shall have determined
(which determination shall, absent manifest error, be final,
conclusive and binding upon all parties hereto but, with respect to
clause (i) below, may be made only by the Agent):

(i) on any Interest Rate Determination Date that, by
reason of any changes arising after the Closing Date affecting
the interbank Eurodollar market, adequate and fair means do
not exist for ascertaining the applicable interest rate on the
basis provided for in the definition of Eurodollar Rate; or

(ii) at any time, any Lender shall incur increased costs
or reduction in the amounts received or receivable hereunder
with respect to any Eurodollar Rate Loan because of (x) any
change since the Closing Date, in the case of any Eurodollar
Rate Revolving Loan or Eurodollar Rate Term Loan, since the
First Restatement Date, in the case of any Eurodollar Rate
Additional Term Loan, and since the Restatement Date, in the
case of any Eurodollar Rate Supplemental Revolving Loan or any
Eurodollar Rate D Tranche Term Loan, in any applicable law or
governmental rule, regulation, order, guideline or request
(whether or not having the force of law) or in the
interpretation or administration thereof and including the
introduction of any new law or governmental rule, regulation,
order, guideline or request, such as, for example, but not
limited to: (A) a change in the basis of taxation of payments
to any Lender of the principal of or interest on the
Obligations or any other amounts payable hereunder (except for
(a) changes in the rate of tax on, or determined by reference
to, the net income or profits of such Lender imposed by the
jurisdiction in which its principal office or applicable
lending office is located and (b) United States withholding
taxes, which shall be governed by the provisions of SECTION
3.11) or (B) a change in official reserve requirements (but,
in all events, excluding reserves required under Regulation D
to the extent included in the computation of the Eurodollar
Rate) and/or (y) other circumstances since the Closing Date,
in the case of any Revolving Lender or Term Lender, since the
First Restatement Date, in the case of any Additional Lender,
and since the Restatement Date, in the case of any
Supplemental Revolving Lender or any D Tranche Lender,
affecting such Lender or the interbank Eurodollar market or
the position of such Lender in such market (excluding,
however, differences in a Lender's cost of funds from those of

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the Agent which are solely the result of credit differences
between such Lender and the Agent); or

(iii) at any time, that the making or continuance of any
Eurodollar Rate Loan has been made (x) unlawful by any law or
governmental rule, regulation or order, (y) impossible by
compliance by any Lender in good faith with any governmental
request (whether or not having force of law) or (z)
impracticable as a result of a contingency occurring after the
Closing Date, in the case of any Eurodollar Rate Revolving
Loan or Eurodollar Rate Term Loan, since the First Restatement
Date, in the case of any Eurodollar Rate Additional Term Loan,
and since the Restatement Date, in the case of any Eurodollar
Rate Supplemental Revolving Loan or any Eurodollar Rate D
Tranche Term Loan, which materially and adversely affects the
interbank Eurodollar market in general;

then, and in any such event, such Lender (or the Agent, in the case
of clause (i) above) shall promptly give notice (by telephone
confirmed in writing) to the Borrower and, except in the case of
clause (i) above, to the Agent of such determination (which notice
the Agent shall promptly transmit to each of the other Lenders).
Thereafter (x) in the case of clause (i) above, Eurodollar Rate
Loans shall no longer be available until such time as the Agent
notifies the Borrower and the Lenders that the circumstances giving
rise to such notice by the Agent no longer exist, and any Notice of
Borrowing or Notice of Conversion or Continuation given by the
Borrower with respect to Eurodollar Rate Loans which have not yet
been incurred (including by way of conversion) shall be deemed
rescinded by the Borrower, (y) in the case of clause (ii) above,
the Borrower shall pay to such Lender, upon written demand
therefore, such additional amounts (in the form of an increased
rate of, or a different method of calculating, interest or
otherwise as such Lender shall determine) as shall be required to
compensate such Lender for such increased costs or reductions in
amounts received or receivable hereunder (a written notice as to
the additional amounts owed to such Lender, showing the basis for
the calculation thereof in reasonable detail, submitted to the
Borrower by such Lender shall, absent manifest error, be final and
conclusive and binding on all the parties hereto; PROVIDED,
HOWEVER, that the failure to give any such notice (unless the
respective Lender has intentionally withheld or delayed such
notice, in which case the respective Lender shall not be entitled
to receive additional amounts pursuant to this SECTION 2.13(A)(Y)
for periods occurring prior to the 180th day before the giving of
such notice) shall not release or diminish the Borrower's
obligations to pay additional amounts pursuant to this SECTION
2.13(A)(Y), and (z) in the case of clause (iii) above, the Borrower
shall take one of the actions specified in SECTION 2.13(B) as
promptly as possible and, in any event, within the time period
required by law. In determining such additional amounts pursuant
to clause (y) of the immediately preceding sentence, each Lender
shall act reasonably and in good faith and will, to the extent the

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increased costs or reductions in amounts receivable relate to such
Lender's loans in general and are not specifically attributable to
a Loan hereunder, use averaging and attribution methods which are
reasonable and which cover all loans similar to the Loans made by
such Lender whether or not the loan documentation for such other
loans permits the Lender to receive increased costs of the type
described in this SECTION 2.13(A).

(b) At any time that any Eurodollar Rate Loan is
affected by the circumstances described in SECTION 2.13(A)(II) OR
(III), the Borrower may (and in the case of a Eurodollar Rate Loan
affected by the circumstances described in SECTION 2.13(A)(III)
shall) either (i) if the affected Eurodollar Rate Loan is then
being made initially or pursuant to a conversion, by giving the
Agent telephonic notice (confirmed in writing) on the same date
that the Borrower was notified by the affected Lender or the Agent
pursuant to SECTION 2.13(A)(II) OR (III), cancel the respective
Borrowing, or (ii) if the affected Eurodollar Rate Loan is then
outstanding, upon at least three Business Days' written notice to
the Agent, require the affected Lender to convert such Eurodollar
Rate Loan into a Prime Rate Loan, PROVIDED that if more than one
Lender is affected at any time, then all affected Lenders must be
treated the same pursuant to this SECTION 2.13(B).

(c) CAPITAL REQUIREMENTS. If at any time after the
Closing Date, in the case of any Eurodollar Rate Revolving Loan or
Eurodollar Rate Term Loan, after the First Restatement Date, in the
case of any Eurodollar Rate Additional Term Loan, and after the
Restatement Date, in the case of any Eurodollar Rate Supplemental
Revolving Loan or any Eurodollar Rate D Tranche Term Loan, any
Lender determines that the introduction of or any change in any
applicable law or governmental rule, regulation, order, guideline
or request (whether or not having the force of law) concerning
capital adequacy, or any change in interpretation or administration
thereof by any Governmental Authority, central bank or comparable
agency, will have the effect of increasing the amount of capital
required or expected to be maintained by such Lender or any
corporation controlling such Lender based on the existence of such
Lender's Commitments or Loans hereunder or its obligations
hereunder, then the Borrower shall pay to such Lender, upon its
written demand therefor, such additional amounts as shall be
required to compensate such Lender or such other corporation for
the increased cost to such Lender or such other corporation or the
reduction in the rate of return to such Lender or such other
corporation as a result of such increase of capital. In
determining such additional amounts, each Lender will act
reasonably and in good faith and will use averaging and attribution
methods which are reasonable and which will, to the extent the
increased costs or reduction in the rate of return relates to such
Lender's commitments or obligations in general and are not
specifically attributable to the Commitments, Loans and obligations
hereunder, cover all commitments and obligations similar to the
Commitments, Loans and obligations of such Lender hereunder

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whether or not the loan documentation for such other commitments or
obligations permits the Lender to make the determination specified
in this SECTION 2.13(C), and such Lender's determination of
compensation owing under this SECTION 2.13(C) shall, absent
manifest error, be final, conclusive and binding on all the parties
hereto. Each Lender, upon determining that any additional amounts
will be payable pursuant to this SECTION 2.13(C), will give prompt
written notice thereof to the Agent and the Borrower, which notice
shall show the basis for calculation of such additional amounts in
reasonable detail, although the failure to give any such notice
(unless the respective Lender has intentionally withheld or delayed
such notice, in which case the respective Lender shall not be
entitled to receive additional amounts pursuant to this SECTION
2.13(C) for periods occurring prior to the 180th day before the
giving of such notice) shall not release or diminish any of the
Borrower's obligations to pay additional amounts pursuant to this
SECTION 2.13(C). The obligations of the Borrower under this
SECTION 2.13(C) shall survive payment in full of the Obligations
and termination of this Agreement.

Section 2.14 REPLACEMENT OF AFFECTED LENDERS. If any
Lender is owed increased costs under SECTION 2.13(A)(II) OR (III),
SECTION 2.13(C), SECTION 2.12(H) or SECTION 3.11 materially in
excess of those of the other Lenders, the Borrower shall have the
right, if no Unmatured Event of Default or Event of Default then
exists, to replace such Lender (the "REPLACED LENDER") with one or
more other Eligible Assignee or Assignees (collectively, the
"REPLACEMENT LENDER") reasonably acceptable to the Agent, PROVIDED
that (i) at the time of any replacement pursuant to this SECTION
2.14, the Replacement Lender shall enter into one or more
Assignment Agreements pursuant to which the Replacement Lender
shall acquire all of the Commitments and outstanding Loans of, and
participation in Letters of Credit and Swing Line Loans by, the
Replaced Lender and all rights and obligations under any
participation agreements to which the Replaced Lender is a party
with respect to the L/C Agreement, and (ii) all obligations of the
Borrower owing to the Replaced Lender (including, without
limitation, such increased costs and excluding those specifically
described in clause (i) above in respect of which the assignment
purchase price has been, or is concurrently being paid) shall be
paid in full to such Replaced Lender concurrently with such
replacement. Upon the execution of the respective assignment
documentation and the payment of amounts referred to in clauses (i)
and (ii) above, the Replacement Lender shall become a Lender
hereunder and the Replaced Lender shall be released from its
obligations under the Loan Documents and shall cease to constitute
a Lender hereunder, except with respect to indemnification
provisions under this Agreement, which shall survive as to such
Replaced Lender. Notwithstanding anything to the contrary
contained above, neither the Facing Agent nor the Swing Line Lender
may be replaced hereunder at any time while it has Letters of
Credit or Swing Line Loans, respectively, outstanding hereunder
unless arrangements satisfactory to the Facing Agent or Swing Line

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Lender (including the furnishing of a standby letter of credit in
form and substance, and issued by an issuer satisfactory to the
Facing Agent or the furnishing of collateral of a kind, in amounts
and pursuant to arrangements satisfactory to the Facing Agent) have
been made with respect to such outstanding Letters of Credit or
Swing Line Loans.

Section 2.15 CHANGE OF LENDING OFFICE. Each Lender
agrees that it will use reasonable efforts to designate an
alternate Lending Office with respect to any of its Eurodollar Rate
Loans affected by the matters or circumstances described in SECTION
2.13 to reduce the liability of the Borrower or avoid the results
described thereunder, so long as such designation is not
financially disadvantageous to such Lender as determined by such
Lender in its sole discretion and will not result in the imposition
upon the Borrower of an increased liability for Taxes pursuant to
SECTION 2.13(A) OR 3.11(A).

Section 2.16 FUNDING LOSSES. The Borrower shall compensate each
Lender, upon its written request (which request shall set forth the basis for
requesting such amounts in reasonable detail and which request shall, absent
manifest error, be final, conclusive and binding upon all of the parties
hereto), for all losses, expenses and liabilities (including, without
limitation, any interest paid by such Lender to lenders of funds borrowed by
it to make or carry its Eurodollar Rate Loans to the extent not recovered by
such Lender in connection with the liquidation or re-employment of such funds
and including the compensation payable by such Lender to a Person to which
the Lender has participated all or a portion of such Borrowing) and any loss
sustained by such Lender in connection with the good faith liquidation or
good faith re-employment of such funds (including, without limitation, a
return on such liquidation or re-employment that would result in such Lender
receiving less than it would have received had such Eurodollar Rate Loan
remained outstanding until the last day of the Interest Period applicable to
such Eurodollar Rate Loans) which the Lender may sustain as a result of: (i)
for any reason (other than a default by such Lender or the Agent) a Borrowing
of, or conversion from or into or continuation of, Eurodollar Rate Loans does
not occur on a date specified therefor in a Notice of Borrowing or Notice of
Conversion or Continuation (whether or not withdrawn); (ii) any payment,
prepayment or conversion or continuation of any of its Eurodollar Rate Loans
occurring for any reason whatsoever on a date which is not the last day of an
Interest Period applicable thereto; (iii) any repayment of any of its
Eurodollar Rate Loans not being made on the date specified in a notice of
payment given by the Borrower; or (iv) (A) any other failure by the Borrower
to repay its Eurodollar Rate Loans when required by the terms of this
Agreement or (B) an election made by the Borrower pursuant to SECTION 2.14.
A written notice as to additional amounts owed such Lender under this SECTION
2.16 and delivered to the Borrower and the Agent by such Lender shall,

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absent manifest error, be final, conclusive and binding for all
purposes.

Section 2.17 PRO RATA BORROWINGS. All Borrowings of
Term Loans, Additional Term Loans, Revolving Loans, Supplemental
Revolving Loans and D Tranche Term Loans under this Agreement shall
be loaned by the Term Lenders, Additional Lenders, Revolving
Lenders, Supplemental Revolving Lenders and D Tranche Lenders,
respectively, pro rata on the basis of their respective Term Loan
Pro Rata Shares, Additional Term Loan Pro Rata Shares, Revolving
Loan Pro Rata Shares, Supplemental Revolving Loan Pro Rata Shares
and D Tranche Term Loan Pro Rata Shares, as the case may be. No
Lender shall be responsible for any default by any other Lender in
its obligation to make Loans hereunder and each Lender shall be
obligated to make the Loans provided to be made by it hereunder,
regardless of the failure of any other Lender to fulfill its
Commitment hereunder. Except with respect to the initial Borrowing
of Supplemental Revolving Loans, if any, which may be made on the
Restatement Date pursuant to SECTION 6.3(K) and with respect to any
borrowings of Revolving Loans for the purpose of repayment of Swing
Line Loans pursuant to SECTION 2.11(C), all Borrowings of Revolving
Loans and Supplemental Revolving Loans shall be made on a
proportionate basis such that after giving effect to such
Borrowings and any proposed repayment of any Obligations to be made
on the proposed borrowing date of which the Borrower has notified
the Agent, the Revolving Loan Availability Ratio and the
Supplemental Revolving Loan Availability Ratio are equalized as
nearly as possible. Upon receipt of a Notice of Borrowing, the
Agent shall determine such proportionate amounts of Revolving Loans
and Supplemental Revolving Loans to be borrowed and shall notify
the Revolving Lenders, Supplemental Revolving Lenders and the
Borrower as provided in SECTION 2.5. The determination by the
Agent shall be made at the time it receives a Notice of Borrowing,
based on the information the Borrower has provided to the Agent at
the time it delivers such Notice of Borrowing with respect to
anticipated repayments of Obligations, and shall be final,
conclusive and binding on all parties hereto.

Section 2.18 FLORENCE LETTERS OF CREDIT. The Agent
acknowledges that it has caused the expiration date of the Florence
Letters of Credit to be extended to the Revolver Termination Date
as contemplated in Section 3 of each of the L/C Agreement
amendments executed by Gelco Corporation and Westinghouse Electric
Corporation as of the Closing Date.

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ARTICLE III

TERMINATION OF COMMITMENTS, PREPAYMENTS AND FEES

Section 3.1 MANDATORY REVOLVING LOAN, SUPPLEMENTAL
REVOLVING LOAN AND SWING LINE LOAN PREPAYMENTS AND COMMITMENT
REDUCTIONS.

(a) If at any time the sum of (i) the aggregate
principal amount of all Revolving Loans and Swing Line Loans
outstanding PLUS (ii) the aggregate amount of L/C Obligations and
Florence L/C Obligations outstanding exceeds the aggregate of the
Revolving Loan Commitments of the Revolving Lenders then in effect,
the Borrower shall immediately prepay the Revolving Loan
Obligations in an aggregate principal amount equal to such excess
together with any accrued but unpaid interest with respect to such
excess. If at any time the aggregate principal amount of all Swing
Line Loans outstanding exceeds the Swing Line Commitment of the
Swing Line Lender then in effect, the Borrower shall immediately
prepay the Swing Line Loan Obligations in an aggregate principal
amount equal to such excess together with any accrued but unpaid
interest with respect to such excess. If at any time the aggregate
principal amount of all Supplemental Revolving Loans outstanding
for all Supplemental Revolving Lenders exceeds the aggregate of the
Supplemental Revolving Loan Commitments of the Supplemental
Revolving Lenders then in effect, the Borrower shall immediately
prepay the Supplemental Revolving Loan Obligations in an aggregate
principal amount equal to such excess together with any accrued but
unpaid interest with respect to such excess.

(b) If an Event of Default shall have occurred and the
Agent shall have notified the Borrower of the election of the
Required Lenders to take any action specified in SECTION 7.2, the
Revolving Loan Commitment of each Revolving Lender, the Swing Line
Commitment of the Swing Line Lender and the Supplemental Revolving
Loan Commitment of each Supplemental Revolving Lender shall,
subject to reinstatement pursuant to SECTION 7.2, be automatically
reduced to $0 without any action on the part of or the giving of
notice to the Borrower by any Lender.

Section 3.2 VOLUNTARY PREPAYMENTS.

(a) The Borrower may repay Revolving Loans, Terms Loans,
Additional Term Loans, Swing Line Loans, Supplemental Revolving
Loans and D Tranche Term Loans in whole at any time or in part from
time to time, without penalty or premium (except as provided in
SECTION 3.2(B)), on the following terms and conditions: (i) the
Borrower shall give the Agent written notice (or telephonic notice
promptly confirmed in writing) of its intent to prepay the Loans,
the amount of such prepayment and, in the case of Eurodollar Rate
Loans, the specific Borrowing or Borrowings pursuant to which made,
which notice shall be given by Borrower at least one Business Day
prior to the date of such prepayment (or by 11:00 a.m. (New York

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City time) on the date of prepayment in the case of a prepayment of
Swing Line Loans) and which notice shall promptly be transmitted by
the Agent to each of the Lenders; (ii) each partial prepayment of
any Borrowing (other than a Borrowing of Swing Line Loans) shall be
in an aggregate principal amount of at least $5,000,000 and in
integral multiples of $1,000,000 above such minimum and each
partial prepayment of a Swing Line Loan shall be an aggregate
principal amount of at least $1,000,000 and in integral multiples
of $1,000,000 above such minimum, provided that no partial
prepayment of Eurodollar Rate Loans made pursuant to a single
Borrowing under the Term Loan, the Additional Term Loan, the
Revolving Loan, the Supplemental Revolving Loan or the D Tranche
Term Loan shall reduce the outstanding Loans made pursuant to such
Borrowing to an amount less than the minimum borrowing amount as
set forth in SECTION 2.4; (iii) any repayment of a Eurodollar Rate
Loan on a day other than the last day of an Interest Period
applicable thereto shall be subject to the provisions of SECTION
2.16; (iv) except as otherwise provided in SECTION 3.6(F), any
voluntary prepayment of the Term Loan, Additional Term Loan and D
Tranche Term Loan must be made on a proportionate basis based on
the respective aggregate outstanding principal amounts of such
Loans, provided that prior to September 30, 1997, any prepayment of
the Term Loan and Additional Term Loan may be made on a
proportionate basis based solely on the respective aggregate
outstanding principal amounts of such Loans and without making any
proportionate prepayment of the D Tranche Term Loan; (v)
prepayments of Revolving Loans, Supplemental Revolving Loans, Term
Loans, Additional Term Loans and D Tranche Term Loans shall be
applied pro rata among the Revolving Lenders, Supplemental
Revolving Lenders, Term Lenders, Additional Lenders and D Tranche
Lenders, respectively, based on their respective Revolving Loan Pro
Rata Shares, Supplemental Revolving Loan Pro Rata Shares, Term Loan
Pro Rata Shares, Additional Term Loan Pro Rata Shares and D Tranche
Term Loan Pro Rata Shares, as the case may be; (vi) in the case of
a voluntary prepayment of the Term Loans, Additional Term Loans and
D Tranche Term Loans as to which the Borrower requests a waiver
pursuant to SECTION 3.6(F), the notice of prepayment shall be given
at least ten (10) Business Days prior to the date of such proposed
prepayment and shall, subject to SECTION 3.6(F), be irrevocable;
(vii) all prepayments of D Tranche Term Loans shall be subject to
SECTION 3.2(B); and (viii) voluntary repayments of Revolving Loans
and Supplemental Revolving Loans shall be made in conjunction with
one another such that after giving effect to such repayments and
any other proposed repayments of Obligations to be made on the
proposed repayment date of which the Borrower has notified the
Agent, the Revolving Loan Availability Ratio and the Supplemental
Revolving Loan Availability Ratio are equalized as nearly as
possible, provided that, prior to any acceleration of the
Obligations pursuant to SECTION 7.2, the Agent shall apply
repayments without regard to such ratios to repay Eurodollar Rate
Loans coming due to the extent necessary to avoid or minimize
breakage costs and expenses imposed under SECTION 2.16. Upon
receipt by the Agent of any notice provided by the Borrower to

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voluntarily repay any Revolving Loans and Supplemental Revolving
Loans, the Agent shall determine the relative amounts of Revolving
Loans and/or Swing Line Loans to be repaid and shall notify the
Borrower as to such amounts. The determination by the Agent shall
be made at the time it receives a notice of a proposed repayment of
Revolving Loans and/or Supplemental Revolving Loans, based on the
information the Borrower has provided to the Agent at the time it
receives such notice with respect to anticipated repayments of
Obligations, and shall be final, conclusive and binding on all
parties hereto. The notice provisions, the provisions with respect
to the minimum amount of any prepayment and the provisions
requiring prepayments in integral multiples above such minimum
amount of this SECTION 3.2 are for the benefit of the Agent and may
be waived unilaterally by the Agent.

(b) In the event that the Borrower voluntarily prepays
all or any portion of the D Tranche Term Loan pursuant to SECTION
3.2(A) on or prior to September 30, 1997, the Borrower shall,
together with any such prepayment, pay to the Agent for pro rata
distribution to the D Tranche Lenders based on their respective D
Tranche Term Loan Pro Rata Shares, a prepayment fee as additional
compensation, and not as a penalty, equal to (i) one percent (1.0%)
of the principal amount of D Tranche Term Loans repaid during the
period from the Restatement Date to and including March 31, 1997
and (ii) one-half of one percent (.50%) of the principal amount of
D Tranche Term Loans repaid during the period from April 1, 1997 to
and including September 30, 1997.

Section 3.3 VOLUNTARY COMMITMENT REDUCTIONS. After
the Restatement Date, the Borrower shall have the right, upon at
least five (5) Business Days' prior written notice to the Agent and
the Revolving Lenders, in the case of any reduction in the
Revolving Loan Commitments, and the Supplemental Revolving Lenders,
in the case of any reduction in the Supplemental Revolving Loan
Commitments, given prior to 10:00 a.m. (New York City time) on the
fifth Business Day preceding the proposed reduction date, without
premium or penalty, to permanently reduce or terminate the
unutilized portion of the aggregate of the Total Revolving Loan
Commitments or Total Supplemental Revolving Loan Commitments in
whole at any time or in part from time to time, in a minimum
aggregate amount of $5,000,000 (unless the Total Revolving Loan
Commitments or Total Supplemental Revolving Loan Commitments, as
the case may be, at such time is less than $10,000,000, in which
case, in an amount equal to the Total Revolving Loan Commitments or
Total Supplemental Revolving Loan Commitments at such time) and, if
such reduction is greater than $5,000,000, in integral multiples of
$1,000,000 above such minimum; PROVIDED, HOWEVER, that (i) no such
reduction or termination of the Revolving Loan Commitments shall be
permitted if, after giving effect thereto and to any prepayment or
payment of the Revolving Loans and Swing Line Loans on the proposed
reduction date, the then outstanding aggregate principal amount of
Revolving Loans and Swing Line Loans plus the then aggregate amount
of L/C Obligations and Florence L/C Obligations outstanding would

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exceed the aggregate Revolving Loan Commitments of the Revolving
Lenders then in effect, (ii) no such reduction or termination of
the Supplemental Revolving Loan Commitments shall be permitted if,
after giving effect thereto and to any prepayment or payment of the
Supplemental Revolving Loans on the proposed reduction date, the
aggregate principal amount of Supplemental Revolving Loans
outstanding for all Supplemental Revolving Lenders would exceed the
aggregate Supplemental Revolving Loan Commitments of the
Supplemental Revolving Lenders then in effect, and (iii) all
prepayments of Eurodollar Rate Loans shall be subject to SECTION
2.16. Any such reduction of the Total Revolving Loan Commitments
and the Total Supplemental Revolving Loan Commitments shall be made
in conjunction with one another on a proportionate basis (with the
$5,000,000 minimum amount specified in the preceding sentence
applying to the aggregate amount of Revolving Loan Commitments and
Supplemental Revolving Loan Commitments being reduced) and any such
reduction shall apply proportionately to the Revolving Loan
Commitments of the Revolving Lenders and the Supplemental Revolving
Loan Commitments of the Supplemental Revolving Lenders based on
such Lender's Revolving Loan Pro Rata Share or Supplemental
Revolving Loan Pro Rata Share, as applicable. Simultaneously with
each reduction or termination of the Revolving Loan Commitments,
the Borrower shall pay to the Agent for the account of each
Revolving Lender the Revolving Loan Commitment Fee accrued on the
amount of the Revolving Loan Commitments so reduced or terminated
through the date thereof. Simultaneously with each reduction or
termination of the Supplemental Revolving Loan Commitments, the
Borrower shall pay to the Agent for the account of each
Supplemental Revolving Lender the Supplemental Revolving Loan
Commitment Fee accrued on the amount of the Supplemental Revolving
Loan Commitments so reduced or terminated through the date thereof.
Any reduction in the Revolving Loan Commitment of the Swing Line
Lender below $25,000,000 shall, without any further action on the
part of the Borrower, cause a dollar for dollar reduction in the
Swing Line Commitment of the Swing Line Lender. Notwithstanding
the foregoing, the Borrower shall not be entitled to terminate the
Total Revolving Loan Commitment in full unless, concurrently
therewith, the Borrower terminates the Florence Letters of Credit
(whether by obtaining a replacement letter of credit therefor,
repaying the Florence Bonds or otherwise) such that no Florence L/C
Obligations remain outstanding.

Section 3.4 MANDATORY PREPAYMENTS. Subject in each
case to the provisions of SECTION 3.5:

(a) PREPAYMENTS FROM EXCESS CASH FLOW. Within five (5)
Business Days after the delivery to the Agent of any Excess Cash
Flow Schedule pursuant to SECTION 5.1.1(B) or 5.1.1(C), beginning
with the Excess Cash Flow Schedule delivered in 1996 with respect
to the Fiscal Quarter ending June 30, 1996, the Borrower shall (i)
with respect to Excess Cash Flow reported for the Fiscal Quarters
ending June 30, 1996 to and including September 30, 1997, prepay
the Term Loan and the Additional Term Loan and (ii) with respect to

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Excess Cash Flow reported for all Fiscal Quarters ending after
September 30, 1997, prepay the Term Loan, the Additional Term Loan
and the D Tranche Term Loan, in each case in accordance with
SECTION 3.6 if the Excess Cash Flow disclosed on such Excess Cash
Flow Schedule with respect to the preceding Fiscal Quarter is
positive (but excluding the first $37,500,000 of positive Excess
Cash Flow in the last three Fiscal Quarters in Fiscal Year 1996
and, thereafter, excluding the first $50,000,000 of positive Excess
Cash Flow in any Fiscal Year). Any mandatory prepayment pursuant
to this SECTION 3.4(a) shall, subject to SECTION 3.6(f), be in an
amount equal to (A)(1) the amount of such positive Excess Cash Flow
(but excluding the first $37,500,000 of positive Excess Cash Flow
in the last three Fiscal Quarters in Fiscal Year 1996 and,
thereafter, excluding the first $50,000,000 of positive Excess Cash
Flow in any Fiscal Year) MULTIPLIED BY (2) 50% or such lesser
Excess Cash Flow Percentage as may be in effect at such time, less
(B) the amount of any voluntary prepayment of the Term Loan, the
Additional Term Loan and the D Tranche Term Loan made during the
Fiscal Quarter in which such Excess Cash Flow is generated;
PROVIDED, HOWEVER, that solely with respect to the calculation of
any mandatory prepayment pursuant to this SECTION 3.4(a) for the
Fiscal Quarters ending June 30, 1996 to and including September 30,
1997, the portion of Excess Cash Flow that would have been
allocated to prepay the D Tranche Term Loan if the D Tranche Term
Loan were required to be prepaid together with the Term Loan and
the Additional Term Loan shall be deemed to be Waived Proceeds.

The Borrower and the Term Lenders acknowledge the waiver,
pursuant to SECTION 3.6(f) of the Existing Credit Agreement, by the
Term Lenders of their right to receive mandatory prepayments of the
Term Loan that would otherwise have become due under SECTION 3.4(a)
of the Existing Credit Agreement with respect to Excess Cash Flow
for the Fiscal Quarters ending June 30, 1995 through and including
March 31, 1996, all pursuant to the terms and conditions of Section
3 of that certain Third Amendment of Credit Agreement and Waiver
Request dated as of June 30, 1995 by and among the Borrower, the
Agent, the Co-Agents and the Existing Lenders. The Borrower, the
Agent, the Co-Agents and the Lenders hereby agree that upon the
funding of the Additional Term Loan the amount of waived Excess
Cash Flow prepayments equal to the sum of (a) the product of (i)
the amount of positive Excess Cash Flow in such Fiscal Quarters
(but excluding the first $50,000,000 of positive Excess Cash Flow
in such Fiscal Quarters) MULTIPLIED BY (ii) 50%, MINUS (b) the
amount of any voluntary prepayments of the Term Loan made during
such Fiscal Quarters may be used for Permitted Uses (including
Permitted Uses described in clauses (ii) and (iii) of the
definition of "Permitted Uses").

(b) PREPAYMENTS FROM INCURRENCE OF INDEBTEDNESS. If the
Borrower or any Wholly-Owned Subsidiary of the Borrower receives
any proceeds (whether in cash or marketable securities)
attributable to the issuance and sale or other disposition of any
Indebtedness for Money Borrowed described in clause (i) of the

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definition of Indebtedness for Money Borrowed of the Borrower or
any Wholly-Owned Subsidiary of the Borrower or any rights to
acquire any such Indebtedness for Money Borrowed described in
clause (i) of the definition of Indebtedness for Money Borrowed
(other than (i) Indebtedness permitted by SECTIONS 5.2.2(a)-(f),
(h)-(k), (m)-(o) AND (q)-(w) and SECTION 5.2.2(x)(ii), (ii)
proceeds received by a Person which cannot be remitted to the
Borrower or a Subsidiary of the Borrower as a result of any legal
or contractual restriction applicable to such Person existing on
the Closing Date and identified on SCHEDULE 3.4 hereto and any
legal or contractual restriction contained in any Indebtedness
which refinances any Indebtedness referenced on SCHEDULE 3.4
provided that the terms thereof are no more onerous to the Borrower
or any Subsidiary than those existing on the Closing Date, (iii)
Indebtedness permitted by SECTION 5.2.2(p) which is not by the
terms of such Section required to be used to prepay the Loans),
then the Borrower shall prepay the Term Loan, the Additional Term
Loan and the D Tranche Term Loan promptly (but in any event within
five Business Days after receipt of such proceeds) to the extent of
all of such proceeds from debt or debt securities (net of any costs
or expenses incurred in connection with the issuance or sale or
other disposition thereof).

(c) PREPAYMENTS FROM ASSET SALES. If the Borrower or
any Wholly-Owned Subsidiary of the Borrower receives any Material
Sale Proceeds, then the Borrower shall prepay the Obligations, to
the extent of such proceeds, promptly (but in any event within five
Business Days) after the first date on which such Persons have
received Material Sale Proceeds totaling an aggregate amount of $5
million or more and within five Business Days after each date
thereafter when such Persons have received additional Material Sale
Proceeds totaling an aggregate of $5 million or more; PROVIDED,
HOWEVER, that during the pendency of an Event of Default all
Material Sales Proceeds shall be payable upon the demand of the
Agent. "MATERIAL SALE PROCEEDS" means, without duplication, (i)
the cash or cash equivalent proceeds or marketable securities
resulting from the sale or other disposition (including, without
limitation, by a sale-leaseback transaction) of (A) assets or other
tangible or intangible property or rights ("ASSETS") not
constituting CP&L Property, Collateral or Mortgaged Property
(unless Substitute Collateral has been provided pursuant to SECTION
9.13(c)) and having an aggregate fair market value in excess of $1
million for each separate transaction or series of related
transactions involving the same seller or (B) any Collateral or
Mortgaged Property (and including any Net Awards and Net Proceeds
required to be paid to the Agent pursuant to the terms of the
Mortgages), LESS (ii) the amount of income taxes payable and any
direct costs or expenses incurred in connection with such sale or
disposition, LESS (iii) the amount of indebtedness secured by such
Assets that are sold, which indebtedness is required to be and is
repaid upon such sale, but Material Sales Proceeds shall not
include: (A) proceeds of inventory sold or otherwise disposed of
in the ordinary course of business; (B) subject to the giving of

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notice to and deposit of funds with the Agent as provided below,
proceeds of Assets not constituting Collateral or Mortgaged
Property (unless Substitute Collateral has been provided pursuant
to SECTION 9.13(c)), sold or exchanged to the extent such proceeds
are utilized in connection with the replacement thereof within 180
days of the sale or exchange of such assets; (C) proceeds of
Permitted Investments; (D) proceeds received by a Person which
cannot be remitted to the Borrower or a Subsidiary of the Borrower
as a result of any legal or contractual restriction applicable to
such Person existing on the Closing Date and identified on SCHEDULE
3.4 hereto and any legal or contractual restriction contained in
any Indebtedness which refinances any Indebtedness referenced on
SCHEDULE 3.4 provided that the terms thereof are no more onerous to
the Borrower or any Subsidiary than those existing on the Closing
Date; (E) proceeds resulting from the payment of insurance with
respect to such Assets provided such proceeds are used for the
replacement of such Assets or are required to be applied to a
purpose specified in a legal instrument applicable to such Assets
or from the payment of business interruption insurance; (F)
proceeds resulting from the sale or other disposition of Assets
between the Borrower and any Wholly-Owned Subsidiary (other than a
Restricted Subsidiary) of the Borrower or Stone-Canada or between
any Wholly-Owned Subsidiaries (other than Restricted Subsidiaries)
of the Borrower or Stone-Canada; (G) up to an aggregate amount of
$300 million of net proceeds from the sale or other disposition of
Assets not constituting Collateral or Mortgaged Property or Assets
constituting Collateral or Mortgaged Property for which Substitute
Collateral has been provided pursuant to SECTION 9.13(c),
designated by the Borrower in writing to the Agent as being
excluded from the prepayment requirements of this Section (any
amount so designated being "EXCLUDED SALE PROCEEDS"); or (H)
proceeds from the sale or other disposition of any Assets
constituting collateral which secures the Indebtedness under the
First Mortgage Note Documents. The cash, cash equivalent proceeds
or marketable securities resulting from the repayment or other
liquidation of the investments permitted by SECTION 5.2.7(i) shall
be included within the meaning of "MATERIAL SALE PROCEEDS."
Proceeds described in subpart (B) of the exclusion from the
definition of Material Sale Proceeds shall be so excluded only if,
within five (5) Business Days after such proceeds are received, the
Borrower gives the Agent written notice of its intent to utilize
such proceeds for replacement purposes and (to the extent such
proceeds have not already been so utilized) delivers such proceeds
to the Agent to be held in an account as security for the
Obligations pursuant to documentation satisfactory to the Agent.
During the period ending on the 180th day after receipt of such
proceeds by the Borrower or one of its Subsidiaries, the Borrower
may, so long as no Event of Default or Unmatured Event of Default
shall have occurred and be continuing, withdraw funds from such
account to pay or reimburse itself for such replacement costs.
Funds in such account shall be held and invested in the manner
prescribed for Deposited Monies pursuant to SECTION 3.5. All
amounts remaining in such account at the conclusion of such 180 day

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period shall, subject to SECTION 3.6(f), be applied on such date as
a prepayment pursuant to this Section and SECTIONS 3.5 and 3.6 as
if constituting Material Sale Proceeds received on such date.

Section 3.5 OTHER PROVISIONS WITH RESPECT TO THE
LOANS. Subject to the obligations of the Agent provided for in
this SECTION 3.5 and if no Event of Default or Unmatured Event of
Default shall have occurred and be continuing, any monies otherwise
required to be used to prepay a Eurodollar Rate Loan pursuant to
SECTION 3.4 on a date other than the last day of the Interest
Period applicable thereto shall be paid to the Agent (the
"DEPOSITED MONIES") when due but, until the earlier of the
occurrence of an Event of Default and the end of the applicable
Interest Period when the Deposited Monies shall be applied to make
such prepayment, shall be held in an account by the Agent for the
benefit of the Lenders and the Borrower shall have no right to or
interest in such funds and such funds shall be used to prepay such
Eurodollar Rate Loan upon the earlier of the occurrence of an Event
of Default or at the end of the applicable Interest Period;
PROVIDED, HOWEVER, that any funds held in such account shall be
invested by the Agent (to the extent the Agent is reasonably able
to do so) on behalf of the Borrower at the direction of the
Borrower in Permitted Investments selected by the Borrower and
having a maturity not exceeding the Business Day prior to the end
of the relevant Interest Period. Interest on the applicable Loans
shall continue to accrue until the Deposited Monies are applied to
the prepayment thereof. Any such investments shall be held by the
Agent or under the control of the Agent. The interest accruing on
such investments and any profits realized from such investments
shall be, after giving effect to such repayment of such Loans with
the Deposited Monies, paid to the Borrower; PROVIDED, HOWEVER, that
any loss resulting from such investments shall be charged to and be
immediately payable by the Borrower upon demand of the Agent.

Section 3.6 ORDER OF PREPAYMENT AND PAYMENT.

(a) All prepayments of principal of Revolving Loans and
Supplemental Revolving Loans made by the Borrower pursuant to
SECTIONS 3.1 AND 3.2 shall be made with interest on such repaid
Revolving Loans and Supplemental Revolving Loans, and with respect
to each Revolving Lender and Supplemental Revolving Lender, in
proportional amounts equal to such Lender's Revolving Loan Pro Rata
Share or Supplemental Revolving Loan Pro Rata Share, as applicable,
of such payment and, shall be applied (i) first to the payment of
Prime Rate Loans and second to the payment of Eurodollar Rate
Loans, and (ii) with respect to Eurodollar Rate Loans, pro rata in
order of the maturity of such Loans.

(b) All prepayments of principal of the Term Loan, the
Additional Term Loan and the D Tranche Term Loan made by the
Borrower pursuant to SECTIONS 3.2 OR 3.4 (other than prepayments
made under SECTION 3.4(c) with any Material Sale Proceeds derived
from the sale of any Collateral or Mortgaged Property) shall be

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applied (i) to the unpaid principal amount of the Term Loan, the
Additional Term Loan and the D Tranche Term Loan in the inverse
order of the remaining regularly scheduled principal installments
set forth in SECTIONS 2.2(a), (d) AND (f), together with accrued
interest on such prepaid principal amount and with respect to each
Term Lender, Additional Lender and D Tranche Lender, in
proportional amounts based on such Lender's outstanding principal
amount of its Term Loan, Additional Term Loan or D Tranche Term
Loan, as applicable; and (ii) first to the payment of Prime Rate
Loans and second to the payment of Eurodollar Rate Loans, and
within such Eurodollar Rate Loans, pro rata in order of the
maturity of such Loans.

(c) All prepayments of principal made by the Borrower
pursuant to SECTION 3.4(c) out of Material Sale Proceeds derived
from the sale of Collateral or Mortgaged Property (other than
Collateral or Mortgaged Property for which Substitute Collateral is
provided in accordance with SECTION 9.13(c)) shall be applied on a
pro rata basis (relative to the outstanding principal amount of the
Term Loan, Additional Term Loan and D Tranche Term Loan, and the
aggregate amount of the Revolving Loan Commitments and Supplemental
Revolving Loan Commitments) to the unpaid principal amount of the
Term Loan, Additional Term Loan and D Tranche Term Loan and to the
unpaid principal amount of the Revolving Loans and Supplemental
Revolving Loans (to the extent thereof), and contemporaneously with
such prepayment there shall be a permanent reduction of the
aggregate outstanding Revolving Loan Commitments and Supplemental
Revolving Loan Commitments (and with respect to each Revolving
Lender and Supplemental Revolving Lender, based on such Lender's
Revolving Loan Pro Rata Share and Supplemental Revolving Loan Pro
Rata Share, respectively)in an amount equal to such Revolving Loan
and Supplemental Revolving Loan pro rata portion of such Material
Sale Proceeds (the "REVOLVING PORTION"). In the event that any
Material Sale Proceeds relative to the Revolving Portion remain
after the prepayment of Revolving Loans and Supplemental Revolving
Loans, any excess shall be deposited with the Agent to cash
collateralize any L/C Obligations then outstanding, but only to the
extent and in the aggregate amount of such Obligations; PROVIDED,
HOWEVER, that the Borrower shall only be required to deposit such
excess proceeds if and for so long as an Unmatured Event of Default
or an Event of Default has occurred and is continuing at such time
or if and to the extent the aggregate outstanding Revolving Loan
Commitments have, pursuant to the preceding sentence, been reduced
to an amount less than the L/C Obligations then outstanding.
Prepayments of Loans described in this SECTION 3.6(c) shall be
applied first to the payment of Prime Rate Loans and second to the
payment of Eurodollar Rate Loans, and, within such Eurodollar Rate
Loans, pro rata in order of the maturity of such Loans. All
prepayments of principal of the Term Loan, Additional Term Loan and
D Tranche Term Loan pursuant to this SECTION 3.6(c) shall be
applied to the unpaid principal amount of the Term Loan, Additional
Term Loan and D Tranche Term Loan in the inverse order of the
remaining installments set forth in SECTIONS 2.2(a) AND (d).

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(d) All regularly scheduled principal installments on
the Term Loan, Additional Term Loan and D Tranche Term Loan shall
be applied first to the payment of Prime Rate Loans and second to
the payment of Eurodollar Rate Loans.

(e) During the pendency of an Event of Default, all
payments in respect of the Obligations shall be applied first to
interest, fees, costs, expenses and other amounts (other than
principal) then owing, and second to principal; PROVIDED, HOWEVER,
that proceeds of collateral realized pursuant to the exercise of
remedies under any security instrument securing the Obligations
shall be applied as specified in such security instrument.

(f) Notwithstanding anything in SECTION 3.2, 3.4, 3.6 OR
9.2 to the contrary, at the request of the Borrower any Term
Lender, Additional Lender or D Tranche Lender may waive its right
to receive all or any part of such Lender's portion of any
voluntary prepayment of the Term Loan, Additional Term Loan or D
Tranche Term Loan made under SECTION 3.2 or any mandatory
prepayment of the Term Loan, Additional Term Loan or D Tranche Term
Loan required to be made under SECTION 3.4 (any such portion,
"WAIVED PROCEEDS") by delivering such waiver in writing to the
Agent and the Borrower, signed by an authorized officer of such
Lender and in form satisfactory to the Agent. Upon receipt of such
written waiver, the Borrower (i) shall, to the extent of any
voluntary prepayment of the Term Loan, Additional Term Loan or D
Tranche Term Loan so waived, be relieved of its obligation, if any,
to prepay such amount pursuant to SECTION 3.4(a) with respect to
any Excess Cash Flow reported by the Borrower for the Fiscal
Quarter in which such voluntary prepayment is made (or was proposed
to be made) and may apply such Waived Proceeds to Permitted Uses,
and (ii) shall, to the extent of any mandatory prepayment of the
Term Loan, Additional Term Loan or D Tranche Term Loan so waived,
be relieved of its obligation to prepay such amount and may apply
such Waived Proceeds to Permitted Uses. Any request by the
Borrower for a waiver of any prepayment pursuant to this SECTION
3.6(f) shall, except with respect to the waiver request being made
to be effective on the Restatement Date to the Term Lenders and
Additional Lenders, be made to the Term Lenders, Additional Lenders
and D Tranche Lenders on a pro rata basis (relative to the
outstanding principal amount of the Term Loan, Additional Term Loan
and D Tranche Term Loan), shall be in writing, shall be made in
accordance with SECTION 3.2(vi) for any request for a waiver of any
voluntary prepayment and shall be delivered to the Agent, which
shall promptly distribute such request to the Term Lenders,
Additional Lenders and D Tranche Lenders. Each Term Lender,
Additional Lender and D Tranche Lender shall use reasonable efforts
to respond to such waiver request within five Business Days (or
such greater number of Business Days as the Borrower may specify)
following receipt of a written request therefor. Any failure by a
Term Lender, Additional Lender or D Tranche Lender to respond to
such waiver request within such period shall be deemed to be an
election by such Lender not to waive its right to receive its

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portion of such prepayment and shall in no event give rise to any
obligation or liability of any kind on the part of such Lender.

Section 3.7 COMMITMENT FEES.

(a) The Borrower shall pay to the Agent for pro rata
distribution to each Revolving Lender (based on its Revolving Loan
Pro Rata Share) a commitment fee (the "REVOLVING LOAN COMMITMENT
FEE") for the period commencing on the Closing Date to the Revolver
Termination Date or the earlier termination of the Revolving Loan
Commitments, computed at a rate equal to 1/2 of 1% per annum on the
average daily unused portion of the aggregate Revolving Loan
Commitments of the Revolving Lenders in effect at the time under
this Agreement; PROVIDED, HOWEVER, that solely for purposes of
computing Commitment Fees, all outstanding Swing Line Loans, L/C
Obligations and Florence L/C Obligations shall at all times be
deemed to be an unused portion of the aggregate Revolving Loan
Commitments.

(b) The Borrower shall pay to the Agent for pro rata
distribution to each Supplemental Revolving Lender (based on its
Supplemental Revolving Loan Pro Rata Share) a commitment fee (the
"SUPPLEMENTAL REVOLVING LOAN COMMITMENT FEE") for the period
commencing on the Restatement Date to the Supplemental Revolver
Termination Date or the earlier termination of the Supplemental
Revolving Loan Commitments, computed at a rate equal to 1/2 of 1%
per annum on the average daily unused portion of the aggregate
Supplemental Revolving Loan Commitments of the Supplemental
Revolving Lenders in effect at the time under this Agreement.

(c) Unless otherwise specified herein, accrued Revolving
Loan Commitment Fees and Supplemental Revolving Loan Commitment
Fees payable under SECTIONS 3.7(a) AND (b) shall be due and payable
(i) quarterly on the Quarterly Payment Dates of each year, (ii) on
the Revolver Termination Date and Supplemental Revolver Termination
Date, and (iii) upon any reduction or termination in whole or in
part of the Revolving Loan Commitments or Supplemental Revolving
Loan Commitments. The Revolving Loan commitment Fees and
Supplemental Revolving Loan Commitment Fees shall be computed on
the basis of a year consisting of 360 days and actual days elapsed.

Section 3.8 AMENDMENT FEE. On the Restatement Date
the Borrower shall pay to the Agent for distribution to the
Existing Lenders which execute this Agreement and return an
acknowledgement letter to the Agent on or before 5:00 p.m. (New
York time) on March 21, 1996 the separately negotiated amendment
fee (the "AMENDMENT FEE") as required by the separate agreement
between the Borrower and BT; PROVIDED, HOWEVER, that the Amendment
Fee shall be payable only in the event that this Agreement is
executed by the Required Lenders, the Majority Revolving Lenders,
the Majority Term Lenders and the Majority Additional Term Lenders
(as such terms are defined in the Existing Credit Agreement).

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Section 3.9 WAIVER FEE. On the Restatement Date the
Borrower shall pay to the Agent for distribution to the Term
Lenders and Additional Lenders which execute the separate waiver
request dated as of the Restatement Date pursuant to SECTION 3.6(f)
on or before 5:00 p.m. (Chicago time) on March 12, 1996 the
separately negotiated waiver fee (the "WAIVER FEE") as required by
the separate agreement between the Borrower and BT; PROVIDED,
HOWEVER, that the Waiver Fee shall be payable only in the event
that this Agreement is executed by the Required Lenders, the
Majority Revolving Lenders, the Majority Term Lenders and the
Majority Additional Term Lenders (as such terms are defined in the
Existing Credit Agreement).

Section 3.10 ADDITIONAL FEES. On the Restatement Date
the Borrower shall pay to BT, without duplication as to any fees
expressly set forth in this Agreement, the separately negotiated
fees (the "ADDITIONAL FEES") as required by the separate agreement
between the Borrower and BT.

Section 3.11 AGENT'S ADMINISTRATIVE FEE. The Borrower
shall pay to the Agent for its own account a separately negotiated
annual fee payable in arrears in equal semi-annual installments as
required by the separate agreement between the Borrower and the
Agent (the "AGENT'S ADMINISTRATIVE FEE").

Section 3.12 PAYMENTS.

(a) All payments by the Borrower under this Agreement or
under any Loan Document shall be made without setoff, counterclaim
or other defense and in such amounts as may be necessary in order
that all such payments (after deduction or withholding for or on
account of any present or future taxes (withholding or otherwise),
levies, imposts, duties, assessments or other charges of whatsoever
nature imposed by any government or any political subdivision or
taxing authority thereof, other than any franchise tax or tax
imposed on or measured by the income of a Lender pursuant to the
income tax laws of the United States of America or the
jurisdictions where such Lender's principal or lending offices are
located (collectively the "TAXES")) shall not be less than the
amounts otherwise specified to be paid under this Agreement. The
Borrower shall indemnify and hold the Agent, the Facing Agent and
the Lenders harmless against any and all such Taxes together with
all interest or penalties owing in respect thereof. A certificate
as to any additional amount payable to a Lender under this Section
submitted to the Borrower and the Agent by such Lender shall show
in reasonable detail the amount payable and the calculations used
to determine in good faith such amount, and shall, absent manifest
error, be final, conclusive and binding upon all parties hereto.
With respect to each deduction or withholding for or on account of
any Taxes, the Borrower shall promptly furnish to each Lender such
certificates, receipts and other documents as may be reasonably
required (in the judgment of such Lender) to establish any tax
credit to which such Lender may be entitled.

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(b) All payments (including prepayments) to be made by
the Borrower on account of principal or interest on any of its
Obligations shall be made to the Agent at its Payment Office for
the ratable account of the Revolving Lenders, the Supplemental
Revolving Lenders the Term Lenders, the Additional Lenders, the D
Tranche Lenders or for the Swing Line Lender or the Facing Agent,
as the case may be, not later than 12:00 noon (New York City time)
on the date when due, in each case in lawful money of the United
States of America and in immediately available funds. Except as
required under SECTIONS 2.12(h) AND (i), 2.13, 2.16, 3.2(a),
3.12(a), 9.5 AND 9.6 or as permitted under SECTION 3.6(f), all
payments (including prepayments) received by the Agent on account
of principal or interest on the Obligations or Letter of Credit
Fees, Revolving Loan Commitment Fees or Supplemental Revolving Loan
Commitment Fees shall be deemed made, and shall be distributed by
the Agent to the Revolving Lenders, the Supplemental Revolving
Lenders, the Term Lenders, the Additional Lenders, the D Tranche
Lenders, the Swing Line Lender or the Facing Agent, as the case may
be, and with respect to any such payments to the Revolving Lenders,
the Supplemental Revolving Lenders, the Term Lenders, the
Additional Lenders, or the D Tranche Lenders, distributed by the
Agent to the Revolving Lenders, the Supplemental Revolving Lenders,
the Term Lenders, the Additional Lenders and the D Tranche Lenders
in accordance with their Revolving Loan Pro Rata Shares,
Supplemental Revolving Loan Pro Rata Shares, Term Loan Pro Rata
Shares, Additional Term Loan Pro Rata Shares and D Tranche Term
Loan Pro Rata Shares, respectively, and, as among all Lenders
(including the Swing Line Lender and the Facing Agent), be applied
ratably according to the amount of principal, interest, Letter of
Credit Fees, Revolving Loan Commitment Fees or Supplemental
Revolving Loan Commitment Fees then due and owing to such Revolving
Lenders, Supplemental Revolving Lenders, Term Lenders, Additional
Lenders, D Tranche Lenders or the Swing Line Lender or the Facing
Agent, at the time such payment is received. If any payment
hereunder becomes due and payable on a day other than a Business
Day, such payment shall be extended to the next succeeding Business
Day (PROVIDED, HOWEVER, that if a payment in respect of a
Eurodollar Rate Loan would otherwise be made on a day which is not
a Business Day and after which no Business Day occurs in the same
month, such payment shall be made on the next preceding Business
Day), and, with respect to payments on principal and, to the extent
permitted by law, interest thereon, interest thereon shall be
payable at the then applicable rate during such extension.
Payments received after noon (New York City time) on any date shall
be deemed received on the next succeeding Business Day.

(c) Each Lender that is not a United States person (as
such term is defined in Section 7701(a)(30) of the Code), shall
submit to the Borrower within 31 days after it becomes a Lender
hereunder duly completed and signed copies of (i) Internal Revenue
Service ("IRS") Form 1001 (relating to such Lender and entitling it
to a complete exemption from United States withholding on all
amounts to be received by such Lender at any Lending Office

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designated by such Lender, including fees, under this Agreement)
and, if necessary to prevent backup withholding, IRS Form W-8
(relating to the foreign status exemption from United States
federal income tax backup withholding), (ii) IRS Form 4224
(relating to all amounts to be received by such Lender at any
Lending Office designated by such Lender, including fees, under
this Agreement) and, if necessary to prevent backup withholding,
IRS Form W-9 (certification of taxpayer identification number) or
(iii) IRS Form W-8 (relating to the exemption from United States
federal income tax withholding on payments of portfolio interest
under Section 871(h) or Section 881(c) of the Code) together with
a certificate substantially in the form of EXHIBIT 3.12(c) hereto.
Thereafter and from time to time, each such Lender, to the extent
legally entitled to do so, shall submit to the Borrower such
additional duly completed and signed copies of the previously
provided forms (or such successor forms as shall be adopted from
time to time by the relevant United States taxing authorities) as
may be (i) requested by the Borrower from such Lender and (ii)
required under then-current United States law or regulations to
avoid United States withholding taxes on payment in respect of
amounts to be received by such Lender at any Lending Office
designated by such Lender, including fees, under this Agreement.
Upon the request of the Borrower, each Lender that is a United
States person (as such term is defined in Section 7701(a)(30) of
the Code) shall submit to the Borrower a certificate to the effect
that it is such a United States person. If any Lender determines
that it is unable to submit to the Borrower any form or certificate
that such Lender is obligated to submit pursuant to this Section,
or that such Lender is required to withdraw or cancel any such form
or certificate previously submitted, such Lender shall promptly
notify the Borrower of such fact. Any amount that would otherwise
have been required to be paid by the Borrower in respect of United
States withholding Taxes pursuant to this Section shall not be
payable by the Borrower to any Lender that (i) is neither (a)
entitled to submit the form or forms required by the first sentence
of this SECTION 3.12(c) (or said successor forms) other than on
account of a change in applicable law or regulations or in any
treaty after the date hereof nor (b) a United States person (as
such term is defined in Section 7701(a)(30) of the Code), or (ii)
has failed to submit any form or certificate that it was required
to file pursuant to this Section and entitled to file under
applicable law.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

In order to induce the Agent, the Co-Agents and the
Lenders to enter into this Agreement and the other Loan Documents
and to make the Loans, and issue (or participate in) the Letters of
Credit as provided herein, the Borrower makes the following
representations and warranties as of the Restatement Date and as of

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the date of each subsequent Credit Event, all of which shall
survive the execution and delivery of this Agreement and the other
Loan Documents and the making of the Loans and issuance of the
Letters or Credit, with the occurrence of each Credit Event on or
after the Restatement Date being deemed to constitute a
representation and warranty that the matters specified in this
ARTICLE IV are true and correct on and as of the Restatement Date
and on and as of the date of each such Credit Event, PROVIDED that
any representation or warranty which by its terms is made as of a
specified date shall be required to be true and correct on the date
of each Credit Event but only as of such specified date, and
PROVIDED FURTHER, that any representation or warranty made by the
Borrower under the Original Credit Agreement or the Existing Credit
Agreement shall survive the execution and delivery of this
Agreement, and the termination hereof:

Section 4.1 DUE ORGANIZATION AND STANDING. The
Borrower and each Subsidiary of the Borrower is a corporation duly
organized, validly existing and in good standing under the laws of
its respective jurisdiction of incorporation. The Borrower and
each Subsidiary of the Borrower is duly qualified and in good
standing as a foreign corporation, and is duly authorized to do
business, in each jurisdiction in which the ownership or leasing of
its or their properties or the conduct of its or their business
requires such qualification, except where the failure to be so
qualified would not have a Material Adverse Effect, either
individually or in the aggregate.

Section 4.2 POWER AND AUTHORITY. The Borrower and
each Subsidiary of the Borrower has all requisite corporate power
and authority to own, operate and encumber its property and assets
and to carry on its business as presently conducted and as proposed
to be conducted. Each of the Borrower and its Subsidiaries has all
requisite power and authority (corporate and otherwise) (i) to
execute, deliver and perform its obligations under each of the
Basic Agreements to which it is a party, (ii) to assign and grant
a security interest or mortgage in the Collateral and the Mortgaged
Property in the manner and for the purpose contemplated by the
Security Agreements and the Mortgages, respectively, to which it is
a party, and (iii) to execute, deliver and perform its obligations
under all other agreements and instruments executed and delivered
by it pursuant to or in connection with any Basic Agreement to
which it is a party or bound thereby.

Section 4.3 SUBSIDIARIES. SCHEDULE 4.3 attached
hereto is a complete and correct list of all Subsidiaries of the
Borrower as of the Restatement Date. Except as set forth on
SCHEDULE 4.3, all of the issued and outstanding shares of capital
stock of each such Subsidiary other than directors' qualifying
shares, if any, are owned directly or indirectly by the Borrower as
of the Restatement Date. As of the Restatement Date, all shares of
capital stock of each Subsidiary of the Borrower have been validly
issued, are fully paid and non-assessable and all such shares owned

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directly or indirectly by the Borrower are owned free and clear of
all Liens other than Permitted Liens. Except as set forth on
SCHEDULE 4.3, as of the Restatement Date, no authorized but
unissued or treasury shares of capital stock of any such Subsidiary
are subject to any option, warrant, right to call or commitment of
any kind or character. Except as set forth on SCHEDULE 4.3, as of
the Restatement Date, the Borrower has no Subsidiaries other than
Wholly-Owned Subsidiaries.

Section 4.4 NO VIOLATION OF AGREEMENTS. The
execution, delivery and performance by each of the Borrower and its
Subsidiaries of each of the Basic Agreements to which it is a party
and all other agreements and instruments to be executed and
delivered by the Borrower or any of its Subsidiaries pursuant
hereto or thereto or in connection herewith or therewith, the
assignment of, and the grant of a security interest or mortgage in,
the Collateral or on the Mortgaged Property in the manner and for
the purpose contemplated by the Security Agreements and the
Mortgages, respectively, do not and will not (i) violate in any
material respect any provisions of any law, statute, rule,
regulation (including, without limitation, Regulations G, T, U or
X of the Board), order, license, permit, writ, judgment, decree,
determination or award presently in effect having applicability to
the Borrower or any of its Subsidiaries, (ii) conflict with or
result in a breach of or constitute a tortious interference with or
constitute a default under the certificate of incorporation or by-laws,
or other organizational documents, as the case may be, of
either the Borrower or any of its Subsidiaries or any indenture or
loan or credit agreement, or any other material agreement or
instrument, to which the Borrower or any of its Subsidiaries is a
party or by which the Borrower or any of its Subsidiaries or any of
their respective properties are bound or affected, or any
governmental permit, license or order, (iii) result in or require
the creation or imposition of any Lien (except for Permitted Liens)
of any nature upon or with respect to any of the properties now
owned or hereafter acquired by the Borrower or any of its
Subsidiaries, or (iv) require any approval of stockholders or any
approval or consent of any Person which have not been obtained on
or prior to the Restatement Date, except for such approvals and
consents referred to on SCHEDULE 4.4 hereto. Neither the Borrower
nor any Subsidiary of the Borrower is in default under or in
violation of any such law, statute, rule, regulation, judgment,
decree, license, order or permit described above or any indenture,
mortgage, deed of trust, agreement or other instrument described
above or under its charter or by-laws, in each case the
consequences of which default or violation, either in any one case
or in the aggregate, would have a Material Adverse Effect.

Section 4.5 DUE AUTHORIZATION, ETC. The execution,
delivery and performance (or filing, as the case may be) of each of
the Basic Agreements, and the consummation of the transactions
contemplated thereby, have been duly authorized by all requisite
corporate action on the part of the Borrower or its applicable

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Subsidiaries party to such Basic Agreements and no other corporate
proceedings on the part of the Borrower or its applicable
Subsidiaries are necessary to authorize any of the Basic
Agreements. Each of the Basic Agreements to which it is a party
and each other agreement or instrument executed and delivered by
the Borrower or any of its Subsidiaries pursuant hereto or thereto
or in connection herewith or therewith has been duly executed and
delivered (or filed, as the case may be) by the Borrower or such
Subsidiary and constitutes or will constitute a legal, valid and
binding obligation of the Borrower or such Subsidiary, enforceable
against the Borrower or such Subsidiary in accordance with its
respective terms (subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other similar laws affecting the
enforcement of creditors' rights generally and general equitable
principles). Each of the Basic Agreements is in full force and
effect and the Borrower and the other parties thereto (other than
the Lenders) have performed and complied in all material respects
with all the terms, provisions, agreements and conditions set forth
therein and required to be performed or complied with by such
parties on or before the Closing Date, and no default by the
Borrower or any Subsidiary of the Borrower or, to the best
knowledge of the Borrower, any of the other parties thereto (other
than the Lenders), exists thereunder. From and after the Closing
Date, the Security Agreements will give the Agent for the benefit
of the Lenders, as security for the repayment of the obligations
secured thereby, assuming proper filings and recordations are made,
a valid and perfected first priority lien (which priority is
subject only to prior Liens permitted by such agreements) upon and
security interest in the Collateral, and each of the Mortgages will
give the Agent for the benefit of the Lenders, as security for the
repayment of the obligations secured thereby, assuming proper
filings and recordations are made, a valid and first priority lien
(which priority is subject only to prior Liens permitted by the
respective Mortgages) upon and security interest in the respective
Mortgaged Property, subject to Permitted Liens.

Section 4.6 INDEBTEDNESS FOR MONEY BORROWED. Attached
hereto as SCHEDULE 4.6 is a complete and correct list of all
Indebtedness for Money Borrowed, exclusive of intercompany
Indebtedness for Money Borrowed owing between and among the
Borrower and its Wholly-Owned Subsidiaries, of the Borrower and
each Subsidiary of the Borrower outstanding as of the Restatement
Date, showing the aggregate principal amount which will be
outstanding on the Restatement Date after giving effect to the
Related Transactions and the making of the Loans hereunder. The
Borrower has delivered or caused to be delivered to the Agent a
true and complete copy of the form of each instrument evidencing
Indebtedness for Money Borrowed listed on SCHEDULE 4.6 and of each
instrument pursuant to which such Indebtedness for Money Borrowed
was issued. All Indebtedness of the Borrower to the Agent or the
Lenders under any Basic Agreement constitutes Senior Indebtedness.
No Indebtedness of the Borrower to any party is senior in priority
of payment to the Obligations.

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Section 4.7 FISCAL QUARTERS AND YEAR. The fiscal
quarters (the "FISCAL QUARTERS") of the Borrower and its
Subsidiaries begin on the first day of January, April, July and
October and end on the last day of March, June, September and
December, respectively, of each year. The fiscal year (the "FISCAL
YEAR") of the Borrower and each of its Subsidiaries commences on
January 1 and ends on December 31 of each calendar year.

Section 4.8 TITLE TO AND CONDITIONS OF PROPERTIES.
Except as disclosed on SCHEDULE 4.8 hereto, as of the Restatement
Date, the Borrower or one of its Subsidiaries has valid, legal and
marketable title to, or a subsisting leasehold interest in, all
material items of real and personal property reflected on the
Balance Sheet or acquired after the date of the Balance Sheet
except for assets sold, transferred or otherwise disposed of in the
ordinary course of business since the date of the Balance Sheet, in
each case (except as to leasehold interests) free and clear of all
Liens, except Permitted Liens. As of the Restatement Date,
substantially all items of real and material personal property
owned by, leased to or used by the Borrower and/or each Subsidiary
of the Borrower are in adequate operating condition and repair,
ordinary wear and tear excepted, are free and clear of any known
defects except such defects as do not substantially interfere with
the continued use thereof in the conduct of normal operations, and
are able to serve the function for which they are currently being
used.

Section 4.9 LITIGATION, PROCEEDINGS, LICENSES,
PERMITS. There is no action, suit or proceeding, or any
governmental investigation or any arbitration pending or, to the
knowledge of the Borrower, threatened against the Borrower or any
of its Subsidiaries or any material property of any thereof before
any court or arbitrator or any governmental or administrative body,
agency or official (i) which asserts the invalidity, or seeks to
enjoin, or otherwise materially interferes with, the performance or
consummation, of any Basic Agreement, or (ii) which is reasonably
likely to have a Material Adverse Effect. Neither the Borrower nor
any of its Subsidiaries (A) is in default with respect to any order
of any court, arbitrator or governmental body or is subject to or
party to any order of any court or governmental authority arising
out of any action, suit or proceeding against it under any statute
or other law respecting antitrust, monopoly, restraint of trade,
unfair competition or similar matters or (B) has violated or is in
violation of any statute, rule or regulation of any governmental
authority in each case where such violation or default would have
a Material Adverse Effect. The Borrower and each of its Subsidiar-
ies have been and are current and in good standing with respect to
all governmental approvals, permits, certificates, licenses,
inspections, consents and franchises necessary to continue to
conduct their respective businesses in accordance with applicable
laws, rules and regulations and to own or lease and operate their
respective properties, except where the failure to be so would not
have a Material Adverse Effect.

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Section 4.10 GOVERNMENTAL CONSENTS, ETC. Except to the
extent not required to be obtained prior to the Restatement Date
(or, with respect to any future date, required to be obtained as of
such date), and except as disclosed on SCHEDULE 4.10 hereto, no
authorization, consent, approval, license, qualification or formal
exemption from, nor any filing, declaration or registration with,
any court, governmental agency or regulatory authority or any
securities exchange or any other Person is required in connection
with the execution, delivery and performance by the Borrower and
its Subsidiaries of any Basic Agreement or the assignment of, and
the grant of a security interest in or mortgage on the Collateral
or the Mortgaged Property, in the manner and for the purposes
contemplated by the Security Agreements or the Mortgages,
respectively, and all of such consents shall have been obtained
prior to, and shall remain in full force and effect on, and any
requirements described on SCHEDULE 4.10 shall have been met on or
prior to, the Restatement Date.

Section 4.11 FINANCIAL STATEMENTS.

(a) The Borrower has heretofore caused to be delivered to
each Lender complete and correct copies of (i) the audited
consolidated balance sheets of the Borrower and its Subsidiaries
for the fiscal years ended December 31, 1993 and 1994, and the
audited consolidated statements of income and consolidated
statements of cash flows for such years then ended, certified by
Price Waterhouse, whose report thereon is incorporated by reference
therein, and (ii) the unaudited consolidated balance sheet of the
Borrower and its Subsidiaries as of September 30, 1995 (such
unaudited consolidated balance sheet and notes thereto as of
September 30, 1995 being herein referred to as the "BALANCE
SHEET"), together with unaudited consolidated statements of income
and consolidated statements of cash flows for the three months and
nine months ended September 30, 1995. As of the Restatement Date,
such consolidated balance sheets and the notes thereto fairly
present the assets, liabilities and financial condition of the
Borrower and its Subsidiaries as at the respective dates thereof,
and such consolidated statements of income and consolidated
statements of cash flows and the notes thereto fairly present the
results of operations of the Borrower and its Subsidiaries for the
respective periods therein referred to, all in accordance with
generally accepted accounting principles consistently applied
throughout the respective periods involved and the prior periods,
except as stated therein or in the notes thereto.

(b) The Borrower has furnished to the Agent the pro
forma consolidated balance sheet (the "PRO FORMA") of the Borrower
and its Subsidiaries dated as of February 16, 1996 and attached
hereto as EXHIBIT 4.11(B). As of February 16, 1996, the Pro Forma
is complete and accurate in all material respects and fairly
presents the Borrower's assets, liabilities and financial
condition, on a consolidated basis, taking into account the

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transactions contemplated by the Basic Agreements, the Related
Transactions and the making of the Loans hereunder based on the
assumptions set forth in the notes to the Pro Forma.

(c) The Borrower has furnished to the Agent initial
Forecasts for the Borrower dated as of February 15, 1996 and
attached hereto as EXHIBIT 4.11(C). For purposes of this
Agreement, "FORECASTS" shall mean forecasted balance sheets for the
forthcoming five (5) years, year-by-year; forecasted cash flow
statements (including proposed Capital Expenditures) for the
forthcoming five (5) years, year-by-year; forecasted profit and
loss statements for the forthcoming five (5) years, year-by-year,
and for the forthcoming Fiscal Year, quarter-by-quarter, together
with appropriate supporting details consistent with EXHIBIT
4.11(C). The initial Forecasts have been prepared by the Borrower
on the basis of the assumptions set forth therein and represent, as
of the Restatement Date, the good faith estimate of the Borrower
regarding the course of the Borrower's business for the periods
covered thereby. The Borrower believes in good faith on the
Restatement Date that the assumptions set forth in the initial
Forecasts are reasonable.

(d) Except as set forth on SCHEDULE 4.11(D) hereto,
neither the Borrower nor any of its Subsidiaries has any material
liabilities or obligations of any nature, whether absolute,
accrued, contingent or otherwise, or any material unsatisfied
judgments or any leases for a period in excess of five (5) years
which either individually or in the aggregate are material (herein
called "MATERIAL LIABILITIES"), except (a) Material Liabilities
which are fully reflected or reserved against on (i) the Pro Forma,
with respect to the period from the Restatement Date until the
delivery of the initial Most Recent Balance Sheet in Fiscal Year
1996 and (ii) the Most Recent Balance Sheet, with respect to all
periods thereafter, and (b) Material Liabilities incurred
subsequent to the date of the Pro Forma or the Most Recent Balance
Sheet, as the case may be, in the ordinary course of business
consistent with past practice. The reserves, if any, reflected on
the Pro Forma or the Most Recent Balance Sheet, as the case may be,
for all Material Liabilities referred to in clause (a) above are
appropriate and reasonable as of the date of the Pro Forma or Most
Recent Balance Sheet, as the case may be.

Section 4.12 NO MATERIAL ADVERSE CHANGE. Except for
the transactions specifically contemplated by the Basic Agreements
or reflected on the Pro Forma and matters disclosed in the public
filings identified on SCHEDULE 4.12 hereto, since December 31, 1994
there has been no material adverse change in the condition
(financial or otherwise), business, assets, liabilities, prospects
or results of operations of the Borrower and its Subsidiaries taken
as a whole.

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Section 4.13 TAX RETURNS AND PAYMENTS. The Borrower
and each of its Subsidiaries has timely filed or caused to be filed
all tax returns which are required to be filed, and has paid all
taxes shown to be due and payable on said returns or on any
assessments made against it or any of its property and all other
material taxes, fees or other charges imposed on it or any of its
property by any Governmental Authority (other than those the amount
or validity of which is being contested in good faith by
appropriate proceedings and with respect to which reserves in
conformity with generally accepted accounting principles have been
provided on the books of the Borrower or such Subsidiary, as the
case may be); and no tax liens have been filed and no claims are
being asserted with respect to any such taxes, fees or other
charges (other than such liens or claims, the amount or validity of
which is currently being contested in good faith by appropriate
proceedings and with respect to which reserves in conformity with
generally accepted accounting principles have been provided).

Section 4.14 PATENTS, ETC. The Borrower and each of
its Subsidiaries own, are licensed or otherwise have the lawful
right to use, or have all permits and other governmental approvals,
patents, trademarks, trade names, copyrights, technology, know-how
and processes used in or necessary for the conduct of their
businesses except where the failure to own or have the right to use
will not have a Material Adverse Effect. To the best of Borrower's
knowledge, the use of such permits and other governmental
approvals, patents, trademarks, trade names, copyrights, technolo-
gy, know-how and processes by the Borrower and each of its
Subsidiaries does not infringe on the rights of any Person, subject
to such claims and infringements as do not, in the aggregate, give
rise to any liability on the part of the Borrower or any of its
Subsidiaries which has or is reasonably likely to have a Material
Adverse Effect. The consummation of the transactions contemplated
by the Basic Agreements will not impair the ownership of or rights
under (or the license or other right to use, as the case may be)
any permits, governmental approvals, patents, trademarks, trade
names, copyrights, technology, know-how or processes by the
Borrower or any of its Subsidiaries in any manner which has or is
reasonably likely to have a Material Adverse Effect.

Section 4.15 ERISA.

(a) With respect to the Borrower and its Subsidiaries
(other than Stone-Canada and its Subsidiaries except to the extent
that a Plan of Stone-Canada or any Subsidiary of Stone-Canada is
subject to ERISA):

(i) No termination since September 2, 1974 of any Plan
of the Borrower or any of its Subsidiaries or any ERISA
Affiliate has resulted in any material liability of the
Borrower or any of its Subsidiaries. All Plans of the
Borrower or any of its Subsidiaries have been operated and

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administered in a manner so as not to result in any material
liability for failure to comply with ERISA, and if intended to
qualify under Section 401(a) or 403(a) of the Code, in a
manner so as not to result in any material liability for
failure to comply with the applicable provisions thereof.
Neither the Borrower nor any of its Subsidiaries or any ERISA
Affiliate has engaged in any transaction in connection with
which any such entity could be subjected to either a material
civil penalty assessed pursuant to Section 502(i) of ERISA or
a material tax imposed by Section 4975 of the Code. Full
payment has been made on a timely basis of all amounts which
the Borrower or any of its Subsidiaries or any ERISA Affiliate
is required under the terms of each Plan to have paid as a
contribution to such Plan. None of the Plans which is subject
to Part 3 of Subtitle B of Title 1 of ERISA or Section 412 of
the Code has an accumulated funding deficiency (as defined in
Section 302 of ERISA and Section 412 of the Code), whether or
not waived. Neither the Borrower nor any of its Subsidiaries
or ERISA Affiliates has any contingent liability under Section
4069 of ERISA. No material liability to the PBGC has been or
is expected by the Borrower to be incurred with respect to any
Plan by the Borrower or any of its Subsidiaries or any ERISA
Affiliate; and there has been no Reportable Event, and no
event or condition, which presents a material risk of
termination of any such Plan by the PBGC which would result in
material liability of the Borrower or any of its Subsidiaries
or any ERISA Affiliate. No material liability has been or is
expected to be incurred by the Borrower or any of its
Subsidiaries or any ERISA Affiliate resulting from any
withdrawal by the Borrower, any of its Subsidiaries or any
ERISA Affiliate from a plan in which it was a substantial
employer (within the meaning of Section 4001 (a)(2) of ERISA).
Assuming that no portion of the Loan proceeds to be advanced
hereunder is attributable, directly or indirectly, to the
assets of any employee benefit plan (within the meaning of
Section 3(3) of ERISA) or plan (within the meaning of Section
4975(e) of the Code), the execution, performance and delivery
of the Basic Agreements by any party thereto will not involve
any prohibited transaction within the meaning of Section 406
of ERISA or Section 4975 of the Code for which an exemption
therefrom is not available. The aggregate fair market value
of the assets of the Plans exceeds the aggregate present value
of accrued benefits under such Plans and, with respect to any
Plan the fair market value of the assets of which does not
exceed the present value of accrued benefits thereunder (an
"UNDERFUNDED PLAN"), the amount by which the present value of
accrued benefits under each Underfunded Plan exceeds the fair
market value of the assets of such Underfunded Plan is not
material to the Borrower and its Subsidiaries taken as a
whole.

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(ii) No material liability has been or is expected to be
incurred by the Borrower or any of its Subsidiaries or any
ERISA Affiliate with respect to any Multiemployer Plan except
for future contributions to any Multiemployer Plan pursuant to
the terms of any applicable collective bargaining agreement.
Full payment has been made of all amounts which the Borrower
or any ERISA Affiliate is required under the terms of any
Multiemployer Plan to have paid as a contribution to such
Multiemployer Plan as of the last day of the most recent
fiscal year of such Multiemployer Plan, except for any
contribution which might be required and is unpaid because of
mathematical error in the calculation of such amount.

(iii) No liability which would have a Material Adverse
Effect has been or is expected to be incurred by the Borrower
or any of its Subsidiaries or any ERISA Affiliate for failure
to comply with the health coverage continuation requirements
enacted under the Consolidated Omnibus Budget Reconciliation
Act of 1986.

(b) With respect to Stone-Canada and its Subsidiaries,
except as set forth on SCHEDULE 4.15, there are no unfunded
liabilities arising out of any pension plan or under any benefit
plan to which Stone-Canada or any Subsidiary of Stone-Canada is a
party or by which either is bound and all employer contributions
required thereunder to date have been made.

Section 4.16 GOVERNMENTAL REGULATION. Neither the
Borrower nor any of its Subsidiaries is subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power
Act, the Interstate Commerce Act, the Investment Company Act of
1940 or any other federal or state statute or regulation such that
its ability to incur indebtedness is limited or its ability to
consummate the transactions contemplated hereby is materially
impaired.

Section 4.17 FEDERAL RESERVE REGULATIONS. Neither the
Borrower nor any Subsidiary of the Borrower is engaged, directly or
indirectly, principally, or as one of its important activities, in
the business of extending, or arranging for the extension of,
credit for the purpose of purchasing or carrying any Margin Stock,
within the meaning of Regulation G, U or X of the Board. Following
application of the proceeds of each Loan, not more than 25% of the
value of the assets (either of the Borrower only or of the Borrower
and its Subsidiaries on a consolidated basis) will be Margin Stock.

Section 4.18 TRANSACTION DOCUMENTS. The Borrower has
delivered to the Agent true, complete and correct copies of the
Transaction Documents (including all schedules, exhibits, annexes,
amendments and all other documents delivered pursuant thereto or in
connection therewith). The Transaction Documents as originally
executed and delivered by the parties thereto have not been

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amended, waived, supplemented or modified without the consent of
the Required Lenders. Neither the Borrower nor any other party
thereto is in default in the performance or compliance with any
provisions thereof. The Transaction Documents are in material
compliance with all applicable laws and the transactions effected
thereunder were consummated in accordance with applicable laws and
regulations.

Section 4.19 SOLVENCY OF THE BORROWER. As of the
Restatement Date, no obligation shall have been incurred by the
Borrower or any Subsidiary of the Borrower with intent to hinder,
delay, disturb or defraud creditors of the Borrower or any
Subsidiary of the Borrower and the Borrower and each of its
Subsidiaries (i) shall not be "insolvent" (within the meaning of
Section 101(29) of The Bankruptcy Code of 1978, as amended, Section
2 of the Uniform Fraudulent Conveyance Act or Section 2 of the
Uniform Fraudulent Transfer Act) and will not become "insolvent"
(after giving effect to the financing contemplated hereby or any
application of the proceeds of the Loans or the proceeds from the
Transaction Documents) as a result of the incurrence of any such
obligations; (ii) shall not be engaged in any business or
transaction with unreasonably small capital (after giving effect to
the financing contemplated hereby); and (iii) shall be able to
perform its contingent obligations and other commitments as they
mature in the normal course of business.

Section 4.20 CERTAIN FEES. Other than as set forth in
the Transaction Documents or in the documentation relating to the
public debt financing contemplated thereby, no broker's or finder's
fees or commissions were paid or will be payable by the Borrower or
any Subsidiary of the Borrower with respect to the transactions
contemplated by the Basic Agreements. No similar fees or
commissions were paid or will be payable by the Borrower or any
Subsidiary of the Borrower for any other services rendered to the
Borrower or any Subsidiary of the Borrower in connection with the
transactions contemplated hereby. The Borrower covenants that it
will indemnify the Agent, the Co-Agents and each Lender against and
hold the Agent, the Co-Agents and each Lender harmless from any
claim, demand or liability for broker's or finder's fees or similar
fees or commissions alleged to have been incurred in connection
with any such issuance or offer, issue and sale, or the
transactions contemplated hereby. The obligations of the Borrower
under this Section shall survive the termination of this Agreement
and the discharge of the Borrower's obligations hereunder and under
the Obligations.

Section 4.21 ENVIRONMENTAL MATTERS. Except as
disclosed on SCHEDULE 4.21, (i) the operations of and the real
property associated with the Borrower and each of its Subsidiaries
is in compliance with all applicable Environmental Laws except
where the failure to so comply could not be expected to have a
Material Adverse Effect; (ii) the Borrower and each of its

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Subsidiaries has obtained and maintains all material environmental,
health and safety permits, certificates, licenses, approvals and
authorizations necessary for their respective operations under all
applicable Environmental Laws (collectively, "ENVIRONMENTAL
PERMITS"), and all such Environmental Permits are in good standing
and the Borrower and its Subsidiaries are in material compliance
with all terms and conditions of such Environmental Permits; (iii)
neither the Borrower nor any of its Subsidiaries nor any of their
present or past properties or operations (whether owned or leased)
are subject to: (A) any written claim, request for information,
judgment, order, decree or agreement from or with any Governmental
Authority or private party related to any material violation of or
material non-compliance with Environmental Laws or Environmental
Permits, (B) any pending or, to the knowledge of the Borrower,
threatened judicial or administrative proceeding, action, suit or
investigation related to any Environmental Laws or Environmental
Permits which, if determined adversely to the Borrower or any of
its Subsidiaries, could have a Material Adverse Effect, or (C) any
liabilities, obligations or costs arising from any Remedial Action
or any Release or threatened Release of a Contaminant into the
environment regardless of whether the Release or threatened Release
is occurring on the Borrower's or any Subsidiaries present or past
properties or at any other location, in each case where such
Remedial Action, Release or threatened Release would have a
Material Adverse Effect; and (iv) except as disclosed on SCHEDULE
4.21 hereto, as of the Restatement Date, neither the Borrower nor
any of its Subsidiaries has received any written notice or claim to
the effect that the Borrower or any of its Subsidiaries is or may
be liable to any Person for an amount in excess of $500,000 as a
result of the Release or threatened Release of a Contaminant into
the environment.

Section 4.22 DISCLOSURE. No statement, fact,
representation or warranty of the Borrower or its Subsidiaries
contained in the Basic Agreements, the Note Prospectus or any other
document furnished to the Lenders by or on behalf of the Borrower
or any Subsidiary for use in connection with the transactions
contemplated by the Basic Agreements contains any untrue statement
of a material fact nor do such documents taken as a whole omit to
state a material fact necessary in order to make the statements
contained herein or therein, as the case may be, not misleading
when made. The pro forma forecasts, projections and pro forma
financial information contained in such materials are based upon
good faith estimates and assumptions believed by the Borrower to be
reasonable at the time made, it being recognized by the Lenders
that such pro forma forecasts and projections as to future events
are not to be viewed as facts and that actual results during the
period or periods covered by any such pro forma forecasts and
projections will differ from the forecasted or projected results.
As of the Restatement Date there is no fact known to the Borrower
(other than matters of a general economic nature not peculiar to
the Borrower, or its Subsidiaries) which materially and adversely

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affects the condition (financial or otherwise), properties,
business, prospects or operations of the Borrower and its
Subsidiaries taken as a whole which has not been disclosed herein
or in such other documents, certificates and statements furnished
to the Lenders for use in connection with the transactions
contemplated hereby.

Section 4.23 SURVIVAL OF WARRANTIES; COVENANT REGARDING
DISCLOSURE. All representations and warranties contained in the
Original Credit Agreement, the Existing Credit Agreement, this
Agreement and the other Basic Agreements shall survive the
execution and delivery of this Agreement and such other Basic
Agreements, as the case may be, and the termination hereof and
thereof. The Borrower may from time to time propose in writing to
the Agent and Lenders modifications or supplements to the
disclosures contained herein or the disclosure schedules attached
to this Agreement in order to maintain the accuracy thereof;
PROVIDED, HOWEVER, that any modifications or supplements to the
disclosures contained in this Agreement or the disclosure schedules
attached to this Agreement and provided by the Borrower after the
Restatement Date shall not be deemed a part of this Agreement until
accepted in writing by the Required Lenders, PROVIDED that a Lender
shall be deemed to have accepted any such proposed modification or
supplement if such Lender fails to give written notice of the
rejection thereof within 30 days after receipt from the Borrower of
such proposed modification or supplement expressly requesting
acceptance thereof under this SECTION 4.23.

ARTICLE V

COVENANTS

Section 5.1 AFFIRMATIVE COVENANTS OF THE BORROWER.
The Borrower covenants and agrees that for so long as this
Agreement is in effect and until the Obligations and all other
obligations incurred hereunder or under any other Loan Document,
whether or not matured, are paid in full and all Commitments have
terminated, the Borrower will, unless first having procured the
written consent of the Required Lenders:

5.1.1 FINANCIAL DATA. Furnish to the Agent and each
Lender:

(a) Within five (5) Business Days after an Executive
Officer of the Borrower shall have obtained knowledge of the
occurrence of an Event of Default and/or an Unmatured Event of
Default, the written statement of the chief executive officer,
chief operating officer, chief financial officer or treasurer
of the Borrower setting forth the details of each such Event
of Default or Unmatured Event of Default which has occurred
and is continuing and the action which the Borrower proposes
to take with respect thereto.

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(b) Within forty-five (45) days (or in the case of the
financial statements referenced in SECTIONS 5.1.1(B)(II),
sixty (60) days) after the end of each Fiscal Quarter (except
the last Fiscal Quarter) of each Fiscal Year of the Borrower,
(i) unaudited financial statements consisting of a
consolidated balance sheet of the Borrower and its
Subsidiaries as at the end of such quarter and a consolidated
statement of income and a consolidated statement of cash flows
of the Borrower and its Subsidiaries for such quarter and for
the portion of the fiscal year through such quarter, all in
reasonable detail and certified (subject to normal year-end
audit adjustments) on behalf of the Borrower by the chief
executive officer, chief financial officer, chief accounting
officer or treasurer of the Borrower as having been prepared
in accordance with generally accepted accounting principles
consistently applied, (ii) unaudited financial statements
consisting of a consolidated balance sheet of the Borrower and
its Subsidiaries as at the end of such quarter and a
consolidated statement of income and a consolidated statement
of cash flows of the Borrower and its Subsidiaries for such
quarter and for the portion of the fiscal year through such
quarter, all in reasonable detail and certified (subject to
normal year-end audit adjustments) on behalf of the Borrower
by the chief executive officer, chief operating officer, chief
financial officer, chief accounting officer or treasurer of
the Borrower as having been prepared in accordance with
generally accepted accounting principles consistently applied
(except that in such statements S-CC shall be accounted for
utilizing the equity method) and (iii) a schedule setting
forth the computation of Excess Cash Flow for the Fiscal
Quarter then ended (an "EXCESS CASH FLOW SCHEDULE"). The
financial statements delivered pursuant to SECTION 5.1.1(B)(I)
shall be accompanied by a certificate from such officer
addressed to the Lenders substantially in the form of EXHIBIT
5.1.1, to the extent applicable, stating that no Event of
Default and no Unmatured Event of Default has come to his
attention which was continuing at the end of such quarter or
on the date of his certificate, or if such an Event of Default
or Unmatured Event of Default has come to his attention and
was continuing at the end of such quarter or on the date of
his certificate, indicating the nature of such Event of
Default or Unmatured Event of Default and the action which the
Borrower proposes to take with respect thereto. Such
certificate shall also detail the amount of any Discretionary
Funds originating during such Fiscal Quarter, any utilization
of Discretionary Funds during such Fiscal Quarter, the amount
of the Discretionary Funds Basket and the Dividend Basket as
of the end of such Fiscal Quarter, the amount of any Debt
Basket Proceeds and Excess Excluded Sales Proceeds remaining
in the Discretionary Funds Basket after any utilization
thereof and any utilization of the Dividend Basket for
Investments, Acquisitions or Capital Expenditures during such

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Fiscal Quarter and shall set forth detailed computations as to
the Borrower's compliance with the covenants set forth in
SECTIONS 5.2.1 (WITH RESPECT TO CLAUSE (O) OF THE DEFINITION
OF PERMITTED LIENS), 5.2.2, 5.2.3, 5.2.5, 5.2.7, 5.2.9,
5.2.11, 5.2.12, 5.2.15, 5.3.1 and 5.3.2 and detailed
computations showing whether an adjustment of Borrowing
Margins pursuant to SECTION 2.9 is required. To the extent
that the accounting principles utilized in the preparation of
any financial statements delivered by the Borrower pursuant to
SECTION 5.1.1(B) OR (C) are at variance with the Agreement
Accounting Principles (other than accounting for S-CC
utilizing the equity method for purposes of the financial
statements delivered pursuant to SECTIONS 5.1.1(B)(II) and
5.1.1(C)(II)), such financial statements shall be accompanied
by a statement detailing the nature of such variance. In
addition to the consolidated financial statements delivered
pursuant to SECTION 5.1.1 (B)(I), the Borrower will provide,
as soon as available and in any event within sixty (60) days
after the end of each Fiscal Quarter (except the last Fiscal
Quarter) of each Fiscal Year of S-CC, unaudited financial
statements consisting of a balance sheet and statement of
stockholders' equity of S-CC as at the end of such quarter and
a statement of income and cash flows of S-CC for such quarter
and for the portion of the fiscal year through such quarter,
all in reasonable detail and certified (subject to normal
year-end audit adjustments) on behalf of S-CC by the chief
executive officer, chief operating officer, chief financial
officer or treasurer of S-CC as having been prepared in
accordance with generally accepted accounting principles
consistently applied. Reporting requirements for separate S-CC
financial information under this subsection and SUBSECTIONS
5.1.1(C),(D) and (E) shall terminate when and if S-CC ceases
to be a Subsidiary.

(c) Within ninety (90) days after the end of each Fiscal
Year of the Borrower, (i) financial statements consisting of
a consolidated balance sheet and statement of stockholders'
equity of the Borrower and its Subsidiaries as at the end of
such fiscal year and a consolidated statement of income and a
consolidated statement of cash flows of the Borrower and its
Subsidiaries for such fiscal year, setting forth in
comparative form the corresponding figures for the preceding
fiscal year, certified without qualification as to scope of
audit by independent public accountants of recognized national
standing and reputation selected by the Borrower, (ii)
unaudited financial statements, consisting of a consolidated
balance sheet of the Borrower and its Subsidiaries as at the
end of such fiscal year and a consolidated statement of income
and a consolidated statement of cash flows of the Borrower and
its Subsidiaries for such fiscal year, all in reasonable
detail and certified on behalf of the Borrower by the chief
executive officer, chief financial officer, chief accounting

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officer or treasurer of the Borrower as having been prepared
in accordance with generally accepted accounting principles
consistently applied (except that in such statements S-CC
shall be accounted for utilizing the equity method) and (iii)
an Excess Cash Flow Schedule setting forth the computation of
Excess Cash Flow for the last Fiscal Quarter in the Fiscal
Year then ended. The financial statements delivered pursuant
to SECTION 5.1.1(C)(I) shall be accompanied by a certificate
from the chief executive officer, chief operating officer,
chief financial officer, chief accounting officer or treasurer
of the Borrower to the Lenders substantially in the form of
EXHIBIT 5.1.1, to the extent applicable, (x) stating that no
Event of Default and no Unmatured Event of Default has come to
his attention which was continuing at the end of such fiscal
year or on the date of his certificate, or, if such an Event
of Default or Unmatured Event of Default has come to his
attention which was so continuing, the certificate shall
indicate the nature of such Event of Default or Unmatured
Event of Default and the action which the Borrower proposes to
take with respect thereto, (y) setting forth detailed
computations showing whether an adjustment of Borrowing
Margins pursuant to SECTION 2.9(A) is required, and (z)
setting forth computations as to the Borrower's compliance for
the preceding fiscal year with the covenants set forth in
SECTIONS 5.2.1 (WITH RESPECT TO CLAUSE (O) OF THE DEFINITION
OF PERMITTED LIENS), 5.2.2, 5.2.3, 5.2.5, 5.2.7, 5.2.9,
5.2.11, 5.2.12, 5.2.15, 5.3.1 and 5.3.2. Such certificate
shall also detail the amount of any Discretionary Funds
originating during the final Fiscal Quarter of the preceding
Fiscal Year, any utilization of Discretionary Funds during
such Fiscal Quarter, the amount of the Discretionary Funds
Basket and the Dividend Basket as of the end of such Fiscal
Quarter, the amount of any Debt Basket Proceeds and Excess
Excluded Sale Proceeds remaining in the Discretionary Funds
Basket after any utilization thereof and any utilization of
the Dividend Basket for Investments, Acquisitions or Capital
Expenditures during such Fiscal Quarter. In addition to the
consolidated financial statements delivered pursuant to
SECTION 5.1.1(C)(I), the Borrower will provide, as soon as
available and in any event within one hundred twenty (120)
days after the end of each fiscal year of S-CC, audited
financial statements consisting of a balance sheet and
statement of stockholders' equity of S-CC as at the end of
such fiscal year and a statement of income and cash flows of
S-CC for such fiscal year, setting forth in comparative form
the corresponding figures for the preceding fiscal year,
certified without qualification as to scope of audit by
independent public accountants of recognized national standing
and reputation elected by S-CC.

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(d) Within ninety (90) days after the end of each fiscal
year of the Borrower, projections for the Borrower and its
Subsidiaries (except for S-CC, which shall be accounted for
utilizing the equity method) for the next five Fiscal Years
(on a quarter-by-quarter basis for the next succeeding fiscal
year and on a year-by-year basis for the duration of such five
year period), except with respect to the first projections to
be delivered in 1995, which shall be for the next six Fiscal
Years, consisting of forecasted consolidated balance sheets,
statements of income and statements of cash flow, together
with appropriate supporting details and a statement of
underlying assumptions, all in substantially the form of
EXHIBIT 4.11(C) hereto; PROVIDED, HOWEVER, that in no event
shall the Borrower be required to deliver projections covering
any period subsequent to the last day of the calendar year
following the year during which the D Tranche Term Loan
Maturity Date is scheduled to occur.

(e) Within ninety (90) days after the end of each Fiscal
Year of the Borrower, a year to year variance analysis which
sets forth a reasonably detailed reconciliation of the actual
consolidated (except for S-CC, which shall be accounted for
utilizing the equity method) financial results of the Borrower
for such year and the projections of results for such year
previously delivered by the Borrower pursuant to SECTION
5.1.1(D).

(f) Promptly upon any Executive Officer of the Borrower
obtaining knowledge thereof, notice of any action, suit,
proceeding or investigation pending or threatened against or
affecting the Borrower or any Subsidiary of the Borrower or
any of its or their respective properties before any court,
governmental agency or regulatory authority (Federal,
provincial, state or local) which is reasonably likely to have
a Material Adverse Effect.

(g) Promptly upon their distribution, copies of
financial statements, reports, notices and proxy statements
sent by the Borrower or any publicly-held Subsidiary of the
Borrower to their respective security holders generally (in
their capacity as security holders only) and all regular and
periodic reports and final registration statements or other
official statements (and all amendments or supplements
thereto) required to be filed by the Borrower or any
publicly-held Subsidiary of the Borrower with the Securities and
Exchange Commission, any competent securities regulatory
authority in Canada or with any national securities exchange
on which any of its securities are listed with respect to its
securities outstanding or to be outstanding and copies of all
press releases and other statements made available generally
by the Borrower or any publicly-held Subsidiary of the
Borrower to the public concerning material developments in the

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business of the Borrower or any publicly-held Subsidiary of
the Borrower.

(h) Such other information respecting the properties,
business affairs, financial condition and/or operations of the
Borrower or any Subsidiary of the Borrower as any Lender
through the Agent may from time to time reasonably (with
respect to frequency as well as scope) request.

5.1.2 DISCHARGE OF TAXES, ETC. Pay and cause each of
its Subsidiaries to pay (i) all taxes, assessments and governmental
charges or levies imposed upon it or any of them or upon its or any
of their income, profits or property prior to the date on which
penalties attach thereto, and (ii) all claims for labor, material
or supplies which, if unpaid, might become a Lien upon the property
of the Borrower or any Subsidiary prior to the time they are
overdue and may become a Lien upon any such property, except to the
extent that the aggregate of all such taxes, assessments,
governmental charges, levies, penalties and claims referred to in
(i) and (ii) above not so paid, does not exceed $25 million at any
time outstanding for the Borrower and its Subsidiaries taken as a
whole; PROVIDED, HOWEVER, that neither the Borrower nor any
Subsidiary of the Borrower shall be required to pay or discharge
any such tax, assessment, charge, levy or claim while the same is
being contested by it in good faith and by appropriate proceedings
and so long as the Borrower or such Subsidiary, as the case may be,
shall have set aside on its books reserves (segregated to the
extent required by generally accepted accounting principles)
reasonably deemed by it to be adequate with respect thereto.

5.1.3 CORPORATE EXISTENCE; BUSINESS.

(a) Except for the Mergers, except as otherwise
permitted by SECTION 5.2.8 and except that any Subsidiary may be
liquidated, dissolved, wound up, merged or amalgamated (other than
Seminole Kraft with respect to any merger, unless, in the case of
Seminole Kraft, such merger is permitted by SECTION 5.2.8) where
such liquidation, dissolution, merger, winding-up or amalgamation
will not have a Material Adverse Effect, (i) preserve and maintain,
and cause each of its Subsidiaries to preserve and maintain, its
corporate existence, rights and franchises and (ii) qualify and
remain qualified, and cause each of its Subsidiaries to qualify and
remain qualified, as a foreign corporation authorized to do
business in each other jurisdiction in which the failure to so
qualify or remain qualified would have a Material Adverse Effect.

(b) Maintain and operate, and cause each of its
Subsidiaries to maintain and operate, its business in substantially
the manner in which it is currently conducted and operated.

5.1.4 COMPLIANCE WITH LAWS. Comply, and cause each
of its Subsidiaries to comply, with all laws, rules, regulations

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and governmental orders (foreign, federal, provincial, state and
local) having applicability to any of them or to the business or
businesses at any time conducted by any of them, where the failure
to so comply would have a Material Adverse Effect.

5.1.5 PERFORMANCE OF BASIC AGREEMENTS. Duly and
punctually pay and perform its obligations and cause each of its
Subsidiaries to pay and perform its obligations under the Basic
Agreements in all material respects in accordance with the terms
thereof and without breach of the terms of each thereof.

5.1.6 INSPECTION OF BOOKS AND PROPERTIES.

(a) Permit, and cause each of its Subsidiaries to permit,
any Lender or its respective representatives (including without
limitation any accounting and/or financial advisor or other similar
professional retained by or on behalf of the Agent pursuant to
SECTION 9.5), at any reasonable time during regular business hours,
and from time to time upon reasonable written notice of such Lender
to the Borrower, to visit and inspect its and their respective
properties, to examine and make copies of and take abstracts from
its and their respective records and books of account, and to
discuss its and their respective affairs, finances and accounts
with its and their respective principal officers and, with the
written consent of the Borrower (which consent shall not be
required if an Event of Default has occurred and is continuing),
their respective independent public accountants, in all cases
acting reasonably both as to frequency and as to scope.

(b) The Agent and each Lender agree that all materials
and information (other than publicly available material and
information) obtained by or provided to the Agent or such Lender
pursuant to the foregoing provisions of this Section which are
identified or designated by the Borrower in writing as confidential
and which was not previously in the possession of or known to the
recipient thereof on a non-confidential basis shall be held in
confidence and that the Agent or such Lender, as the case may be,
will use its best efforts not to disclose any such information
unless the same has previously been made public, PROVIDED that
nothing in this Agreement shall prohibit the Agent or such Lender,
as the case may be, from, or subject the Agent or such Lender to
liability for, disclosing any of such information (i) pursuant to
any order, writ, judgment, decree, injunction or ruling of any
governmental body (including any bank regulators) to whose
jurisdiction the Agent or such Lender may be subject, (ii) pursuant
to any applicable requirement of law or regulation, (iii) to the
auditors, attorneys and other advisors of the Agent or such Lender
to the extent required in connection with their services to the
Agent or such Lender with respect to this Agreement, (iv) to the
extent necessary in the enforcement of rights hereunder or under
the Basic Agreements during the continuance of an Unmatured Event
of Default or Event of Default, (v) to actual or prospective

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Assignees or participants as permitted by SECTION 9.12(G) or to any
Lender hereunder.

5.1.7 MAINTENANCE OF BOOKS AND RECORDS. Keep, or
cause to be kept, and cause each of its Subsidiaries to keep or
cause to be kept, proper books of record and account, in which
complete and accurate entries are made reflecting its and their
business and financial transactions.

5.1.8 ERISA.

(a) Other than with respect to Stone-Canada and its
Subsidiaries (except to the extent that a Plan of Stone-Canada or
any Subsidiary of Stone-Canada is subject to ERISA), (i) within ten
(10) days, after it or any of its Subsidiaries or any ERISA
Affiliate knows that a Reportable Event has occurred with respect
to any Plan or Multiemployer Plan (whether or not the requirement
for notice of such Reportable Event has been waived by the PBGC),
deliver, or cause such Subsidiary or any ERISA Affiliate to deliver
to the Agent in sufficient quantity for distribution to each Lender
a certificate of a Responsible Officer of the Borrower or such
Subsidiary or any ERISA Affiliate, as the case may be, setting
forth the details of such Reportable Event; PROVIDED, HOWEVER, that
with respect to any Reportable Event described in ERISA Section
4043(b)(3) this clause (i) shall not apply if the PBGC has waived
the requirement that notice of the Reportable Event be given to the
PBGC and if this clause (i) shall apply to any Reportable Event
described in ERISA Section 4043(b)(3) then the ten (10)-day period
of time referred to above shall be extended to thirty days; (ii)
upon the request of the Agent or any Lender made from time to time
and promptly confirmed in writing, deliver to the Agent in
sufficient quantity for distribution to each Lender a copy of the
most recent available actuarial report and annual report completed
with respect to any Plan; (iii) within ten (10) days, after it or
any of its Subsidiaries or any ERISA Affiliate knows that any of
the following have occurred with respect to any Plan: (A) any such
Plan has been terminated, (B) the Plan Sponsor initiates any action
to terminate any such Plan, or (C) the PBGC has instituted or will
institute proceedings under Section 4042 of ERISA to terminate any
such Plan, deliver, or cause such Subsidiary or ERISA Affiliate to
deliver, to the Agent and each Lender a written notice thereof;
(iv) within ten (10) days, after it or any of its Subsidiaries or
any ERISA Affiliate knows that any of them has caused a complete
withdrawal or partial withdrawal (within the meaning of Sections
4203 and 4205, respectively, of ERISA) from any Multiemployer Plan
or a withdrawal from a Plan in which any such entity was a
substantial employer within the meaning of Section 4001(a)(2) of
ERISA (or a deemed withdrawal within the meaning of Section 4062(e)
of ERISA with respect to an Underfunded Plan) deliver, or cause
such Subsidiary or ERISA Affiliate to deliver, to the Agent in
sufficient quantity for distribution to each Lender a written
notice thereof; and (v) within ten (10) days after it or any of its

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Subsidiaries or any ERISA Affiliate knows that a prohibited
transaction (within the meaning of Section 406 of ERISA) with
respect to any Employee Benefit Plan has occurred and knows such
transaction will result in a material liability to such entity
under Section 4975 of the Code or otherwise, if such transaction is
not corrected, deliver, or cause such Subsidiary or ERISA Affiliate
to deliver, to the Agent in sufficient quantity for distribution to
each Lender a certificate of an Executive Officer of the Borrower
or such Subsidiary or ERISA Affiliate, as the case may be, setting
forth the details of such prohibited transaction and such entity's
proposed response thereto. For purposes of this Section, the
Borrower, any of its Subsidiaries and any ERISA Affiliate shall be
deemed to have knowledge of all facts known by the Plan
Administrator of any Plan of which such entity is the Plan Sponsor;
PROVIDED, HOWEVER, that with respect to any Multiemployer Plan, the
Borrower, any of its Subsidiaries and any ERISA Affiliate shall not
be deemed to have any knowledge other than the actual knowledge of
their respective officers.

(b) With respect to Stone-Canada and its Subsidiaries,
except for Europa Carton, A.G., within ten (10) days after the
Borrower or any of its Subsidiaries knows that Stone-Canada or any
of its Subsidiaries has unfunded liabilities which exceed the
liabilities set forth on SCHEDULE 4.15 arising out of any pension
plan to which Stone-Canada or any of its Subsidiaries is a party or
by which either is bound, deliver to the Agent in sufficient
quantity for distribution to each Lender a certificate of a
Responsible Officer of the Borrower or such Subsidiary disclosing
such unfunded liabilities.

5.1.9 INSURANCE. Maintain, and cause each of its
Subsidiaries to maintain, such insurance, to such extent and
against such hazards and liabilities, as is customarily maintained
by Persons similarly situated to the extent that such insurance is
available at commercially reasonable rates, and furnish to the
Agent in sufficient quantity for distribution to each Lender, upon
written request, information as to the insurance carried by the
Borrower or any Subsidiary of the Borrower. The provisions of this
SECTION 5.1.9 shall be deemed to be supplemental to, but not
duplicative of, the provisions of any of the other Loan Documents
that require the maintenance of insurance with respect to the
Collateral and Mortgaged Property.

5.1.10 MAINTENANCE OF PROPERTIES. Except as to
equipment no longer used or useful to the business of the Borrower
and its Subsidiaries, keep and maintain all material properties,
equipment and other assets (and shall cause its Subsidiaries to
keep and maintain their respective material properties, equipment
and other assets) in good repair, working order and condition
(ordinary wear and tear excepted) and shall make all necessary
replacements thereof and renewals and repairs thereto so that the
value thereof and the operating efficiency of the Borrower and its

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Subsidiaries shall at all times be maintained and preserved in a
manner consistent with past practices of the Borrowers' and its
Subsidiaries' business. With respect to all items of leased
equipment, the Borrower shall, and shall cause its Subsidiaries to,
keep, maintain, repair, replace and operate such leased properties,
equipment and other assets in accordance with the terms of the
applicable lease, in either case, to the extent failure to do so
would result in a Material Adverse Effect.

5.1.11 USE OF PROCEEDS. (i) Use the proceeds of the
Term Loan, Revolving Loans, Letters of Credit and Swing Line Loans
(A) to provide all or a portion of the funds necessary to repay in
full all of the indebtedness outstanding under the U.S. Credit
Agreement on the Closing Date, (B) to make loans and/or capital
contributions on the Closing Date to Stone-Canada, which will, on
the Closing Date, repay all of the indebtedness outstanding under
the Canadian Credit Agreements, (C) to repay in whole or in part
the indebtedness outstanding under the Stone Savannah Credit
Agreement and to fund the Stone Savannah Transactions, (D) in the
case of Letters of Credit, for general corporate purposes and (E)
for ongoing working capital and general corporate purposes; (ii)
use the proceeds of the Additional Term Loan to (A) voluntarily
repurchase, prepay, redeem or otherwise extinguish Indebtedness of
the Borrower consisting of (1) all or any portion of the 8-7/8%
Notes (including the payment of principal and interest thereon),
(2) all or any portion of the 12-1/8% Subordinated Debentures
(including the payment of principal and interest thereon) and/or
(3) Senior Indebtedness (including the payment of principal,
premium, whether or not stated, if any, and interest thereon), (B)
pay certain fees and expenses incurred in connection with the
execution and delivery of the Existing Credit Agreement and/or (C)
repay outstanding Revolving Loans under the Original Credit
Agreement; (iii) use the proceeds of the D Tranche Term Loan from
time to time to, directly or indirectly, (A) repurchase, repay,
redeem or otherwise extinguish any senior or subordinated
Indebtedness for Money Borrowed of the Borrower (other than the
Obligations) (it being understood that, to the extent of such
proceeds, any such repurchase, repayment, redemption or other
extinguishment occurring on or after the Restatement Date shall be
deemed made directly or indirectly out of such proceeds, with the
Borrower having no duty or obligation to escrow or segregate such
proceeds until such time as they are directly or indirectly
applied), (B) pay certain fees and expenses incurred in connection
with the execution and delivery of this Agreement and/or (C) repay
outstanding Revolving Loans under the Existing Credit Agreement;
(iv) use the proceeds of the Supplemental Revolving Loans for
ongoing working capital and general corporate purposes; and (v) not
use any part of the proceeds of any Loan or Letter of Credit
hereunder for any purpose other than as set forth in this Section,
including without limitation, to purchase or carry any Margin Stock
or to extend credit to others for such purpose in violation of
Regulation G, U or X of the Board.

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5.1.12 LENDER MEETING. Cause a meeting open to all
Lenders to be held at least once in each fiscal year for the
purpose of having officers of the Borrower describe generally the
Borrower's business, financial results and prospects and respond to
inquiries from the Lenders regarding such matters.

5.1.13 REDEMPTION OF SENIOR SUBORDINATED NOTES AND
STONE SAVANNAH STOCK. On or prior to December 30, 1994, (i) cause
the amounts deposited with the trustee under the Stone Savannah
Senior Subordinated Note Indenture on the Closing Date to be used
to redeem in full all of the Stone Savannah Senior Subordinated
Notes at par (plus stated premium), together with accrued and
unpaid interest thereon, (ii) redeem in full or otherwise purchase,
(A) all of the outstanding Stone Savannah Preferred Stock at par
(plus stated premium), together with accrued and unpaid dividends
thereon, and (B) all of the issued and outstanding Stone Savannah
Common Stock not owned by the Borrower and (iii) cause Stone
Savannah to merge into the Borrower or make other arrangements
satisfactory to the Required Lenders with respect to the Collateral
and Mortgaged Property owned by Stone Savannah. The redemptions
and purchases described in (i) and (ii) of this SECTION 5.1.13 are
collectively referred to as the "STONE SAVANNAH TRANSACTIONS".

5.1.14 ENVIRONMENTAL NOTIFICATION.

(a) Notify the Agent, in writing, promptly, and in any
event within twenty (20) days after a Responsible Officer
learns thereof, of any: (A) written notice or claim to the
effect that the Borrower or any of its Subsidiaries is or may
be liable to any Person in an amount in excess of $1,000,000
as a result of the Release or threatened Release of any
Contaminant into the environment; (B) written notice that the
Borrower or any of its Subsidiaries is subject to
investigation by any governmental authority evaluating whether
any Remedial Action involving potential claims or costs to the
Borrower or its Subsidiaries in excess of $1,000,000 is needed
to respond to any material Release or threatened Release of
any Contaminant into the environment; or (C) notice of
violation to the Borrower or any of its Subsidiaries of
conditions which result in a notice of violation of any
Environmental Laws or Environmental Permits, which could
reasonably be expected to have a Material Adverse Effect.

(b) Upon written request by the Agent, the Borrower
shall promptly submit to the Agent and the Lenders a report
providing an update of the status of each environmental,
health or safety compliance, hazard or liability issue
identified in any notice or report required pursuant to clause
(i) above and any other environmental, health and safety
compliance obligation, remedial obligation or liability that
could reasonably be expected to have a Material Adverse
Effect.

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5.1.15 ENVIRONMENTAL COMPLIANCE. The Borrower shall,
and shall cause each of its Subsidiaries, in the exercise of its
reasonable business judgment, to take prompt and appropriate action
to respond to any material non-compliance with Environmental Laws
or Environmental Permits or to any unpermitted Release or
threatened Release of a Contaminant, and shall regularly report to
the Agent on such response. Without limiting the generality of the
foregoing, whenever the Agent or any Lender has a reasonable basis
to believe that the Borrower is not in material compliance with all
Environmental Laws or Environmental Permits or that any property of
the Borrower or its Subsidiaries, or any property to which
Contaminants generated by Borrower or its Subsidiaries have come to
be located ("OFFSITE PROPERTY") has or may become contaminated or
subject to an order or decree such that any such non-compliance,
contamination or order or decree could reasonably be expected to
have a Material Adverse Effect then the Borrower agrees to, at the
Agent's request and the Borrower's expense: (a) cause a qualified
environmental engineer reasonably acceptable to the Agent to assess
the site where the alleged or actual noncompliance contamination
has occurred and prepare and deliver to the Agent, the Lenders and
the Borrower a report reasonably acceptable to Agent setting forth
the results of such assessments, a proposed plan and schedule for
responding to any environmental problems described therein, and an
estimate of the costs thereof; and (b) provide the Agent, the
Lenders and the Borrower a supplemental report of such engineer
whenever the scope of the environmental problems or the Borrower's
response thereto or the estimated costs thereof, shall change in
any material respect; or, as an alternative to subparagraphs
(a) and (b) above, the Borrower, upon the Agent's or any Lender's
request, shall allow the Agent or such Lender, as the case may be,
or an agent or representative of the Agent or such Lender, to enter
onto the property to conduct any desired environmental audits and
tests at the Borrower's expense. The Agent and the Lenders hereby
covenant and agree that any reports, records, notices, estimates or
other information they receive in connection with this subsection
shall be kept strictly confidential, and shall not be disclosed to
or used by any Person (other than the Agent's or any Lender's
authorized representatives for the purpose of reviewing or
enforcing the Agent's or such Lender's rights hereunder, which
persons shall also be bound by this sentence) unless and only to
the extent that disclosure is required pursuant to any
Environmental Laws, Environmental Permits, or order of a court of
competent jurisdiction, in which case the Agent or such Lender, as
the case may be, shall promptly notify the Borrower in writing of
such requirement and the nature and extent of the required
disclosure.

5.1.16 ADDITIONAL SUBSIDIARY GUARANTEES. Upon the
request of the Agent, the Borrower shall cause any domestic
Subsidiary (other than StoneSub) from time to time having assets
with a fair market value in excess of $25 million to execute a
Subsidiary Guarantee; PROVIDED, HOWEVER, that in the event the

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Borrower acquires, directly or indirectly, a domestic Subsidiary in
an Acquisition after the Closing Date, such Subsidiary shall not be
required to execute a Subsidiary Guarantee so long as (i) all of
the funds used by the Borrower, directly or indirectly, to acquire
such Subsidiary were Discretionary Funds and (ii) neither the
Borrower nor any other Subsidiary shall make any loans or advances
to, or any Investments in (other than the initial Investment
therein), such Subsidiary, or assume, guarantee or endorse or
otherwise become directly or contingently liable in respect of, any
obligation of such Subsidiary until a Subsidiary Guarantee is so
delivered.

5.1.17 DELAYED COLLATERAL.

(a) The parties acknowledge that as a result of delays
associated with title and survey matters, third party consent
requirements and other matters (i) with respect to certain
converting plants it has been impractical to consummate on the
Closing Date the mortgaging of the interests of the Borrower or a
Subsidiary, as applicable, in the Mortgaged Property (the "DELAYED
PROPERTIES") marked with an asterisk on SCHEDULE 1.1(c), and (ii)
with respect to certain of the Mortgaged Properties that were
mortgaged on the Closing Date, certain title, survey, local counsel
opinions and other documents ("ANCILLARY DOCUMENTS") may not be
available on the Closing Date.

(b) As soon as practicable, but in any event on or prior
to February 17, 1995, the Borrower shall, or, as applicable, shall
cause its applicable Subsidiaries to, execute and deliver, or cause
to be delivered, to the Agent (i) Mortgages with respect to the
Delayed Properties together with all fixed assets and inventory
located at such facilities and including such environmental
information and studies, leases, title reports, title insurance
(with all requirements for the issuance thereof having been
satisfied), lien searches, opinions of counsel, evidence of
recordation and payment of applicable taxes as the Agent may
reasonably request and (ii) such Ancillary Documents as the Agent
may reasonably request. The Borrower shall also take or cause to
be taken all actions reasonably requested by the Agent in order to
perfect or protect the Liens of the Mortgages with respect to the
Delayed Properties. Without limiting the foregoing, the Borrower
shall use its best non-financial efforts to secure such landlord
consents, waivers and similar documents as the Agent may reasonably
request in connection with leasehold mortgages and related
mortgages or pledges of the Delayed Properties.

(c) To the extent that the Agent shall, in its sole
discretion, determine that in light of environmental, legal or
other considerations it would be adverse to the interests of the
Lenders or impractical to accept as collateral one or more of the
Delayed Properties, it may in writing release the Borrower from its
obligations to pledge any of such Delayed Properties, provided that

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the Borrower shall provide, or cause to be provided, such
alternative collateral of reasonably comparable value as may be
acceptable to the Agent. Such additional collateral shall be
granted pursuant to such documentation and within such time period
as may be satisfactory to the Agent.

(d) To the extent that the Borrower or an applicable
Subsidiary is contractually prohibited from granting a leasehold
mortgage or mortgage on any Delayed Property which is leased or
subject to an industrial revenue bond financing and the Borrower
has complied with the last sentence of SECTION 5.1.17(b), the
Borrower shall be released from its obligation to grant a leasehold
mortgage or mortgage thereupon but shall not be released from its
obligation to pledge the fixed assets or inventory located at such
Delayed Property unless the Borrower or its applicable Subsidiary
is contractually prohibited from doing so in the relevant lease.

5.1.18 MERGER OF STONE SOUTHWEST. The Borrower shall
cause Stone Southwest to be merged with and into the Borrower
promptly after the earlier of (i) at such time as when such merger
would no longer cause a violation or breach of the terms and
conditions of the Stone Southwest Indenture or any other material
agreement or indenture to which Stone Southwest is a party and (ii)
such time as all Indebtedness issued under the Stone Southwest
Indenture and such other agreements and indentures has been paid in
full and such merger is no longer restricted thereby.

Section 5.2 NEGATIVE COVENANTS OF THE BORROWER. The
Borrower covenants and agrees that for so long as this Agreement is
in effect and until the Obligations and all other obligations
incurred hereunder, whether or not matured, are paid in full and
all Commitments have terminated, without the prior written consent
of the Required Lenders, the Borrower will not nor will it permit
any Subsidiary of the Borrower to:

5.2.1 LIENS. Except for Permitted Liens, create,
incur, assume or permit to exist any Lien on any of its or any of
its Subsidiaries' existing or future properties, assets (including
stock of any Subsidiaries), income or rights in any thereof whether
now owned or hereafter acquired.

5.2.2 INDEBTEDNESS FOR MONEY BORROWED. Create,
incur, assume or suffer to exist any Indebtedness for Money
Borrowed except for:

(a) the Obligations under the Loan Documents;

(b) Indebtedness for Money Borrowed as shown on SCHEDULE
4.6 hereto;

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S.A., Stone Container de Mexico S.A. de C.V., Cartomills,
S.A., Societe Emballages des Cevennes, S.A., Stone Container
Australia Pty. Ltd and Stone Container Japan Co., Ltd. or any
Subsidiary thereof, or any foreign Subsidiary created or
acquired after the Restatement Date (other than a Subsidiary
created or existing under United States or Canadian laws, or
any State, Province or other subdivision thereof), in each
case which is not guaranteed by (except as permitted by
SECTION 5.2.3(i)) and is non-recourse to the Borrower or any
Subsidiary of the Borrower;

(d) intercompany loans and advances (i) made in the
ordinary course of business to the Borrower or Wholly-Owned
Subsidiaries of the Borrower and, in the case of non-Wholly-
Owned Subsidiaries, Indebtedness arising out of Investments
permitted by SECTION 5.2.7; or (ii) made to StoneSub in an
aggregate principal amount at any time outstanding not in
excess (together with any unreimbursed capital contributions
made pursuant to SECTION 5.2.7(h)) of (A) the amounts
contemplated from time to time by the terms of the respective
Receivables Financings and (B) those amounts, up to an
aggregate at any one time outstanding of $5 million for each
$100 million (on a pro-rated basis) of Receivables Financings
which have been established and are in existence at such time,
which may be advanced to StoneSub in order to cure or remedy,
or otherwise avoid the commencement of, liquidation,
termination or similar events in connection with the
Receivables Financings; PROVIDED, HOWEVER, that, except as
otherwise expressly permitted under this Agreement, this
clause (d) shall not be deemed to permit intercompany
Indebtedness for Money Borrowed made to SVCPI (other than
pursuant to contractual agreements permitted by this Agreement
and as in effect on the date hereof) or to S-CC or any of S-CC's
Subsidiaries other than Indebtedness for Money Borrowed
made between S-CC and its Subsidiaries or between Subsidiaries
of S-CC;

(e) the Indebtedness for Money Borrowed of any Person at
the time such Person becomes a Subsidiary, or is merged or
consolidated with or into the Borrower or a Subsidiary of the
Borrower, so long as such Indebtedness for Money Borrowed was
not created in anticipation of or as a result of such Person
becoming a Subsidiary of the Borrower or of such merger or
consolidation;

(f) refinancings of Indebtedness for Money Borrowed due
to remarketing provisions, to provisions relating to computing
a variable rate of interest or to provisions providing for the
fixing of interest rates on theretofore variable rate
obligations as provided for in the instruments pursuant to
which such Indebtedness for Money Borrowed was issued as in
effect on the date hereof or assumed pursuant to SECTION
5.2.2(e), PROVIDED that the principal amount of such

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Indebtedness for Money Borrowed is not increased thereby
except to the extent necessary to finance the fees and costs
of such refinancing;

(g) Indebtedness for Money Borrowed all the net proceeds
of which are used promptly (but in no event more than five
Business Days) after the date of the incurrence of such
Indebtedness for Money Borrowed to effect the prepayments as
set forth in SECTIONS 3.4 AND 3.6 so long as: (i) with respect
to any such Indebtedness for Money Borrowed in an aggregate
principal amount not to exceed $300,000,000, (A) such
Indebtedness for Money Borrowed is not secured by any Lien
(other than Permitted Liens described in clause (h) of the
definition of Permitted Liens), (B) such Indebtedness has an
average life which is at least equal to one year greater than
the remaining average life of the Term Loan but is less than
one year greater than the remaining average life of the
Additional Term Loan and D Tranche Term Loan, and (C) such
Indebtedness has a maturity which is at least one year after
the latest date (taking into account the application of all
previous prepayments) on which any regularly scheduled
principal installment is at the time due to be paid on the
Term Loan but is less than one year after the latest date
(taking into account the application of all previous
prepayments) on which any regularly scheduled principal
installment is at the time due to be paid on the Additional
Term Loan and D Tranche Term Loan; and (ii) with respect to
any such Indebtedness for Money Borrowed (other than any such
Indebtedness for Money Borrowed referred to in clause (i)
above), (A) such Indebtedness for Money Borrowed is not
secured by any Lien (other than Permitted Liens described in
clause (h) of the definition of Permitted Liens), (B) such
Indebtedness has an average life which is at least equal to
one year greater than the remaining average life of the
Additional Term Loan and D Tranche Term Loan and (C) such
Indebtedness has a maturity which is at least one year after
the latest date (taking into account the application of all
previous prepayments) on which any regularly scheduled
principal installment is at the time due to be paid on the
Additional Term Loan and D Tranche Term Loan;

(h) Indebtedness for Money Borrowed (i) in respect of
tax-exempt financings or (ii) all of the net proceeds of which
are used to effect a prepayment or defeasance of any IRB
identified on SCHEDULE 5.2.2 hereto (A) in the event that
amendments to the Code are enacted which would require that
the Borrower prepay or defease such IRB, (B) which is put to
the Borrower pursuant to presently existing contractual
arrangements identified on SCHEDULE 5.2.2 hereto and which the
Borrower is not able to resell at a market interest rate
without effecting a "reissuance" thereof for tax purposes, or
(C) which is being refinanced on terms requiring repayment of

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such Indebtedness for Money Borrowed at times no earlier than
and in amounts no greater (except to the extent necessary to
finance the fees and costs of such refinancing) than required
by the present amortization schedule for the IRB being
refinanced and subject to covenants, defaults and other terms
which are not materially more restrictive upon or
disadvantageous to the obligor than the existing terms;

(i) Indebtedness for Money Borrowed consisting of
Financing Lease Obligations (including, without limitation,
Indebtedness under the Florence Agreements); PROVIDED,
HOWEVER, that the amount of such obligations incurred after
the date hereof and payable prior to the Additional Term Loan
Maturity Date or D Tranche Term Loan Maturity Date shall not
exceed $100 million;

(j) Indebtedness for Money Borrowed constituting
guarantees by the Borrower or any Subsidiary permitted by
SECTION 5.2.3;

(k) Indebtedness for Money Borrowed of the Borrower or
a Subsidiary of the Borrower, as the case may be, issued,
incurred or assumed in respect of the purchase price of
property which is not secured by any Lien other than a Lien
referred to in clause (b) of the definition of Permitted
Liens; PROVIDED, HOWEVER, that not more than $100 million in
aggregate principal amount of such Indebtedness for Money
Borrowed shall mature prior to the Additional Term Loan
Maturity Date or D Tranche Term Loan Maturity Date;

(l) Subordinated Debt;

(m) Indebtedness for Money Borrowed consisting of an
unsecured line of credit not exceeding at any time outstanding
$50 million in aggregate principal amount by Stone-Canada or
any Subsidiary of Stone-Canada (other than S-CC);

(n) Indebtedness for Money Borrowed as defined in clause
(vi) of the definition of such term contained in the
Definitional Appendix;

(o) Indebtedness for Money Borrowed incurred in respect
of (i) foreign exchange, interest rate swap, interest rate cap
insurance, hedging agreements or similar arrangements entered
into in the ordinary course of business by the Borrower in
connection with the Obligations with a notional amount of such
agreements not exceeding the aggregate principal amount of the
Obligations, (ii) foreign exchange or currency swap agreements
or similar arrangements entered into in the ordinary course of
business by the Borrower or any Subsidiary to protect the
Borrower or any Subsidiary against fluctuations in currency
values and (iii) one or more unsecured interest rate swap or

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similar hedging arrangements entered into in the ordinary
course of business by the Borrower pursuant to which the fixed
interest rate payment obligations up to $500 million aggregate
principal amount of Indebtedness for Money Borrowed at any
time outstanding would be converted to floating interest rate
payment obligations;

(p) Indebtedness for Money Borrowed of the Borrower as
permitted by the penultimate sentence of SECTION 5.2.13; and
Indebtedness for Money Borrowed by StoneSub from the Issuer
pursuant to Receivables Financings which in the aggregate
shall not permit StoneSub to incur Indebtedness for Money
Borrowed in excess of, subject to the third proviso of the
penultimate sentence of SECTION 5.2.13, $500 million at any
one time outstanding (and in the event that the Accounts
Receivable Financing Program includes Canadian dollar
Receivables of Subsidiaries organized under Canadian laws,
without giving effect to increases in such amount after the
date of the incurrence of such Indebtedness for Money
Borrowed, or portion thereof, solely as the result of
subsequent fluctuations in the exchange rate between U.S. and
Canadian dollars); PROVIDED, HOWEVER, that if (i) the Borrower
either (A) acquires any Subsidiaries not in existence as of
the Closing Date (other than through the formation of
Subsidiaries in the ordinary course of business to conduct
existing lines of business) or (B) enters into any lines of
business in which it is not engaged as of the Closing Date and
(ii) the Borrower and/or StoneSub engages in a Receivables
Financing or financing permitted by the penultimate sentence
of SECTION 5.2.13, in each case with respect to the
Receivables of the Subsidiary so acquired or the line of
business so acquired (each such financing, solely to the
extent relating to such new Subsidiary or new line of
business, a "NEW RECEIVABLES FINANCING") then, in such event,
the initial proceeds to the Borrower or StoneSub (as
applicable) of such New Receivables Financing, net of the
amount of any initial deposit to, the applicable cash
collateral spread account and of the fees and expenses of the
Borrower or StoneSub incurred in establishing such New
Receivables Financing and net of any amounts required to
refinance then existing New Receivables Financings, shall be
used (following remittance to the Borrower or the
Participating Subsidiary, as applicable, for the purchase of
Receivables therefrom) to make a mandatory prepayment as
required by SECTION 3.4(b) in the order required by SECTION
3.6(b) and (ii) in the case of any New Receivables Financing
structured as a borrowing by StoneSub (or deemed to be a
borrowing pursuant to the terms hereof), StoneSub shall borrow
(A) on the initial date of any New Receivables Financing, the
maximum borrowings then available to it (based on the initial
amount of Receivables transferred) under such New Receivables
Financing (except that such initial maximum borrowings may be

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reduced by no more than $2 million for each New Receivables
Financing for reasons of administrative practicality) and (B)
after such initial date, in the reasonable business judgment
of StoneSub, the maximum borrowings practicable under such New
Receivables Financings which have been established and are
continuing. For purposes of this Agreement, (i) in the event
that the terms of any New Receivables Financing are amended to
increase the potential borrowings or sales thereunder, the
initial borrowing or sale by StoneSub under such amended
program shall be deemed to constitute a borrowing or sale
under an additional New Receivables Financing to the extent of
such increase, PROVIDED that this clause (i) shall not apply
in the event that the increase in the potential borrowings or
sales under such New Receivables Financing is being made
solely to finance additional purchases of Receivables from
then existing business lines of Participating Subsidiaries
whose Receivables with respect to such business line or lines
have grown or are expected to grow as the result of price
increases, greater sales or similar changes in general
business lines, (ii) in the event that any sale or purported
sale of Receivables to StoneSub by the Borrower or any
Participating Subsidiary is required to be recharacterized as
a loan, the resulting obligations of the Borrower or such
Participating Subsidiary shall not be deemed to be
Indebtedness for Money Borrowed and (iii) any Receivables
Financing structured as a sale of Receivables by StoneSub to
the Issuer shall, for all purposes of this Agreement, and
regardless of the treatment thereof by the Borrower on its
financial statements, be deemed to be an incurrence by
StoneSub of Indebtedness for Money Borrowed in respect of the
financing of the Receivables involved and not as a sale of
such Receivables by StoneSub;

(q) Indebtedness for Money Borrowed constituting
refinancings of Indebtedness for Money Borrowed identified on
SCHEDULE 4.6 hereto or in SECTION 5.2.2(v); PROVIDED, HOWEVER,
that no such refinancing shall shorten the final maturity or
average loan life of the refinanced Indebtedness, increase the
collateral, if any, securing any such refinanced Indebtedness
(provided that any collateral securing such refinanced
Indebtedness may be substituted with other property or assets
so long as the fair market value thereof does not exceed the
fair market value of the collateral being substituted at the
time of such substitution), be on terms which, taken as a
whole, are materially more adverse to the obligor or modify in
any way adverse to the Lenders any subordination provisions
applicable to such Indebtedness and, to the extent the
refinanced Indebtedness is non-recourse to the Borrower and
its other Subsidiaries and is not otherwise permitted to be
recourse Indebtedness, such Indebtedness shall be non-recourse
to the Borrower and its other Subsidiaries;

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(r) Indebtedness for Money Borrowed the net proceeds of
which are used to pay annual premiums for property and
casualty insurance policies maintained by the Borrower or its
Subsidiaries and other prepaid amounts in respect of goods or
services purchased by the Borrower or its Subsidiaries in the
ordinary course of business, which Indebtedness at no time
exceeds $40 million in aggregate outstanding principal amount,
is unsecured (except for Liens described in clause (n) of the
definition of Permitted Liens) and is incurred on terms and
pursuant to documentation satisfactory to the Agent;

(s) from and after the date on which the Borrower has
repaid all outstanding Revolving Loan Obligations,
Supplemental Revolving Loan Obligations and Swing Line
Obligations, has terminated the Swing Line Commitment, all
Revolving Loan Commitments and all Supplemental Revolving Loan
Commitments, and has caused the Florence Letters of Credit to
be terminated, and there exists no L/C Obligations or Florence
L/C Obligations, Indebtedness for Money Borrowed under a
replacement revolving credit facility in an aggregate
principal amount not to exceed $450 million, all of the
proceeds of which (net of issuance costs) are used for general
corporate purposes (including without limitation repayment of
Revolving Loans, Supplemental Revolving Loans and Swing Line
Loans), PROVIDED that such Indebtedness for Money Borrowed
shall be on terms not materially more adverse to the Borrower
than those existing hereunder;

(t) secured or unsecured Indebtedness for Money Borrowed
in an aggregate principal amount not to exceed $400 million
for general corporate purposes; PROVIDED, HOWEVER, that (i) if
such Indebtedness for Money Borrowed constitutes Senior
Indebtedness, the terms and conditions of such Indebtedness
and the documentation relating thereto shall be substantially
similar to, or shall be not materially more burdensome or
restrictive with respect to the Borrower and its Subsidiaries
or the Agent and the Lenders than, the terms and conditions
of, and the documentation relating to, the Borrower's
Indebtedness for Money Borrowed issued pursuant to the Senior
Indentures, and such Senior Indebtedness shall bear a market
rate of interest for comparable instruments at the time of
issue or sale and shall have no scheduled amortization
payments or otherwise mature on or prior to October 1, 2003,
(ii) if such Indebtedness for Money Borrowed does not
constitute Senior Indebtedness, the terms and conditions of
such Indebtedness and the documentation relating thereto shall
be substantially similar to the terms and conditions of, and
the documentation relating to, the Borrower's Subordinated
Debt issued pursuant to the Senior Subordinated Note
Indenture, and such Subordinated Debt shall bear a market rate
of interest for comparable instruments at the time of issue or
sale and shall have no scheduled amortization payments or

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otherwise mature on or prior to October 1, 2003, (iii) to the
extent such Indebtedness for Money Borrowed is secured, such
Liens are permitted by clause (o) of the definition of
Permitted Liens and the Indebtedness secured thereby shall not
be less than 66% of the value of the collateral securing such
Indebtedness as of the date which such Indebtedness is
incurred, as such value is evidenced by appraisals or other
information delivered to the Agent by the Borrower, and (iv)
in no event shall any Subsidiary incur Indebtedness pursuant
to this subsection that is recourse to the Borrower or any
other Subsidiary if such Indebtedness refinances Indebtedness
that is non-recourse to the Borrower and its other
Subsidiaries and is not otherwise permitted to be recourse to
the Borrower and its other Subsidiaries;

(u) Indebtedness for Money Borrowed of S-CC and
Subsidiaries of S-CC to the extent permitted by the S-CC Debt
Documents. Any such Indebtedness for Money Borrowed shall be
non-recourse to the Borrower or any of its other Subsidiaries
(except S-CC and its Subsidiaries);

(v) Indebtedness for Money Borrowed incurred pursuant to
the Senior Notes and the First Mortgage Notes;

(w) unsecured Indebtedness for Money Borrowed the
proceeds of which shall be used to repay Revolving Loans and
which shall be in an aggregate principal amount which does not
exceed the lesser of (i) the aggregate cash consideration paid
by or on behalf of the Borrower to repurchase or prepay the
8-7/8% Notes plus the aggregate cash consideration which the
Borrower notifies the Agent prior to the issuance of such
Indebtedness for Money Borrowed that it intends (although not
obligated) to pay to repurchase or prepay the remaining
outstanding 8-7/8% Notes, in each case, as permitted by
SECTION 5.2.10(a)(xiv), and (ii) $50 million; PROVIDED,
HOWEVER, that (A) if such unsecured Indebtedness for Money
Borrowed shall constitute Senior Indebtedness, then the terms
and conditions of such Indebtedness for Money Borrowed, and
the documentation relating thereto, shall be substantially
similar to the terms and conditions of, and the documentation
relating to, the Borrower's Senior Indebtedness issued
pursuant to the Indenture dated November 1, 1991 between the
Borrower and The Bank of New York, as trustee, or the
Indenture dated October 12, 1994 between the Borrower and The
Bank of New York, as trustee, and such Senior Indebtedness
shall bear a market rate of interest for comparable
instruments at the time of issue or sale and shall have no
scheduled amortization payments on or prior to October 1,
2003, and (B) if such Indebtedness for Money Borrowed does not
constitute Senior Indebtedness, then the terms and conditions
of such Indebtedness for Money Borrowed, and the documentation
relating thereto, shall be substantially similar to the terms

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and conditions of, and the documentation relating to, the
Borrower's Subordinated Debt issued pursuant to the Indenture
dated March 15, 1992 between the Borrower and The Bank of New
York, as trustee, and such Indebtedness shall bear a market
rate of interest for comparable instruments at the time of
issue or sale and shall have no scheduled amortization
payments on or prior to October 1, 2003; and

(x) secured Indebtedness for Money Borrowed in an
aggregate principal amount not to exceed $100 million and all
the net proceeds of which are used promptly (but in no event
more than five Business Days, or such longer period of time so
long as such net proceeds are held pursuant to escrow
arrangements satisfactory to the Agent) after the date of the
incurrence of such Indebtedness for Money Borrowed (i) to
effect the prepayments as set forth in SECTIONS 3.4 AND 3.6
and/or (ii) to prepay, repurchase, redeem or otherwise
extinguish any scheduled installment or stated maturity of any
other Indebtedness for Money Borrowed of the Borrower which,
pursuant to the contractual terms thereof, is scheduled for
repayment or maturity on or before May 1, 1999; PROVIDED,
HOWEVER, that (A) the terms and conditions of such
Indebtedness for Money Borrowed and the documentation relating
thereto shall be substantially similar to, or shall be not
materially more burdensome or restrictive with respect to the
Borrower and its Subsidiaries or the Agent and the Lenders
than, the terms and conditions of, and the documentation
relating to, the Borrower's Indebtedness for Money Borrowed
issued pursuant to the Senior Indentures, and such
Indebtedness for Money Borrowed shall bear a market rate of
interest for comparable instruments at the time of issue or
sale and which has no scheduled amortization payments or
otherwise matures on or prior to October 1, 2003, (B) such
Indebtedness for Money Borrowed is secured by mortgages on one
or more box converting facilities owned by the Borrower, which
mortgages secure only the real property and not any personal
property (including machinery and equipment) located at such
facilities, provided such Liens are permitted by clause (o) of
the definition of Permitted Liens and the value of the
collateral shall not exceed 150% of the Indebtedness secured
thereby as of the date such Indebtedness is incurred, as such
value is evidenced by appraisals or other documentation
satisfactory to the Agent and (C) the Borrower and the Persons
issuing or extending such Indebtedness for Money Borrowed
shall have executed and delivered to the Agent such
intercreditor agreements as the Agent may request, in form and
substance satisfactory to the Agent.

Any Indebtedness for Money Borrowed used in the calculation of any
threshold amount specified in any clause of this SECTION 5.2.2
shall not be used to calculate the threshold amounts specified in
another of such clauses.

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5.2.3 GUARANTEES. Assume, guarantee or endorse, or
otherwise become directly or contingently liable in respect of, any
obligation of any Person, except, without duplication:

(a) subject to SECTION 5.3.2, the Borrower may assume,
guarantee or endorse, or otherwise become directly or
contingently liable in respect of, any obligation of any
Person, PROVIDED that notwithstanding the foregoing the
Borrower shall not be permitted to assume, guarantee or
otherwise take any of the foregoing actions with respect to
any Indebtedness for Money Borrowed incurred by S-CC, Seminole
Kraft (except as permitted by SECTIONS 5.2.8(g) and
5.2.10(a)(XIII)), StoneSub, SVCPI or any Subsidiary of any of
such entities except as set forth on SCHEDULE 5.2.3 hereto;

(b) by way of endorsement of negotiable instruments for
deposit or collection and similar transactions;

(d) guarantees by any Subsidiary of the Borrower of
Indebtedness for Money Borrowed constituting Financing Lease
Obligations of any of its Subsidiaries (other than S-CC,
SVCPI, or any of their respective Subsidiaries) permitted by
SECTION 5.2.2;

(e) guarantees by a Subsidiary of the Borrower (other
than S-CC or any of its Subsidiaries) in the ordinary course
of business of such Subsidiary of Indebtedness of any Person
not exceeding in principal amount $75 million in the aggregate
for the Subsidiaries of the Borrower taken as a whole
(excluding S-CC and any of its Subsidiaries) at any time
outstanding;

(f) as contemplated by Section 10.01 of the Leveraged
Lease;

(g) guarantees by a Subsidiary of the Borrower in effect
at the time of its becoming a Subsidiary of the Borrower and
not created in contemplation thereof;

(h) to the extent not otherwise permitted by this
Section, guarantees by and other contingent liabilities of S-CC
and Subsidiaries of S-CC to the extent permitted by the S-CC Debt
Documents; and

(i) guarantees by the Borrower or any Subsidiary of the
Borrower of Indebtedness of any Person not exceeding $10
million in aggregate principal amount at any time.

5.2.4 AFFILIATE TRANSACTIONS. Enter into or engage
in any material transaction or contract (other than (i) agreements

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existing on the Closing Date and identified on SCHEDULE 5.2.4
hereto, (ii) transactions or contracts with affiliates permitted
by SECTION 5.2.3, 5.2.7, 5.2.8 or 5.2.9 and (iii) agreements
between S-CC and any of its Subsidiaries or between Subsidiaries of
S-CC) with any Affiliate other than Wholly-Owned Subsidiaries of
the Borrower (except for the Restricted Subsidiaries of the
Borrower), on a basis less favorable to the Borrower or such
Subsidiary of the Borrower than those that could be obtained at the
time in a comparable good faith arms length transaction with an
unrelated third party. Except as specified on SCHEDULE 5.2.4 or as
otherwise specifically permitted under this Agreement, the Borrower
shall not permit any contract identified on SCHEDULE 5.2.4 to be
directly or indirectly amended or extended without the prior
consent of the Required Lenders; PROVIDED, HOWEVER, that any such
contract may be amended without the prior consent of the Required
Lenders if the applicable amendment is not materially adverse to
the Borrower or its applicable Subsidiary and if a copy of the
amendment is delivered to the Agent within five Business Days after
its execution.

5.2.5 DIVIDENDS. Declare or pay any dividend or
distribution, or purchase or redeem any shares of any class of
capital stock of the Borrower or any Subsidiary of the Borrower, or
make any other payment or distribution on or in respect of any
class of capital stock of the Borrower or any of its Subsidiaries,
or set aside any amounts for any such purposes, except that:

(a) any Subsidiary may pay dividends or make
distributions (including, without limitation, distributions in
the form of the redemption or purchase for cancellation of
shares or in connection with the reduction of capital) to the
Borrower or to any Wholly-Owned Subsidiary of the Borrower;

(b) the Borrower may pay cash dividends, make
distributions on its capital stock or make purchases or
redemptions of its capital stock to the extent that the
aggregate amount of all such dividends, distributions,
purchases and redemptions from October 1, 1994 to the date of
the proposed dividend, distribution, purchase or redemption
(after giving effect to such proposed dividend, distribution,
purchase or redemption) would not exceed the sum of (A) an
amount equal to (1) 75% of the Consolidated Net Income of the
Borrower for the period from October 1, 1994 to the date of
payment of such proposed dividend, distribution, purchase or
redemption MINUS (2) 100% of the Consolidated Net Loss of the
Borrower for the period from October 1, 1994 to the date of
payment of such proposed dividend, distribution, purchase or
redemption PLUS (B) 100% of the cash proceeds (net of the pro
rata fees, costs and expenses of sale and underwriting
discounts and commissions) of sales of common stock and
Permitted Preferred Stock of the Borrower from the Closing
Date to the date of payment of such proposed dividend,

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distribution, purchase or redemption MINUS (C) the sum of the
amount of Investments made pursuant to SECTION 5.2.7(g), and
Capital Expenditures made pursuant to subsection (ii) of the
penultimate sentence of SECTION 5.2.11 PLUS (D) the principal
amount of all Subordinated Debt which is converted into equity
securities of the Borrower in accordance with the terms of the
instruments pursuant to which such Subordinated Debt was
issued, as in effect on June 30, 1995, exclusive of the
principal amount of any 8-7/8% Notes converted to equity
securities of the Borrower in connection with the transactions
permitted by SECTION 5.2.10(a)(XIV); PROVIDED, HOWEVER, that
without respect to the foregoing limitations, the Borrower
shall be permitted to pay cash dividends and to make
distributions with respect to its Permitted Preferred Stock
outstanding as of the date hereof (but not with respect to its
common stock or subsequently issued preferred stock) to the
extent such dividends or distributions are at the time
permitted by the terms of the Borrower's Indenture to the Bank
of New York, as trustee, dated as of March 15, 1992; and
PROVIDED FURTHER, that if all of the conditions to the
declaration of a dividend or distribution set out in this
subsection are satisfied at the time such dividend or
distribution is declared, then, subject to the proviso which
follows SECTION 5.2.5(h), such dividend or distribution may be
paid or made within forty-five (45) days after such
declaration even if the payment of such dividend, the making
of such distribution or the declaration thereof would not have
been permitted under this SECTION 5.2.5(b) at any time after
such declaration; and PROVIDED FURTHER, that solely for
purposes of computing Consolidated Net Income and Consolidated
Net Loss pursuant to clause (A) of this SECTION 5.2.5(b),
there shall be excluded from the computation thereof (x) fees
and other charges or write-offs incurred or accrued
(including, without limitation, the write-off of previously
unamortized debt issuance costs related to the Debt
Refinancing) in respect of Indebtedness incurred or repaid in
connection with the consummation of this Agreement, the
Related Transactions and the Stone Savannah Transactions and
(y) to the extent not otherwise excluded from the computation
thereof, any non-cash loss recognized by the Borrower in
respect of the repurchase, prepayment, conversion, redemption
or other extinguishment of the 8-7/8% Notes pursuant to
SECTION 5.2.10(a)(XIV);

(c) the Borrower may distribute shares of its common
stock to holders of the same or another class of its common
stock as a stock dividend or in connection with a stock split;

(d) the Borrower may distribute rights to purchase for
cash Permitted Preferred Stock or common stock to the holders
of its capital stock;

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(e) the Borrower may exchange shares of its common stock
or Permitted Preferred Stock for any outstanding shares of its
capital stock other than preferred stock which is not
Permitted Preferred Stock;

(f) the Borrower may acquire the capital stock of Stone
Savannah as contemplated by SECTION 5.1.13;

(g) the Borrower or any Subsidiary of the Borrower may
make any Investment permitted by SECTION 5.2.7; and

(h) S-CC and its Subsidiaries may pay dividends or may
make distributions on their respective capital stock or
purchase or redeem any shares of any capital stock of S-CC or
its Subsidiaries, in each case to the extent not prohibited by
the terms of the S-CC Debt Documents;

PROVIDED, HOWEVER, that in the case of clause (b) above no Event of
Default or Unmatured Event of Default (except in the case of
regular quarterly dividends on the Borrower's common stock, and/or
Permitted Preferred Stock which do not exceed the amount of the
regular quarterly dividend paid by the Borrower on its common stock
and/or Permitted Preferred Stock for the calendar quarter ending
prior to such proposed dividend, in which case an Unmatured Event
of Default relating to a payment default only) shall have occurred
and be continuing before or after giving effect to any such
proposed dividend.

5.2.6 NEGATIVE DEBT COVENANTS. Except for (i)
instruments evidencing Indebtedness for Money Borrowed set out in
SCHEDULE 4.6 hereto, (ii) instruments set out in SCHEDULE 3.4, 4.3,
5.2.2 or 5.2.4 hereto, in either case as in effect on the Closing
Date, (iii) agreements to which StoneSub is or becomes a party
pursuant to the Accounts Receivable Financing Program, (iv) the
S-CC Debt Documents and other agreements to which S-CC or any
Subsidiary of S-CC is a party or (v) in the case of any Person
becoming a Subsidiary after the Closing Date, agreements in
existence at the time it becomes a Subsidiary to the extent they
were not entered into in anticipation of such Person becoming a
Subsidiary, directly or indirectly, voluntarily create or otherwise
voluntarily cause or suffer to exist or become effective any
encumbrance or restriction (other than encumbrances or restrictions
existing on the Closing Date and referenced on SCHEDULE 3.4 and any
encumbrances or restrictions contained in any Indebtedness which
refinances any Indebtedness referenced on SCHEDULE 3.4 provided
that the terms thereof are no more onerous to the Borrower or any
Subsidiary than those existing on the Closing Date) on the ability
of any Subsidiary of the Borrower to: (A) pay dividends or make
any other distributions on its capital stock; (B) make loans or
advances to the Borrower; or (C) repay loans or advances from the
Borrower. In addition, the Borrower shall not, nor shall it permit
any of its Subsidiaries to, directly or indirectly, voluntarily

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create or otherwise voluntarily cause or suffer to exist or become
effective any encumbrance or restriction upon its ability to
encumber any of its property to secure the Obligations or any
Subsidiary Guarantee or to guaranty the Obligations and encumber
its property to secure such guaranty except for (1) encumbrances or
restrictions set forth on SCHEDULE 5.2.6 hereto, (2) encumbrances
or restrictions upon StoneSub created in connection with the
Accounts Receivable Financing Program, (3) in the case of any
Person becoming a Subsidiary after the Closing Date, encumbrances
or restrictions existing at the time it becomes a Subsidiary to the
extent they were not created in anticipation of such Person
becoming a Subsidiary, (4) Permitted Liens or (5) encumbrances or
restrictions on S-CC or Subsidiaries of S-CC to the extent not
prohibited by the S-CC Debt Documents.

5.2.7 INVESTMENTS. Have or make any Investment in
any Subsidiary or other Affiliate or any other Person except for:

(a) existing Investments and commitments to make
Investments set forth on SCHEDULE 5.2.7 hereto and existing
Investments and Investments to be made in the future pursuant
to the existing commitments or contracts of the Borrower and
its Subsidiaries set forth on SCHEDULE 5.2.7-A hereto, but in
no event in excess of the amounts specified on such SCHEDULE
5.2.7-A;

(b) Permitted Investments;

(c) Investments in Wholly-Owned Subsidiaries of the
Borrower other than Investments in StoneSub, S-CC or any of S-CC's
Subsidiaries (except as specifically permitted by clause
(j) of this Section) and other than additional Investments in
SVCPI made after the date, if any, on which such Person has
become a Wholly-Owned Subsidiary of the Borrower;

(d) in Fiscal Year 1994 and each Fiscal Year thereafter,
Investments in an amount equal to 15% of Capital Expenditures
permitted in such year by SECTION 5.2.11 (excluding Capital
Expenditures permitted by the final two sentences thereof but
including Capital Expenditure amounts carried over from year
to year so long as the Borrower had positive Consolidated Net
Income in the Fiscal Year in which such carryover amount
originates); PROVIDED, HOWEVER, that the amount of such
Investments shall be reduced by the amount of any Investments
made by the Borrower or its Subsidiaries during Fiscal Year
1994 and thereafter and identified on SCHEDULE 5.2.7-A (other
than the Belgium Cartomills Investment) and shall also be
reduced by the amount of any Acquisitions pursuant to SECTION
5.2.9(e)(i).

(e) Investments by the Borrower in Persons as permitted
by SECTION 5.2.9;

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(f) loans or advances of a type included in the
definition of Investments and made by the Borrower or any
Subsidiary of the Borrower in the ordinary course of the
Borrower's or such Subsidiary's business;

(g) Investments (including Investments in S-CC and
SVCPI) in amounts not exceeding the amount of the Dividend
Basket immediately prior to the making of such Investment;

(h) Investments in StoneSub not in excess (together with
outstanding Indebtedness for Money Borrowed under SECTION
5.2.2(d)(II)) of (i) the amounts contemplated from time to
time by the terms of the respective Receivables Financings and
(ii) those amounts, up to an aggregate at any one time
outstanding, of $5 million for each $100 million (on a pro-rated
basis) of Receivables Financings which have been
established and are in existence at such time, which may be
advanced to StoneSub in order to cure or remedy, or otherwise
avoid the commencement of, liquidation, termination or similar
events in connection with the Receivables Financings;

(i) Investments made by the Borrower or any Subsidiary of
the Borrower in respect of debt or equity securities to the
extent received in a transaction permitted by SECTION
5.2.8(b) or 5.2.12;

(j) Investments by S-CC in its Subsidiaries and other
Investments by S-CC and its Subsidiaries to the extent not
prohibited by the S-CC Debt Documents;

(k) Investments by Europa Carton, A.G. or Stone Container
Holdings GmbH out of the proceeds of Indebtedness incurred by
Europa Carton, A.G. or Stone Container Holdings GmbH,
respectively, pursuant to SECTION 5.2.2(c);

(l) additional Investments (other than Investments in
S-CC, SVCPI or any of their respective Subsidiaries) out of
Discretionary Funds (other than any Discretionary Funds
resulting from any Debt Basket Proceeds or any Excess Excluded
Sales Proceeds) in an amount not to exceed the Discretionary
Funds Basket made at a time when no Event of Default or
Unmatured Event of Default shall have occurred and be
continuing;

(m) Investments in Stone Savannah on the Closing Date as
contemplated by SECTIONS 5.1.13 AND 6.1(l);

(n) Investments consisting of securities or notes
received in settlement of accounts receivable incurred in the
ordinary course of business from a customer which the Borrower
has reasonably determined is unable to make cash payments in
accordance with the terms of such account receivable;

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(o) additional Investments in amounts and pursuant to
the terms and conditions set forth on SCHEDULE 1.1(b) hereto;
and

(p) an additional Investment in Seminole Kraft in an
amount not to exceed $1,250,000 for the purpose of acquiring
the remaining 1% of outstanding capital stock of Seminole
Kraft that was not previously owned by the Borrower.

Except as specifically provided in the foregoing clauses (d) (with
respect to SVCPI only), (g) and (j) neither the Borrower nor any
Subsidiary shall be permitted to make additional Investments in
Seminole Kraft, S-CC, SVCPI or any of their respective Subsidiaries
(other than (A) pursuant to contractual agreements permitted by
this Agreement and as in effect on the date hereof and set forth on
SCHEDULE 5.2.7-A and (B) Investments in Seminole Kraft, the
proceeds of which are promptly used to prepay Indebtedness for
Money Borrowed pursuant to SECTION 5.2.10(a)(xiii)).

5.2.8 MERGERS. Merge into or consolidate or
amalgamate with any Person except that:

(a) any Wholly-Owned Subsidiary of the Borrower (except
for StoneSub and any Restricted Subsidiary) may merge,
consolidate or amalgamate with or into the Borrower or another
Wholly-Owned Subsidiary of the Borrower (except for StoneSub
and any Restricted Subsidiary) and any corporation that is a
StoneSub may merge or consolidate with any other corporation
that is a StoneSub; PROVIDED, HOWEVER, that StoneSub may merge
with and into the Borrower in order to consummate a
refinancing of the Receivables Financings existing on the
Closing Date so long as (i) the Borrower immediately
contributes and transfers all or a substantial portion of the
assets of StoneSub into a newly formed StoneSub in connection
with such refinancing and (ii) all Indebtedness of the
StoneSub which has been merged with and into the Borrower is
immediately repaid in full with the proceeds of such
refinancing;

(b) any Subsidiary of the Borrower may merge with a
third party in a transaction for which the Borrower or one of
its Wholly-Owned Subsidiaries receives less than $50 million
in aggregate consideration or in a transaction in which the
Borrower or one of its Wholly-Owned Subsidiaries receives $50
million or more in aggregate consideration and receives (i) at
least 70% of such consideration for such merger in cash or
cash equivalents and readily marketable securities, (ii)
non-cash consideration for such merger consisting of debt
obligations of the purchaser and (iii) if any consideration to
be received consists of a note or other debt obligation, such
note or debt obligation shall be either (A) a note which is
not by its terms or the terms of any related instrument

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subordinate to any other indebtedness or (B) a note or debt
obligation secured by a first priority security interest in
the assets of the Subsidiary of the Borrower so merged subject
only to the Permitted Liens described in subsections (c) and
(f) of the definition of Permitted Liens;

(c) any Wholly-Owned Subsidiary of the Borrower may
merge with a third party in a transaction in which the only
consideration paid by the Borrower or such Subsidiary of the
Borrower is common stock of the Borrower or Permitted
Preferred Stock;

(d) a Wholly-Owned Subsidiary may be liquidated and its
assets distributed to one or more Wholly-Owned Subsidiaries
and/or the Borrower;

(e) the Borrower may merge or consolidate with any
Person (except for StoneSub, SVCPI and any Restricted
Subsidiaries and Wholly-Owned Subsidiaries that borrow
independently on a non-recourse basis) so long as (i) the
Borrower is the surviving entity, (ii) the Consolidated
Tangible Net Worth of the Borrower immediately following such
merger or consolidation is greater than or equal to the
Consolidated Tangible Net Worth of the Borrower immediately
prior to such merger or consolidation and (iii) at the time of
such merger or consolidation and immediately thereafter no
Event of Default or Unmatured Event of Default shall have
occurred and be continuing;

(f) any Wholly-Owned Subsidiary of S-CC may merge with
S-CC or with any other Wholly-Owned Subsidiary of S-CC to the
extent not prohibited by the S-CC Debt Documents and S-CC or
any Subsidiary of S-CC may merge with a third party to the
extent not prohibited by the S-CC Debt Documents; and

(g) Seminole Kraft may merge with and into the Borrower
with the Borrower as the surviving corporation, provided that
(i) the Borrower shall have prepaid, defeased or otherwise
deposited under an irrevocable trust agreement in form and
substance reasonably satisfactory to the Agent, or caused to
be prepaid, defeased or so deposited, pursuant to the terms
and conditions of SECTION 5.2.10(a)(XIII), the Indebtedness of
Seminole Kraft under (A) the Credit Agreement dated as of
March 27, 1991, as amended, among Seminole Kraft, Citibank,
N.A., as agent, and the financial institutions party thereto
and (B) Seminole Kraft's 13.50% Subordinated Notes due October
15, 1996 issued under the Indenture dated as of October 15,
1986, as supplemented and amended, between Seminole Kraft and
Norwest Bank, as successor trustee to Manufacturers Hanover
Trust Company, (ii) Seminole Kraft shall have no Indebtedness
for Money Borrowed outstanding at the time of such merger
other than the Indebtedness for Money Borrowed set forth on

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SCHEDULE 5.2.8(g) hereto, (iii) on the date of such merger the
Borrower shall deliver to the Agent a certificate of a
Responsible Officer of the Borrower certifying that both
before and after giving effect to the prepayment of such
Indebtedness and the consummation of such merger, no Event of
Default or Unmatured Event of Default has occurred is
continuing and the representations and warranties contained in
the Credit Agreement and the other Loan Documents are true and
correct in all material respects at and as of the date thereof
as though made on and as of the date thereof (except to the
extent specifically made with regard to a particular date) and
(iv) such merger shall occur on or prior to June 30, 1995.

The Borrower shall cause any equity interest or other non-cash
consideration received by the Borrower or any of its Subsidiaries
in consideration of any transaction permitted by this Section and
involving aggregate consideration of $50 million or more to be
pledged by the Borrower or such Subsidiary, as applicable, to the
Agent for the benefit of the Lenders pursuant to a Supplemental
Pledge Agreement. For purposes of this Section, the use of the
terms "merge" and "merger" shall be deemed to include, in the case
of Canadian Subsidiaries of the Borrower, the terms "amalgamate"
and "amalgamation," respectively.

5.2.9 PURCHASE OF STOCK OR ASSETS. Acquire any
assets, capital stock or debt securities of any Person (an
"ACQUISITION") except that:

(a) the Borrower and its Subsidiaries may acquire assets
other than capital stock in the ordinary course of business;

(b) the Borrower or any Subsidiary of the Borrower may
purchase assets or capital stock of a Person for a
consideration consisting in whole of common stock or Permitted
Preferred Stock of the Borrower so long as no Event of Default
or Unmatured Event of Default shall have occurred and be
continuing after giving effect to such Investment;

(d) the Borrower may purchase the Facility pursuant to
Section 10.01, 10.04 or 19.09 of the Leveraged Lease;

(e) the Borrower or any Subsidiary of the Borrower may
make Acquisitions for cash consideration or property, PROVIDED
that the aggregate cash consideration or property paid by the
Borrower and its Subsidiaries for such Acquisition shall not
exceed (i) the maximum amount of Investments then permitted
pursuant to SECTION 5.2.7(d) PLUS (ii) after such maximum
amount has been reduced to zero, and so long as no Event of
Default or Unmatured Event of Default shall have occurred and

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be continuing, an amount of Discretionary Funds (other than
any Discretionary Funds resulting from any Debt Basket
Proceeds or any Excess Excluded Sales Proceeds) not exceeding
the Discretionary Funds Basket;

(f) the Borrower or any Subsidiary may make Acquisitions
for cash consideration or property PROVIDED that the cash
consideration or property paid by the Borrower and its
Subsidiaries for any Acquisition shall not exceed the amount
of the Dividend Basket immediately prior to the making of such
Acquisition;

(g) Capital Expenditures permitted by SECTION 5.2.11
hereof and expenditures of the type described in subsections
(I)-(V) of the definition of Capital Expenditures may be made;

(h) [Intentionally Omitted];

(i) the Borrower or any Subsidiary of the Borrower may
acquire assets in connection with the asset exchanges permitted
by the first proviso to the first sentence of SECTION 5.2.12;

(j) the Borrower or any Subsidiary of the Borrower may
acquire capital stock or debt securities to the extent
permitted by SECTION 5.2.10;

(k) StoneSub may purchase or otherwise acquire an
interest in Receivables (with cash or by means of the issuance
of Indebtedness for Money Borrowed permitted by SECTION
5.2.2(d)(II)) pursuant to the Accounts Receivable Financing
Program; and

(l) S-CC may make Acquisitions to the extent not
prohibited by the S-CC Debt Documents.

Any acquisition or purchase counted for purposes of any of SECTIONS
5.2.9(a)-(l) shall not be counted for the purposes of any other
such subsection.

5.2.10 PREPAYMENT OF INDEBTEDNESS; CERTAIN AMENDMENTS.

(a) Make any voluntary purchase or prepayment of or
defease any Indebtedness for Money Borrowed or purchase,
voluntarily redeem or otherwise voluntarily acquire any
preferred or preference stock of the Borrower or any of its
Subsidiaries, except (i) the Obligations (to the extent
otherwise permitted hereby); (ii) a prepayment or defeasance
of the IRBs as permitted in SECTION 5.2.2(h); (iii) the
redemption, purchase, defeasance or voluntary prepayments of
any Indebtedness of the Borrower arising under or in
connection with the Florence Agreements; (iv) repayment of the

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unsecured lines of credit permitted by SECTION 5.2.2(m) or of
intercompany loans or advances permitted by SECTION 5.2.2(d);
(v) the redemption or purchase of preferred or preference
stock of Stone-Canada or any of its Wholly-Owned Subsidiaries;
(vi) refinancings permitted by SECTION 5.2.2; (vii) a purchase
or acquisition permitted under SECTION 5.2.7; (viii) S-CC or
any Subsidiary of S-CC may voluntarily purchase, prepay or
defease any of its Indebtedness for Money Borrowed or any
preferred or preference stock of S-CC or any Subsidiary of S-CC;
(ix) so long as no Event of Default or Unmatured Event of
Default shall have occurred and be continuing, the prepayment
of any maturity or maturities of debt securities of the
Borrower (including the payment of principal, stated premium,
if any, and interest thereon) out of Discretionary Funds in an
amount not to exceed the Discretionary Funds Basket; (x) the
Debt Refinancing and the Stone Savannah Transactions, all of
which shall occur on the Closing Date, except as otherwise
provided in SECTION 5.1.13, as a Related Transaction pursuant
to the Transaction Documents; (xi) transactions permitted by
SECTION 5.2.10(b); (xii) prepayments of Indebtedness for Money
Borrowed utilizing the proceeds of Indebtedness permitted by
SECTION 5.2.2(t); (xiii) the Borrower may voluntarily prepay,
or cause to be prepaid, the Indebtedness of Seminole Kraft
consisting of (A) Indebtedness under the Credit Agreement
dated as of March 27, 1991, as amended, among Seminole Kraft,
Citibank, N.A., as agent, and the financial institutions party
thereto, (B) Seminole Kraft's 13.50% Subordinated Notes due
October 15, 1996 issued under the Indenture dated as of
October 15, 1986, as supplemented and amended, between
Seminole Kraft and Norwest Bank, as successor trustee to
Manufacturers Hanover Trust Company, and (C) if necessary, up
to $8,400,000 of Indebtedness under the 1991 Settlement
Agreement dated as of March 26, 1991 entered into by Champion
International Corporation and Seminole Kraft, so long as the
aggregate amount of all such Indebtedness prepaid does not
exceed $140,000,000, and may use proceeds of the Revolving
Loan to prepay any such Indebtedness for Money Borrowed,
PROVIDED that (1) all existing Liens securing any such
Indebtedness for Money Borrowed of Seminole Kraft are promptly
released upon the prepayment of such Indebtedness for Money
Borrowed and (2) the Borrower shall, promptly upon the
prepayment of such Indebtedness for Money Borrowed, cause
Seminole Kraft to be merged with and into the Borrower
pursuant to the terms and conditions of SECTION 5.2.8(g); and
(xiv) the Borrower may use proceeds of Revolving Loans to
voluntarily repurchase, prepay, redeem or otherwise extinguish
the Indebtedness consisting of (A) all or any portion of the
8-7/8% Notes (including the payment of principal and interest
thereon) and (B) all or any portion of the 12-1/8%
Subordinated Debentures at par value (including the payment of
principal or par value and interest thereon) and/or any
Indebtedness for Money Borrowed of the Borrower constituting

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Senior Indebtedness (including the payment of principal,
premium, whether or not stated, if any, and interest thereon),
PROVIDED that (1) no Unmatured Event of Default or Event of
Default shall have occurred and be continuing at the time of
any such repurchase, prepayment, redemption or extinguishment
(or, if irrevocable notice must be given to affect a
redemption or extinguishment, then at the time of giving such
notice) and (2) (i) the aggregate amount of cash consideration
paid by or on behalf of the Borrower to repurchase, prepay,
redeem or otherwise extinguish Indebtedness pursuant to this
clause (xiv) shall not exceed the lesser of (x) $250,000,000
or (y) the aggregate principal amount or par value of such
Indebtedness repurchased, prepaid, redeemed or otherwise
extinguished, and (ii) the aggregate amount of cash
consideration paid by or on behalf of the Borrower to
repurchase, prepay, redeem or otherwise extinguish 12-1/8%
Subordinated Debentures or Senior Indebtedness under clause
(B) above shall not exceed (x) $250,000,000 MINUS (y) the
aggregate cash consideration paid by or on behalf of the
Borrower in connection with the repurchase or prepayment of
the 8-7/8% Notes pursuant to clause (A) above;

(b) Amend, modify, cancel or issue any securities (except
for debt securities which are otherwise permitted by SECTION
5.2.2) in exchange for any Indebtedness for Money Borrowed or
any preferred or preference stock of the Borrower or any of
its Subsidiaries, except (i) that the Borrower may issue its
common stock or Permitted Preferred Stock in exchange for
Indebtedness for Money Borrowed; (ii) that Stone-Canada or any
of its Wholly-Owned Subsidiaries may issue common, preferred
or preference stock to any other Wholly-Owned Subsidiary in
exchange for inter-company debt; (iii) that Stone-Canada may
issue common and/or preferred shares of capital stock to the
Borrower in exchange for intercompany debt of Stone-Canada to
the Borrower or in exchange for preferred shares of capital
stock of Stone-Canada held by the Borrower; and (iv) with
respect to S-CC or any of its Subsidiaries, to the extent not
prohibited by the S-CC Debt Documents; or

(c) Materially amend, modify or grant any material
waiver (for purposes hereof any amendment, modification or
waiver with respect to subordination provisions, increasing
the principal amount, increasing the interest rate or
shortening maturity shall be deemed material) with respect to
any indenture (including, without limitation, the Senior
Subordinated Note Indenture), note or other instrument
(including, without limitation, the Continental Guaranty)
evidencing or creating such Indebtedness for Money Borrowed or
preferred stock of the Borrower or any Subsidiary (other than
Permitted Preferred Stock which remains Permitted Preferred
Stock after giving effect to any such amendment, modification
or waiver) or pursuant to which any such Indebtedness for

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Money Borrowed or preferred stock was issued, PROVIDED that
this clause (c) shall not apply to agreements for Indebtedness
for Money Borrowed of S-CC or any Subsidiary of S-CC which
Indebtedness is nonrecourse to the Borrower or any other
Subsidiary of the Borrower (other than S-CC or any Subsidiary
of S-CC, as the case may be).

5.2.11 CAPITAL EXPENDITURES. Expend or incur any
Capital Expenditure in any Fiscal Year if the aggregate amount of
the Capital Expenditures expended or incurred by the Borrower and
its Subsidiaries (exclusive of S-CC and Subsidiaries of S-CC) in
such Fiscal Year would exceed the following amounts, as such
amounts may be increased in any Fiscal Year pursuant to the terms
and conditions set forth on SCHEDULE 1.1(B):

FISCAL YEAR AMOUNT
-------------------- -------------
1994 $225 million
1995 $225 million
1996 and each Fiscal $275 million
Year thereafter

Each of the foregoing amounts established for Fiscal Years
commencing with and including 1994 may be carried forward from one
year to the next to the extent not used for Capital Expenditures
(or for Investments pursuant to SECTION 5.2.7(d)) during any prior
Fiscal Year. Capital Expenditures permitted above (i) shall be
reduced for any Fiscal year by the amount of Investments made
during such Fiscal Year pursuant to SECTION 5.2.7(d) and by the
amount of expenditures made during such Fiscal Year pursuant to
SECTION 5.2.9(e), (ii) at the option of the Borrower, may be
increased at any time or from time to time by an amount not
exceeding the amount of the Dividend Basket immediately prior to
the making of such Capital Expenditure, and (iii) at the option of
the Borrower, so long as no Event of Default or Unmatured Event of
Default shall have occurred and be continuing, may be increased at
any time or from time to time by an amount of Discretionary Funds
(other than any Discretionary Funds resulting from any Debt Basket
Proceeds or any Excess Excluded Sales Proceeds) not exceeding the
Discretionary Funds Basket. Notwithstanding the foregoing
limitations on Capital Expenditures in this SECTION 5.2.11, (A) the
Borrower and its Subsidiaries may make Cluster Expenditures and (B)
Europa Carton, A.G. and Stone Container Holdings GmbH may make
Capital Expenditures out of the proceeds of Indebtedness incurred
by Europa Carton, A.G. or Stone Container Holdings GmbH,
respectively, pursuant to SECTION 5.2.2(c).

5.2.12 SALE OF ASSETS. Sell, lease, assign, transfer
or otherwise dispose of any Asset (other than cash or Permitted
Investments) or related group of Assets, including shares of

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capital stock, to a Person which is not the Borrower or a
Wholly-Owned Subsidiary of the Borrower (other than a Restricted
Subsidiary) except sales or other dispositions of inventory in the
ordinary course of business for cash or represented by accounts
receivable, unless the transaction (i) is a disposition permitted
by SECTION 5.2.13, (ii) is a disposition of Collateral or Mortgaged
Property and is for consideration consisting solely of cash, cash
equivalents or readily marketable securities, (iii) is a
disposition not involving Collateral or Mortgaged Property and is
for aggregate consideration of not more than $50 million or (iv) is
a disposition not involving Collateral or Mortgaged Property and is
for aggregate consideration in excess of $50 million, of which at
least 70% consists of cash or cash equivalents and readily
marketable securities and any non-cash consideration consists of
debt obligations of the purchaser which are either in the form of
(A) a note which is not by its terms or the terms of any related
instrument subordinate to any other indebtedness or (B) a note or
debt obligation secured by a first priority security interest in
the assets of the purchaser purchased in such transaction subject
only to the Permitted Liens described in subsections (c) and (f) of
the definition of Permitted Liens; PROVIDED, HOWEVER, that mills
and plant facilities and leasehold interests therein not
constituting Collateral or Mortgaged Property may be exchanged for
like-kind assets on an arms-length basis; PROVIDED FURTHER, that S-CC
and any Subsidiary of S-CC may sell, lease, assign, transfer or
otherwise dispose of assets to the extent not prohibited by, and in
accordance with the requirements of, the S-CC Debt Documents;
PROVIDED FURTHER, that in no event may the Borrower sell, lease,
assign or otherwise transfer any Collateral or Mortgaged Property
to any Subsidiary unless Substitute Collateral is provided in
accordance with SECTION 9.13(c), except (x) to the extent provided
in the Security Agreements and Mortgages and (y) that the Borrower
may transfer Collateral or Mortgaged Property not exceeding $10
million in aggregate fair market value to one or more Subsidiaries
so long as each such Subsidiary takes such transferred property
subject to the Liens under the applicable Loan Documents. The
Borrower shall cause any equity interest or other non-cash
consideration received by the Borrower or any of its Subsidiaries
in consideration of any transaction permitted by this Section and
involving aggregate consideration of $50 million or more to be
pledged by the recipient thereof to the Agent for the benefit of
the Lenders pursuant to a Supplemental Pledge Agreement; PROVIDED,
HOWEVER, that such requirement shall not apply if (i) the Assets
disposed of are subject to a Lien and such equity interest or other
non-cash consideration is required to be and is pledged or paid
over to the holder of such Lien or (ii) such consideration
constitutes Excluded Sale Proceeds.

5.2.13 SALE OF ACCOUNTS RECEIVABLE. Sell or otherwise
dispose of any account receivable, including any sale or transfer
to any Subsidiary of the Borrower, except that (a) any Subsidiary
of the Borrower may sell or transfer any of its accounts receivable

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to the Borrower, (b) the Borrower or any Subsidiary of the Borrower
may sell its accounts receivable in the ordinary course of business
consistent with the Borrower's or such Subsidiaries' collection
practices as in effect from time to time and not as part of a
financing and (c) the Borrower or any Participating Subsidiary may
sell or otherwise grant an interest in its Receivables to StoneSub,
and StoneSub may sell or otherwise grant an interest in its
Receivables to other Persons, in each case pursuant to the Accounts
Receivable Financing Program. In addition to the foregoing, the
Borrower or any Subsidiary eligible to be a Participating
Subsidiary may directly sell interests in Receivables to a
financial institution or other Person (whether on a revolving
purchase basis or in a one-time transaction); PROVIDED, HOWEVER,
that all such sales shall be on terms (considered as a whole) not
materially more onerous to the Borrower and the Lenders than those
permitted for sales by StoneSub to the Issuer under the Receivables
Financings in existence on the Closing Date; and PROVIDED FURTHER,
that any such sales of receivables shall, for all other purposes of
this Agreement, and regardless of the treatment thereof by the
Borrower on its financial statements, be deemed to be an incurrence
by the Borrower of Indebtedness for Money Borrowed in respect of
the financing of the receivables involved and not as a sale of such
receivables; and PROVIDED FURTHER, that the aggregate of the
Indebtedness for Money Borrowed deemed to have been incurred and at
any time outstanding pursuant to this sentence shall reduce on a
dollar-for-dollar basis the aggregate principal amount of
Indebtedness for Money Borrowed which StoneSub is permitted to have
outstanding at any time under SECTION 5.2.2(p) pursuant to
Receivables Financings. Notwithstanding anything in this Section
to the contrary, S-CC and its Subsidiaries shall be permitted to
dispose of any account receivable to the extent not prohibited by
the S-CC Debt Documents.

5.2.14 SUBSIDIARIES. (a) Other than non-Wholly-Owned
Subsidiaries in existence on the Closing Date, S-CC and
Subsidiaries of S-CC, permit to exist Subsidiaries which are not
Wholly-Owned Subsidiaries; or (b) permit any Subsidiary which was
a Wholly-Owned Subsidiary on the Closing Date to cease to be a
Wholly-Owned Subsidiary, except in either case as otherwise
permitted by SECTIONS 5.2.8, or 5.2.12, as a result of honoring the
existing contractual commitments referenced on SCHEDULE 5.2.7-A or,
in the case of clause (b), as a result of a transaction otherwise
permitted hereby whereby such entity ceases to be a Subsidiary.

5.2.15 LEASE PAYMENTS. Except for lease payments
arising in connection with the Leveraged Lease or any Financing
Lease, incur, assume or suffer to exist or permit any of its
Subsidiaries to incur, assume or suffer to exist, any obligation
for rental payments as lessee, whether directly or as guarantor, if
after giving effect thereto, the aggregate amount of lease payments
required to be made by the Borrower and its Subsidiaries (other
than S-CC and Subsidiaries of S-CC) will exceed $150 million during

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any calendar year, PROVIDED, HOWEVER, that S-CC and its
Subsidiaries may incur, assume or suffer to exist any obligations
for rental payments, as lessee, whether directly or as guarantor,
to the extent not prohibited by the S-CC Debt Documents.

5.2.16 ACCOUNTS RECEIVABLE FINANCING PROGRAM. Enter
into any initial documentation in connection with a Receivables
Financing or any sales of receivables permitted by the penultimate
sentence of SECTION 5.2.13 unless such documentation (i) has been
approved by the Required Lenders or is on terms and conditions
which, taken as a whole, are not materially more adverse to the
Borrower and the Lenders than the documentation in existence on the
Closing Date with respect to existing Receivables Financings or
(ii) is non-material documentation entered into pursuant to such
approved documentation or amend or modify in any material respect
any of such documentation unless such amendment or modification has
been so approved or otherwise satisfies the conditions of
clause (i) above.

Section 5.3 FINANCIAL COVENANTS OF THE BORROWER. The
Borrower covenants and agrees that for so long as this Agreement is
in effect and until the Obligations and all other obligations
incurred hereunder whether or not matured, are paid in full, the
Borrower will, unless first having procured the written consent of
the Required Lenders:

5.3.1 INTEREST COVERAGE RATIO. As of the end of each
Fiscal Quarter, calculated for the most recently completed four
Fiscal Quarters (but if four fiscal quarters have not been
completed since the Closing Date, then for the number of Fiscal
Quarters that have been completed since the Closing Date), maintain
an Interest Coverage Ratio for such period ending on a date set
forth below of not less than the amount set forth opposite such
date:

DATE RATIO
------------------ ---------
December 31, 1994 1.00 to 1
March 31, 1995 1.15 to 1
June 30, 1995 1.25 to 1
September 30, 1995 1.35 to 1
December 31, 1995 1.50 to 1
March 31, 1996 1.65 to 1
June 30, 1996 1.75 to 1
September 30, 1996 1.85 to 1
December 31, 1996 2.00 to 1
March 31, 1997 2.00 to 1
June 30, 1997 2.00 to 1
September 30, 1997 2.25 to 1
and thereafter

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5.3.2 INDEBTEDNESS RATIO. Have an Indebtedness Ratio of
not more than the following amounts as of the end of each Fiscal
Quarter ending on a date set forth below:

DATE RATIO
------------------------- ---------
December 31, 1994 through
March 31, 1996 .85 to 1
June 30, 1996 through
September 30, 1996 .80 to 1
December 31, 1996 through
September 30, 1997 .77 to 1
December 31, 1997 through
September 30, 1998 .72 to 1
December 31, 1998 through
September 30, 1999 .67 to 1
December 31, 1999 and
thereafter .62 to 1

ARTICLE VI

CONDITIONS OF CREDIT

Section 6.1 CONDITIONS PRECEDENT TO THE BORROWING OF
INITIAL LOANS. The right of the Borrower to make the Borrowing of
the Initial Loans and the obligation of the Lenders to make the
Initial Loans under this Agreement shall be subject to the
fulfillment, at or prior to the time of the making of such Initial
Loans, of each of the following conditions:

(a) The Borrower shall have duly executed and delivered
to the Agent, with a signed counterpart for each Lender, this
Agreement and, subject to SECTION 5.1.17, all of the other Loan
Documents, all of which shall be in full force and effect.

(b) All of the other Basic Agreements shall have been
duly executed and delivered in form and substance satisfactory to
the Agent and shall be in full force and effect.

(c) No Event of Default or Unmatured Event of Default
shall have occurred and be continuing or will occur after giving
effect to the making of the Initial Loans and the consummation of
the transactions contemplated by the Basic Agreements.

(d) The Mergers shall have been consummated in
compliance with the Merger Documents and with all applicable laws.
The Agent shall have received duly executed copies of the Merger
documents as filed with the Secretary of the State of Delaware.

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(e) The Agent shall have received proof that the
applicable Loan Documents and appropriate financing statements and
other documents required by the applicable Loan Documents have been
filed and/or recorded in such jurisdictions as the Agent shall have
specified or arrangements for such filing or recording satisfactory
to the Agent have been made; PROVIDED, HOWEVER, that with respect
to the recordations of the Mortgages in the real estate records of
any jurisdictions, proof of recordation shall not be required if
the Agent receives the title insurance or binders to assure the
same in accordance with this SECTION 6.1.

(f) The Agent shall have received copies of searches of
financing statements filed under the Uniform Commercial Code, lien
and judgment searches and title searches, as appropriate, with
respect to the Collateral and the Mortgaged Property which searches
are reasonably satisfactory to the Agent.

(g) Subject to SECTION 5.1.17, the Agent shall have
received binding policies of mortgagee's title insurance (with such
co-insurance and/or reinsurance arrangements as are satisfactory to
the Agent and with such special endorsements as the Agent shall
require, all in form reasonably satisfactory to the Agent),
together with such surveys as the Agent shall require, on each
parcel of the Mortgaged Property specified by the Agent pursuant to
policies on the applicable ALTA form which will insure that the
mortgagees thereunder will have a valid first mortgage lien
(subject to Permitted Liens) in the amounts specified on SCHEDULE
6.1(g) hereto, subject to such exceptions as are provided for in
the Mortgages.

(h) The Agent shall have received the signed opinion of
Sidley & Austin, counsel to the Borrower and its Subsidiaries,
dated the Closing Date and addressed to the Agent, the Co-Agents
and all of the Lenders in substantially the form set forth on
EXHIBIT 6.1(h) hereto, with such changes (if any) therein as shall
be acceptable to the Agent and as to such other matters as the
Agent may reasonably request, and the Agent shall have received the
signed opinions addressed to all of the Lenders of such local
counsel reasonably satisfactory to the Agent as the Agent may
reasonably request.

(i) The Agent shall have received a copy of all
resolutions (in form and substance reasonably satisfactory to the
Agent) adopted by the Board of Directors of each of the Borrower
and those Subsidiaries (including, without limitation, each of the
Stone Merger Subsidiaries and Stone Southwest Merger Subsidiaries)
as reasonably deemed necessary by the Agent, authorizing or
relating to (i) the execution, delivery and performance of the
Basic Agreements and the other documents and instruments provided
for therein, (ii) the consummation of the Mergers, and (iii) the
consummation of the transactions contemplated hereby and thereby,
(iv) the granting and confirmation of the liens, pledges, mortgages

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and security interests pursuant to the Security Agreements, and the
Mortgages by the Borrower and its applicable Subsidiaries, together
with by-laws of the Borrower and such Subsidiaries, all certified
by the Secretary or a Vice-President of the Borrower and such
Subsidiary. Such certificate shall be dated the Closing Date and
shall state that the resolutions set forth therein have not been
amended, modified, revoked or rescinded as of such date and are at
such date in full force and effect.

(j) The Agent shall have received certified copies of
the charters of each of the Borrower and those Subsidiaries as
reasonably deemed necessary by the Agent in their respective
jurisdictions of incorporation and evidence of their good standing
therein.

(k) The Agent shall have received a certificate of the
Secretary or a Vice-President of the Borrower, dated the Closing
Date as to the incumbency and signature of the officers of the
Borrower and any applicable Subsidiary executing any Basic
Agreement and any certificate or other document or instrument to be
delivered pursuant thereto by or on behalf of the Borrower or such
Subsidiary, together with evidence of the incumbency of such
Secretary or Vice-President, as the case may be.

(l) Contemporaneously with the funding of the Initial
Loans, the Borrower shall have (i) paid in full all outstanding
indebtedness under the U.S. Credit Agreement, the U.S. Credit
Agreement shall have been terminated and all Liens existing
pursuant thereto shall have been released and terminated, (ii) made
loans and/or capital contributions to Stone-Canada, the proceeds of
which Stone-Canada shall have used to pay in full all outstanding
indebtedness under the Canadian Credit Agreements such that the
Canadian Credit Agreements shall have been terminated and all Liens
existing pursuant thereto shall have been released and terminated,
(iii) caused the payment in full of all outstanding indebtedness
under the Stone Savannah Credit Agreement such that the Stone
Savannah Credit Agreement shall have been terminated and all Liens
existing pursuant thereto shall have been released and terminated,
and (iv) shall have given irrevocable notice of redemption to the
trustee of the Stone Savannah Senior Subordinated Note Indenture
with respect to all outstanding Stone Savannah Senior Subordinated
Notes and shall have caused to be deposited with such trustee funds
sufficient to redeem in full all of the Stone Savannah Senior
Subordinated Notes at par (plus stated premium), together with
interest accrued and to accrue through the date of redemption,
which shall be on or prior to December 30, 1994. All of the
foregoing shall be pursuant to documentation reasonably
satisfactory to the Agent.

(m) The Agent shall have received a certificate executed
by a Responsible Officer on behalf of the Borrower, dated the
Closing Date and in the form of EXHIBIT 6.1(m) hereto.

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(n) All outstanding participations in the Florence
Letters of Credit shall have been terminated and all Revolving
Lenders (other than BT) shall have entered into a Participation
Agreement with respect to its Revolving Loan Pro Rata share of the
Florence L/C Obligations.

(o) Each of Westinghouse Electric Corporation, Gelco
Corporation and BT shall have entered into amendments to the L/C
Agreement in substantially the forms of EXHIBITS 6.1(O)-A AND B
hereto.

(p) Contemporaneously with the funding of the Initial
Loans, the Borrower shall have paid in full all accrued Revolving
Loan Commitment Fees and the Facility Fee.

(q) The Borrower shall have paid the Agent the Agent's
Fees due on the Closing Date.

(r) The Agent shall have received a Notice of Borrowing
by 3:00 p.m. New York time on the Business Day prior to the Closing
Date with respect to its Initial Loans hereunder.

(s) The Agent shall have received the Environmental
Study, the results of which shall be acceptable to the Agent.

(t) The Agent shall have received certificates of
insurance evidencing insurance required to be maintained pursuant
to SECTION 5.1.9 and the other Loan Documents, evidence of full
payment of premiums thereon and loss payable endorsements, all as
required by this Agreement and the other Loan Documents.

(u) The Borrower shall have realized gross proceeds of
$700 million from the issuance and sale of the Senior Notes and the
First Mortgage Notes and the Agent shall have received a duly
executed copy of each of the Senior Note Documents and the First
Mortgage Note Documents, the terms, conditions, representations,
warranties, covenants, events of default and other provisions of
which shall be satisfactory in all respects to the Agent.

(v) The Borrower shall have entered into a letter
agreement with the Facing Agent providing for Letter of Credit
fees, in form and substance satisfactory to the Facing Agent.

(w) All corporate and other proceedings taken in
connection with the transactions hereunder at or prior to the
Closing Date and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Agent.

(x) The Agent shall have received such other documents
or legal opinions as the Agent or the Required Lenders may
reasonably request, all in form and substance satisfactory to the
Agent. The Borrower shall have furnished to the Agent or the

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Lenders such additional copies or executed counterparts of the
documents referred to above as the Agent or any Lender may request.

Section 6.2 CONDITIONS PRECEDENT TO ALL CREDIT EVENTS.
The right of the Borrower to make any Borrowing or to have issued
any Letter of Credit, and the obligation of each Lender to make a
Loan (including the Loans made on the Restatement Date and Swing
Line Loans) in respect of any such Borrowing and the obligation of
the Facing Agent to issue or any Revolving Lender to participate in
any Letter of Credit shall, in each case, be subject to the
fulfillment at or prior to the time of the making of such
Borrowing, or the issuance of such Letter of Credit, as the case
may be, of each of the following conditions:

(a) REPRESENTATIONS AND WARRANTIES. The representations
and warranties contained in ARTICLE IV of this Agreement and in the
other Loan Documents shall each be true and correct in all material
respects at and as of such time, as though made on and as of such
time except to the extent such representations and warranties are
expressly made as of a specified date in which event such
representation and warranty shall be true and correct as of such
specified date.

(b) NO DEFAULT. No Event of Default shall have occurred
and shall then be continuing on such date or will occur after
giving effect to such Borrowing (including without limitation the
use of proceeds requirements set forth in SECTION 5.1.11).

(i) Prior to the making of each Loan, the Agent shall
have received a Notice of Borrowing meeting the requirements
of SECTION 2.5.

(ii) Prior to the issuance of each Letter of Credit, the
Agent and the Facing Agent shall have received a request for
the issuance of a Letter of Credit meeting the requirements of
SECTION 2.12(C).

(d) OTHER INFORMATION. The Agent shall have received
such other instruments and documents as the Agent or the Required
Lenders may reasonably request in connection with the Loans and
Letters of Credit and all such instruments and documents shall be
reasonably satisfactory in form and substance to the Agent.

The acceptance of the benefits of each such Credit Event
by the Borrower shall be deemed to constitute a representation and
warranty by it to the effect of paragraphs (a), (b) and (c) of this
SECTION 6.2.

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Section 6.3 CONDITIONS PRECEDENT TO EFFECTIVENESS OF
AGREEMENT, INITIAL FUNDING OF SUPPLEMENTAL REVOLVING LOANS AND
FUNDING OF D TRANCHE TERM LOAN. The amendments to the Existing
Credit Agreement embodied in this Agreement shall not be effective
(in which case the Existing Credit Agreement shall remain in full
force and effect), the initial Supplemental Revolving Loans shall
not be funded and the D Tranche Term Loan shall not be funded
unless and until the Borrower shall have furnished to the Agent, or
unless and until the following conditions precedent have been
satisfied, in each case on or prior to the Restatement Date:

(a) The Borrower, the Agent, the Required Lenders (as
defined in the Existing Credit Agreement), the Majority Revolving
Lenders (as defined in the Existing Credit Agreement), the Majority
Term Lenders (as defined in the Existing Credit Agreement), the
Majority Additional Term Lenders (as defined in the Existing Credit
Agreement) and each Supplemental Revolving Lender and D Tranche
Lender shall have duly executed and delivered this Agreement.

(b) The Borrower shall have duly executed and delivered
the Supplemental Revolving Notes and the D Tranche Term Notes.

(d) No Event of Default or Unmatured Event of Default
shall have occurred and be continuing or will occur after giving
effect to the making of the initial Supplemental Revolving Loan and
the D Tranche Term Loan and the consummation of the transactions
contemplated herein.

(e) The Agent shall have received duly executed
modifications to the Mortgages and such other Loan Documents as the
Agent may request, in form and substance satisfactory to the Agent,
together with assurances satisfactory to the Agent for the
recordations of the modifications to the Mortgages in the real
estate records of all appropriate jurisdictions.

(f) The Agent shall have received (i) such documentary,
intangible or similar taxes with respect to the Collateral and
Mortgaged Property and (ii) such additional and/or new title
insurance and title insurance endorsements with respect to the
Mortgaged Property as may be necessary to maintain the Agent's
perfected security interest (including existing priority) in the
Collateral and Mortgaged Property with respect to the Obligations
(including, without limitation, the Supplemental Revolving Loans
and the D Tranche Term Loan) and as the Agent may otherwise
reasonably request.

(g) The Agent shall have received the signed opinion of
Sidley & Austin, counsel to the Borrower and its Subsidiaries,
dated the Restatement Date and addressed to the Agent, the Co-

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Agents and all of the Lenders in substantially the form set forth
on EXHIBIT 6.3(G) hereto, with such changes (if any) therein as
shall be acceptable to the Agent and as to such other matters as
the Agent may reasonably request, and the Agent shall have received
the signed opinions addressed to all of the Lenders of such local
counsel reasonably satisfactory to the Agent as the Agent may
reasonably request.

(h) The Agent shall have received a copy of the
resolutions (in form and substance reasonably satisfactory to the
Agent) adopted by the Board of Directors of the Borrower,
authorizing or relating to (i) the execution, delivery and
performance of this Agreement and the other documents and
instruments provided for herein, (ii) the consummation of the
transactions contemplated hereby and thereby, (iii) the
confirmation of the liens, pledges, mortgages and security
interests granted pursuant to the Security Agreements and the
Mortgages by the Borrower, together with the articles of
incorporation and by-laws of the Borrower, all certified by the
Secretary or an Assistant Secretary of the Borrower. Such
certificate shall be dated the Restatement Date and shall state
that the resolutions, articles of incorporation and by-laws set
forth therein have not been amended, modified, revoked or rescinded
as of such date and are at such date in full force and effect.

(i) The Agent shall have received certified copies of
the certificate of incorporation of the Borrower from its
jurisdiction of incorporation and evidence of its good standing
therein.

(j) The Agent shall have received a certificate of the
Secretary or an Assistant Secretary of the Borrower, dated the
Restatement Date as to the incumbency and signature of the officers
of the Borrower executing any Loan Document and any certificate or
other document or instrument to be delivered pursuant hereto by or
on behalf of the Borrower, together with evidence of the incumbency
of such Secretary or Assistant Secretary, as the case may be.

(k) Simultaneously with the funding of the D Tranche
Term Loan or as soon thereafter as may be possible without
incurring breakage costs under SECTION 2.16, the Borrower shall
utilize proceeds of Supplemental Revolving Loans and/or the D
Tranche Term Loan to repay outstanding Revolving Loans such that,
after giving effect thereto and to the application of the proceeds
of the D Tranche Term Loan, the Revolving Loan Availability Ratio
and the Supplemental Revolving Loan Availability Ratio are
equalized as nearly as possible.

(l) The Agent shall have received a certificate executed
by a Responsible Officer on behalf of the Borrower, dated the
Restatement Date and in the form of EXHIBIT 6.3(L) hereto.

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(m) Contemporaneously with the funding of the D Tranche
Term Loan, the Borrower shall have paid in full the Additional
Fees, the Amendment Fees and the Waiver Fees.

(n) All corporate and other proceedings taken in
connection with the transactions hereunder at or prior to the
Restatement Date and all documents incident thereto shall be
reasonably satisfactory in form and substance to the Agent.

(o) The Agent shall have received such other documents
or legal opinions as the Agent or the Required Lenders may
reasonably request, all in form and substance satisfactory to the
Agent. The Borrower shall have furnished to the Agent or the
Lenders such additional copies or executed counterparts of the
documents referred to above as the Agent or any Lender may request.

In the event that all of the foregoing conditions
precedent have not been satisfied or waived on or before April 15,
1996, this Agreement (other than the required payment of certain
Additional Fees as separately agreed to between the Borrower and
BT) shall be of no further force and effect and the Existing Credit
Agreement shall continue in full force and effect.

ARTICLE VII

EVENTS OF DEFAULT

Section 7.1 EVENTS OF DEFAULT. The occurrence of any
of the following events shall constitute an "EVENT OF DEFAULT":

(a) PAYMENTS. The Borrower (i) shall fail to pay when
due (whether at maturity, upon acceleration, by mandatory
prepayment or otherwise) any payment of principal on any Obligation
or (ii) shall default in the payment of interest on any Obligation
or default in the payment of any fee or other amount owing
hereunder or under any other Loan Document when due and, in the
case of this clause (ii), such default in payment shall continue
for a period of five (5) Business Days; or

(b) REPRESENTATIONS AND WARRANTIES. Any representation
or warranty on the part of the Borrower contained in, or
incorporated by reference in, any Basic Agreement or any document,
instrument or certificate delivered pursuant thereto shall have
been incorrect in any material respect when made or deemed to have
been made; or

(c) CERTAIN COVENANTS. The Borrower shall default in
the performance or observance of any term, covenant, condition or
agreement on its part to be performed or observed under SECTION 5.1
(except SECTIONS 5.1.1(B)-(H), 5.1.2, 5.1.3(B), 5.1.4, 5.1.5
(giving effect to any cure or remedy periods in the documents

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referred to in such Sections), 5.1.6, 5.1.7, 5.1.8, 5.1.9, 5.1.12 and
5.1.15), 5.2 (except for SECTION 5.2.1 with respect to non-contractual
Liens) or 5.3; or

(d) OTHER COVENANTS. The Borrower shall default in the
performance or observance of any term, covenant, condition or
agreement on its part to be performed or observed hereunder or
under any Basic Agreement (and not constituting an Event of Default
under any other clause of this SECTION 7.1) and, with respect only
to such defaults as are capable of being remedied, such default
shall continue unremedied for a period of thirty (30) days after
written or telephonic (promptly confirmed in writing) notice
thereof has been given to the Borrower by the Agent or any Lender;
or

(e) BANKRUPTCY. The Borrower or any of its Subsidiaries
shall become insolvent or generally fail to pay, or admit in
writing its inability to pay, its debts as they become due, or
shall voluntarily commence any proceeding or file any petition
under any bankruptcy, insolvency or similar law or seeking
dissolution or reorganization or the appointment of a receiver,
trustee, custodian or liquidator for it or a substantial portion of
its property, assets or business or to effect a plan or other
arrangement with its creditors, or shall file any answer admitting
the jurisdiction of the court and the material allegations of an
involuntary petition filed against it in any bankruptcy, insolvency
or similar proceeding, or shall be adjudicated bankrupt, or shall
make a general assignment for the benefit of creditors, or shall
consent to, or acquiesce in the appointment of, a receiver,
trustee, custodian or liquidator for a substantial portion of its
property, assets or business; or

(f) INVOLUNTARY PROCEEDINGS. Involuntary proceedings or
an involuntary petition shall be commenced or filed against the
Borrower or any of its Subsidiaries under any bankruptcy,
insolvency or similar law or seeking the dissolution or
reorganization of it or the appointment of a receiver, trustee,
custodian or liquidator for it or of a substantial part of its
property, assets or business, or any writ, judgment, warrant of
attachment, execution or similar process shall be issued or levied
against a substantial part of its property, assets or business, and
such proceedings or petition shall not be dismissed, or such writ,
judgment, warrant of attachment, execution or similar process shall
not be released, vacated or fully bonded, within sixty (60) days
after commencement, filing or levy, as the case may be, or any
order for relief shall be entered in any such proceeding; or

(g) INDEBTEDNESS FOR MONEY BORROWED. (i) The Borrower
or any of its Subsidiaries (other than SVCPI) shall default in the
payment when due, whether at stated maturity or otherwise, of any
Indebtedness for Money Borrowed having an aggregate principal
amount of $10 million or more, (ii) an event of default as defined

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in any mortgage, indenture, agreement or instrument under which
there may be issued, or by which there may be secured or evidenced,
any such Indebtedness for Money Borrowed shall occur which permits
any holder thereof to cause any such Indebtedness for Money
Borrowed of the Borrower or any of its Subsidiaries (other than
SVCPI) to become due and payable prior to the stated maturity or
due date thereof, or (iii) any event or condition shall occur which
with notice or lapse of time or both permits such Indebtedness for
Money Borrowed of the Borrower or any of its Subsidiaries (other
than SVCPI) to be declared due and payable prior to its stated
maturity or due date; PROVIDED, HOWEVER, that solely with respect
to S-CC or any of its Subsidiaries (but only in the event that S-CC
constitutes a Subsidiary of the Borrower), (A) any event described
in subsection (i) above shall constitute an Event of Default only
if the payment default relates to the final maturity of the
relevant Indebtedness for Money Borrowed and the holder thereof has
commenced legal action in respect of such default and (B) any event
described in subsection (ii) or (iii) above shall constitute an
Event of Default only if the relevant "event of default", "event"
or "condition" results in any such Indebtedness for Money Borrowed
being declared due and payable prior to its stated maturity or due
date; or

(h) JUDGMENTS. One or more judgments or decrees shall
be entered against the Borrower or any of its Subsidiaries
involving, individually or in the aggregate, a liability of $10
million or more and a sufficient number of such judgments or
decrees shall not have been vacated, discharged, satisfied or
stayed pending appeal within thirty (30) days from the entry
thereof so as to bring the aggregate below the $10 million
threshold set forth above; or

(i) BASIC AGREEMENTS. (i) Any of the Basic Agreements
shall cease for any reason to be in full force and effect (other
than termination in accordance with its terms) or the obligor
thereunder shall disavow or seek to discontinue its obligations
thereunder, or shall contest the validity or enforceability of any
thereof; or (ii) any Lien purported to be granted pursuant to the
Security Agreements or the Mortgages for any reason shall cease to
be a legal, valid or enforceable lien and security interest in the
Collateral or the Mortgaged Property, as the case may be; or

(j) ERISA. Either (i) any Reportable Event which
constitutes reasonable grounds for the termination of any Plan by
the PBGC or for the appointment by the appropriate United States
District Court of a trustee to administer or liquidate any Plan
shall have occurred; (ii) a trustee shall be appointed by a United
States District Court to administer any Plan; (iii) the PBGC shall
institute proceedings to terminate any Plan; (iv) any Plan shall be
terminated; or (v) the Borrower, any of its Subsidiaries or any
ERISA Affiliate shall become liable to the PBGC pursuant to ERISA
Sections 4063 or 4064; AND the aggregate outstanding liability of

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the Borrower, all of its Subsidiaries, and all ERISA Affiliates
with respect to the Plan (assuming the Plan had terminated) and all
other Plans as to which any of the events (i) through (v) has
occurred exceeds $10 million or a contribution failure occurs with
respect to any Plan sufficient to give rise to a Lien under Section
302(f) of ERISA; or

(k) OTHER ERISA. Either (i) a trustee shall be appointed
by a United States District Court to administer any Multiemployer
Plan; (ii) the PBGC shall institute proceedings to terminate
any Multiemployer Plan; (iii) the Borrower, any of its Subsidiaries
or any ERISA Affiliates shall become liable to any Multiemployer
Plan pursuant to ERISA Section 4201; or (iv) any Multiemployer Plan
shall be terminated; AND the aggregate outstanding liability of
the Borrower, all of its Subsidiaries, and all ERISA Affiliates
with respect to the Multiemployer Plan (assuming the Multiemployer
Plan had terminated if either (i) or (ii) has occurred) and all other
Multiemployer Plans as to which any of the events (i) through (iv) has
occurred exceeds $20 million; or

(l) CROSS-DEFAULTS. Any default or event of default
shall occur under any of the Subsidiary Guarantees, the Security
Agreements, the Mortgages, any other Basic Agreement, the L/C
Agreement or the Continental Guaranty; PROVIDED, HOWEVER, that for
purposes of this Section and SECTION 7.1(G), no Default or Event of
Default shall be deemed to have occurred under the Continental
Guaranty to the extent that such Default or Event of Default arises
solely out of a cross-default under the Continental Guaranty to the
debt instruments of SVCPI or S-CC and Continental has neither
sought to enforce any remedies under the Continental Guaranty in
respect thereof nor given the Borrower written notice of its intent
to do so upon the passage of time or the occurrence or non-occurrence
of specified events; or

(m) CHANGE OF CONTROL. There shall have occurred a
Change of Control.

Section 7.2 REMEDIES. If an Event of Default shall
occur and be continuing, the Agent may and, at the direction of the
Required Lenders shall, take one or more of the following actions:
(a) by written or oral or telephonic notice (in the case of oral or
telephonic notice confirmed in writing promptly thereafter) to the
Borrower declare the Total Maximum Commitment to be terminated
whereupon the Total Maximum Commitment shall forthwith terminate,
(b) by written or oral or telephonic notice (in the case of oral or
telephonic notice confirmed in writing promptly thereafter) to the
Borrower declare all sums then owing by the Borrower hereunder to
be forthwith due and payable, whereupon all such sums shall become
and be immediately due and payable without presentment, demand,
protest or notice of any kind (except as expressly provided for
herein), all of which are hereby expressly waived by the Borrower,

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or (c) exercise any remedies available under any Loan Document or
otherwise. In the case of the occurrence of any Event of Default
described in clause (E) or (F) of SECTION 7.1, the Total Maximum
Commitment shall forthwith terminate and the Obligations, together
with accrued interest thereon, shall become due and payable
forthwith without the requirement of any such acceleration or
request, and without presentment, demand, protest or other notice
of any kind, all of which are expressly waived, and other amounts
payable by the Borrower hereunder shall also become immediately due
and payable, all without notice of any kind.

If the maturity of the Obligations has been accelerated
pursuant to the preceding paragraph, the Borrower shall, on the
Business Day it receives notice from the Agent or the Required
Lenders thereof, deposit in an account with the Agent, for the
benefit of the Revolving Lenders, an amount in cash equal to the
L/C Obligations as of such date. Such deposit shall be held by the
Agent as collateral for the payment and performance of the L/C
Obligations. The Agent shall have exclusive dominion and control,
including the exclusive right of withdrawal, over such account.
Other than any interest earned on the investment of such deposits
in Permitted Investments, which investments shall be made at the
option and sole discretion of the Agent, such deposits shall not
bear interest. Interest or profits, if any, on such investments
shall accumulate in such account. Monies in such account shall (i)
automatically be applied by the Agent to reimburse the Facing Agent
and BT for any Letter of Credit disbursement, (ii) be held for the
satisfaction of the reimbursement obligations of the Borrower at
such time and (iii) be applied to satisfy the Obligations. If the
Borrower is required to provide an amount of cash collateral
hereunder as a result of an acceleration of the Obligations, such
amount (to the extent not applied as aforesaid) shall be returned
to the Borrower within three Business Days after all Events of
Default have been cured or waived and the acceleration has been
rescinded and annulled as provided in the succeeding paragraph.

Anything in this SECTION 7.2 to the contrary
notwithstanding, the Agent shall, if requested by the Required
Lenders (or all the Lenders if required by the terms of SECTION
9.2), within thirty (30) days of (a) the delivery to the Borrower
of a notice of acceleration of the Obligations or (b) an automatic
acceleration of the Obligations by reason of the occurrence of any
Event of Default described in clause (E) or (F) of SECTION 7.1,
rescind and annul any acceleration of the Obligations; PROVIDED,
HOWEVER, that at the time such acceleration is so rescinded and
annulled (i) all past due interest and principal, if any, on the
Obligations and all other sums payable under this Agreement and the
other Loan Documents (except any principal and interest on any
Obligations which has become due and payable by reason of such
acceleration pursuant to this SECTION 7.2) shall have been duly
paid and (ii) no other Event of Default or Unmatured Event of
Default shall have occurred and be continuing and the Agent shall

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have received the certificate of an Executive Officer of the
Borrower to such effect. If any reduction in commitments has
occurred pursuant to this SECTION 7.2 in connection with any such
acceleration, then upon the rescission and annulment of such
acceleration pursuant to this SECTION 7.2, the Revolving Loan
Commitment of each Revolving Lender, the Supplemental Revolving
Loan Commitment of each Supplemental Lender and the Swing Line
Commitment of the Swing Line Lender shall be reinstated to the
respective amounts thereof which would have been in effect on the
date of such rescission and annulment had no commitment reduction
occurred pursuant to this SECTION 7.2.

ARTICLE VIII

THE AGENT

In this ARTICLE VIII, the Lenders agree among themselves
as follows:

Section 8.1 APPOINTMENT. The Lenders hereby appoint
BT as Agent hereunder and under each other Loan Document as herein
specified. Each Lender hereby irrevocably authorizes and each
holder of any Obligation by the acceptance thereof shall be deemed
irrevocably to authorize the Agent to take such action on its
behalf under the provisions of this Agreement and the other Basic
Agreements (including, without limitation, to give notices and take
such actions on behalf of the Required Lenders as are consented to
in writing by the Required Lenders) and any other instruments,
documents and agreements referred to herein and therein and to
exercise such powers hereunder and thereunder as are specifically
delegated to the Agent by the terms hereof and thereof and such
other powers as are reasonably incidental thereto. The Agent may
perform any of their respective duties hereunder, or under the Loan
Documents, by or through their respective agents or employees.

Section 8.2 NATURE OF DUTIES. The Agent shall not
have any duties or responsibilities, express or implied, except
those expressly set forth in this Agreement and the other Loan
Documents. The duties of the Agent shall be mechanical and
administrative in nature. The Agent shall not have by reason of
this Agreement a fiduciary relationship in respect of any Lender,
any Co-Agent or the Borrower. Nothing in this Agreement or any of
the Loan Documents, expressed or implied, is intended to or shall
be so construed as to impose upon the Agent any obligations in
respect of this Agreement or any of the Loan Documents except as
expressly set forth herein or therein. Each Lender shall make its
own independent investigation of the financial condition and
affairs of the Borrower and its Subsidiaries in connection with the
making and the continuance of the Loans and the issuance of Letters
of Credit hereunder, and shall make its own appraisal of the
creditworthiness of the Borrower. The Agent shall not have any
duty or responsibility, either initially or on a continuing basis,

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to provide any Lender with any credit or other information with respect
thereto, whether coming into its possession before making of the Loans or at
any time or times thereafter. The Agent will promptly notify each Lender at
any time that the Required Lenders have instructed it to act or refrain from
acting pursuant to ARTICLE VII.

Section 8.3 RIGHTS, EXCULPATION, ETC. Neither the Agent nor any of
its officers, directors, employees or agents shall be liable to any Lender
for any action taken or omitted by it hereunder or under any of the Loan
Documents, or in connection herewith or therewith, unless caused by its or
their gross negligence or willful misconduct. Neither the Agent nor any of
its officers, directors, employees or agents shall be responsible to any
Lender for or have any duty to ascertain, inquire into, or verify (i) any
recitals, statements, representations or warranties made in connection with
any Loan Document or any Borrowing hereunder, (ii) the performance or
observance of any of the covenants or agreements of any obligor under any
Loan Document, including, without limitation, any agreement by an obligor to
furnish information directly to each Lender, (iii) the satisfaction of any
condition specified in ARTICLE VI, except receipt of items required to be
delivered to the Agent, or (iv) the execution, effectiveness, genuineness,
validity, enforceability, collectability or sufficiency of any of the Loan
Documents or the financial condition of the Borrower or any of its
Subsidiaries. The Agent shall not be required to make any inquiry concerning
either the performance or observance of any of the terms, provisions or
conditions of any of the Loan Documents or the financial condition of the
Borrower or any of its Subsidiaries, or the existence or possible existence
of any Unmatured Event of Default or Event of Default unless requested to do
so by the Required Lenders. The Agent shall have no duty to disclose to the
Co-Agents or the Lenders information that is not required to be furnished by
the Borrower to the Agent at such time, but is voluntarily furnished by the
Borrower to the Agent (either in its capacity as Agent or in its individual
capacity). The Agent may at any time request instructions from the Lenders
with respect to any actions or approvals which by the terms of any of the
Loan Documents the Agent is permitted or required to take or to grant, and if
such instructions are requested, the Agent shall be absolutely entitled to
refrain from taking any action or to withhold any approval and shall not be
under any liability whatsoever to any Person for refraining from any action
or withholding any approval under any of the Loan Documents until it shall
have received such instructions from the Required Lenders. Any such
instructions and any action taken or failure to act pursuant thereto shall be
binding on all of the Lenders. Without limiting the foregoing, no Lender
shall have any right of action whatsoever against the Agent as a result of
the Agent acting or refraining from acting under any of the Loan Documents in
accordance with the instructions of the Required Lenders. The

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Lenders hereby acknowledge that the Agent shall be under no duty to take any
discretionary action permitted to be taken by it pursuant to the provisions of
this Agreement unless it shall be requested in writing to do so by the Required
Lenders.

Section 8.4 EMPLOYMENT OF AGENTS AND COUNSEL. The Agent may
execute any of its duties as Agent hereunder and under any other Loan
Document by or through employees, agents and attorneys-in-fact and shall not
be answerable to the Lenders or the Co-Agents, except as to money or
securities received by it or its authorized agents, for the default or
misconduct of any such agents or attorneys-in-fact selected by it with
reasonable care. The Agent shall be entitled to advice of counsel concerning
all matters pertaining to the agency hereby created and its duties hereunder
and under any other Loan Document.

Section 8.5 RELIANCE. The Agent shall be entitled to rely upon any
written notice, statement, certificate, order or other document or any telephone
message reasonably believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person, and, with respect to all matters
pertaining to any of the Loan Documents and its duties hereunder or thereunder,
upon advice of counsel selected by it.

Section 8.6 INDEMNIFICATION. To the extent that the Agent is not
reimbursed and indemnified by the Borrower, the Lenders will reimburse and
indemnify the Agent for and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on,
incurred by, or asserted against the Agent, acting pursuant hereto, in any way
relating to or arising out of any of the Loan Documents or any action taken or
omitted by the Agent, under any of the Loan Documents, in proportion to each
Lender's respective ratable share of the aggregate of the Total Maximum
Commitment (or, if the Commitments have been terminated, in proportion to their
Commitments immediately prior to such termination); PROVIDED, HOWEVER, that no
Lender shall be liable for any fees payable to the Agent pursuant to SECTION 3.9
or for any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from the
Agent's gross negligence or willful misconduct. The obligations of the Lenders
under this SECTION 8.6 shall survive the payment in full of the Obligations and
the termination of this Agreement.

Section 8.7 NOTICE OF DEFAULT. The Agent shall not be deemed to
have knowledge or notice of the occurrence of any Event of Default or Unmatured
Event of Default hereunder unless the Agent has received written notice from a
Lender or the Borrower referring to this Agreement describing such Event of
Default or Unmatured Event of Default and stating that such notice is a
"notice of

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default". In the event that the Agent receives such a notice, the Agent
shall give prompt notice thereof to the Lenders.

Section 8.8 THE AGENT INDIVIDUALLY. With respect to its Revolving
Loan Pro Rata Share, Term Loan Pro Rata Share, Additional Term Loan Pro Rata
Share, Supplemental Revolving Loan Pro Rata Share, D Tranche Term Loan Pro Rata
Share, Maximum Commitment, Additional Term Loan Commitment, Supplemental
Revolving Loan Commitment and D Tranche Term Loan Commitment hereunder and the
Loans made or Letters of Credit issued by it, the Agent in its individual
capacity shall have and may exercise the same rights and powers hereunder and is
subject to the same obligations and liabilities as and to the extent set forth
herein for any other Lender or holder of an Obligation. The terms "Lenders",
"Required Lenders", "Majority Revolving Lenders", "Majority Term Lenders",
"Majority Additional Term Lenders", "Majority Supplemental Revolving Lenders" or
"Majority D Tranche Lenders" or any similar terms shall, unless the context
clearly otherwise indicates, include the Agent in its individual capacity as a
Lender, one of the Required Lenders or a holder of an Obligation. The Agent may
accept deposits from, lend money to, and generally engage in any kind of
banking, trust or other business with the Borrower or any Subsidiary of the
Borrower as if they were not acting as Agent pursuant hereto.

Section 8.9 RESIGNATION BY THE AGENT.

(a) The Agent may resign from the performance of all its functions and
duties hereunder at any time by giving 15 Business Days' prior written notice to
the Borrower and the Lenders. Such resignation shall take effect upon the
acceptance by a successor Agent of appointment pursuant to clauses (b) and (c)
below or as otherwise provided below.

(b) Upon any such notice of resignation by the Agent, the Required
Lenders shall appoint a successor Agent who shall be satisfactory to the
Borrower and shall be an incorporated bank or trust company having total assets
in excess of $3 billion (or the foreign currency equivalent thereof).

(c) If a successor Agent shall not have been so appointed within said
15 Business Day period, the Agent, with the consent of the Borrower, shall then
appoint a successor Agent who shall serve as Agent until such time, if any, as
the Required Lenders, with the consent of the Borrower, appoint a successor
Agent as provided above.

(d) If no successor Agent has been appointed pursuant to clause (b) or
(c) by the 20th Business Day after the date such notice of resignation was given
by the Agent, the Agent's resignation shall become effective and the Required
Lenders shall thereafter perform all the duties of the Agent hereunder until
such

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time, if any, as the Required Lenders, with the consent of the Borrower,
appoint a successor Agent as provided above.

Section 8.10 HOLDERS OF OBLIGATIONS. The Agent may deem and treat
the payee of any Obligation as reflected on the books and records of the Agent
as the owner thereof for all purposes hereof unless and until a written notice
of the assignment or transfer thereof shall have been filed with the Agent
pursuant to SECTION 9.12(d). Any request, authority or consent of any Person
who, at the time of making such request or giving such authority or consent, is
the holder of any Obligation shall be conclusive and binding on any subsequent
holder, transferee or assignee of such Obligation or of any Obligation or
Obligations granted in exchange therefor.

Section 8.11 CO-AGENTS. None of the Lenders identified on the cover
page or signature pages of this Agreement as a "Co-Agent" shall have any right,
power, obligation, liability, responsibility or duty under this Agreement or any
other Loan Document other than those applicable to all Lenders as such. Each
Lender acknowledges that it has not relied, and will not rely, on any of the
Lenders identified as Co-Agents in deciding to enter into this Agreement or in
taking or refraining from taking any action hereunder or pursuant hereto.

ARTICLE IX

MISCELLANEOUS

Section 9.1 NO WAIVER; MODIFICATIONS IN WRITING. No failure or
delay on the part of the Agent or any Lender in exercising any right, power or
remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
The remedies provided for herein and in the other Loan Documents are cumulative
and are not exclusive of any remedies that may be available to the Agent or any
Lender at law, in equity or otherwise.

Section 9.2 AMENDMENTS. No amendment, modification, supplement,
termination or waiver of or to any provision of this Agreement, nor consent to
any departure by the Borrower or any of its Subsidiaries therefrom, shall be
effective unless the same shall be in writing and signed by or on behalf of the
Required Lenders; PROVIDED, HOWEVER, that no such amendment, modification,
supplement, termination, waiver or consent, as the case may be, which
(i) reduces the rate of interest on any Loan or reduces the principal amount of
any Loan or the amount of fees payable by the Borrower hereunder, or forgives
any such payment or any part thereof; (ii) extends the Term Loan Maturity Date
or the Revolver Termination Date or the scheduled date for the payment of
interest

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on any Loan; (iii) changes this SECTION 9.2 or the definitions of the terms
"Required Lenders", "Revolving Loan Pro Rata Share" or "Term Loan Pro Rata
Share"; (iv) changes the Maximum Commitment of any Lender hereunder;
(v) releases the Liens created by the Loan Documents upon all or substantially
all of the Collateral and the Mortgaged Property (except where Substitute
Collateral is provided or as otherwise permitted by SECTION 9.13) or changes the
provisions of SCHEDULE 1.1(b) hereto relating to the release of all of the
Collateral and Mortgaged Property; or (vi) releases or terminates all or
substantially all of the Subsidiary Guarantees shall be effective unless the
same shall be signed by or on behalf of (A) in the case of any changes
described in clause (i), (ii) or (iii) (other than changing the definition of
"Required Lenders") above, each Term Lender if amounts payable to the Term
Lenders would be affected by such change or each Revolving Lender if amounts
payable to the Revolving Lenders would be affected by such change, with each
class of Lenders voting as a separate class, and (B) in the case of any changes
described in clause (iv), (v) or (vi) above, each Lender hereunder; PROVIDED
FURTHER, that except as provided in SECTION 3.6(f), no such amendment,
modification, supplement, termination, waiver or consent which changes the
application of any prepayments or scheduled repayments of any Loans, reduces the
amount of or waives any prepayments or scheduled repayments of any Loans, or
extends the time of payment for any prepayments or scheduled repayments of any
Loans, shall be effective unless the same shall be signed by or on behalf of (i)
to the extent such prepayment or repayment applies to the Term Loan, Term
Lenders holding Term loans representing more than 50% of the aggregate
outstanding principal amount of the Term Loan (the "MAJORITY TERM LENDERS"),
and (ii) to the extent such prepayment or repayment applies to the Revolving
Loan, Revolving Lenders holding Revolving Loans and Revolving Loan Commitments,
if any, representing more than 50% of the sum of (x) the aggregate outstanding
principal amount of the Revolving Loans and (y) the Total Available Revolving
Commitment (the "MAJORITY REVOLVING LENDERS"); and PROVIDED FURTHER, that no
such amendment, modification, supplement, termination, waiver or consent, as the
case may be, which has the effect of (i) increasing the duties or obligations of
the Agent hereunder; or (ii) increasing the standard of care or performance
required on the part of the Agent, the Swing Line Lender or any Facing Agent
hereunder, or (iii) reducing or eliminating the fees, indemnities or immunities
to which the Agent, the Swing Line Lender or any Facing Agent is entitled
hereunder (including, without limitation, any amendment or modification of this
Section) shall be effective unless the same shall be signed by or on behalf of
the Agent, the Swing Line Lender or such Facing Agent, as the case may be. Any
amendment, modification or supplement of or to any provision of this Agreement,
any waiver of any provision of this Agreement, and any consent to any departure
by the Borrower from the terms of any provision of this Agreement, shall be
effective only in the specific instance and for the specific purpose for which
made or given.

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Section 9.3 CERTAIN OTHER AMENDMENTS; AMENDMENTS AFFECTING
ADDITIONAL LENDERS, SUPPLEMENTAL REVOLVING LENDERS AND D TRANCHE LENDERS. No
amendment which changes (i) this clause (i) or the definition of "Term Loan Pro
Rata Share" shall be effective unless the same shall be signed by or on behalf
of each Term Lender which at the time has outstanding any portion of the Term
Loan or (ii) this clause (ii) or the definition of "Revolving Loan Pro Rata
Share" shall be effective unless the same shall be signed by or on behalf of
each Revolving Lender which at the time has made or has outstanding a portion of
the Revolving Loan Commitment or the Revolving Loans. In addition, without
limiting or changing the provisions of SECTION 9.2, no amendment, modification,
supplement, termination, waiver or consent of or to any provision of this
Agreement which (i) reduces the rate of interest on any Additional Term Loan or
reduces the principal amount of any Additional Term Loan, or forgives any such
payment or any part thereof, (ii) extends the Additional Term Loan Maturity Date
or the scheduled date for the payment of interest on any Additional Term Loan,
(iii) changes this second sentence of SECTION 9.3 or the definition of the term
"Additional Term Loan Pro Rata Share" or (iv) changes the Additional Term Loan
Commitment of any Additional Lender hereunder shall be effective unless the same
shall be signed by or on behalf of each Additional Lender if amounts payable to
the Additional Lenders would be affected by such change; PROVIDED, HOWEVER, that
except as provided in SECTION 3.6(f), no such amendment, modification,
supplement, termination, waiver or consent which changes the application of any
prepayments or scheduled repayments of the Additional Term Loan, reduces the
amount of or waives any prepayments or scheduled repayments of the Additional
Term Loan, or extends the time of payment for any prepayments or scheduled
repayments of the Additional Term Loan, shall be effective unless the same shall
be signed by or on behalf of Additional Lenders holding Additional Term Loans
representing more than 50% of the aggregate outstanding principal amount of the
Additional Term Loan (the "MAJORITY ADDITIONAL TERM LENDERS"). Without limiting
or changing the provisions of SECTION 9.2, no amendment, modification,
supplement, termination, waiver or consent of or to any provision of this
Agreement which (i) reduces the rate of interest on any Supplemental Revolving
Loan or reduces the principal amount of any Supplemental Revolving Loan, or
forgives any such payment or any part thereof, (ii) extends the Supplemental
Revolver Termination Date or the scheduled date for the payment of interest on
any Supplemental Revolving Loan, (iii) changes this third sentence of
SECTION 9.3 or the definition of the term "Supplemental Revolving Loan Pro Rata
Share" or (iv) changes the Supplemental Revolving Loan Commitment of any
Supplemental Revolving Lender hereunder shall be effective unless the same shall
be signed by or on behalf of each Supplemental Revolving Lender if amounts
payable to the Supplemental Revolving Lenders would be affected by such change;
PROVIDED, HOWEVER, that no such amendment, modification, supplement,
termination, waiver or consent which changes the application of any prepayments
or scheduled repayments of the

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Supplemental Revolving Loan, reduces the amount of or waives any prepayments
or scheduled repayments of the Supplemental Revolving Loan, or extends the time
of payment for any prepayments or scheduled repayments of the Supplemental
Revolving Loan, shall be effective unless the same shall be signed by or on
behalf of Supplemental Revolving Lenders holding Supplemental Revolving Loans
representing more than 50% of the sum of (i) the aggregate outstanding
principal amount of the Supplemental Revolving Loans and (ii) the Total
Available Supplemental Revolving Commitment (the "MAJORITY SUPPLEMENTAL
REVOLVING LENDERS"). Without limiting or changing the provisions of SECTION
9.2, no amendment, modification, supplement, termination, waiver or consent of
or to any provision of this Agreement which (i) reduces the rate of interest on
any D Tranche Term Loan or reduces the principal amount of any D Tranche Term
Loan, or forgives any such payment or any part thereof, (ii) extends the
D Tranche Term Loan Maturity Date or the scheduled date for the payment of
interest on any D Tranche Term Loan, (iii) changes this fourth sentence of
SECTION 9.3 or the definition of the term "D Tranche Term Loan Pro Rata
Share" or (iv) changes the D Tranche Term Loan Commitment of any D Tranche
Lender hereunder shall be effective unless the same shall be signed by or on
behalf of each D Tranche Lender if amounts payable to the D Tranche Lenders
would be affected by such change; PROVIDED, HOWEVER, that except as provided in
SECTION 3.6(f), no such amendment, modification, supplement, termination, waiver
or consent which changes the application of any prepayments or scheduled
repayments of the D Tranche Term Loan, reduces the amount of or waives any
prepayments or scheduled repayments of the D Tranche Term Loan, or extends the
time of payment for any prepayments or scheduled repayments of the D Tranche
Term Loan, shall be effective unless the same shall be signed by or on behalf of
D Tranche Lenders holding D Tranche Term Loans representing more than 50% of the
aggregate outstanding principal amount of the D Tranche Term Loan (the "MAJORITY
D TRANCHE TERM LENDERS").

Section 9.4 NOTICES, ETC. Except where telephonic instructions or
notices are authorized herein to be given, all notices, demands, instructions
and other communications (collectively, "NOTICES") required or permitted to be
given to or made upon any party hereto or any other Person shall be in writing
and (except for written confirmations of telephonic or telex instructions) shall
be personally delivered or sent by registered or certified mail, postage
prepaid, return receipt requested, or by a reputable courier delivery service,
or by prepaid telex, TWX or telegram (with messenger delivery specified in the
case of a telegram), or by telecopier. Notices shall be deemed to be given for
purposes of this Agreement (a) if given by telex, when such telex is transmitted
to the telex number specified in this Section and the appropriate answerback is
received, (b) if given by mail, 72 hours after such communication is deposited
in the mails with first class postage prepaid, addressed as aforesaid or (c) if
given by any other means (including, without limitation, by air courier),

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when delivered at the address specified in this Section; PROVIDED, HOWEVER,
that any Notice of Borrowing to the Agent shall not be effective until
received. Unless otherwise specified in a Notice sent or delivered in
accordance with the foregoing provisions of this Section Notices shall be
given to or made upon the respective parties hereto at their respective
addresses (or to their respective telex, TWX or telecopier numbers) indicated
on their signature pages hereto or in any Assignment Agreement and, in the
case of telephonic instructions or notices, by calling the telephone number
or numbers indicated for such party. Except where notice is specifically
required by this Agreement or any other Basic Agreement, no notice to or
demand on the Borrower in any case shall entitle the Borrower to any other or
further notice or demand in similar or other circumstances.

Section 9.5 COSTS, EXPENSES AND TAXES. The Borrower agrees to pay
(without duplication) all reasonable costs and expenses incurred by the Agent in
connection with the negotiation, preparation, reproduction, execution and
delivery of this Agreement and the other Basic Agreements, any amendments,
waivers or modifications of any of the foregoing and any and all other documents
furnished pursuant hereto or thereto or in connection herewith or therewith,
including the reasonable fees and out-of-pocket expenses of Winston & Strawn,
special counsel to the Agent, any local counsel retained by the Agent,
reasonable attorney's fees and expenses or (but not as well as) the reasonable
allocated costs of staff counsel of the Agent as well as the reasonable fees and
out-of-pocket expenses of additional special counsel, independent public
accountants, investment advisors and other outside experts retained by or on
behalf of the Agent in connection with the administration of this Agreement or
with matters generally relating to this Agreement or any of the transactions
contemplated by this Agreement, and all costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses or (but not as well as) the
reasonable allocated costs of staff counsel, if any) incurred by the Agent or
any Lender in connection with the enforcement of this Agreement, any other Basic
Agreement or any other agreement furnished pursuant hereto or thereto or in
connection herewith or therewith. In addition, the Borrower shall pay any and
all stamp, original issue and other similar taxes payable or determined to be
payable in connection with the execution and delivery of this Agreement, any
Basic Agreement or the making of any Loan, and the Borrower agrees to save and
hold the Agent, the Co-Agents and each Lender harmless from and against any and
all liabilities with respect to or resulting from any delay in paying, or
omission to pay, such taxes. Expenses being reimbursed by the Borrower under
this Section include, without limitation, the cost and expense of obtaining an
appraisal of each parcel of real property or interest in real property described
in the Mortgages, which appraisals shall be in conformity with the applicable
requirements of any law or governmental rule, regulation, policy, guideline or
directive (whether or not having

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the force of law), or any interpretation thereof, including, without
limitation, the provisions of Title XI of the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, as amended, reformed or otherwise
modified from time to time, and any rules promulgated to implement such
provisions. Any portion of the foregoing fees, costs and expenses which
remains unpaid more than thirty (30) days following the Agent's or any
Lender's statement and request for payment thereof shall bear interest from
the date of such statement and request to the date of payment at the Default
Rate.

Section 9.6 INDEMNIFICATION. The Borrower will (a) indemnify and
hold harmless each Lender, each Co-Agent and the Agent and each director,
officer, employee, agent or attorney and Affiliate thereof (each such Person
an ("INDEMNIFIED PARTY") from and against all losses, claims, damages,
expenses or liabilities to which such Indemnified Party may become subject,
insofar as such losses, claims, damages, expenses or liabilities (or actions,
suits or proceedings including any inquiry or investigation or claims in
respect thereof) arise out of, in any way relate to, or result from the
transactions contemplated by any Basic Agreement or the use by the Borrower
of the proceeds of any Loan, and (b) reimburse each Indemnified Party upon
their demand, for any reasonable legal or other expenses (including (but not
as well as) the reasonable allocated costs of staff counsel) incurred in
connection with investigating, preparing to defend or defending any such
loss, claim, damage, liability, action or claim; PROVIDED, HOWEVER, that no
such Person shall have the right to be so indemnified hereunder for its own
gross negligence or willful misconduct or bad faith as finally determined by
a court of competent jurisdiction after all appeals and the expiration of
time to appeal. If any action, suit or proceeding arising from any of the
foregoing is brought against the Agent, any Co-Agent, any Lender or any other
Person indemnified or intended to be indemnified pursuant to this SECTION
9.6, the Borrower will, if requested by the Agent, any Co-Agent, any Lender
or any such indemnified Person, resist and defend such action, suit or
proceeding or cause the same to be resisted and defended by counsel
reasonably satisfactory to the Person or Persons indemnified or intended to
be indemnified. Each Indemnified Party shall, unless the Agent, a Lender or
other Indemnified Party has made the request described in the preceding
sentence and such request has been complied with, have the right to employ
its own counsel (or (but not as well as) staff counsel) to investigate and
control the defense of any matter covered by such indemnity and the
reasonable fees and expenses of such counsel shall be at the expense of the
indemnifying party. The obligations of the Borrower under this SECTION 9.6,
under SECTIONS 2.12(h) AND (i) and under SECTION 2.13 shall survive the
termination of this Agreement and the discharge of the Borrower's other
obligations hereunder and under the Obligations.

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Excluding any liability arising out of the gross negligence or
willful misconduct of any Indemnified Party, the Borrower further agrees to
indemnify and hold each Indemnified Party harmless from all loss, cost
(including reasonable attorneys' fees), liability and damage whatsoever
incurred by any Indemnified Party by reason of any violation of any
Environmental Laws or Environmental Permits or for the Release or threatened
Release of any Contaminant into the environment for which the Borrower or any
of its Subsidiaries has any liability or which occurs upon the Mortgaged
Property or which is related to any property currently or formerly owned,
leased or operated by or on behalf of the Borrower or any of its
Subsidiaries, or by reason of the imposition of any Environmental Lien or
which occurs by a breach of any of the representations, warranties or
covenants relating to environmental matters contained herein, including,
without limitation, by reason of any matters disclosed in SCHEDULE 4.21,
PROVIDED that, with respect to any liabilities arising from acts or failure
to act for which the Borrower or any of its Subsidiaries is strictly liable
under any Environmental Law or Environmental Permit, the Borrower's
obligation to each Indemnified Party under this indemnity shall likewise be
without regard to fault on the part of the Borrower or any such Subsidiary.
If the Borrower shall fail to do any act or thing which it has covenanted to
do hereunder or any representation or warranty on the part of the Borrower or
any Subsidiary contained herein or in any other Loan Document shall be
breached, the Agent may (but shall not be obligated to), after requesting the
Borrower to do such act or thing and the failure by the Borrower to
immediately undertake such action to the satisfaction of the Agent, do the
same or cause it to be done or remedy any such breach, and may expend its
funds for such purpose, and will use its best efforts to give prompt written
notice to the Borrower that it proposes to take such action. Any and all
amounts so expended by the Agent shall be repaid to it by the Borrower
promptly upon the Agent's demand therefor, with interest at the Default Rate
in effect from time to time during the period including the date so expended
by the Agent to the date of repayment. The obligations of the Borrower under
this SECTION 9.6 shall survive the termination of this Agreement and the
discharge of the Borrower's other Obligations hereunder.

Section 9.7 SPECIAL EXPENDITURES. If the Borrower shall fail to do
any act or thing which it has covenanted to do hereunder or under any other
Basic Agreement or any representation or warranty on the part of the Borrower
contained herein or therein shall be breached, the Agent may (but shall not
be obligated to) do the same or cause it to be done or remedy any such
breach, and may expend its funds for such purpose, and will use its best
efforts to give prompt written notice to the Borrower that it proposes to
take such action. Any and all amounts so expended by the Agent shall be
repayable to it by the Borrower promptly upon the Agent's demand therefor,
with interest at the Default Rate in

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effect from time to time during the period from the date so expended by the
Agent to the date of repayment.

Section 9.8 CONFIRMATIONS. Each of the Borrower and each holder of
any Obligation agree from time to time, upon written request received by it
from the other, to confirm to the other in writing (with a copy of each such
confirmation to the Agent) the aggregate unpaid principal amount of the Loans
then outstanding in respect of such Obligation; each such holder agrees from
time to time, upon written request received by it from the Borrower, to make
the relevant internal records of such holder maintained by it with respect to
such Obligation available for reasonable inspection by the Borrower at the
office of such holder.

Section 9.9 ADJUSTMENT.

(a) If at any time any Revolving Lender, Supplemental Revolving
Lender, Term Lender, Additional Lender or D Tranche Lender (a "BENEFITTED
LENDER") shall receive any payment (other than (i) a payment received by the
Swing Line Lender in respect of any Swing Line Loan in which no Revolving
Lenders have purchased a participation pursuant to SECTION 2.11(d) and
(ii) non-pro rata payments to any Term Lender, Additional Lender or D Tranche
Lender solely as the result of Waived Proceeds being retained by the Borrower
pursuant to SECTION 3.6(f)) of all or part of any of its Loans, or interest
thereon, including as the result of SECTION 9.10, in a greater proportion
relative to such Lender's Revolving Loan Pro Rata Share, Supplemental
Revolving Loan Pro Rata Share, Term Loan Pro Rata Share, Additional Term Loan
Pro Rata Share or D Tranche Term Loan Pro Rata Share, as applicable, than any
such payment to any other Revolving Lender, Supplemental Revolving Lender,
Term Lender, Additional Lender or D Tranche Lender in respect of such other
Lender's Revolving Loan Pro Rata Share, Supplemental Revolving Loan Pro Rata
Share, Term Loan Pro Rata Share, Additional Term Loan Pro Rata Share or D
Tranche Term Loan Pro Rata Share, as applicable, or interest thereon, such
Benefitted Lender shall purchase for cash from the other Revolving Lenders,
Supplemental Revolving Lenders, Term Lenders, Additional Lenders or D Tranche
Lenders, as the case may be, such portion of each such other Lender's Loans
as shall be necessary to cause such Benefitted Lender to share the excess
payment ratably with each of the Revolving Lenders, Supplemental Revolving
Lenders, Term Lenders, Additional Lenders or D Tranche Lenders, as the case
may be; PROVIDED, HOWEVER, that if all or any portion of such excess payment
or benefits is thereafter recovered from such Benefitted Lender, such
purchase shall be rescinded, and the purchase price and benefits returned, to
the extent of such recovery, but without interest. The Borrower agrees that
each Lender so purchasing a portion of another Lender's Loans may exercise
all rights of payment (including, without limitation, rights of set-off) with
respect to such portion as fully as if such Lender were the direct holder of
such portion.

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(b) If any Lender (a "COLLATERAL BENEFITTED LENDER") shall at any
time receive any collateral in respect of its Loans (whether voluntary or
involuntary, by set-off, pursuant to events or proceedings of the nature
referred to in SECTION 7.1(e) OR 7.1(f) hereof, or otherwise) in a greater
proportion than any such collateral received by any other Lender in respect
of such other Lender's Loans, such Collateral Benefitted Lender shall provide
such other Lenders with the benefits of any such collateral as shall be
necessary to cause such Collateral Benefitted Lender to share the benefits of
such collateral ratably with each of the Lenders; PROVIDED, HOWEVER, that if
all or any portion of such benefits is thereafter recovered from such
Collateral Benefitted Lender, such benefits shall be returned to the extent
of such recovery but without interest.

Section 9.10 RIGHT OF SETOFF. (a) In addition to any rights and
remedies of the Lenders provided by law, each Lender shall have the right,
without prior notice to the Borrower, any such notice being expressly waived
by the Borrower, upon the occurrence and during the continuance of an Event
of Default, to setoff and apply against any Indebtedness, whether matured or
unmatured, of the Borrower to such Lender, any amount owing from such Lender
to the Borrower, at or at any time after, the occurrence of such Event of
Default, and the aforesaid right of setoff may be exercised by such Lender
against the Borrower or against any trustee in bankruptcy, debtor in
possession, assignee for the benefit of creditors, receivers, or execution,
judgment or attachment creditor of the Borrower, or against anyone else
claiming through or against, the Borrower or such trustee in bankruptcy,
debtor in possession, assignee for the benefit of creditors, receivers, or
execution, judgment or attachment creditor, notwithstanding the fact that
such right of setoff shall not have been exercised by such Lender prior to
the making, filing or issuance, or service upon such Lender of, or of notice
of, any such petition, assignment for the benefit of creditors, appointment
or application for the appointment of a receiver, or issuance of execution,
subpoena, order or warrant. Each Lender agrees promptly to notify the
Borrower and the Agent after any such setoff and application made by such
Lender, PROVIDED that the failure to give such notice shall not affect the
validity of such setoff and application.

(b) The Borrower expressly agrees that to the extent the Borrower
makes a payment or payments and such payment or payments, or any part
thereof, are subsequently invalidated, declared to be fraudulent or
preferential, set aside or are required to be repaid to a trustee, receiver,
or any other party under any bankruptcy act, state or federal law, common law
or equitable cause, then to the extent of such payment or repayment, the
Indebtedness to the Lenders or part thereof intended to be satisfied shall be
revived and continued in full force and effect as if said payment or payments
had not been made.

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Section 9.11 EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by different parties hereto on
separate counterparts, each of which counter-parts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same Agreement.

Section 9.12 BINDING EFFECT; ASSIGNMENT.

(a) This Agreement shall be binding upon, and inure to the benefit
of, the Borrower, the Agent and the Lenders and their respective successors
and assigns upon the execution by the Borrower, the Agent, the Required
Lenders (as defined in the Existing Credit Agreement), the Majority Revolving
Lenders (as defined in the Existing Credit Agreement), the Majority Term
Lenders (as defined in the Existing Credit Agreement), the Majority
Additional Term Lenders (as defined in the Existing Credit Agreement) and
each Supplemental Revolving Lender and D Tranche Lender; PROVIDED, HOWEVER,
that the Borrower may not assign its rights or obligations hereunder or in
connection herewith or any interest herein (voluntarily, by operation of law
or otherwise) without the prior written consent of the Lenders.

(b) Any Lender may make, carry or transfer Loans at, to or for the
account of, any of its branch offices or the office of an Affiliate of such
Lender.

(c) Each Lender may at any time sell to one or more banks or other
entities ("PARTICIPANTS") participating interests in all or any portion of
its Commitment and related outstanding obligations of such Lender hereunder
(in respect of any Lender, its "CREDIT EXPOSURE"); PROVIDED, HOWEVER, that in
the case of a Revolving Lender, it sells it Credit Exposure ratably between
its Revolving Loan Commitment and its participation interest in the Florence
Letters of Credit. In the event of any such sale by a Lender of
participating interests to a Participant, such Lender's obligations under
this Agreement shall remain unchanged, such Lender shall remain solely
responsible for the performance thereof, and the Borrower and the Agent shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement. The Borrower agrees
that if amounts outstanding under this Agreement or any of the Loan Documents
are due or unpaid, or shall have been declared or shall have become due and
payable upon the occurrence of an Event of Default, each Participant shall be
deemed to have the right of set-off in respect of its participating interest
in amounts owing under this Agreement and the Loan Documents to the same
extent as if the amount of its participating interest were owing directly to
it as a Lender under this Agreement or any other Loan Document, PROVIDED that
such right of set-off shall be subject to the obligation of such Participant
to share with the Lenders, and the Lenders agree to share with such
Participant, as provided in SECTION 9.9. The

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Borrower also agrees that each Participant shall be entitled to the benefits
of SECTIONS 2.13 AND 2.16 with respect to its participation in the Loans and
Letters of Credit outstanding from time to time, PROVIDED that such
Participant's benefits under SECTIONS 2.13 AND 2.16 shall be limited to the
benefits that the Lender granting the participation would be entitled to
thereunder with respect to the Credit Exposure so participated. Each Lender
agrees that any agreement between such Lender and any such Participant in
respect of such participating interest shall not restrict such Lender's right
to approve or agree to any amendment, supplement, modification or waiver to
this Agreement or any of the Loan Documents except for any amendment,
supplement, modification or waiver which reduces the rate or amount of
principal, interest or fees payable by the Borrower, extends the Term Loan
Maturity Date, the Revolver Termination Date, the Additional Term Loan Maturity
Date, the Supplemental Revolver Termination Date, the D Tranche Term Loan
Maturity Date or the scheduled date for any payment of interest (but only if
such Participant is participating in the Term Loan, the Additional Term Loan,
the Revolving Loan, the Supplemental Revolving Loan or the D Tranche Term Loan,
as applicable, affected thereby), or release all or substantially all of the
Collateral and Mortgaged Property (other than when Substitute Collateral is
provided and other than in accordance with SECTION 9.13) or release or
terminate all or substantially all of the Subsidiary Guarantees.

(d) Any Lender may at any time assign to one or more banks or other
entities, including an Affiliate thereof (each an "ASSIGNEE"), all or any
part of its Credit Exposure pursuant to an Assignment Agreement (an
"ASSIGNMENT AGREEMENT") in substantially the form of EXHIBIT 9.12(d) hereto,
PROVIDED that (i) in the case of a Revolving Lender, it assigns its Credit
Exposure ratably between its Revolving Loan Commitment and its participation
interest in the Florence Letters of Credit, (ii) any assignment by a
Revolving Lender of all or any portion of its Revolving Loan Commitment shall
require the prior written consent of each Facing Agent which has issued a
Letter of Credit that remains outstanding at such time (with the consent of
such Facing Agent not to be unreasonably withheld), (iii) at no time shall
any Revolving Lender or Supplemental Revolving Lender assign any portion of
its Revolving Loan Commitment or Supplemental Revolving Loan Commitment if
after giving effect to such assignment the transferor Lender's or the
Assignee's aggregate amount of Revolving Loan Commitment and Supplemental
Revolving Loan Commitment, on a combined basis, shall be less than
$15,000,000 (the "REVOLVING MINIMUM AMOUNT") (except (A) with respect to an
assignment of all of such Lender's Revolving Loan Commitment and/or
Supplemental Revolving Loan Commitment and (B) in the event that the
Revolving Loan Commitments and Supplemental Revolving Loan Commitments have
been terminated, then the Revolving Minimum Amount shall refer to such
transferor Lender's (1) Revolving Loan Pro Rata Share of the aggregate
principal amount of Revolving Loans and Swing Line Loans

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outstanding and the aggregate L/C Obligations and Florence L/C Obligations
outstanding and (2) Supplemental Revolving Loan Pro Rata Share of the aggregate
principal amount of Supplemental Revolving Loans outstanding), PROVIDED that
(I) all Affiliates of any transferor Lender or any Assignee shall be included
in the determination of whether such transferor Lender or such Assignee
satisfies the Revolving Minimum Amount and (II) the Revolving Minimum Amount
shall automatically reduce PRO RATA based on any reduction in (x) the Total
Revolving Loan Commitments and Total Supplemental Revolving Loan Commitments
or (y) if the Total Revolving Loan Commitments and Total Supplemental
Revolving Loan Commitments have been terminated, the aggregate principal
amount of Revolving Loans, Supplemental Revolving Loans and Swing Line Loans
outstanding and the aggregate L/C Obligations and Florence L/C Obligations
outstanding, (iv) at no time shall any Term Lender assign any portion of its
Term Loan if after giving effect to such assignment the transferor Lender's
or the Assignee's principal amount of the Term Loan shall be less than
$7,500,000 (the "TERM MINIMUM AMOUNT") (except with respect to an assignment
of all of such Term Lender's Term Loan), PROVIDED that (A) the Term Minimum
Amount shall automatically reduce PRO RATA based on any reduction in the
aggregate principal amount of the Term Loan outstanding and (B) all
Affiliates of any transferor Lender or any Assignee shall be included in the
determination of whether such transferor Lender or such Assignee satisfies
the Term Minimum Amount but in no event shall any single Lender's or
Affiliate's principal amount of the Term Loan be less than $2,500,000 (with
such amount reducing PRO RATA based on any reduction in the aggregate
outstanding principal amount of the Term Loan), (v) at no time shall any
Additional Lender assign any portion of its Additional Term Loan if after
giving effect to such assignment the transferor Lender's or the Assignee's
principal amount of the Additional Term Loan shall be less than $5,000,000
(the "ADDITIONAL TERM MINIMUM AMOUNT") (except with respect to an assignment
of all of such Lender's Additional Term Loan), PROVIDED that (A) the
Additional Term Minimum Amount shall automatically reduce PRO RATA based on
any reduction in the aggregate principal amount of the Additional Term Loan
outstanding and (B) all Affiliates of any transferor Lender or any Assignee
shall be included in the determination of whether such transferor Lender or
such Assignee satisfies the Additional Term Minimum Amount but in no event
shall any single Lender's or Affiliate's principal amount of the Additional
Term Loan be less than $2,500,000 (with such amount reducing PRO RATA based
on any reduction in the aggregate outstanding principal amount of the
Additional Term Loan), (vi) at no time shall any D Tranche Lender assign any
portion of its D Tranche Term Loan if after giving effect to such assignment
the transferor Lender's or the Assignee's principal amount of the D Tranche
Term Loan shall be less than $5,000,000 (the "D TRANCHE TERM MINIMUM AMOUNT")
(except with respect to an assignment of all of such Lender's D Tranche Term
Loan), PROVIDED that (A) the D Tranche Term Minimum Amount shall
automatically reduce PRO RATA based on any reduction in the

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aggregate principal amount of the D Tranche Term Loan outstanding and (B) all
Affiliates of any transferor Lender or any Assignee shall be included in the
determination of whether such transferor Lender or such Assignee satisfies
the D Tranche Term Minimum Amount but in no event shall any single Lender's
or Affiliate's principal amount of the D Tranche Term Loan be less than
$2,500,000 (with such amount reducing PRO RATA based on any reduction in the
aggregate outstanding principal amount of the D Tranche Term Loan), (vii) any
assignment shall require the prior written consent of the Agent, which
consent shall not be unreasonably withheld, and (viii) any assignment to an
Assignee other than another Lender, or an Affiliate of the assigning Lender
or another Lender, shall require the prior written consent of the Borrower
(with the consent of the Borrower not to be unreasonably withheld). Upon
execution of an Assignment Agreement and the payment of a nonrefundable
assignment fee of $3,500 in immediately available funds to the Agent at its
Payment Office in connection with each such assignment, each Assignee shall
become a party to this Agreement as a Lender and the Assignee shall have, to
the extent of such assignment, the same rights and benefits as it would have
if it were a Lender hereunder and the holder of the Obligations and, if the
Assignee has expressly assumed, for the benefit of the Borrower, some or all
of the transferor Lender's obligations hereunder, such transferor Lender
shall be relieved of its obligations hereunder to the extent of such
assignment and assumption. Such Assignment Agreement shall be deemed to
amend this Agreement and SCHEDULE 1.1(A) hereto to the extent, and only to
the extent, necessary to reflect the addition of such Assignee as a Lender
and the resulting adjustment of all or a portion of the rights and
obligations of such transferor Lender under this Agreement (including its
Revolving Loan Commitment, Supplemental Revolving Loan Commitment, Term Loan
Commitment, Additional Term Loan Commitment and/or D Tranche Term Loan
Commitment), the Maximum Commitments, the determination of Revolving Loan Pro
Rata Share, Supplemental Revolving Loan Pro Rata Share, Term Loan Pro Rata
Share, Additional Term Loan Pro Rata Share or D Tranche Term Loan Pro Rata
Share (rounded to twelve decimal places), the Loans and any outstanding
Letters of Credit and new Notes shall be issued, at the Borrower's expense,
to such Assignee and to the assigning Lender upon the request of such
Assignee or such assigning Lender, such new Notes to be in conformity with
the requirements of SECTION 2.2 (with the appropriate modifications) to the
extent needed to reflect the revised Commitment of the Assignee and the
assigning Lender.

(e) For so long as any Lender shall be in default of its obligation
to fund its Revolving Loan Pro Rata Share of any Revolving Loan, to fund its
Supplemental Revolving Loan Pro Rata Share of any Supplemental Revolving
Loan, to reimburse the Facing Agent for any drawings under any Letters of
Credit or to fund its participation in any Swing Line Loan, (i) no Revolving
Loan Commitment Fees or Supplemental Revolving Loan Commitment Fees shall be
accrued by or paid to such Lender and (ii) for purposes of

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the definition of "Required Lenders," such Lender shall be deemed not to have
any Loans or Revolving Loan Commitment or Supplemental Revolving Loan
Commitment outstanding.

(f) Notwithstanding any other provision set forth in this Agreement,
any Lender may at any time pledge or create a security interest in all or any
portion of its rights under this Agreement and the other Loan Documents
(including, without limitation, the Notes held by it) in favor of any Federal
Reserve Bank in accordance with Regulation A of the Federal Reserve Board
without notice to or consent of the Borrower and no such pledge or assignment
shall release the transferor Lender from its obligations hereunder.

(g) A Lender may furnish any information concerning the Borrower or
any of its Subsidiaries in the possession of such Lender from time to time to
Lenders, Assignees and participants (including prospective Assignees and
participants), PROVIDED that with respect to any such information which has
been identified or designated by the Borrower as confidential and which has
not previously been made public, any such Assignee or participant shall have
agreed to hold such information in confidence and not to disclose such
information (subject to the exceptions specified in SECTION 5.1.6 hereof) and
any prospective Assignee or participant shall have agreed to return such
information which is in written form to the Borrower or otherwise destroy
such information if it does not become an actual Assignee or participant.

(h) Any Lender that is not a citizen or resident of the United
States of America, a corporation, partnership or other entity created or
organized in or under the laws of the United States of America, or an estate
or trust the income of which is subject to United States federal income
taxation regardless of the source of its income (a "NON-U.S. LENDER") and
that could become completely exempt from withholding of any Taxes in respect
of payment of any obligations due to such Non-U.S. Lender with respect to the
Term Loan, Additional Term Loan or D Tranche Term Loan if the applicable
Notes were in registered form for United States federal income tax purposes
may request the Borrower (through the Agent), and the Borrower agrees
thereupon, to exchange any promissory note(s) evidencing the Term Loan,
Additional Term Loan or D Tranche Term Loan for promissory note(s) registered
as provided in this SECTION 9.12(H) below (each, a "REGISTERED NOTE"). A
Registered Note shall be substantially in the form of EXHIBIT 2.2(A) except
that it shall be made payable to such Non-U.S. Lender or registered assigns.
Registered Notes shall be deemed to be and shall be Term Notes, Additional
Term Notes or D Tranche Term Notes for all purposes of this Agreement.
Registered Notes may not be exchanged for promissory notes that are not
Registered Notes. Each Non-U.S. Lender holding a Registered Note (a
"REGISTERED NOTEHOLDER") shall comply with the requirements of SECTION
3.11(C). The Agent shall maintain a register (the "REGISTER") on which it

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shall enter the names of the registered owners of the Term Loan, Additional
Term Loan or D Tranche Term Loan evidenced by Registered Notes. The Agent,
acting as an agent of the Borrower solely with respect to the maintenance of
the Register, shall incur no liabilities with respect to its maintenance of
the Register and recordation of the information therein. The entries in the
Register shall be conclusive, in the absence of manifest error, and the
Borrower and the Agent shall treat each Term Lender, Additional Lender and D
Tranche Lender in whose name a Term Loan, Additional Term Loan or D Tranche
Term Loan and the Registered Note evidencing the same is registered as the
owner thereof for all purposes of this Agreement, notwithstanding notice to
the contrary. No assignment of a Registered Note and the Term Loan,
Additional Term Loan or D Tranche Term Loan evidenced thereby shall be
effective unless the Agent has recorded the appropriate Assignment Agreement
in the Register and such assignment otherwise complies with the requirements
of SECTION 9.12. Any assignment or transfer of all or any part of the Term
Loan, Additional Term Loan or D Tranche Term Loan and the Registered Note(s)
evidencing the same shall be registered on the Register only upon surrender
for registration of assignment or transfer of the Registered Note(s)
evidencing the Term Loan, Additional Term Loan or D Tranche Term Loan, duly
endorsed by (or accompanied by a written instrument of assignment or transfer
duly executed by) the Registered Noteholder thereof, and thereupon one or
more new Registered Note(s) in the same aggregate principal amount shall be
issued to the designated assignee(s) or transferee(s). The Register shall be
available at the offices were kept by the Agent for inspection by the
Borrower and any Term Lender, Additional Lender or D Tranche Lender at any
reasonable time upon reasonable prior written notice to the Agent.

Section 9.13 RELEASE OF COLLATERAL. The following provisions
shall govern the release of collateral granted by the Borrower to the Agent
pursuant to the Loan Documents.

(a) Upon termination of all Revolving Loan Commitments, Supplemental
Revolving Loan Commitments, the Swing Line Commitment, the L/C Agreement,
the L/C Participation Agreements and the Florence Letters of Credit, and the
payment in full of all outstanding Revolving Loan Obligations, Supplemental
Revolving Loan Obligations, Swing Line Obligations, L/C Obligations and
Florence L/C Obligations such that no such Commitments, Loan Documents or
Obligations remain outstanding, the Borrower shall be entitled to the
release of the Collateral and Mortgaged Property set forth on SCHEDULE
9.13(A) hereto from the Lien of the Loan Documents upon the request of the
Borrower subject to the following terms and conditions: (i) the Agent shall
have received a certificate from the Borrower's chief executive or chief
financial officer certifying that no Event of Default or Unmatured Event of
Default has occurred and is continuing as of the date on which the Agent
proposes to release such Collateral and Mortgaged Property; and (ii) at the
Borrower's cost and expense, the

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Agent shall have received from one or more independent third parties
appraisals and/or valuations acceptable to, and in form, substance and
using methodologies satisfactory to, the Required Lenders, demonstrating
that, after giving effect to such release, the ratio of (A) the aggregate
value of the remaining Collateral and Mortgaged Property, as such value is
determined by such independent third parties and acceptable to the Required
Lenders, to (B) the Obligations which remain outstanding under the Loan
Documents is not less than 2.50 to 1.00. The determination by the Required
Lenders pursuant to the preceding sentence shall be made by those Term
Lenders, Additional Lenders and D Tranche Lenders constituting the Required
Lenders at such time.

(b) Upon receipt by the Borrower and the Agent of an officer's
certificate and such other information delivered pursuant to SECTION
5.1.1(C), beginning with any such officer's certificate and information
delivered after December 31, 1994, the Borrower shall be entitled to the
release of all of the Collateral and Mortgaged Property from the Lien of the
Loan Documents subject to the following terms and conditions: (i) the Agent
shall have received a certificate from the Borrower's chief executive or
chief financial officer certifying that no Event of Default or Unmatured
Event of Default has occurred and is continuing as of the date on which the
Agent proposes to release the Collateral and Mortgaged Property; and (ii)
the officer's certificate delivered pursuant to SECTION 5.1.1(C) satisfies
the terms and conditions set forth on SCHEDULE 1.1(B) hereto.

(c) The Borrower shall be entitled to the release of all or any
portion of the Collateral and/or Mortgaged Property upon the request of the
Borrower subject to the following terms and conditions: (i) the Agent shall
have received a certificate from the Borrower's chief executive or chief
financial officer certifying that no Event of Default or Unmatured Event of
Default has occurred and is continuing as of the date on which the Agent
proposes to release such Collateral and Mortgaged Property; (ii) prior to
the release date of such Collateral and/or Mortgaged Property the Borrower
shall have furnished to the Agent for the benefit of the Lenders substitute
collateral ("SUBSTITUTE COLLATERAL") which (A) is acceptable to the Required
Lenders and (B) has a value as determined by the Required Lenders at least
equal to the aggregate value of the Collateral and/or Mortgaged Property to
be released; and (iii) such Substitute Collateral shall be provided pursuant
to documentation and legal opinions in form and substance satisfactory to
the Agent. Any such Substitute Collateral shall be deemed to have been
granted in consideration of the release of such Collateral and/or
Mortgaged Property.

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(d) The Borrower shall be entitled to the release of any portion of
the Collateral and/or Mortgaged Property which is the subject of any
sale, transfer or other disposition permitted by SECTION 5.2.12 upon the
request of the Borrower subject to the following terms and conditions:
(i) at least ten (10) Business Days prior to the release date of such
Collateral and/or Mortgaged Property the Borrower shall have furnished to
the Agent in writing a description of such Collateral and/or Mortgaged
Property and the proposed terms of the sale, transfer or other
disposition thereof; (ii) the Agent shall have received a certificate
from the Borrower's chief executive or chief financial officer certifying
that no Event of Default or Unmatured Event of Default has occurred and
is continuing; and (iii) prior to or contemporaneously with such release,
the Agent shall have received any Material Sale Proceeds derived from
such disposition in immediately available funds pursuant to the terms of
SECTION 3.4(C) to be applied as a prepayment of the Obligations in
accordance with SECTION 3.6(C), unless any such Material Sale Proceeds
constitute Waived Proceeds pursuant to the terms of SECTION 3.6(F),
together with a written accounting of all proceeds from such sale,
transfer or other disposition and the determination of Material Sale
Proceeds resulting therefrom, in form and substance reasonably
satisfactory to the Agent; PROVIDED, HOWEVER, that inventory pledged to
the Agent pursuant to the Loan Documents may be sold or disposed of in
the ordinary course of business free and clear of the Liens created
thereby; and PROVIDED FURTHER, that immaterial portions of Collateral or
Mortgaged Property may for purposes of administrative practicality or
legal requirements be released by the Agent pursuant to the provisions,
if any, ofthe respective Security Agreements or Mortgages.

(e) Upon the satisfaction of the applicable conditions set forth in
SECTION 9.13(A), (B) or (C), the Agent shall within thirty (30) days
deliver to the Borrower all released Collateral and related documents
then in the custody or possession of the Agent and shall prepare and
execute release documents relating to the Collateral and Mortgaged
Property to be released and shall execute and deliver to the Borrower
such other documents and instruments as the Borrower may reasonably
request, all without recourse upon, or warranty whatsoever by, the Agent,
and at the cost and expense of the Borrower.

(f) The Borrower shall be entitled to the release of any portion of
the Mortgaged Property consisting of box converting facilities which are
used to collateralize Indebtedness for Money Borrowed incurred in
accordance with SECTION 5.2.2(x), upon the request of the Borrower
subject to the following terms and conditions: (i) at least thirty (30)
days (or such lesser number of days as to which the Agent may agree) prior
to the release date of such Mortgaged Property the Agent shall have
received appraisals or other documentation of such

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<PAGE>

Mortgaged Property which satisfy the terms and conditions of
SECTION 5.2.2(x); (ii) the Agent shall have received a certificate from
the Borrower's chief executive or chief financial officer certifying that
no Event of Default or Unmatured Event of Default has occurred and is
continuing; (iii) at least ten (10) Business Days (or such lesser number
of days as to which the Agent may agree) prior to the release date of such
Mortgaged Property the Borrower shall have furnished to the Agent in writing
a description of such Mortgaged Property, together with copies of all
documentation relating to such Indebtedness for Money Borrowed; and
(iv) the Agent shall have received such intercreditor agreements as
specified in SECTION 5.2.2(X).

SECTION 9.14 CONSENT TO JURISDICTION. THE BORROWER HEREBY
IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF ANY UNITED STATES
FEDERAL OR NEW YORK STATE COURT SITTING IN NEW YORK CITY IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER BASIC
AGREEMENT, AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN
RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
UNITED STATES FEDERAL OR NEW YORK STATE COURT AND THE BORROWER IRREVOCABLY
WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN
SUCH RESPECTIVE JURISDICTIONS. AS A METHOD OF SERVICE, THE BORROWER ALSO
IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION
OR PROCEEDING BROUGHT IN ANY COURT IN OR OF THE STATE OF NEW YORK BY THE
DELIVERY OF COPIES OF SUCH PROCESS TO THE BORROWER, AT ITS ADDRESS SPECIFIED
IN SECTION 9.4 HEREOF OR BY CERTIFIED MAIL DIRECT TO SUCH ADDRESS.

Section 9.15 GOVERNING LAW. This Agreement shall be deemed to be
a contract made under the laws of the State of New York, and for all purposes
shall be construed in accordance with the laws of said State, without regard
to principles of conflicts of law. Nothing contained in this Agreement and
no action taken by the Agent, any Co-Agent or any Lender pursuant hereto
shall be deemed to constitute the Agent, any Co-Agent or the Lenders a
partnership, an association, a joint venture or other entity.

Section 9.16 SEVERABILITY OF PROVISIONS. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.

Section 9.17 HEADINGS. The Table of Contents and Article and
Section headings used in this Agreement are for convenience of reference only
and shall not affect the construction of this Agreement.

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<PAGE>

Section 9.18 TIME. Time shall be of the essence of this Agreement.

Section 9.19 FURTHER ASSURANCES. The Borrower agrees to do such
further acts and things and to execute and deliver to the Agent such
additional assignments, agreements, powers and instruments as the Agent may
reasonably require or deem advisable to carry into effect the purposes of
this Agreement or to better assure and confirm unto the Agent and the
Lenders, their respective rights, powers and remedies hereunder.

Section 9.20 FLORIDA REAL PROPERTY. The parties hereto hereby
acknowledge that the Revolving Loans, Supplemental Revolving Loans and Swing
Line Loans are secured by real and personal property located both inside and
outside the State of Florida and hereby agree that for purposes of
calculating intangible taxes due under Section 199.133, Florida Statutes, the
first amounts advanced as Revolving Loans, Supplemental Revolving Loans and
Swing Line Loans shall be deemed to be the portion allocable to the
Collateral and Mortgaged Property consisting of real property located in the
State of Florida, and such portion allocable to such Collateral and Mortgaged
Property shall also be deemed to be the last to be repaid under the terms
hereof. Nothing herein shall limit the Agent's or any Lender's right to
recover or realize from the Collateral or Mortgaged Property located in the
State of Florida amounts in excess of that allocated to the Revolving Loans,
Supplemental Revolving Loans and Swing Line Loans or to apply amounts so
recovered or realized against the Obligations in such order as required
pursuant to the Loan Documents.

Section 9.21 EFFECT OF RESTATEMENT. This Agreement shall, except
as otherwise expressly set forth herein, supersede the Existing Credit
Agreement from and after the Restatement Date with respect to the
transactions hereunder and with respect to the Loans and Letters of Credit
outstanding under the Existing Credit Agreement as of Restatement Date. The
parties hereto acknowledge and agree, however, that (i) this Agreement and
all other Loan Documents executed and delivered herewith do not constitute a
novation, payment and reborrowing or termination of the Obligations under the
Existing Credit Agreement and the other Loan Documents as in effect prior to
the Restatement Date, (ii) such Obligations are in all respects continuing
with only the terms being modified as provided in this Agreement and the
other Loan Documents, (iii) the liens and security interests in favor of the
Agent for the benefit of the Lenders securing payment of such Obligations are
in all respects continuing and in full force and effect with respect to all
Obligations and (iv) all references in the other Loan Documents to this
Agreement shall be deemed to refer without further amendment to this
Agreement.

- 133 -
<PAGE>

[signature pages to follow]

- 134 -
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
date first above written.

STONE CONTAINER CORPORATION

By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------

Address:

Stone Container Corporation
150 North Michigan Avenue
39th Floor
Chicago, Illinois 60601
Attn: Randolph C. Read
Senior Vice President -
Chief Financial and
Planning Officer
Tel. No.: (312) 580-4604
Fax No.: (312) 580-7040

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<PAGE>

BANKERS TRUST COMPANY, in its
individual capacity and as Agent

By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------

Address:

Bankers Trust Company
233 South Wacker Drive
Suite 8400
Chicago, IL 60606
Attention: Loretta L. Summers,
Vice-President
Tel. No.: (312) 993-8006
Telex No.: 210106
(Answerback: BTCI-UR)
Fax No.: (312) 993-8218

With a copy to:

Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attention: Gregory S. Murray, Esq.
Tel. No.: (312) 558-5600
Fax No.: (312) 558-5700

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<PAGE>

BANK OF AMERICA ILLINOIS

By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------

Address:

Bank of America Illinois
231 South LaSalle Street
Chicago, IL 60697
Attn: Jon Kitei
Tel. No.: (312) 828-5121
Fax No.: (312) 828-7448

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<PAGE>

BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, in its individual
capacity and as a Co-Agent

By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------

Address:

Bank of America NT & SA
c/o Bank of America Illinois
231 South LaSalle Street
Chicago, IL 60697
Attn: Patricia P. Delgrande
Managing Director
Tel. No.: (312) 828-3122
Fax No.: (312) 987-1276

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<PAGE>

BANK OF BOSTON

By:
-------------------------
Name:
-----------------------
Title:
----------------------

Address:

Bank of Boston
100 Federal Street 1-9-1
Boston, Massachusetts 02110
Attn: Diana Ng
Tel. No.: (617) 434-8993
Telecopier No.: (617) 434-4929

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<PAGE>

THE BANK OF NEW YORK, in its individual
capacity and as a Co-Agent

By:
-------------------------
Name:
-----------------------
Title:
----------------------

Address:

The Bank Of New York
One Wall Street
19th Floor
New York, NY 10286
Attn: John Lambert
Tel. No.: (212) 635-8204
Telecopier No.: (212) 635-1208

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<PAGE>

THE BANK OF NOVA SCOTIA, in its
individual capacity and as a
Co-Agent

By:
-------------------------
Name:
-----------------------
Title:
----------------------

Address:

The Bank of Nova Scotia
(Chicago Branch)
181 West Madison Street
Suite 3700
Chicago, IL 60602
Attn: Robert Gaviglio
Tel. No.: (312) 201-4132
Fax No.: (312) 201-4108

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<PAGE>

CAISSE NATIONALE DE CREDIT AGRICOLE, in
its individual capacity and as a
Co-Agent

By:
-------------------------
Name:
-----------------------
Title:
----------------------

Address:

Caisse Nationale de Credit Agricole
(Chicago Branch)
55 East Monroe Street
Suite 4700
Chicago, IL 60603-5702
Attn: Lynn M. Rusinsky,
Vice President
Tel. No.: (312) 917-7449
Fax No.: (312) 323-2830

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<PAGE>

AERIES FINANCE LTD. CERES FINANCE LTD.

By: By:
------------------------- -------------------------
Name: Name:
----------------------- -----------------------
Title: Title:
---------------------- ----------------------

STRATA FUNDING LTD.

By:
-------------------------
Name:
-----------------------
Title:
----------------------

Address:

c/o Chancellor Senior Secured Management, Inc.
1166 Avenue of the Americas
New York, NY 10036
Attn: Christopher Jansen
Tel. No.: (212) 278-9001
Fax No.: (212) 278-9619

S-9
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<PAGE>

THE CHASE MANHATTAN BANK, N.A., in
its individual capacity and as a
Co-Agent

By:
-------------------------
Name:
-----------------------
Title:
----------------------

Address:

The Chase Manhattan Bank, N.A.
1 Chase Plaza
4th Floor
New York, NY 10081
Attn: Hans H. Heinsen,
Managing Director
Tel. No.: (212) 552-2396
Fax No.: (212) 552-7773

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<PAGE>

CHEMICAL BANK, in its individual
capacity and as a Co-Agent

By:
-------------------------
Name:
-----------------------
Title:
----------------------

Address:

Chemical Bank (Chicago Branch)
10 South LaSalle Street
23rd Floor
Chicago, IL 60603
Attn: Jon Twichell,
Vice President
Tel. No.: (312) 807-4038
Fax No.: (312) 346-9310

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<PAGE>

CHL HIGH YIELD LOAN PORTFOLIO, a Unit
of Chemical Bank

By:
-------------------------
Name:
-----------------------
Title:
----------------------

Address:

CHL High Yield Loan Portfolio,
a Unit of Chemical Bank
270 Park Avenue
8th Floor
New York, NY 10017-2070
Attn: Joyce Delucca
Tel. No.: (212) 270-4394
Fax No.: (212) 270-3860

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<PAGE>

COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENNE

By:
-------------------------
Name:
-----------------------
Title:
----------------------

Address:

Compagnie Financiere de CIC et de
l'Union Europeenne
520 Madison Avenue
New York, NY 10022
Attn: Sean Mounier,
First Vice President
Tel. No.: (212) 715-4413
Fax No.: (212) 715-4535

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<PAGE>

DRESDNER BANK AG (Chicago and Grand
Cayman Branches), in its individual
capacity and as a Co-Agent

By:
-------------------------
Name:
-----------------------
Title:
----------------------

Address:

Dresdner Bank AG
(Chicago and Grand Cayman Branches)
Suite 2700
190 South LaSalle Street
Chicago, IL 60603
Attn: John H. Schaus,
First Vice President
Tel. No.: (312) 444-1317
Fax No.: (312) 444-1305

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<PAGE>

THE EQUITABLE LIFE ASSURANCE SOCIETY
OF THE UNITED STATES

By:
-------------------------
Name:
-----------------------
Title:
----------------------

Address:

The Equitable Life Assurance Society
of the United States
a/c Annuity High Income
Alliance Capital Management
1345 Avenue of the Americas
38th Floor
New York, NY 10105
Attn: Tricia Hillman
Tel. No.: (212) 969-2270
Fax No.: (212) 969-1554

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<PAGE>

THE FIRST NATIONAL BANK OF CHICAGO, in
its individual capacity and as a
Co-Agent

By:
-------------------------
Name:
-----------------------
Title:
----------------------

Address:

The First National Bank of Chicago
One First National Plaza
Chicago, IL 60670
Attn: Karen F. Kizer,
Senior Vice President
Tel. No.: (312) 732-2330
Fax No.: (312) 732-5161

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<PAGE>

KEYPORT LIFE INSURANCE COMPANY

By: Chancellor Senior Secured Management, Inc.

By:
-------------------------
Name:
-----------------------
Title:
----------------------

Address:

Keyport Life Insurance Company
c/o Chancellor Senior Secured Management, Inc.
1166 Avenue of the Americas
New York, NY 10036
Attn: Steve Alfieri
Tel. No.: (212) 278-9563
Fax No.: (212) 278-9619

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<PAGE>

LEHMAN COMMERCIAL PAPER INC.

By: ___________________________________

Name: _________________________________

Title: ________________________________

Address:

Lehman Commercial Paper Inc.
c/o Lehman Brothers Inc.
Three World Financial Center
10th Floor
New York, NY 10285
Attn: Michelle Swanson
Tel. No.: (212) 526-0330
Fax No.: (212) 528-0819

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<PAGE>

THE LONG-TERM CREDIT BANK OF JAPAN, LTD.,
in its individual capacity and as a Co-Agent

By: ___________________________________

Name: _________________________________

Title: ________________________________

Address:

The Long-Term Credit Bank of Japan, Ltd.
190 South LaSalle Street
Suite 800
Chicago, IL 60603
Attn: John R. Carley,
Vice President
Tel. No.: (312) 853-9516
Fax No.: (312) 704-8505

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<PAGE>

MERITA BANK LTD., formerly known as Union
Bank of Finland, Ltd., Grand Cayman Branch

By: ___________________________________

Name: _________________________________

Title: ________________________________

Address:

Merita Bank Ltd.
c/o Union Bank of Finland, New York Branch
437 Madison Avenue
New York, NY 10022
Attn: Frank Maffei
Tel. No.: (212) 318-9314
Fax No.: (212) 421-4420

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<PAGE>

MERRILL LYNCH PRIME RATE MERRILL LYNCH SENIOR FLOATING RATE
PORTFOLIO FUND, INC.

By: Merrill Lynch Asset Management,
LP, as Investment Advisor By: ________________________________

By: _______________________________ Name: ______________________________

Name: ______________________________ Title: _____________________________

Title: _____________________________

SENIOR HIGH INCOME PORTFOLIO, INC. SENIOR HIGH INCOME PORTFOLIO II, INC.

By: _______________________________ By: ________________________________

Name: ______________________________ Name: ______________________________

Title: _____________________________ Title: _____________________________

SENIOR STRATEGIC INCOME FUND, INC.

By: _______________________________

Name: ______________________________

Title: _____________________________

Address:

Merrill Lynch
800 Scudders Mill Road
Plainsboro, NJ 08536
Attn: R. Douglas Henderson
Tel. No.: (609) 282-2059
Fax No.: (609) 282-2550

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<PAGE>

NATIONSBANK, N.A. (CAROLINAS), in its
individual capacity and as Co-Agent

By: ___________________________________

Name: _________________________________

Title: ________________________________

Address:

NationsBank (Chicago Branch)
233 South Wacker Drive
Suite 2800
Chicago, IL 60606-6308
Attn: Michael O. Lincoln,
Senior Vice President
Tel. No.: (312) 234-5612
Telecopier No.: (312) 234-5601

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<PAGE>

PEARL STREET, L.P.

By: ___________________________________

Name: _________________________________

Title: ________________________________

Address:

Pearl Street
85 Broad Street
New York, NY 10004
Attn: Nancy Unrath
Tel. No.: (212) 902-4425
Fax No.: (212) 902-3757

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<PAGE>

PROSPECT STREET SENIOR PORTFOLIO, L.P.

By: Prospect Street Senior Loan Corp.,
as Managing General Partner

By: ___________________________________

Name: _________________________________

Title: ________________________________

Address:

Prospect Street Senior Loan Corp.
Exchange Place
37th Floor
Boston, MA 02109
Attn: Preston I. Carnes, Jr.,
Vice President
Tel. No.: (617) 742-3800
Fax No.: (617) 742-9415

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Credit Agreement

<PAGE>

Name: ______________________________________

Title: _____________________________________

STICHTING RESTRUCTURED OBLIGATIONS
BACKED BY SENIOR ASSETS 2 (ROSA2)

By: Chancellor Senior Secured Management, Inc.,
as Portfolio Advisor

By: ________________________________________

Name: ______________________________________

Title: _____________________________________

Address:

c/o Chancellor Senior Secured Management, Inc.
1166 Avenue of the Americas
New York, NY 10036
Attn: Christopher Jansen
Tel. No.: (212) 278-9001
Fax No.: (212) 278-9619

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<PAGE>

SENIOR DEBT PORTFOLIO

By: Boston Management and Research, as
Investment Advisor

By: ___________________________________

Name: _________________________________

Title: ________________________________

Address:

Senior Debt Portfolio
c/o Eaton Vance Prime Rate Reserves
24 Federal Street
Boston, MA 02110
Attn: Michael J. Cannon
Tel. No.: (617) 348-0115
Fax No.: (617) 645-8474

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<PAGE>

THE SUMITOMO, BANK, LTD., CHICAGO BRANCH,
in its individual capacity and as a Co-Agent

By: ___________________________________

Name: _________________________________

Title: ________________________________

Address:

The Sumitomo Bank, Ltd., Chicago Branch
233 South Wacker Drive
Suite 4800
Chicago, IL 60606-6448
Attn: John F. DiLegge
Tel. No.: (312) 876-6444
Fax No.: (312) 876-6436

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<PAGE>

TORONTO DOMINION (TEXAS), INC., in its
individual capacity and as a Co-Agent

By: ___________________________________

Name: _________________________________

Title: ________________________________

Address:

The Toronto Dominion Bank
909 Fannin
Houston, TX 77010
Attn: Neva Nesbitt
Tel. No.: (713) 653-8245
Fax No.: (713) 951-9921

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<PAGE>

VAN KAMPEN MERRITT PRIME RATE INCOME
TRUST

By: ___________________________________

Name: _________________________________

Title: ________________________________

Address:

Van Kampen Merritt Prime Income Trust
One Parkview Plaza
OakBrook Terrace, IL 60181
Attn: Jeffrey W. Maillet,
Sr. Vice President - Portfolio Mgr.
Tel. No.: (708) 684-6000
Fax No.: (708) 684-6740

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<PAGE>

MEDICAL LIABILITY MUTUAL INSURANCE COMPANY

By: ________________________________________

Name: ______________________________________

Title: _____________________________________

Address:

c/o Chancellor Senior Secured Management, Inc.
1166 Avenue of the Americas
New York, NY 10036
Attn: Christopher Jansen
Tel. No.: (212) 278-9001
Fax No.: (212) 278-9619

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<PAGE>

FIRST ALABAMA BANK

By: ___________________________________

Name: _________________________________

Title: ________________________________

Address:

First Alabama Bank
417 North 20th Street
Birmingham, Alabama 35203
Attn: James E. Schmalz
Tel. No.: (205) 326-7905
Fax No.: (205) 326-7715

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<PAGE>

INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL
CORPORATION

By: _____________________________________

Name: ___________________________________

Title: __________________________________

Address:

Internationale Nederlanden (U.S.) Capital
Corporation
135 East 57th Street
New York, New York 10022
Attn: Joan M. Chiappe
Tel. No.: (212) 446-1742
Fax No.: (212) 371-9295

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<PAGE>

THE YASUDA TRUST & BANKING CO., LTD.
CHICAGO BRANCH

By: _____________________________________

Name: ___________________________________

Title: __________________________________

Address:

The Yasuda Trust & Banking Co., Ltd.
Chicago Branch
181 West Madison Street
Suite 4500
Chicago, Illinois 60602
Attn: K. Inoue
Tel. No.: (312) 683-3802
Fax No.: (312) 683-3899

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<PAGE>

APPALOOSA MANAGEMENT L.P.

By: ___________________________________

Name: _________________________________

Title: ________________________________

Address:

Appaloosa Management L.P.
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078
Attn: James E. Bolin
Tel. No.: (201) 376-5400
Fax No.: (201) 376-5415

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<PAGE>

INDOSUEZ CAPITAL FUNDING II, LIMITED

By: Indosuez Capital Luxembourg,
as Collateral Manager

By: ___________________________________

Name: _________________________________

Title: ________________________________

Address:

Indosuez Capital Funding II, Limited
1211 Avenue of the Americas
7th Floor
New York, New York 10036
Attn: Mike Aroughetti
Tel. No.: (212) 278-2206
Fax No.: (212) 278-2203

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<PAGE>

ING CAPITAL ADVISORS, INC.

By: ___________________________________

Name: _________________________________

Title: ________________________________

Address:

ING Capital Advisors, Inc.
333 South Grand Avenue
Suite 400
Los Angeles, California 90071
Attn: Beth Dagotti
Tel. No.: (213) 621-9061
Fax No.: (213) 626-6552

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<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto
duly authorized as of the date first above written.

STONE CONTAINER CORPORATION

By: __________________________

Name: ________________________

Title: _______________________

Address:

Stone Container Corporation
150 North Michigan Avenue
Chicago, Illinois 60601
Attn: Randolph C. Read
Senior Vice President,
Chief Financial and
Planning Officer
Tel. No.: (312) 580-4604
Telecopier No.: (312) 580-7040

S-1
<PAGE>

BANKERS TRUST COMPANY, in its
individual capacity and as Agent

By: __________________________

Name: ________________________

Title: _______________________

Address:

Bankers Trust Company
233 South Wacker Drive
Suite 8400
Chicago, IL 60606
Attention: Loretta L. Summers
Vice-President
Tel. No.: (312) 993-8006
Telex No.: 210106
(Answerback: BTCI-UR)
Telecopier No.: (312) 993-8218

With a copy to:

Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attention: Gregory S. Murray, Esq.
Tel. No.: (312) 558-5600
Telecopier No.: (312) 558-5700

S-2

<PAGE>

DEFINITIONAL APPENDIX
TO
CREDIT AGREEMENT

As used in this Agreement, unless the context requires a
different meaning, the following terms have the meanings indicated:

"ACCOUNTS RECEIVABLE FINANCING PROGRAM" means a program
of sales of, or transfers of interests in, receivables (whether
characterized as sales or as non-recourse loans) and related
contract rights and other property (the "RECEIVABLES") by the
Borrower and its Participating Subsidiaries to StoneSub, which
shall finance such purchases through (i) sales or transfers of
Receivables or borrowings or other debt issuances (which, except as
described in EXHIBIT 1.1(e) hereto, shall be non-recourse to the
Borrower and its Subsidiaries other than StoneSub) from one or more
limited purpose finance companies, investors participating in an
offering of debt securities, financial institutions or other
Persons not affiliated with the Borrower or through one or more
trusts originated by StoneSub (individually and collectively, the
"ISSUER"), (ii) capital contributions from the Borrower, (iii)
subordinated loans from the Borrower and its applicable
Participating Subsidiaries and (iv) collections from previously
purchased Receivables. Each separate financing arrangement within
the Accounts Receivable Financing Program is referred to as a
"RECEIVABLES FINANCING." All Receivables Financings which are in
existence at any time shall together not permit StoneSub to incur
more than, subject to the third proviso of the penultimate sentence
of SECTION 5.2.13, $500 million of Indebtedness for Money Borrowed
from the Issuer at any one time outstanding (and, in the event that
the Accounts Receivable Financing Program includes Canadian dollar
Receivables of Canadian Subsidiaries, without giving effect to
increases in such amount after the date of the incurrence of such
Indebtedness for Money Borrowed, or portion thereof, solely as the
result of subsequent fluctuations in the exchange rate between
United States Dollars and Canadian dollars) and shall be on terms
(considered as a whole) not materially more onerous to the Borrower
and the Lenders than those of Receivables Financings in existence
on the date hereof. The Lenders hereby acknowledge and agree that
any Receivables Financing purported to be structured as a sale of
Receivables to StoneSub by the Borrower or a Participating
Subsidiary and as to which the Borrower has received an opinion of
counsel as to the sale nature thereof shall constitute a sale of
such Receivables and not a loan from StoneSub secured by such
Receivables. Nothing herein shall prevent the Borrower from
alternatively structuring a Receivables Financing as the sale of
Receivables by StoneSub to the Issuer, PROVIDED that any such
Receivables Financing shall be subject to clause (iii) of the last
sentence of SECTION 5.2.2(p) for all purposes of this Agreement.

"ACQUISITION" is defined in SECTION 5.2.9.

Appendix - Page 1

<PAGE>
"ACQUIRING PERSON" means any person or group (as defined
in Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder as in
effect on the date of this Agreement (the "EXCHANGE ACT")) who or
which, together with all affiliates and associates (as defined in
Rule 12b-2 under the Exchange Act) becomes the beneficial owner of
shares of the Borrower having more than 50% of the total number of
votes that may be cast for the election of directors of the
Borrower; PROVIDED, HOWEVER, an Acquiring Person shall not include
(i) the Borrower, (ii) any Subsidiary of the Borrower, (iii) any
employee benefit plan of the Borrower or any Subsidiary of the
Borrower or any entity holding common stock of the Borrower for or
pursuant to the terms of any such plan, (iv) any descendant of
Joseph Stone or the spouse of any such descendant, the estate of
any such descendant or the spouse of any such descendant, any trust
or other arrangement for the benefit of any such descendant or the
spouse of any such descendant or any charitable organization
established by any such descendant or the spouse of any such
descendant (collectively, the "STONE FAMILY"), or (v) any group
which includes any member or members of the Stone Family and a
majority of the common stock held by such group is beneficially
owned by such member or members (such a group is hereinafter
referred to as a "STONE GROUP"). Notwithstanding the foregoing, no
Person shall become an Acquiring Person as the result of an
acquisition of common stock by the Borrower which, by reducing the
number of shares outstanding, increases the proportionate number of
shares beneficially owned by such Person to more than 50% or more
of the common stock of the Borrower then outstanding; PROVIDED,
HOWEVER, that if a Person shall become the beneficial owner of more
than 50% or more of the common stock of the Borrower then
outstanding by reason of share purchases by the Borrower and shall,
after such share purchases by the Borrower, become the beneficial
owner of any additional common stock of the Borrower, then such
Person shall be deemed to be an Acquiring Person.

"ADDITIONAL FEES" is defined in SECTION 3.10.

"ADDITIONAL LENDER" means, at any time, any Lender which
then has an Additional Term Loan Commitment or is owed any portion
of the Additional Term Loan.

"ADDITIONAL TERM LOAN" means, individually and
collectively, the loans made by each of the Additional Lenders to
the Borrower in accordance with SECTION 2.1(c), which Additional
Term Loan shall from time to time be comprised of Prime Rate Loans
or Eurodollar Rate Loans or any combination of the foregoing.

"ADDITIONAL TERM LOAN COMMITMENT" means, with respect to
each Additional Lender, the principal amount set forth opposite
such Additional Lender's name on SCHEDULE 1.1(e) hereto under the
caption "Amount of Additional Term Loan Commitment."

Appendix - Page 2

<PAGE>

"ADDITIONAL TERM LOAN MATURITY DATE" means October 1,
2003.

"ADDITIONAL TERM LOAN OBLIGATIONS" means the obligations
of the Borrower to repay the principal of, and pay the interest on,
the Additional Term Loan pursuant to SECTION 2.2(d).

"ADDITIONAL TERM LOAN PRO RATA SHARE" means, with respect
to any Additional Lender and any described aggregate or total
amount, the amount equal to the result obtained by multiplying such
described aggregate or total amount by a fraction, the numerator of
which shall be the portion of the Additional Term Loan made by such
Lender and outstanding at the time and the denominator of which
shall be the aggregate amount of the Additional Term Loan made by
all of the Additional Lenders and outstanding at the time.

"ADDITIONAL TERM NOTE" is defined in SECTION 2.2(d).

"ADJUSTED WORKING CAPITAL" means the difference between
Consolidated Current Assets (excluding cash and marketable
securities) and Consolidated Current Liabilities.

"AFFILIATE" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or under
common control with, such Person, whether through the ownership of
voting securities, by contract or otherwise.

"AGENT" is defined in the preamble to this Agreement.

"AGENT'S ADMINISTRATIVE FEE" is defined in SECTION 3.11.

"AGENT'S FEE" has the meaning assigned to that term in
the Original Credit Agreement.

"AGREEMENT" means this Amended and Restated Credit
Agreement, as the same may at any time be amended, restated,
supplemented or otherwise modified in accordance with the terms
hereof and in effect.

"AGREEMENT ACCOUNTING PRINCIPLES" is defined in SECTION
1.2.

"AMENDMENT FEE" is defined in SECTION 3.8.

"ASSETS" is defined in SECTION 3.4(c).

"ASSIGNEE" is defined in SECTION 9.12(d).

"ASSIGNMENT AGREEMENT" is defined in SECTION 9.12(d).

"AVAILABLE REVOLVING COMMITMENT" means, as to any
Revolving Lender at any time, an amount equal to the excess, if

Appendix - Page 3

<PAGE>

any, of (i) such Lender's Revolving Loan Commitment over (ii) the
sum of (A) the aggregate principal amount then outstanding of
Revolving Loans made by such Lender and (B) such Lender's Revolving
Loan Pro Rata Share of the L/C Obligations, Florence L/C
Obligations and Swing Line Loans then outstanding.

"AVAILABLE SUPPLEMENTAL REVOLVING COMMITMENT" means, as
to any Supplemental Revolving Lender at any time, an amount equal
to the excess, if any, of (i) such Lender's Supplemental Revolving
Loan Commitment over (ii) the aggregate principal amount then
outstanding of Supplemental Revolving Loans made by such Lender.

"BALANCE SHEET" is defined in SECTION 4.11(a).

"BASIC AGREEMENTS" means, collectively, the Loan
Documents, the Transaction Documents and all agreements amending
any of the foregoing agreements.

"BENEFITTED LENDER" is defined in SECTION 9.9(a).

"BOARD" means the Board of Governors of the Federal
Reserve System.

"BORROWER" is defined in the preamble to this Agreement.

"BORROWING" means the incurrence pursuant and subject to
ARTICLE II of this Agreement of one Type of Loan by the Borrower
from all of the Lenders having a Commitment for the Type of Loan
subject to the Borrowing on a PRO RATA basis on a given date (or
resulting from conversions on a given date), having in the case of
Eurodollar Rate Loans, the same Interest Periods; PROVIDED,
HOWEVER, that Prime Rate Loans or Eurodollar Rate Loans incurred
pursuant to SECTION 2.13(b) shall be considered part of any related
Borrowing of Eurodollar Rate Loans.

"BORROWING MARGINS" and "BORROWING MARGIN" mean,
respectively, (i) the borrowing margins referred to in SECTIONS
2.8(a), (b), (c), (d), (e), (f), (g), (h), (i), (j) AND (k), and
(ii) any one of such borrowing margins.

"BT" means Bankers Trust Company, a New York banking
corporation.

"BUSINESS DAY" means (i) for all purposes other than as
covered by clause (ii) below, any day excluding Saturday, Sunday
and any day which shall be in the City of New York or Chicago a
legal holiday or a day on which banking institutions are authorized
by law or other governmental actions to close and (ii) with respect
to all notices and determinations in connection with, and payments
of principal and interest on, Eurodollar Rate Loans, any day which
is a Business Day described in clause (i) and which is also a day

Appendix - Page 4

<PAGE>

for trading by and between banks in U.S. dollar deposits in the
interbank Eurodollar market.

"CANADIAN CREDIT AGREEMENTS" means the Canadian Revolving
Credit Agreement and the Canadian Term Loan Agreement.

"CANADIAN REVOLVING CREDIT AGREEMENT" means that certain
Revolving Credit Agreement dated as of March 1, 1989, as amended,
by and among Stone-Canada, BT Bank of Canada, as Administrative
Agent, The Bank of Nova Scotia, as Payment Agent, Bankers Trust
Company, as Collateral Agent, and the financial institutions
signatory thereto.

"CANADIAN TERM LOAN AGREEMENT" means that certain Credit
Agreement dated as of March 1, 1989, as amended, by and among
Stone-Canada, BT, as agent, Citibank, N.A., Chemical Bank (as
successor to Manufacturers Hanover Trust Company) and The First
National Bank of Chicago, as co-agents, and the financial
institutions signatory thereto.

"CAPITAL EXPENDITURES" means, without duplication, with
respect to the Borrower and any Subsidiary of the Borrower (other
than S-CC and its Subsidiaries), any amounts expended or incurred
during or in respect of a period for any purchase, exchange or
other acquisition for value of any asset that is classified on a
consolidated balance sheet of the Borrower prepared in accordance
with generally accepted accounting principles as a fixed or capital
asset; PROVIDED, HOWEVER, that in no event shall Capital
Expenditures include amounts (i) expended in respect of
replacements and maintenance consistent with the business practices
of the Borrower in respect of plant facilities, machinery, fixtures
and other like capital assets utilized in the ordinary conduct of
business (to the extent such amounts are not capitalized in
preparing a consolidated balance sheet in accordance with generally
accepted accounting principles), (ii) expended in the replacement,
repair or reconstruction of any fixed or capital asset which was
destroyed or damaged, in whole or in part, to the extent of
insurance proceeds are receivable or have been received by the
Borrower or any such Subsidiary in respect of such destruction or
damage, (iii) expended in the replacement of any fixed or capital
asset within 180 days (or in the case of a disposition of
collateral under the First Mortgage Note Indenture, within the time
permitted for redeployment of the proceeds of the replaced fixed or
capital asset pursuant to Section 1015 of such indenture) of the
sale or other disposition of the fixed or capital asset replaced,
to the extent of any cash or cash equivalent proceeds received by
the Borrower or such Subsidiary in connection with such sale or
other disposition of the fixed or capital asset replaced, (iv)
expended for the purchase of the Facility pursuant to Section
10.01, 10.04 or 19.09 of the Leveraged Lease or (v) expended
pursuant to any Financing Lease.

Appendix - Page 5

<PAGE>

"CASH EQUIVALENTS" means those Permitted Investments
included in clauses (i)-(v) of the definition thereof, with the
additional requirement that any such Permitted Investment must
mature not more than 30 days after the date of its purchase.

"CASH FLOW COVERAGE RATIO" means, for a period of four
quarters ending on the most recent quarter end prior to the date of
computation (treating each such period as a single accounting
period) on a consolidated basis, a ratio of (a) the sum of (i)
Consolidated Net Income of the Borrower (before income taxes) plus
(ii) interest expense (net of interest income on Permitted
Investments) during such period plus (iii) depreciation and
amortization deducted in determining Consolidated Net Income for
such period minus (iv) Capital Expenditures of the Borrower other
than Capital Expenditures made through the utilization of
Discretionary Funds to (b) interest expense (net of interest income
on Permitted Investments) during such period.

"CB" means Consolidated-Bathurst Inc., a Canadian federal
corporation, and its successors and assigns.

"CERTIFICATES OF OWNERSHIP AND MERGER" means (i) the
Certificate of Ownership and Merger of Stone Container Corporation,
a Delaware corporation, dated as of September 30, 1994, executed by
the Borrower and each of Stone Connecticut Paperboard Corporation,
Stone Mill Operating Corporation, Stone Bag Corporation, Stone
Packaging Corporation, Stone-Consolidated Newsprint, Inc. and Stone
Packaging Systems, Inc. (the "STONE MERGER SUBSIDIARIES"), merging
the Stone Merger Subsidiaries with and into the Borrower and filed
with the Delaware Secretary of State on September 30, 1994 and (ii)
the Certificate of Ownership and Merger of Stone Southwest, Inc.,
a Delaware corporation, dated as of September 30, 1994, executed by
Stone Southwest and each of Stone Hodge, Inc., Stone Hopewell,
Inc., Manufacturers Folding Carton, Inc. and Stone Corrugated, Inc.
(the "STONE SOUTHWEST MERGER SUBSIDIARIES"), merging the Stone
Southwest Merger Subsidiaries with and into Stone Southwest and
filed with the Delaware Secretary of State on September 30, 1994.

"CHANGE OF CONTROL" means any event by which (i) an
Acquiring Person has become such, or (ii) Continuing Directors
cease to comprise a majority of the members of the board of
directors of the Borrower.

"CLOSING DATE" means October 12, 1994.

"CLUSTER EXPENDITURES" means capital expenditures
mandated pursuant to, or made to comply with, the final adopted
version, if any, of the proposed rules promulgated by the
Environmental Protection Agency at 58 Fed. Reg. 66078 (December 17,
1993) with respect to Effluent Limitations Guidelines,
Pretreatment Standards, and New Source Performance Standards: Pulp,
Paper, and Paperboard Category; National Emission Standards for

Appendix - Page 6

<PAGE>

Hazardous Air Pollutants for Source Category: Pulp and Paper
Production.

"CO-AGENTS" and "CO-AGENT" have the respective meanings
assigned to such terms in the introduction to this Agreement.

"CODE" means the Internal Revenue Code of 1986, as from
time to time amended, including the regulations proposed or
promulgated thereunder, or any successor or regulation proposed or
promulgated thereunder.

"COLLATERAL" has the meaning assigned to that term in the
Security Agreements and shall include the inventory, machinery and
equipment of the Borrower or a Subsidiary, as applicable, located
at the Mortgaged Property.

"COLLATERAL BENEFITTED LENDER" is defined in SECTION
9.9(b).

"COMMERCIAL LETTERS OF CREDIT" means the commercial
Letters of Credit issued by the Facing Agent for the account of
Borrower pursuant to SECTION 2.12, each of which is drawable upon
presentation of documents evidencing the sale or shipment of goods
purchased by the Borrower or any of its Subsidiaries in the
ordinary course of its business.

"COMMITMENT" means, with respect to each Lender, the
aggregate of the Revolving Loan Commitment, Supplemental Revolving
Loan Commitment, Term Loan Commitment, Additional Term Loan
Commitment and D Tranche Term Loan Commitment of such Lender and
"COMMITMENTS" means such commitments of all of the Lenders
collectively. For purposes of this definition, the Revolving Loan
Commitment of the Swing Line Lender shall be deemed to include the
Swing Line Commitment of the Swing Line Lender.

"CONSOLIDATED CURRENT ASSETS" means, subject to the last
sentence of SECTION 1.2, as at the time any determination thereof
is to be made, the amount, without duplication, that is classified
on a consolidated balance sheet of the Borrower and its
Subsidiaries as the consolidated current assets of the Borrower and
its Subsidiaries at such time in accordance with generally accepted
accounting principles; PROVIDED, HOWEVER, that there shall be
excluded from the calculation of Consolidated Current Assets any
insurance receivables (net of related payables) relating to the
April, 1994 occurrence at the Panama City Mill.

"CONSOLIDATED CURRENT LIABILITIES" means, subject to the
last sentence of SECTION 1.2, as at the time any determination
thereof is to be made, all Indebtedness of the Borrower and its
Subsidiaries, without duplication, that is included as consolidated
current liabilities on a consolidated balance sheet of the Borrower
and its Subsidiaries in accordance with generally accepted

Appendix - Page 7

<PAGE>

accounting principles, except that there shall be excluded from
Consolidated Current Liabilities (i) fixed sinking fund payments,
(ii) mandatory redemption and other payments of principal
outstanding or due (whether as a result of an acceleration or
otherwise), (iii) other mandatory prepayments required to be made
with respect to any Indebtedness for Money Borrowed within one year
after such date of determination, (iv) any other Indebtedness for
Money Borrowed maturing on demand and (v) all outstanding Revolving
Loans, Supplemental Revolving Loans and Swing Line Loans under this
Agreement.

"CONSOLIDATED NET INCOME" AND "CONSOLIDATED NET LOSS"
mean, respectively, subject to the last sentence of SECTION 1.2,
with respect to any period, the aggregate of the net income (loss)
(before taking account of minority interests) of the Borrower and
its Subsidiaries for such period, determined in accordance with
generally accepted accounting principles on a consolidated basis,
PROVIDED that (i) in the case of any Person which is not a
consolidated Subsidiary, the net income (loss) of such Person shall
be disregarded and the amount of cash dividends and distributions
paid by such Person to the Borrower or a consolidated Subsidiary of
the Borrower shall be included in the net income (loss) of the
Borrower; and (ii) the net income (loss) of any Person acquired in
a pooling of interests transaction for any period prior to the date
of such acquisition shall be excluded. There shall be excluded in
computing Consolidated Net Income the excess (but not the deficit),
if any, of (A) any gain which must be treated as an extraordinary
item under generally accepted accounting principles or any gain
realized upon the sale or other disposition of any real property or
equipment that is not sold in the ordinary course of business or of
any capital stock of the Borrower or a Subsidiary of the Borrower
over (B) any loss which must be treated as an extraordinary item
under generally accepted accounting principles or any loss realized
upon the sale or other disposition of any real property or
equipment that is not sold in the ordinary course of business or of
any capital stock of the Borrower or a Subsidiary of the Borrower.

"CONSOLIDATED NET WORTH" of the Borrower means, subject
to the last sentence of SECTION 1.2, as at the time any
determination thereof is made, without duplication, an amount equal
to the sum of (i) the Borrower's total common stockholders' equity
(excluding treasury stock, the effects of FASB 115 and excluding
the effects of foreign currency translation adjustments) and
(ii) the amount of the Permitted Preferred Stock.

"CONSOLIDATED TANGIBLE NET WORTH" of the Borrower means,
subject to the last sentence of SECTION 1.2, as at the time any
determination thereof is made, without duplication, an amount equal
to (i) the sum of (A) the Borrower's total common stockholders'
equity (excluding treasury stock, the effects of FASB 115 and
excluding the effects of foreign currency translation adjustments)
and (B) the amount of the Permitted Preferred Stock, MINUS (ii) the

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<PAGE>

net book value of all assets of the Borrower and its Subsidiaries
which would be treated as intangibles under generally accepted
accounting principles, including, without limitation, deferred
charges, leasehold conversion costs, franchise rights, non-compete
agreements, goodwill, unamortized debt discounts, patents, patent
applications, trademarks, trade names, copyrights and licenses,
except for any such intangibles of Southwest Forest Industries,
Inc. or CB created as the result of the acquisition of either
thereof.

"CONTAMINANT" means any pollutant, contaminant (as those
terms are defined in 42 U.S.C. Section 9601(33)), toxic pollutant (as that
term is defined in 33 U.S.C. Section 1362(13)), hazardous substance (as
that term is defined in 42 U.S.C. Section 9601(14)), hazardous chemical
(as that term is defined by 29 CFR Section 1910.1200(c)), hazardous waste
(as that term is defined in 42 U.S.C. Section 6903(5)), or any state or
local equivalent of such laws and regulations, including, without
limitation, radioactive material, special waste, polychlorinated
biphenyls, asbestos, petroleum, including crude oil or any
petroleum-derived substance, waste, or breakdown or decomposition
product thereof, or any constituent of any such substance or waste.

"CONTINENTAL GUARANTY" means the Guaranty dated as of
August 30, 1983 between The Continental Group, Inc., a New York
corporation, and the Borrower, as amended from time to time.

"CONTINUING DIRECTOR" means any member of a board of
directors, while such Person is a member of such board of directors
who is not an Acquiring Person, or an affiliate or associate of an
Acquiring Person or a representative of an Acquiring Person or of
any such affiliate or associate and who (i) was a member of such
board of directors prior to the date of this Agreement, or
(ii) subsequently becomes a member of such board of directors and whose
nomination for election or election to such board of directors is
recommended or approved by resolution of a majority of the
Continuing Directors or who is included as a nominee in a proxy
statement of the Borrower distributed when a majority of such board
of directors consists of Continuing Directors.

"CONVERTIBLE INDENTURE" means the Indenture dated as of
June 15, 1993 between the Borrower and Norwest Bank Minnesota,
National Association, at Trustee, as amended, supplemented,
restated or otherwise modified from time to time.

"CONVERTIBLE SUBORDINATED INDENTURE" means the Indenture
dated as of February 15, 1992 between the Borrower and The Bank of
New York, as Trustee, pursuant to which the Borrower issued its 6-3/4%
Convertible Subordinated Debentures due February 15, 2007, as
amended, supplemented, restated or otherwise modified from time to
time.

Appendix - Page 9

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"CP&L PROPERTY" means any intangible property or contract
rights of the Borrower relating to or existing under that certain
Electric Power Purchase Agreement dated as of December 17, 1984, as
amended, between the Borrower and Carolina Power & Light.

"CREDIT EVENT" means the making of any Loan and the
issuance of any Letter of Credit.

"CREDIT EXPOSURE" is defined in SECTION 9.12(c).

"D TRANCHE LENDER" means, at any time any Lender which
then has a D Tranche Term Loan Commitment or is owed any portion of
the D Tranche Term Loan.

"D TRANCHE TERM LOAN" means, individually and
collectively, the loans made by each of the D Tranche Lenders to
the Borrower in accordance with SECTION 2.1(e), which D Tranche
Term Loan shall from time to time be comprised of Prime Rate Loans
or Eurodollar Rate Loans or any combination of the foregoing.

"D TRANCHE TERM LOAN COMMITMENT" means, with respect to
each D Tranche Lender, the principal amount set forth opposite such
D Tranche Lender's name on SCHEDULE 1.1(f) hereto under the caption
"Amount of D Tranche Term Loan Commitment."

"D TRANCHE TERM LOAN MATURITY DATE" means October 1,
2003.

"D TRANCHE TERM LOAN OBLIGATIONS" means the obligations
of the Borrower to repay the principal of, and pay the interest on,
the D Tranche Term Loan pursuant to SECTION 2.2(f).

"D TRANCHE TERM LOAN PRO RATA SHARE" means, with respect
to any D Tranche Lender and any described aggregate or total
amount, the amount equal to the result obtained by multiplying such
described aggregate or total amount by a fraction, the numerator of
which shall be the portion of the D Tranche Term Loan made by such
Lender and outstanding at the time and the denominator of which
shall be the aggregate amount of the D Tranche Term Loan made by
all of the D Tranche Lenders and outstanding at the time.

"D TRANCHE TERM NOTE" is defined in SECTION 2.2(f).

"DEBT BASKET PROCEEDS" is defined in the definition of
"Discretionary Funds."

"DEBT REFINANCING" means the termination of the U.S.
Credit Agreement, the Canadian Credit Agreements and the Stone
Savannah Credit Agreement and the repayment in full of all
obligations outstanding thereunder.

Appendix - Page 10

<PAGE>

"DEBT REFINANCING DOCUMENTS" means the documents and
instruments entered into with respect to the termination of the
commitments, and the reimbursement obligations with respect to any
letters of credit issued, under the U.S. Credit Agreement, the
Canadian Credit Agreements and the Stone Savannah Credit Agreement,
the repayment of the loans and other obligations thereunder, the
release of all guaranties and security with respect thereto and any
consents required in connection therewith.

"DEFAULT RATE" is defined in SECTION 2.8(l).

"DELAYED COLLATERAL" is defined in SECTION 5.1.17.

"DEPOSITED MONIES" is defined in SECTION 3.5.

"DISCRETIONARY FUNDS" means the sum of (i) the aggregate
amount of Waived Proceeds, PLUS (ii) the aggregate amount of
Excluded Sale Proceeds (not to exceed $300 million), with the
aggregate amount of Excluded Sale Proceeds in excess of $200
million being referred to as "EXCESS EXCLUDED SALE PROCEEDS", PLUS
(iii) the aggregate amount of Indebtedness incurred pursuant to
SECTION 5.2.2(t) (not to exceed $400 million) ("DEBT BASKET
PROCEEDS"), PLUS (iv) the aggregate amount of Excess Cash Flow for
each Fiscal Quarter of the Borrower commencing with the Fiscal
Quarter ending December 31, 1994 which is not required by SECTION
3.4(a) to be utilized as a mandatory prepayment, such amount to be
determined without giving effect to any prepayment reduction or
waiver pursuant to clause (B) of SECTION 3.4(a) or SECTION 3.6(f)
and such amount with respect to any Fiscal Quarter becoming
Discretionary Funds only after the delivery of the Excess Cash Flow
Schedule for such Fiscal Quarter pursuant to SECTION 5.1.1(b) or
5.1.1(c). As of the Restatement Date, the amount of Debt Basket
Proceeds shall be deemed increased by $300 million without
otherwise limiting the Borrower's ability to incur Indebtedness
under SECTION 5.2.2(t), and such $300 million increase may be
utilized from and after the Restatement Date by the Borrower as
Discretionary Funds constituting Debt Basket Proceeds.

"DISCRETIONARY FUNDS BASKET" means, at any time, (i) the
aggregate amount of Discretionary Funds less (ii) the aggregate
amount of the sum of (A) Investments made pursuant to SECTION
5.2.7(l), (B) Acquisitions pursuant to SECTION 5.2.9(e)(ii), (C)
prepayments of Indebtedness pursuant to SECTION 5.2.10(a)(ix), and
(D) Capital Expenditures made pursuant to SECTION 5.2.11(iii). Any
utilization of Discretionary Funds for the purpose specified in
clause (C) above shall first be deemed a utilization of Debt Basket
Proceeds and Excess Excluded Sale Proceeds to the extent thereof
and then a utilization of other Discretionary Funds.

"DIVIDEND BASKET" means, at any time, the maximum amount
of cash dividends which the Borrower would then be permitted to pay
to its shareholders pursuant to SECTION 5.2.5(b).

Appendix - Page 11

<PAGE>

"DOLLAR" and "$" shall mean lawful currency of the United
States of America unless a currency of another country is
specifically designated.

"8-7/8% NOTES" means the Borrower's 8-7/8% Convertible
Senior Subordinated Notes due July 15, 2000.

"ELIGIBLE ASSIGNEE" means (i) a commercial bank organized
under the laws of the United States of America, or any State
thereof, and having total assets in excess of $5,000,000,000; (ii)
a savings and loan association or savings bank organized under the
laws of the United States of America, or any State thereof, and
having total assets in excess of $5,000,000,000; or (iii) a
commercial bank which is organized under the laws of any other
country, and which has total assets in excess of $5,000,000,000,
PROVIDED that such bank is acting through a branch or agency
located in the United States of America.

"EMPLOYEE BENEFIT PLAN" means an "employee benefit plan",
as defined in Section 3(3) of ERISA, which is or has been
established or maintained, or to which contributions are or have
been made, by the Borrower or any of its Subsidiaries or any ERISA
Affiliate.

"ENVIRONMENTAL LAWS" means any and all applicable
foreign, federal, state or local laws, statutes, ordinances, codes,
rules, regulations, orders, decrees, judgments, directives and
cleanup or action standards, levels or objectives imposing
liability or standards of conduct for or relating to the protection
of health, safety or the environment, including, but not limited
to, the following statutes as now written and amended, and as
amended hereafter: the Federal Water Pollution Control Act, 33
U.S.C. Section 1251 ET SEQ., the Clean Air Act, 42 U.S.C.
Section 7401 ET SEQ., the Toxic Substances Control Act, 15
U.S.C. Section 2601 ET SEQ., the Solid Waste Disposal Act,
42 U.S.C. Section 6901 ET SEQ., the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Section 9601
ET SEQ., the Emergency Planning and Community Right-to-Know Act of 1986,
42 U.S.C. Section 11001 ET SEQ., and the Safe
Drinking Water Act, 42 U.S.C. Section 300f ET SEQ.

"ENVIRONMENTAL LIEN" means a Lien in favor of any
governmental authority for (i) any liability under foreign,
federal, state or local environmental laws or regulations, or (ii)
damages arising from, or costs incurred by such governmental
authority in response to, a Release or threatened Release of a
Contaminant into the environment.

"ENVIRONMENTAL PERMITS" is defined in SECTION 4.21.

"ENVIRONMENTAL STUDY" means those certain environmental
assessments and documents upon which such assessments are based of
the Facilities prepared by EnviroClean Midwest, Inc. with regard to

Appendix - Page 12

<PAGE>

the existing and potential liability of the Borrower with respect
to any environmental matters, including a review of compliance with
Environmental Laws.

"ERISA" means the Employee Retirement Income Security Act
of 1974, as from time to time amended.

"ERISA AFFILIATE" means each trade or business (whether
or not incorporated) which together with the Borrower or a
Subsidiary of the Borrower would be deemed to be a "single
employer" within the meaning of Section 4001(b) of ERISA or Section
414 of the Code, excluding any foreign Subsidiary of the Borrower
which is not subject to ERISA.

"EURODOLLAR RATE" means, with respect to each Interest
Period to be applicable to a Eurodollar Rate Loan, the rate per
annum obtained by dividing (i) the arithmetic average (rounded
upward to the nearest 1/16th of 1%) of the offered quotation to
first-class banks in the interbank Eurodollar market by each
Reference Bank for U.S. Dollar deposits of an amount in immediately
available funds approximately equal to the principal amount of the
Eurodollar Rate Loan to be made by such Reference Bank for a period
approximately equal to such Interest Period determined as of 10:00
a.m. (New York City time) two (2) Business Days prior the
commencement of such Interest Period, PROVIDED that if any
Reference Bank fails to provide the Agent in a timely fashion with
its aforesaid quotation then the Eurodollar Rate shall be
calculated using the arithmetic average of the quotations provided
to the Agent by the other Reference Bank or Banks by (ii) a
percentage equal to 100% minus the stated maximum rate (expressed
as a percentage) as prescribed by the Board of all reserve
requirements (including, without limitation, any marginal,
emergency, supplemental, special or other reserves and all reserves
required to be maintained against "Eurocurrency liabilities" as
specified in Regulation D (or any successor regulation)) applicable
on the first day of such Interest Period to any member bank of the
Federal Reserve System in respect of Eurodollar funding or
liabilities. The determination of the Eurodollar Rate by the Agent
shall be conclusive and binding on the Borrower and the Lenders
absent manifest error.

"EURODOLLAR RATE ADDITIONAL TERM LOAN" means the
Additional Term Loan or any portion thereof during any period in
which it bears interest at the Eurodollar Rate.

"EURODOLLAR RATE D TRANCHE TERM LOAN" means the D Tranche
Term Loan or any portion thereof during any period in which it
bears interest at the Eurodollar Rate.

"EURODOLLAR RATE LOAN" means any Loan which bears
interest at a rate determined with reference to the Eurodollar
Rate.

Appendix - Page 13

<PAGE>

"EURODOLLAR RATE REVOLVING LOAN" means a Revolving Loan
or any portion thereof during any period in which it bears interest
at the Eurodollar Rate.

"EURODOLLAR RATE SUPPLEMENTAL REVOLVING LOAN" means a
Supplemental Revolving Loan or any portion thereof during any
period in which it bears interest at the Eurodollar Rate.

"EURODOLLAR RATE TERM LOAN" means the Term Loan or any
portion thereof during any period in which it bears interest at a
rate determined with reference to the Eurodollar Rate.

"EVENT OF DEFAULT" is defined in SECTION 7.1.

"EXCESS CASH FLOW" means, without duplication, for any
Fiscal Quarter, an amount equal to the sum of (i) Consolidated Net
Income (or Consolidated Net Loss), PLUS (MINUS) (ii) depreciation,
depletion, amortization, deferred taxes and other noncash expenses
(revenues) which, pursuant to generally accepted accounting
principles, were deducted (added) in determining the Consolidated
Net Income, MINUS (PLUS) (iii) the increase (decrease) in Adjusted
Working Capital from the last day of the prior Fiscal Quarter
(excluding changes in income taxes payable), MINUS (iv) Capital
Expenditures (other than Capital Expenditures incurred through the
utilization of Indebtedness for Money Borrowed permitted by
SECTION 5.2.2(k) or Discretionary Funds and other than Capital
Expenditures of S-CC and Subsidiaries of S-CC) for such Fiscal
Quarter, MINUS (v) the amount of any required prepayment (except
(A) under this Agreement (including as the result of mandatory
reductions in the Revolving Loan Commitments or Supplemental
Revolving Loan Commitments) and (B) under the First Mortgage Note
Documents in connection with the sale of any collateral securing
the Indebtedness thereunder) or any regularly scheduled payments of
Indebtedness for Money Borrowed (but excluding Indebtedness for
Money Borrowed described in subparagraphs (IV) or (vi) of the
definition of Indebtedness for Money Borrowed) during such quarter,
MINUS (vi) cash dividends, distributions or other amounts paid by
the Borrower to any of its stockholders with respect to its capital
stock during such quarter, MINUS (vii) Investments by the Borrower
or any Subsidiary of the Borrower (other than S-CC and Subsidiaries
of S-CC) during such quarter except for Investments made through
the utilization of Discretionary Funds, MINUS (viii) any portion of
Consolidated Net Income attributable to gains (losses) on the
disposition of assets to the extent the proceeds therefrom were
used pursuant to SECTION 3.4(c) to prepay the Obligations, MINUS
(ix) dividends paid by non-Wholly-Owned Subsidiaries of the
Borrower to minority shareholders other than the Borrower or
Wholly-Owned Subsidiaries of the Borrower, PLUS (x) the increases
in the aggregate principal amount of borrowings by StoneSub from
the Issuer in connection with each Receivables Financing from (A)
the later of (1) the beginning of the quarter for which the
calculation is being made or (2) the date on which the applicable

Appendix - Page 14

<PAGE>

Receivables Financing commenced (if established during such
quarter) to (B) the end of such quarter, MINUS (xi) the decreases
in the aggregate principal amount of borrowings (other than as the
result of a refinancing of such borrowings from a source other than
internally generated cash or Borrowings hereunder) by StoneSub from
the Issuer in connection with each Receivables Financing from (A)
the later of (1) the beginning of the quarter for which the
calculation is being made or (2) the date on which the applicable
Receivables Financing commenced (if established during such
quarter) to (B) the end of such quarter. In the event that
Seminole Kraft merges with and into the Borrower pursuant to
SECTION 5.2.8(g) in any Fiscal Quarter, Excess Cash Flow for such
Fiscal Quarter shall be calculated as though the merger of Seminole
Kraft with and into the Borrower occurred on the first day of such
Fiscal Quarter.

"EXCESS CASH FLOW PERCENTAGE" means 50% from the date of
this Agreement and continuing thereafter until adjusted pursuant to
the terms and conditions set forth on SCHEDULE 1.1(b) hereto.

"EXCESS CASH FLOW SCHEDULE" is defined in SECTION
5.1.1(b).

"EXCESS EXCLUDED SALE PROCEEDS" is defined in the
definition of "Discretionary Funds".

"EXCLUDED SALE PROCEEDS" is defined in SECTION 3.4(c).

"EXECUTIVE OFFICER" means from time to time any officer
of the Borrower elected by the board of directors of the Borrower
or designated as an executive officer in any Form 10-K or successor
form filed by the Borrower with the Securities and Exchange
Commission.

"EXISTING CREDIT AGREEMENT" is defined in the Recitals to
this Agreement.

"EXISTING LENDERS" is defined in the Recitals to this
Agreement.

"FACILITIES" means the owned and leased facilities of the
Borrower set forth on SCHEDULE 1.1(c) hereto.

"FACILITY" has the meaning assigned to that term in the
Participation Agreement.

"FACILITY FEE" has the meaning assigned to that term in
the Original Credit Agreement.

"FACING AGENT" means BT or such other Revolving Lender as
may from time to time have been designated as such by the Borrower
and shall have agreed in writing to act in such capacity.

Appendix - Page 15

<PAGE>

"FEDERAL FUNDS RATE" means on any given day, the rate per
annum equal to the weighted average of the rate on overnight
Federal funds transactions with members of the Federal Reserve
System only arranged by Federal funds brokers, as published as of
such day by the Federal Reserve Bank of New York, or, if such rate
is not so published, the rate then used by first class banks in
extending overnight loans to other first class banks.

"FINANCING LEASE" means, at the time any determination
thereof is to be made, any lease of property, real or personal, in
respect of which the present value of the minimum rental commitment
is capitalized on the balance sheet of the lessee in accordance
with generally accepted accounting principles.

"FINANCING LEASE OBLIGATION" means, at the time any
determination thereof is to be made, the amount of the liability in
respect of a Financing Lease which would at such time be so
required to be capitalized on the lessee's balance sheet in
accordance with generally accepted accounting principles.

"FIRST MORTGAGE NOTE DOCUMENTS" means the First Mortgage
Note Indenture, the First Mortgage Notes, the Security Documents
(as such term is defined in the First Mortgage Note Indenture) and
all other documents, instruments and agreements now or hereafter
evidencing or securing all or any portion of the Borrower's
obligations under the First Mortgage Note Indenture and the First
Mortgage Notes, including any documents, instruments or agreements
evidencing or securing the amendment, refinancing, modification,
replacement, renewal, restatement, refunding, deferral, extension,
supplement, reissuance or resale thereof.

"FIRST MORTGAGE NOTE INDENTURE" means the Indenture dated
as of October 12, 1994 between the Borrower and Norwest Bank
Minnesota, National Association, as Trustee, pursuant to which the
Borrower issued its First Mortgage Notes, as amended, supplemented,
restated or otherwise modified from time to time.

"FIRST MORTGAGE NOTES" means the Borrower's 10-3/4% First
Mortgage Notes due October 1, 2002 in the aggregate principal
amount of $500 million and issued pursuant to the First Mortgage
Note Indenture, as amended, supplemented, restated or otherwise
modified from time to time.

"FIRST RESTATEMENT DATE" means August 29, 1995.

"FISCAL QUARTERS" is defined in SECTION 4.7.

"FISCAL YEAR" is defined in SECTION 4.7.

"FLORENCE AGREEMENTS" mean, collectively, (i) the
Participation Agreement dated as of March 1, 1985 among the
Borrower, as successor in interest to Stone Container Corporation,

Appendix - Page 16

<PAGE>

an Illinois corporation, the Borrower, as Ground Lessor, Dart &
Kraft Financial Corporation, Irving Trust Company and NCNB National
Lender of North Carolina (as amended and Supplemented by the First
Supplement thereto dated as of June 1, 1986, as further amended and
supplemented by the Second Supplement thereto dated as of June 1,
1987, and as further amended and supplemented and in effect from
time to time, the "D&K Participation Agreement"), (ii) each of the
"Basic Documents" as defined in Appendix A to the D&K Participation
Agreement, (iii) the Participation Agreement dated as of March 1,
1985 among the Borrower, as successor in interest to Stone
Container Corporation, an Illinois corporation, the Borrower, as
Ground Lessor, Westinghouse Credit Corporation ("WCC"), Irving
Trust Company and NCNB National Lender of North Carolina (as
amended and supplemented by the First Supplement thereto dated as
of June 1, 1986, and as further amended and supplemented by the
Second Supplement thereto dated as of June 1, 1987, and as further
amended and supplemented and in effect from time to time, the "WCC
PARTICIPATION AGREEMENT"), (iv) each of the "Basic Documents"
defined in Appendix A to the WCC Participation Agreement, and (v)
the Transfer and Assumption Agreement dated as of March 1, 1987
between D&K Financial Corporation ("D&K") and WCC, together with
such additional documents as have been executed in connection with
the transfer by D&K of a portion of its interest in the D&K
Participation Agreement to WCC.

"FLORENCE BONDS" means the Variable Rate Demand
Industrial Revenue Bonds, Series 1984, issued by Florence County,
South Carolina pursuant to the Trust Indenture dated as of December
15, 1984 as in effect on the date of this Agreement.

"FLORENCE L/C OBLIGATIONS" means, at any time of
determination, the sum of (i) the aggregate undrawn face amount of
the Florence Letters of Credit, plus (ii) the amount of any
drawings under the Florence Letters of Credit which have not been
reimbursed pursuant to the L/C Agreement, plus (iii) the principal
amount of any term loans outstanding under the L/C Agreement.

"FLORENCE LETTERS OF CREDIT" means, individually and
collectively, the letters of credit from time to time issued
pursuant to the L/C Agreement.

"FORECASTS" is defined in SECTION 4.11(c).

"GOVERNMENT ACTS" is defined in SECTION 2.12(i).

"GOVERNMENTAL AUTHORITY" means any foreign, Federal,
state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign.

"INDEBTEDNESS" means, with respect to any Person, without
duplication:

Appendix - Page 17

<PAGE>

(a) all obligations of such Person which in accordance
with generally accepted accounting principles would be shown on the
balance sheet of such Person as a liability (including, without
limitation, obligations for borrowed money and for the deferred
purchase price of property or services, and obligations evidenced
by bonds, debentures, notes or other similar instruments);

(b) all obligations under Financing Leases, required to
be capitalized under generally accepted accounting principles;

(c) all guarantees (direct or indirect), all contingent
reimbursement obligations under undrawn letters of credit and other
contingent obligations of such Person in respect of, or obligations
to purchase or otherwise acquire or to assure payment of,
Indebtedness of others;

(d) Indebtedness of others secured by any Lien upon
property owned by such Person, whether or not assumed; and

(e) all sinking fund payments or other mandatory
redemption or payments on preferred or preference stock due on or
prior to January 15, 2004 (other than preferred or preference
shares issued to the Borrower by Stone-Canada).

"INDEBTEDNESS FOR MONEY BORROWED" means, without
duplication, (i) the principal amount of all Indebtedness of the
Borrower or a Subsidiary of the Borrower, as the case may be,
current or funded, secured or unsecured, incurred in connection
with borrowings (including the sale of debt securities), (ii) all
Indebtedness of the Borrower or a Subsidiary of the Borrower, as
the case may be, issued, incurred or assumed in respect of the
purchase price of property except for trade and intercompany
accounts payable, (iii) all Financing Lease Obligations of the
Borrower or a Subsidiary of the Borrower, as the case may be, (iv)
any direct or indirect guarantee in respect of Indebtedness of any
other Person of any of the types specified in the preceding clauses
(i)-(iii), (v) the amount of all Indebtedness described in
subsection (e) of the definition of Indebtedness, and (vi) the
maximum stated amount from time to time available for drawing under
the letters of credit issued pursuant to the L/C Agreement plus the
amount of any unreimbursed drawings under the letters of credit
plus (without duplication) the amount of any "Term Loans"
outstanding under the L/C Agreement.

"INDEBTEDNESS RATIO" means, as at the time any
determination thereof is to be made, a ratio, the numerator of
which shall be Total Consolidated Indebtedness for Money Borrowed
and the denominator of which shall be the sum of (i) Consolidated
Net Worth and (ii) Total Consolidated Indebtedness for Money
Borrowed. For purposes of calculating the Indebtedness Ratio,
Total Consolidated Indebtedness for Money Borrowed shall not
include the aggregate principal amount of proceeds from

Appendix - Page 18

<PAGE>

Indebtedness incurred on the Closing Date which have been deposited
and remain in escrow with the trustee of the Stone Savannah Senior
Subordinated Note Indenture pursuant to SECTION 6.1(l)(iv) or
Indebtedness which has been defeased and is no longer treated as
Indebtedness for purposes of generally accepted accounting
principles.

"INITIAL LOANS" means the Term Loan and, if any Revolving
Loans or Swing Line Loans are requested by the Borrower on the
Closing Date, such Revolving Loans or Swing Line Loans.

"INTEREST COVERAGE RATIO" means, for the period of four
quarters ending on the most recent quarter end prior to the date of
computation (treating each such period as a single accounting
period) on a consolidated basis, a ratio of (a) the sum of (i)
Consolidated Net Income of the Borrower (before income taxes) plus
(ii) interest expense (net of interest income on Permitted
Investments) during such period plus (iii) depreciation and
amortization deducted in determining Consolidated Net Income for
such period plus (iv) any non-cash loss resulting from the early
extinguishment of debt deducted in determining Consolidated Net
Income for such period to (b) interest expense (net of interest
income on Permitted Investments) during such period. For purposes
of computing Consolidated Net Income in clause (i) above, there
shall be excluded from the computation thereof, to the extent not
otherwise excluded from the computation thereof or added back by
clause (iv) above, any non-cash loss recognized by the Borrower in
respect of the repurchase, prepayment, conversion, redemption or
other extinguishment of the 8-7/8% Notes pursuant to SECTION
5.2.10(a)(xiv).

"INTEREST PERIOD" means any interest period applicable to
a Loan as determined pursuant to SECTION 2.10.

"INTEREST RATE DETERMINATION DATE" means any date on
which the Agent is required to determine the applicable Eurodollar
Rate in connection with a Notice of Borrowing or Notice of
Conversion or Continuation delivered by the Borrower.

"INVESTMENT" means, with respect to any Person (such
Person being referred to in this definition as the "INVESTOR"), any
amount paid by the Investor, directly or indirectly, or any
transfer of property, directly or indirectly, by the Investor to
any other Person for capital stock of, or as a capital contribution
to, or any amount which the Investor has loaned or advanced,
directly or indirectly, to, any other Person, including, in the
case of any Person which becomes a Subsidiary of the Borrower, the
aggregate principal amount of Indebtedness for Money Borrowed of
such Person outstanding at the time such Person becomes a
Subsidiary. The calculation of any Investment shall be exclusive
of amounts paid for goods or services in the ordinary course of
business on terms customary for the industry.

Appendix - Page 19

<PAGE>

"INVESTMENT GRADE RATING" means a rating of the
Borrower's senior unsecured long-term debt outstanding, without
third-party enhancement, by Standard & Poor's Corporation of BBB-
or better and by Moody's Investor Services, Inc. of Baa3 or better.

"IRB" means industrial revenue bonds and other debt
instruments set forth on SCHEDULE 5.2.2 hereto.

"ISSUER" has the meaning assigned to that term in the
definition of Accounts Receivable Financing Program.

"L/C AGREEMENT" means, collectively, the letter of credit
agreements entered into between (i) BT and Gelco Corporation, as
successor in interest to D & K Financial Corporation, and (ii) BT
and Westinghouse Electric Corporation, as successor by merger to
Westinghouse Credit Corporation, with respect to the issuance by BT
of one or more letters of credit to secure the Florence Bonds, as
such letter of credit agreements may at any time be amended,
modified or restated in accordance with the terms thereof and in
effect.

"L/C OBLIGATIONS" means, at any time, an amount equal to
the sum of (i) the aggregate Stated Amount of the then outstanding
Letters of Credit and (ii) the aggregate amount of drawings under
Letters of Credit which have not been reimbursed and which have not
been converted to Revolving Loans pursuant to SECTION 2.12(E).

"L/C PARTICIPATION AGREEMENTS" means, collectively, the
Letter of Credit Participation Agreements entered into by and
between each Revolving Lender (other than BT) and BT dated as of
the date hereof with respect to the L/C Agreement, as the same may
at any time be amended, supplemented, restated or otherwise
modified in accordance with the terms thereof and in effect.

"LENDING OFFICE" means for each Lender, the office
specified for such Lender pursuant to SECTION 9.4 as the office
from which its Revolving Loan Pro Rata Share, Term Loan Pro Rata
Share or Additional Term Loan Pro Rata Share, as the case may be,
of any Borrowing will be made.

"LETTER OF CREDIT FEE" is defined in SECTION 2.12(F)(II).

"LETTERS OF CREDIT" means the Commercial Letters of
Credit and the Standby Letters of Credit, but shall not include the
Florence Letters of Credit.

"LENDERS" and "LENDER" have the respective meanings
assigned to those terms in the preamble to this Agreement and shall
include each Assignee and Eligible Assignee thereof that shall
become a party to this Agreement pursuant to SECTION 9.12. For
purposes of this Agreement, the Lenders shall collectively include

Appendix - Page 20

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all of the Revolving Lenders in their capacities as such, all Term
Lenders in their capacities as such, all Additional Lenders in
their capacities as such, all Supplemental Revolving Lenders in
their capacities as such, all D Tranche Lenders in their capacities
as such and the Swing Line Lender in its capacity as such. A
Lender may be a Revolving Lender, a Supplemental Revolving Lender,
a Term Lender, an Additional Lender and/or a D Tranche Lender
hereunder.

"LEVERAGED LEASE" means, collectively, (i) the Lease
Agreement dated as of March 1, 1985 between the Borrower and D&K
Financial Corporation as amended from time to time and (ii) the
Lease Agreement dated as of March 1, 1985 between the Borrower and
Westinghouse Credit Corporation as amended from time to time.

"LIEN" means any mortgage, pledge, security interest,
adverse claim (as defined in Section 8.302(2) of the New York
Uniform Commercial Code), encumbrance, lien or charge of any kind
(including, without limitation, any conditional sale or other title
retention agreement or lease in the nature thereof, any sale of
receivables with recourse against the seller or any Affiliate of
the seller, any filing or agreement to file a financing statement
as debtor under the Uniform Commercial Code or any similar statute
other than to reflect ownership by a third party of property leased
to the Borrower or any of its Subsidiaries under a lease which is
not in the nature of a conditional sale or title retention
agreement).

"LOAN" means any of the Term Loan, the Additional Term
Loan, the Revolving Loans, the Supplemental Revolving Loans, the
D Tranche Term Loan or the Swing Line Loans and "LOANS" means all
of such Loans collectively.

"LOAN DOCUMENTS" means, collectively, this Agreement, the
Notes, the Security Agreements, the Mortgages, the Subsidiary
Guarantees, the L/C Agreement, the L/C Participation Agreement, the
Florence Letters of Credit and all other agreements, assignments,
security agreements, instruments and documents executed in
connection with this Agreement or any other Loan Document, in each
case as the same may at any time be amended, supplemented, restated
or otherwise modified and in effect. For purposes of this
Agreement, "Loan Documents" shall also include all guaranties,
security agreements, mortgages, pledge agreements, collateral
assignments and other collateral documents in the nature of any
thereof entered into by the Borrower or any Subsidiary of the
Borrower after the date of this Agreement in favor of the Agent for
the benefit of the Lenders in satisfaction of the requirements of
this Agreement.

"MAJORITY ADDITIONAL TERM LENDERS" is defined in SECTION
9.3.

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<PAGE>

"MAJORITY D TRANCHE TERM LENDERS" is defined in SECTION
9.3.

"MAJORITY REVOLVING LENDERS" is defined in SECTION 9.2.

"MAJORITY SUPPLEMENTAL REVOLVING LENDERS" is defined in
SECTION 9.3.

"MAJORITY TERM LENDERS" is defined in SECTION 9.2.

"MARGIN STOCK" has the meaning provided in Regulation U
of the Board, as from time to time in effect or any successor to
all or any portion thereof establishing margin credit restrictions.

"MATERIAL ADVERSE EFFECT" means a material adverse effect
on (i) the properties, business, condition (financial or otherwise)
or results of operations of the Borrower and its Subsidiaries taken
as a whole, (ii) the ability of the Borrower or any Subsidiary to
perform its obligations under any of the Loan Documents or (iii)
the validity or enforceability or any of the Loan Documents or the
rights or remedies of the Agent or the Lenders thereunder.

"MATERIAL LIABILITIES" is defined in SECTION 4.11(D).

"MATERIAL SALE PROCEEDS is defined in SECTION 3.4(C).

"MAXIMUM COMMITMENT" means, when used with reference to
any Lender, the aggregate amount of such Lender's Term Loan
Commitment and Revolving Loan Commitment in the amounts not to
exceed those set forth opposite such Lender's name on SCHEDULE
1.1(A) hereto under the caption "Amount of Maximum Commitment",
subject to reduction from time to time in accordance with the terms
of this Agreement. For purposes of this definition, the Revolving
Loan Commitment of the Swing Line Lender shall be deemed to include
the Swing Line Commitment of the Swing Line Lender.

"MERGERS" means the merger of (i) the Stone Merger
Subsidiaries with and into the Borrower, with the Borrower being
the surviving corporation and (ii) Stone Southwest Merger
Subsidiaries with and into Stone Southwest, with Stone Southwest
being the surviving corporation.

"MERGER DOCUMENTS" means the Certificates of Ownership
and Merger along with all of the agreements, documents,
resolutions, consents, instruments and certificates executed in
order to effect the transactions contemplated by the Certificates
of Ownership and Merger.

"MORTGAGED PROPERTY" means, collectively, all of the
properties of the Borrower and the Subsidiaries of the Borrower
defined as "Mortgaged Property" in each of the respective Mortgages
and shall include the fee or leasehold interests of the Borrower or

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a Subsidiary in the manufacturing facilities identified on
SCHEDULE 1.1(C) hereto.

"MORTGAGES" means, collectively, (i) the mortgages and
leasehold mortgages in substantially the forms of EXHIBITS 1.1(D)-A
AND B hereto (with such state by state modifications as may be
appropriate, and modifications to provide for pro rata liens as
required under the Continental Guaranty and to reflect the securing
of obligations created under Subsidiary Guarantees) as required by
the Agent, each dated as of the date hereof (subject to SECTION
5.1.17) and each by the Borrower or a Subsidiary, as applicable, as
mortgagor, in favor of the Agent for the benefit of the Lenders (or
its designee), as mortgagee, relating to the Mortgaged Property,
and (ii) any other mortgage, leasehold mortgage, deed of trust,
collateral assignment of lease or similar agreement executed by the
Borrower or a Subsidiary of the Borrower pursuant to which such
Person shall have granted a mortgage, leasehold mortgage or other
Lien to the Agent for the benefit of the Lenders, as each such
agreement may at any time be amended, supplemented, restated or
otherwise modified in accordance with the terms thereof and in
effect.

"MOST RECENT BALANCE SHEET" means the most recent
consolidated balance sheet of the Borrower and its Subsidiaries
delivered to the Agent and each Lender pursuant to SECTION
5.1.1(B)(I).

"MULTIEMPLOYER PLAN" means any plan described in Section
4001(a)(3) of ERISA and not excluded pursuant to Section 4021(b)
thereof to which contributions are or have been made by the
Borrower or any of its Subsidiaries or any ERISA Affiliate.

"NET AWARDS" is defined in the Mortgages.

"NET PROCEEDS" is defined in the Mortgages.

"NEW RECEIVABLES FINANCING" is defined in SECTION
5.2.2(P).

"NON-U.S. LENDER" is defined in SECTION 9.12(H).

"NOTE" means any of the Term Notes, Additional Term
Notes, Revolving Notes, Supplemental Revolving Notes, D Tranche
Term Notes or the Swing Line Note and "NOTES" means all of such
promissory notes collectively.

"NOTE PROSPECTUS" means the Prospectus for the First
Mortgage Notes and the Senior Notes dated September 29, 1994.

"NOTICE OF BORROWING" is defined in SECTION 2.5.

Appendix - Page 23

<PAGE>

"NOTICE OF CONVERSION OR CONTINUATION" is defined in
SECTION 2.6.

"NOTICES" is defined in SECTION 9.4.

"OBLIGATIONS" means the Term Loan Obligations, the
Additional Term Loan Obligations, the Revolving Loan Obligations,
the Supplemental Revolving Loan Obligations, the D Tranche Term
Loan Obligations, the Swing Line Loan Obligations, the L/C
Obligations and all other liabilities and obligations of the
Borrower and any Subsidiary of the Borrower now or hereafter
arising under this Agreement or any of the other Loan Documents,
whether for principal, interest, reimbursements, fees, expenses,
indemnities or otherwise, and whether primary, secondary, direct,
indirect, contingent, fixed or otherwise (including obligations of
performance).

"OFFSITE PROPERTY" is defined in SECTION 5.1.15.

"ORIGINAL CREDIT AGREEMENT" is defined in the Recitals to
this Agreement.

"ORIGINAL LENDERS" is defined in the Recitals to this
Agreement.

"PARTICIPANTS" is defined in SECTION 9.12(C).

"PARTICIPATING SUBSIDIARY" means any Wholly-Owned
Subsidiary of the Borrower which is a participant in the Accounts
Receivable Financing Program with respect to one or more business
lines thereof; PROVIDED, HOWEVER, that in no event shall S-CC or
any of its Subsidiaries or any Wholly-Owned Subsidiary which is not
domiciled in the United States or Canada be a Participating
Subsidiary.

"PARTICIPATION AGREEMENTS" means, collectively, the D&K
Participation Agreement and the WCC Participation Agreement (as
each of such terms is defined within the definition of "Florence
Agreements") and "PARTICIPATION AGREEMENT" means either of such
Agreements.

"PAYMENT OFFICE" is defined in SECTION 2.7.

"PBGC" means the Pension Benefit Guaranty Corporation
created by Section 4002(a) of ERISA.

"PERMITTED BENEFICIARY" means any insurance company,
state workers' compensation authority, state or Federal
environmental agency, related trustee or surety, local utility,
municipality, other domestic or foreign Governmental Authority, any
vendor of goods or services being purchased by the Borrower or any
of its Subsidiaries, any domestic or foreign financial institution,

Appendix - Page 24

<PAGE>

or any other Person approved by the Facing Agent, in its sole
discretion.

"PERMITTED INVESTMENTS" mean (i) any evidence of
indebtedness, maturing not more than one year after the date of
issue, issued by the United States of America, or any
instrumentality or agency thereof and guaranteed fully as to
principal, interest and premium, if any, by the United States of
America, (ii) any certificate of deposit, maturing not more than
360 days after the date of purchase issued by a commercial banking
institution which is a member of the Federal Reserve System or a
Canadian banking institution and which has a combined capital and
surplus and undivided profits of not less than $200 million, (iii)
commercial paper, maturing not more than 360 days after the date of
purchase, issued by a corporation (other than the Borrower or any
Subsidiary of the Borrower or any of their respective Affiliates)
organized and existing under the laws of (A) any state within the
United States of America with a rating, at the time of purchase, of
"P-2" (or higher) according to Moody's Investors Service, Inc. or
"A-2" (or higher) according to Standard & Poor's Corporation, or
(B) solely with respect to Permitted Investments made by a foreign
Subsidiary, any foreign country with a rating equivalent to that
specified in clause (A) above, (iv) demand deposits with any bank
or trust company, (v) investments in money market funds having a
rating from each of Moody's Investors Service, Inc. and Standard &
Poor's Corporation in the highest investment category granted
thereby (including without limitation funds for which any Lender,
the Agent or any Co-Agent is investment manager or adviser), (vi)
reverse repurchase agreements with respect to indebtedness issued
by the United States of America, or any instrumentality or agency
thereof and guaranteed fully as to principal, interest and premium,
if any, by the United States of America, and (vii) in the case of
foreign Subsidiaries of the Borrower, short-term investments
comparable to the foregoing.

"PERMITTED LIENS" means with respect to any Person:

(a) Liens existing on the Closing Date and referenced on
SCHEDULE 1.1(D) hereto;

(b) any Lien on any property securing Indebtedness
incurred or assumed for the purpose of financing all or any part of
the acquisition, construction, repair or improvement cost of such
property (including any refinancing thereof), PROVIDED that such
Lien does not extend to any other property;

(c) Liens for taxes or assessments or governmental
charges or levies not yet due or which are being contested in good
faith by appropriate proceedings and with respect to which adequate
reserves, if appropriate under generally accepted accounting
principles, are being maintained;

Appendix - Page 25

<PAGE>

(d) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other Liens imposed by law
created in the ordinary course of business for amounts not yet due
or which are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves, if
appropriate under generally accepted accounting principles, are
being maintained;

(e) Liens (other than any Lien imposed by ERISA)
incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and
other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids,
leases, government contracts, or progress payments, performance and
return-of-money bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money);

(f) easements, rights-of-way, restrictions and other
similar charges or encumbrances not interfering with the ordinary
conduct of the business of the Borrower or any of its Subsidiaries;

(g) Liens existing on any property prior to the
acquisition thereof, prior to the acquisition of the Person which
owns such property or prior to the Person becoming a Subsidiary, by
the Borrower or any of its Subsidiaries, in each case which lien
was not created in contemplation of such acquisition;

(h) the rights of collecting banks having a right of
setoff, revocation, refund or chargeback with respect to money or
instruments of the Borrower or its Subsidiaries on deposit with or
in the possession of such Lender;

(i) Liens created by the Loan Documents and any other
Liens granted to the Agent to secure, directly or indirectly, all
or any portion of the Obligations or other obligations arising
pursuant to the Loan Documents;

(j) the Lien granting ratable security in certain of the
Mortgaged Properties and Collateral pursuant to the requirements of
the Continental Guaranty;

(k) Liens on the property of S-CC or any Subsidiary of S-CC
securing indebtedness which is non-recourse to the Borrower and
each other Subsidiary of the Borrower (other than Subsidiaries of
S-CC in the case of indebtedness of S-CC or any of its
Subsidiaries) and Liens on the property of S-CC or any Subsidiary
of S-CC to the extent permitted by the S-CC Debt Documents;

(l) Liens in favor of any Lender which is a party to a
foreign exchange or interest rate swap or hedging agreement with
the Borrower as permitted by SECTION 5.2.2(O)(I), PROVIDED that
such Liens are not senior to those of the Lenders with respect to

Appendix - Page 26

<PAGE>

such agreements and do not attach to properties of the Borrower
other than those in which the Lenders have a security interest or
mortgage;

(m) Liens on the property of StoneSub securing
obligations of StoneSub incurred pursuant to the Accounts
Receivable Financing Program and Liens in favor of StoneSub granted
by the Borrower or any Participating Subsidiary with respect to
Receivables purportedly sold to StoneSub by the Borrower or any
Participating Subsidiary pursuant to the Accounts Receivable
Financing Program in order to evidence the right, title and
interest of StoneSub in and to such Receivables;

(n) Liens for Indebtedness for Money Borrowed permitted
by SECTION 5.2.2(R) PROVIDED that such Liens attach only to
unearned and return premiums, dividends and loss payments which
reduce the unearned premiums under insurance policies the premiums
of which have been financed with such Indebtedness for Money
Borrowed;

(o) Liens (other than those listed in clauses (A)
through (N) above) securing Indebtedness for Money Borrowed to the
extent such Liens are permitted by clause (xii) of the definition
of "Permitted Liens" set forth in the Senior Indentures as in
effect on the Closing Date, provided such Liens do not (i) extend
to property securing all or any part of the Obligations and (ii)
secure Indebtedness for Money Borrowed which exceeds $350 million
in aggregate principal amount outstanding at any time;

(p) Liens securing Indebtedness for Money Borrowed
permitted by SECTION 5.2.2(K), PROVIDED that at the time of
creation thereof, such Liens do not extend to property securing all
or any part of the Obligations;

(q) Liens securing the First Mortgage Notes pursuant to
the First Mortgage Note Documents as in effect on the Closing Date,
including substitutions and replacements permitted thereby;

(r) extensions, renewals or replacements of any Lien
referred to in clauses (A) through (Q) above, PROVIDED that the
principal amount of the Indebtedness or obligation secured thereby
is not increased and that any such extension, renewal or
replacement is limited to the property originally encumbered
thereby; and

(s) Liens on an account maintained by Stone-Canada or an
escrow agent therefor or Liens on amounts held back by S-CC, in any
case for the payment of certain liabilities identified at the time
of the December 1993 transfer of Stone-Canada's assets to S-CC in
compliance with and to the extent required by the bulk sales
provisions of the Civil Code of Lower Canada (Quebec).

Appendix - Page 27

<PAGE>

"PERMITTED PREFERRED STOCK" means preferred or preference
stock of the Borrower so long as and to the extent that such
preferred or preference stock is not subject to a sinking fund
payment or other mandatory redemption or payment prior to January
15, 2004.

"PERMITTED USES" means (i) for ongoing working capital
and general corporate purposes of the Borrower, (ii) the making or
incurrence of Capital Expenditures and/or Investments in excess of
the annual limitations (and without reduction of the annual
permitted basket amounts) set forth in SECTIONS 5.2.7(D) AND
5.2.11, and (iii) the prepayment of any maturity or maturities of
debt securities of the Borrower, including the payment of
principal, stated premium, if any, and interest thereon.

"PERSON" means an individual or a corporation,
partnership, trust, incorporated or unincorporated association,
joint venture, joint stock company, government (or an agency or
political subdivision thereof) or other entity of any kind.

"PLAN" means any plan described in Section 4021(a) of
ERISA and not excluded pursuant to Section 4021(b) thereof, which
may be or has been established or maintained, or to which
contributions are or have been made, by the Borrower or any of its
Subsidiaries or any ERISA Affiliate, but not including any
Multiemployer Plan.

"PLAN ADMINISTRATOR" has the meaning assigned to the term
"administrator" in Section 3(16)(A) of ERISA.

"PLAN SPONSOR" has the meaning assigned to the term "plan
sponsor" in Section 3(16)(B) of ERISA.

"PRIME RATE" means at any time, the greater of (i) the
rate which BT announces from time to time as its prime lending
rate, as in effect from time to time, and (ii) the Federal Funds
Rate plus 1/2 of 1% per annum. The Prime Rate is a reference rate
and does not necessarily represent the lowest or best rate actually
charged to any customer. BT may make commercial loans or other
loans at rates of interest at, above or below the Prime Rate.

"PRIME RATE ADDITIONAL TERM LOAN" means the Additional
Term Loan or any portion thereof during any period in which it
bears interest at a rate determined with reference to the Prime
Rate.

"PRIME RATE D TRANCHE TERM LOAN" means the D Tranche Term
Loan or any portion thereof during any period in which it bears
interest at a rate determined with reference to the Prime Rate.

"PRIME RATE LOAN" means any Loan which bears interest at
a rate determined with reference to the Prime Rate.

Appendix - Page 28

<PAGE>

"PRIME RATE REVOLVING LOAN" means a Revolving Loan or any
portion thereof during any period in which it bears interest at a
rate determined with reference to the Prime Rate.

"PRIME RATE SUPPLEMENTAL REVOLVING LOAN" means a
Supplemental Revolving Loan or any portion thereof during any
period in which it bears interest at a rate determined with
reference to the Prime Rate.

"PRIME RATE TERM LOAN" means the Term Loan or any portion
thereof during any period in which it bears interest at a rate
determined with reference to the Prime Rate.

"PRO FORMA" is defined in SECTION 4.11(B).

"QUARTERLY PAYMENT DATE" means the 25th day of March,
June, September and December of each year.

"RECEIVABLES" has the meaning assigned to that term in
the definition of Accounts Receivable Financing Program.

"RECEIVABLES FINANCING" has the meaning assigned to that
term in the definition of Accounts Receivable Financing Program.

"REFERENCE BANKS" means, collectively, BT, Chemical Bank
and The First National Bank of Chicago and any successor reference
bank determined pursuant to SECTION 2.8(J).

"REFUNDED SWING LINE LOANS" is defined in SECTION
2.11(C).

"REGISTER" is defined in SECTION 9.12(H).

"REGISTERED NOTE" is defined in SECTION 9.12(H).

"REGISTERED NOTEHOLDER" is defined in SECTION 9.12(H).

"REGULATION D" means Regulation D of the Board as from
time to time in effect and any successor to all or a portion
thereof establishing reserve requirements.

"RELATED TRANSACTIONS" means, collectively, the execution
and delivery of the Basic Agreements, the consummation of the
Mergers pursuant to the Merger Documents, the issuance and sale of
the Senior Notes and First Mortgage Notes pursuant to the Senior
Note Documents and the First Mortgage Note Documents, respectively,
the funding of the Term Loan and each Borrowing under the Revolving
Loan and Swing Line Loan (if any) and each issuance of a Letter of
Credit (if any) on the Closing Date, the consummation of the Debt
Refinancing pursuant to the Debt Refinancing Documents, the Stone

Appendix - Page 29

<PAGE>

Savannah Transactions and the payment of all fees, costs and
expenses associated with all of the foregoing.

"RELEASE" means release, spill, emission, leaking,
pumping, pouring, emptying, dumping, injection, deposit, disposal,
discharge, dispersal, escape, leaching or migration into the indoor
or outdoor environment or into or out of any property of the
Borrower or its Subsidiaries, including the movement of
Contaminants through or in the air, soil, surface water,
groundwater or property of the Borrower or its Subsidiaries.

"REMEDIAL ACTION" means actions required to (i) clean up,
remove, treat or in any other way address Contaminants in the
indoor or outdoor environment; (ii) prevent or minimize the Release
or threat of Release of Contaminants so they do not migrate or
endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment; or (iii) perform pre-remedial
studies and investigations and post-remedial monitoring and care.

"REPLACED LENDER" is defined in SECTION 2.14.

"REPLACEMENT LENDER" is defined in SECTION 2.14.

"REPORTABLE EVENT" means a "reportable event" described
in Section 4043(b) of ERISA or in the regulations thereunder or
receipt of a notice of withdrawal liability or reorganization with
respect to a Multiemployer Plan pursuant to Section 4202 or 4242 of
ERISA.

"REQUIRED LENDERS" means, as of the date of determination
thereof, the Lenders having greater than 50% of the sum of (i) the
aggregate principal amount of loans and other extensions of credit
then outstanding under any of the Loan Documents plus (ii) the
aggregate amount of the remaining available commitments of the
Lenders under any of the Loan Documents; PROVIDED, HOWEVER, that
for purposes of determining the amount of a Revolving Lender's
Loans, each Revolving Lender shall be deemed to hold the principal
amount of Swing Line Loans and the amount of L/C Obligations and
Florence L/C Obligations equal to its Revolving Loan Pro Rata Share
of the Swing Line Loans, L/C Obligations and Florence Obligations
then outstanding.

"RESPONSIBLE OFFICER" means, with respect to any Person,
any of the chairman of the board of directors, the chief executive
officer, chief operating officer, chief financial officer, any
executive vice president, any vice president, treasurer, secretary
or any other similar officer or position of such Person.

"RESTATEMENT DATE" is defined in the Recitals to this
Agreement.

Appendix - Page 30
<PAGE>

"RESTRICTED SUBSIDIARY" means S-CC upon the Borrower
acquiring all of its outstanding shares of capital stock.

"REVOLVER TERMINATION DATE" means May 15, 1999.

"REVOLVING LENDER" means, at any time, any Lender which
then has a Revolving Loan Commitment or is owed a Revolving Loan.

"REVOLVING LOAN AVAILABILITY RATIO" means, on any date of
determination, the ratio of the Total Available Revolving
Commitment to the Total Revolving Loan Commitments.

"REVOLVING LOAN COMMITMENT" means, with respect to any
Lender, the obligation of such Lender to (i) make Revolving Loans
to the Borrower, (ii) participate in Swing Line Loans made by the
Swing Line Lender and (iii) participate in Letters of Credit issued
by the Facing Agent for the account of the Borrower, in an
aggregate principal amount and/or Stated Amount at any one time
outstanding not to exceed the amount set forth opposite such
Lender's name on SCHEDULE 1.1(a) hereto under the caption "Amount
of Revolving Loan Commitment." Each Revolving Loan Commitment
shall be subject to reduction from time to time in accordance with
the terms of this Agreement.

"REVOLVING LOAN COMMITMENT FEE" is defined in SECTION
3.7(a).

"REVOLVING LOAN OBLIGATIONS" means the obligations of the
Borrower to repay principal, and pay interest, on the Revolving
Loans pursuant to SECTION 2.2(b).

"REVOLVING LOAN PRO RATA SHARE" means, with respect to
any Revolving Lender and any described aggregate or total amount,
the amount equal to the result obtained by multiplying such
aggregate or total amount by a fraction, the numerator of which
shall be such Lender's Revolving Loan Commitment in effect at the
time (or, if the Total Revolving Loan Commitments have been
terminated, the principal amount of such Lender's Revolving Loans
then outstanding) and the denominator of which shall be the Total
Revolving Loan Commitments in effect at the time (or, if the Total
Revolving Loan Commitments have been terminated, the aggregate
principal amount of all Revolving Loans then outstanding).

"REVOLVING LOANS" means, individually and collectively,
each of the loans by each of the Revolving Lenders to the Borrower
in accordance with SECTION 2.1(b), which Revolving Loans shall from
time to time be comprised of Prime Rate Loans or Eurodollar Rate
Loans or any combination of the foregoing.

"REVOLVING NOTE" is defined in SECTION 2.2(b).

"REVOLVING PORTION" is defined in SECTION 3.6(c).

Appendix - Page 31

<PAGE>

"S-CC" means Stone-Consolidated Corporation, a Canadian
federal corporation, and any successor thereto.

"S-CC DEBT DOCUMENTS" means the documentation pursuant to
which S-CC has incurred the Indebtedness for Money Borrowed
permitted by SECTIONS 5.2.2(u), as such documentation may be
amended, supplemented, restated or otherwise modified from time to
time, and including documentation related to refinancings of such
Indebtedness for Money Borrowed permitted by such Section.

"SECURITY AGREEMENTS" means, collectively, (i) the
Security Agreement in substantially the form of EXHIBIT 1.1 (a)
hereto dated as of the Closing Date between the Borrower and the
Agent, (ii) the Security Agreement in substantially the form of
EXHIBIT 1.1(b)-A hereto dated as of the Closing Date between Stone
Savannah and the Agent, (iii) the Security Agreement in
substantially the form of EXHIBIT 1.1(b)-B hereto dated as of the
Closing Date between Stone Southwest and the Agent, (iv) any
Security Agreement executed by any Subsidiary of the Borrower to
secure all or any portion of the Obligations after the Closing Date
and (v) any Supplemental Pledge Agreement, in each case, as
amended, supplemented, restated or otherwise modified from time to
time.

"SEMINOLE KRAFT" means Seminole Kraft Corporation, a
Delaware corporation.

"SENIOR INDEBTEDNESS" has the meaning assigned to that
term in each of the Senior Subordinated Note Indenture, the Senior
Subordinated (11-1/2%) Indenture, the Convertible Indenture, the
Convertible Subordinated Indenture and, from and after the merger
of Stone Southwest with and into the Borrower, the Stone Southwest
Indenture.

"SENIOR INDENTURES" means, collectively, the Senior Note
Indenture and the Indenture dated November 1, 1991 between the
Borrower and The Bank of New York, as trustee, pursuant to which
the Borrower issued its 11-7/8% Senior Notes due December 1, 1998.

"SENIOR NOTE DOCUMENTS" means the Senior Note Indenture,
the Senior Notes and all other documents, instruments and
agreements now or hereafter evidencing all or any portion of the
Borrower's obligations under the Senior Note Indenture and the
Senior Notes, including any documents, instruments or agreements
evidencing the amendment, refinancing, modification, replacement,
renewal, restatement, refunding, deferral, extension, supplement,
reissuance or resale thereof.

"SENIOR NOTE INDENTURE" means the Indenture dated as of
October 12, 1994 between the Borrower and The Bank of New York, as
Trustee, pursuant to which the Borrower issued its Senior Notes.

Appendix - Page 32

<PAGE>

"SENIOR NOTES" means, collectively, the Borrower's
11-1/2% Senior Notes due October 1, 2004 in the aggregate principal
amount of $200 million and issued pursuant to the Senior Note
Indenture, as amended, supplemented, restated or otherwise modified
from time to time.

"SENIOR SUBORDINATED (11-1/2%) INDENTURE" means the
Indenture dated as of September 1, 1989 between the Borrower and
Bankers Trust Company, as Trustee, pursuant to which the Borrower
issued its 11-1/2% Senior Subordinated Notes due September 1, 1999,
as amended, supplemented, restated, or otherwise modified from time
to time.

"SENIOR SUBORDINATED NOTE INDENTURE" means the Indenture
dated as of March 15, 1992 between the Borrower and The Bank of New
York, as Trustee, pursuant to which the Borrower issued its 10-3/4%
Senior Subordinated Notes due June 15, 1997, its 10-3/4% Senior
Subordinated Debentures due April 1, 2002 and its 11% Senior
Subordinated Notes due August 15, 1999, as amended, supplemented,
restated or otherwise modified from time to time.

"STANDBY LETTERS OF CREDIT" means any of the standby
Letters of Credit issued by the Facing Agent for the account of the
Borrower pursuant to SECTION 2.12.

"STATED AMOUNTS" means, with respect to any letter of
credit, the stated or face amount of such letter of credit to the
extent available at the time for drawing (subject to presentment of
all requisite documents), as the same may be increased or decreased
from time to time in accordance with the terms of such Letter of
Credit.

"STONE-CANADA" means Stone Container (Canada) Inc., a
Canadian federal corporation and formerly named Stone-Consolidated
Inc., and its successors and assigns.

"STONE MERGER SUBSIDIARIES" is defined in the definition
of Certificates of Ownership and Merger.

"STONE SAVANNAH" means Stone Savannah River Pulp & Paper
Corporation, a Delaware corporation, and any successor thereto.

"STONE SAVANNAH CREDIT AGREEMENT" means the Credit
Agreement dated as of December 9, 1988, as amended, by and among
Stone Savannah, Manufacturers Hanover Trust Company and Citibank,
N.A., as co-managers, the financial institutions signatory thereto
and Citibank, N.A., as agent.

"STONE SAVANNAH SENIOR SUBORDINATED NOTES" means the
14.125% Senior Subordinated Notes due December 15, 2000 of Stone
Savannah issued pursuant to the Stone Savannah Senior Subordinated
Notes Indenture.

Appendix - Page 33

<PAGE>

"STONE SAVANNAH SENIOR SUBORDINATED NOTES INDENTURE"
means the Indenture dated as of December 15, 1988, between Stone
Savannah and The Bank of New York (as successor to Manufacturers
Hanover Trust Company), as Trustee, in respect of the Stone
Savannah Senior Subordinated Notes, as amended from time to time.

"STONE SAVANNAH TRANSACTIONS" is defined in SECTION
5.1.13.

"STONE SOUTHWEST" means Stone Southwest, Inc., a Delaware
corporation.

"STONE SOUTHWEST INDENTURE" means the Indenture dated as
of September 15, 1983 between Stone Southwest (as successor to
Southwest Forest Industries, Inc.) and National Westminster Bank
USA (as successor to Bankers Trust Company), as Trustee, as
amended, restated or otherwise modified from time to time.

"STONE SOUTHWEST MERGER SUBSIDIARIES" is defined in the
definition of Certificates of Ownership and Merger.

"STONESUB" means, individually and collectively, one or
more corporations organized under the laws of one of the United
States of America or Canada which are special purpose Wholly-Owned
Subsidiaries of the Borrower formed to engage in the Accounts
Receivable Financing Program, and including any Wholly-Owned
Subsidiary formed as a holding company, the only assets of which
consist of the capital stock of such subsidiaries formed to engaged
in the Accounts Receivables Financing Program.

"SUBORDINATED DEBT" means (i) the Borrower's 10-3/4%
Senior Subordinated Notes due June 15, 1997, 11% Senior
Subordinated Notes due August 15, 1999 and 10-3/4% Senior
Subordinated Debentures due April 1, 2002 issued pursuant to the
Senior Subordinated Note Indenture, (ii) the Borrower's 11-1/2%
Senior Subordinated Notes due September 1, 1999 issued pursuant to
the Senior Subordinated (11-1/2%) Indenture, (iii) the Borrower's
12-1/8% Subordinated Debentures due September 15, 2001 under the
Stone Southwest Indenture, (iv) the Borrower's 8-7/8% Convertible
Senior Subordinated Notes due July 15, 2000 issued pursuant to the
Convertible Indenture, (v) the Borrower's 6-3/4% Convertible
Subordinated Debentures due February 15, 2007 issued pursuant to
the Convertible Subordinated Indenture and (vi) any other
Indebtedness for Money Borrowed of the Borrower which is
subordinate and junior in right of payment to the prior payment in
full of all amounts owing to the Lenders under the Loan Documents
pursuant to an agreement in form, terms and substance satisfactory
to the Required Lenders.

"SUBSIDIARY" of any Person means any corporation of which
such Person, directly or indirectly, shall at the time own shares
of any class or classes (however designated) having ordinary voting

Appendix - Page 34

<PAGE>

power for the election of at least a majority of the members of the
board of directors (or the governing body) of such corporation,
other than shares having such power only by reason of the happening
of a contingency. Unless otherwise expressly provided, all
references herein to a "Subsidiary" shall mean a Subsidiary of the
Borrower. Notwithstanding the foregoing, SVCPI shall not be deemed
to be a Subsidiary for any purposes of this Agreement (including
without limitation the definition of "Wholly-Owned Subsidiary")
regardless of the fact that Stone-Canada and/or Affiliates of
Stone-Canada may at any time own a majority or all of the
outstanding voting shares of SVCPI, PROVIDED, HOWEVER that in the
event Stone-Canada and/or Affiliates of Stone-Canada become the
owner of a majority of the outstanding voting shares of SVCPI, then
(i) SVCPI shall be deemed to be a Subsidiary for purposes of
SECTIONS 5.1.1(f), (g) and (h), 5.1.6 and 5.1.7 and (ii) for
purposes of the financial statements referred to in SECTIONS
5.1.1(b), (c), (d) and (e), SVCPI shall be accounted for utilizing
the equity method.

"SUBSIDIARY GUARANTEES" means, collectively, (i) the
Subsidiary Guarantees each in substantially the form of EXHIBIT 1.1
(c) hereto dated as of the Closing Date and executed by Stone
Savannah and Stone Southwest in favor of the Agent and the Lenders
and (ii) any Subsidiary Guarantee executed by any Subsidiary of the
Borrower after the Closing Date pursuant to SECTION 5.1.16, in each
case as amended, supplemented, restated or otherwise modified from
time to time.

"SUBSTITUTE COLLATERAL" is defined in SECTION 9.13(c).

"SUPPLEMENTAL PLEDGE AGREEMENT" means a pledge or
security agreement in a form reasonably acceptable to the Agent
pursuant to which the recipient of any equity interest or other
non-cash consideration described in the penultimate sentence of
SECTION 5.2.8 or the last sentence of SECTION 5.2.12 pledges or
hypothecates such equity interest or non-cash consideration to the
Agent for the benefit of the Lenders to secure the "Obligations"
(as defined in the Security Agreements).

"SUPPLEMENTAL REVOLVER TERMINATION DATE" means May 15,
1999.

"SUPPLEMENTAL REVOLVING LENDER" means, at any time, any
Lender which then has a Supplemental Revolving Loan Commitment or
is owed a Supplemental Revolving Loan.

"SUPPLEMENTAL REVOLVING LOAN AVAILABILITY RATIO" means,
on any date of determination, the ratio of the Total Available
Supplemental Revolving Commitment to the Total Supplemental
Revolving Loan Commitments.

Appendix - Page 35

<PAGE>

"SUPPLEMENTAL REVOLVING LOAN COMMITMENT" means, with
respect to any Lender, the obligation of such Lender to make
Supplemental Revolving Loans to the Borrower in an aggregate
principal amount at any one time outstanding not to exceed the
amount set forth opposite such Lender's name on SCHEDULE 1.1(f)
hereto under the caption "Amount of Supplemental Revolving Loan
Commitment." Each Supplemental Revolving Loan Commitment shall be
subject to reduction from time to time in accordance with the terms
of this Agreement.

"SUPPLEMENTAL REVOLVING LOAN COMMITMENT FEE" is defined
in SECTION 3.7(b).

"SUPPLEMENTAL REVOLVING LOAN OBLIGATIONS" means the
obligations of the Borrower to repay principal, and pay interest,
on the Supplemental Revolving Loans pursuant to SECTION 2.2(e).

"SUPPLEMENTAL REVOLVING LOAN PRO RATA SHARE" means, with
respect to any Supplemental Revolving Lender and any described
aggregate or total amount, the amount equal to the result obtained
by multiplying such aggregate or total amount by a fraction, the
numerator of which shall be such Lender's Supplemental Revolving
Loan Commitment in effect at the time (or, if the Total
Supplemental Revolving Loan Commitments have been terminated, the
principal amount of such Lender's Supplemental Revolving Loans then
outstanding) and the denominator of which shall be the Total
Supplemental Revolving Loan Commitments in effect at the time (or,
if the Total Supplemental Revolving Loan Commitments have been
terminated, the aggregate principal amount of all Supplemental
Revolving Loans then outstanding).

"SUPPLEMENTAL REVOLVING LOANS" means, individually and
collectively, each of the loans by each of the Supplemental
Revolving Lenders to the Borrower in accordance with SECTION
2.1(d), which Supplemental Revolving Loans shall from time to time
be comprised of Prime Rate Loans or Eurodollar Rate Loans or any
combination of the foregoing.

"SUPPLEMENTAL REVOLVING NOTE" is defined in SECTION
2.2(e).

"SVCPI" means Stone Venepal (Celgar) Pulp, Inc., a
Canadian federal corporation.

"SWING LINE COMMITMENT" means, with respect to the Swing
Line Lender at any date, the obligation of the Swing Line Lender to
make Swing Line Loans pursuant to SECTION 2.11 in the amount
referred to therein.

"SWING LINE LENDER" means BT.

"SWING LINE LOANS" is defined in SECTION 2.11(a).

Appendix - Page 36

<PAGE>

"SWING LINE LOAN OBLIGATIONS" means the obligations of
the Borrower to repay principal, and pay interest, on the Swing
Line Loans pursuant to SECTION 2.2(c).

"SWING LINE LOAN PARTICIPATION CERTIFICATE" means a
certificate, substantially in the form of EXHIBIT 2.11(d).

"SWING LINE NOTE" is defined in SECTION 2.2(c).

"TAXES" is defined in SECTION 3.12(a).

"TERM LENDER" means, at any time, any Lender which then
has a Term Loan Commitment or is owed any portion of the Term Loan.

"TERM LOAN" means, individually and collectively, the
loans made by each of the Term Lenders to the Borrower in
accordance with SECTION 2.1(a), which Term Loan shall from time to
time be comprised of Prime Rate Loans or Eurodollar Rate Loans or
any combination of the foregoing.

"TERM LOAN COMMITMENT" means, with respect to each Term
Lender, the principal amount set forth opposite such Term Lender's
name on SCHEDULE 1.1(a) hereto under the caption "Amount of Term
Loan Commitment."

"TERM LOAN MATURITY DATE" means April 1, 2000.

"TERM LOAN OBLIGATIONS" means the obligations of the
Borrower to repay principal, and pay interest, on the Term Loan
pursuant to SECTION 2.2(a).

"TERM LOAN PRO RATA SHARE" means, with respect to any
Term Lender and any described aggregate or total amount, the amount
equal to the result obtained by multiplying such described
aggregate or total amount by a fraction, the numerator of which
shall be the portion of the Term Loan made by such Lender and
outstanding at the time and the denominator of which shall be the
aggregate amount of the Term Loan made by all of the Term Lenders
and outstanding at the time.

"TERM NOTE" is defined in SECTION 2.2(a).

"TOTAL AVAILABLE REVOLVING COMMITMENT" means, at the time
any determination thereof is made, the sum of the respective
Available Revolving Commitments of the Revolving Lenders at such
time.

"TOTAL AVAILABLE SUPPLEMENTAL REVOLVING COMMITMENT"
means, at the time any determination thereof is made, the sum of
the respective Available Supplemental Revolving Commitments of the
Supplemental Revolving Lenders at such time.

Appendix - Page 37

<PAGE>

"TOTAL CONSOLIDATED INDEBTEDNESS FOR MONEY BORROWED"
means, subject to the last sentence of SECTION 1.2, the total of
all Indebtedness for Money Borrowed of the Borrower and its
Subsidiaries.

"TOTAL MAXIMUM COMMITMENT" means, at the time any
determination thereof is to be made, the sum of the respective
Maximum Commitments, Additional Term Loan Commitments, Supplemental
Revolving Loan Commitments and D Tranche Term Loan Commitments of
the Lenders at such time.

"TOTAL REVOLVING LOAN COMMITMENTS" means, at any time any
determination thereof is to be made, the sum of the respective
Revolving Loan Commitments of the Revolving Lenders at such time.

"TOTAL SUPPLEMENTAL REVOLVING LOAN COMMITMENTS" means, at
any time any determination thereof is to be made, the sum of the
respective Supplemental Revolving Loan Commitments of the
Supplemental Revolving Lenders at such time.

"TRANSACTION DOCUMENTS" means the Merger Documents, the
Senior Note Documents, the First Mortgage Note Documents, the Debt
Refinancing Documents and any other document, instrument or
agreement executed and/or delivered in connection with the
consummation of the Related Transactions.

"12-1/8% SUBORDINATED DEBENTURES" means the Borrower's
12-1/8% Subordinated Debentures due September 15, 2001.

"TYPE" means any type of Loan, namely a Prime Rate Loan
or a Eurodollar Rate Loan (whether a Term Loan, Additional Term
Loan or Revolving Loan).

"UNDERFUNDED PLAN" is defined in SECTION 4.15(a).

"UNMATURED EVENT OF DEFAULT" means an event, act or
occurrence which, with the giving of notice or the lapse of time
(or both), would become an Event of Default.

"U.S. CREDIT AGREEMENT" means that certain Credit
Agreement dated as of March 1, 1989, executed as of October 25,
1993 and effective as an amended and restated agreement effective
as of December 17, 1993, as further amended, by and among the
Borrower, BT, as Agent, Citibank, N.A., Chemical Bank (as successor
to Manufacturers Hanover Trust Company) and The First National Bank
of Chicago, as Co-Agents, and certain financial institutions
signatory thereto.

"WAIVED PROCEEDS" is defined in SECTION 3.6(f).

"WAIVER FEE" is defined in SECTION 3.9.

Appendix - Page 38

<PAGE>

"WHOLLY-OWNED SUBSIDIARY" means, with respect to any
Person, at any time any Subsidiary of such Person, all of the
outstanding shares of capital stock of which (other than qualifying
shares required to be owned by directors) are at the time owned
directly by such Person and/or one or more Wholly-Owned
Subsidiaries of such Person. Unless otherwise expressly provided,
all references herein to a "Wholly-Owned Subsidiary" shall mean a
Wholly-Owned Subsidiary of the Borrower.

The foregoing definitions shall be equally applicable to
both the singular and plural forms of the defined terms. The words
"herein", "hereof" and words of similar import as used in this
Agreement shall refer to this Agreement as a whole and not to any
particular provision in this Agreement. Unless specifically stated
to the contrary, all references to "Sections," "subsections,"
"paragraphs," "Exhibits" and "Schedules" in this Agreement shall
refer to Sections, subsections, paragraphs, Exhibits and Schedules
of this Agreement unless otherwise expressly provided; references
to Persons include their respective permitted successors and
assigns or, in the case of governmental Persons, Persons succeeding
to the relevant functions of such persons; and all references to
statutes and related regulations shall include any amendments of
same and any successor statutes and regulations.

Appendix - Page 39

<PAGE>

EXECUTION COPY

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

STONE RECEIVABLES CORPORATION,
Issuer

and

STONE CONTAINER CORPORATION,
Servicer

MARINE MIDLAND BANK,
Trustee

and

BANKERS TRUST COMPANY,
Administrative Agent

MASTER TRUST INDENTURE AND
SECURITY AGREEMENT

Term and Revolving Notes

Dated as of March 14, 1995

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

<PAGE>

TABLE OF CONTENTS

SECTION PAGE
----
ARTICLE I
DEFINITIONS

Section 1.01 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.02 INCORPORATION BY REFERENCE TO TRUST
INDENTURE ACT. . . . . . . . . . . . . . . . . . . . . 3
Section 1.03 COMPLIANCE CERTIFICATES AND OPINIONS. . . . . . . . . . 3
Section 1.04 FORM OF DOCUMENTS DELIVERED TO TRUSTEE
AND/OR ADMINISTRATIVE AGENT. . . . . . . . . . . . . . 4
Section 1.05 ACTS OF NOTEHOLDERS . . . . . . . . . . . . . . . . . . 4
Section 1.06 CONFLICT WITH TRUST INDENTURE ACT . . . . . . . . . . . 5
Section 1.07 BENEFITS OF INDENTURE . . . . . . . . . . . . . . . . . 6
Section 1.08 INCORPORATION OF RECITALS . . . . . . . . . . . . . . . 6

ARTICLE II
CONVEYANCE OF CERTAIN ASSETS; ISSUANCE
OF NOTES

Section 2.01 ACCEPTANCE BY TRUSTEE . . . . . . . . . . . . . . . . . 6
Section 2.02 CERTAIN MATTERS REGARDING THE GRANT . . . . . . . . . . 6
Section 2.03 REPRESENTATIONS AND WARRANTIES OF THE
ISSUER RELATING TO THE PLEDGED ASSETS. . . . . . . . . 7
Section 2.04 NO ASSUMPTION OF OBLIGATIONS RELATING TO
RECEIVABLES, RELATED TRANSFERRED ASSETS
OR CONTRACTS . . . . . . . . . . . . . . . . . . . . . 9

ARTICLE III
ADMINISTRATION AND SERVICING
OF RECEIVABLES

Section 3.01 ACCEPTANCE OF APPOINTMENT AND OTHER
MATTERS RELATING TO THE SERVICER . . . . . . . . . . . 10
Section 3.02 DUTIES OF THE SERVICER AND THE ISSUE. . . . . . . . . . 11
Section 3.03 LOCKBOX ACCOUNTS; CONCENTRATION ACCOUNTS. . . . . . . . 13
Section 3.04 RECORDS OF THE SERVICER AND REPORTS TO BE
PREPARED BY THE SERVICER AND ISSUER. . . . . . . . . . 16
Section 3.05 MONTHLY SERVICER'S CERTIFICATE. . . . . . . . . . . . . 18
Section 3.06 ANNUAL SERVICING REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS; FORMS 10-Q AND 10-K. . . . . . . . 18
Section 3.07 RIGHTS OF THE TRUSTEE . . . . . . . . . . . . . . . . . 19
Section 3.08 ONGOING RESPONSIBILITIES OF STONE CONTAINER . . . . . . 21
Section 3.09 FURTHER ACTION EVIDENCING TRANSFER AND
GRANT. . . . . . . . . . . . . . . . . . . . . . . . . 23

ARTICLE IV
RIGHTS OF NOTEHOLDERS; ALLOCATION
AND APPLICATION OF COLLECTIONS

Section 4.01 ESTABLISHMENT OF TRUST ACCOUNTS . . . . . . . . . . . . 24
Section 4.02 DAILY CALCULATIONS AND FUNDS ALLOCATIONS. . . . . . . . 27

<PAGE>

Section 4.03 INVESTMENT OF FUNDS IN TRUST ACCOUNTS . . . . . . . . . 34
Section 4.04 ATTACHMENT OF TRUST ACCOUNTS. . . . . . . . . . . . . . 35

ARTICLE V
DISTRIBUTIONS AND REPORTS TO
NOTEHOLDERS

Section 5.01 DISTRIBUTIONS TO NOTEHOLDERS. . . . . . . . . . . . . . 35
Section 5.02 DISTRIBUTIONS TO THE ISSUER . . . . . . . . . . . . . . 38
Section 5.03 INFORMATION TO NOTEHOLDERS. . . . . . . . . . . . . . . 39
Section 5.04 NOTICE OF EARLY LIQUIDATION AT THE
SELLERS' ELECTION. . . . . . . . . . . . . . . . . . . 40

ARTICLE VI
THE NOTES

Section 6.01 FORMS OF THE NOTES GENERALLY. . . . . . . . . . . . . . 40
Section 6.02 FORM OF ADMINISTRATIVE AGENT'S CERTIFICATE OF
AUTHENTICATION . . . . . . . . . . . . . . . . . . . . 40
Section 6.03 AMOUNT; ISSUABLE IN SERIES. . . . . . . . . . . . . . . 41
Section 6.04 EXECUTION, AUTHENTICATION AND DELIVERY. . . . . . . . . 42
Section 6.05 REGISTRATION OF TRANSFER AND EXCHANGE OF THE NOTES. . . 45
Section 6.06 MUTILATED, DESTROYED, LOST OR STOLEN NOTES. . . . . . . 47
Section 6.07 AUTHENTICATING AGENT. . . . . . . . . . . . . . . . . . 48
Section 6.08 CHANGES IN AMOUNT OF REVOLVING NOTES. . . . . . . . . . 49
Section 6.09 BOOK-ENTRY NOTES. . . . . . . . . . . . . . . . . . . . 50
Section 6.10 NOTICES TO CLEARING AGENCY. . . . . . . . . . . . . . . 51
Section 6.11 DEFINITIVE NOTES. . . . . . . . . . . . . . . . . . . . 51
Section 6.12 TEMPORARY NOTES . . . . . . . . . . . . . . . . . . . . 52
Section 6.13 CANCELLATION. . . . . . . . . . . . . . . . . . . . . . 53
Section 6.14 CUSIP NUMBER. . . . . . . . . . . . . . . . . . . . . . 53
Section 6.15 LETTER OF REPRESENTATIONS . . . . . . . . . . . . . . . 53
Section 6.16 PERSONS DEEMED OWNERS . . . . . . . . . . . . . . . . . 53
Section 6.17 APPOINTMENT OF PAYING AGENT . . . . . . . . . . . . . . 54

ARTICLE VII
THE ISSUER

Section 7.01 REPRESENTATIONS AND WARRANTIES OF THE
ISSUER RELATING TO THE ISSUER AND THE
TRANSACTION DOCUMENTS. . . . . . . . . . . . . . . . . 55
Section 7.02 COVENANTS OF THE ISSUER . . . . . . . . . . . . . . . . 60
Section 7.03 INDEMNIFICATION BY THE ISSUER . . . . . . . . . . . . . 70

ARTICLE VIII
THE SERVICER

Section 8.01 REPRESENTATIONS AND WARRANTIES OF THE SERVICER. . . . . 73
Section 8.02 COVENANTS OF THE SERVICER . . . . . . . . . . . . . . . 76
Section 8.03 MERGER OR CONSOLIDATION OF, OR ASSUMPTION
OF THE OBLIGATIONS OF, THE SERVICER. . . . . . . . . . 76
<PAGE>

Section 8.04 INDEMNIFICATION BY THE SERVICER . . . . . . . . . . . . 77
Section 8.05 SERVICER LIABILITY. . . . . . . . . . . . . . . . . . . 78

ARTICLE IX
LIQUIDATION EVENTS; EVENTS OF DEFAULT

Section 9.01 LIQUIDATION EVENTS. . . . . . . . . . . . . . . . . . . 79
Section 9.02 EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . 80
Section 9.03 REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . 81

ARTICLE X
SERVICER DEFAULTS

Section 10.01 SERVICER DEFAULTS. . . . . . . . . . . . . . . . . . . 82
Section 10.02 ADMINISTRATIVE AGENT TO ACT; APPOINTMENT
OF SUCCESSOR. . . . . . . . . . . . . . . . . . . . . 83

ARTICLE XI
THE TRUSTEE AND THE ADMINISTRATIVE AGENT

Section 11.01 DUTIES OF TRUSTEE AND THE ADMINISTRATIVE AGENT . . . . 86
Section 11.02 CERTAIN MATTERS AFFECTING THE TRUSTEE AND THE
ADMINISTRATIVE AGENT. . . . . . . . . . . . . . . . . 90
Section 11.03 MAY HOLD NOTES . . . . . . . . . . . . . . . . . . . . 92
Section 11.04 MONEY HELD IN TRUST. . . . . . . . . . . . . . . . . . 92
Section 11.05 DISQUALIFICATION; CONFLICTING INTERESTS. . . . . . . . 92
Section 11.06 PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER . . . 93
Section 11.07 LIMITATION ON LIABILITY OF TRUSTEE AND
ADMINISTRATIVE AGENT; ADMINISTRATIVE AGENT NOT
A FIDUCIARY . . . . . . . . . . . . . . . . . . . . . 93
Section 11.08 TRUSTEE AND ADMINISTRATIVE AGENT MAY DEAL WITH
OTHER PARTIES . . . . . . . . . . . . . . . . . . . . 95
Section 11.09 SERVICER TO PAY TRUSTEE'S AND THE ADMINISTRATIVE
AGENT'S FEES AND EXPENSES . . . . . . . . . . . . . . 95
Section 11.10 CORPORATE TRUSTEE REQUIRED; ELIGIBILITY. . . . . . . . 96
Section 11.11 RESIGNATION OR REMOVAL OF TRUSTEE OR
ADMINISTRATIVE AGENT. . . . . . . . . . . . . . . . . 97
Section 11.12 SUCCESSOR TRUSTEE OR ADMINISTRATIVE
AGENT . . . . . . . . . . . . . . . . . . . . . . . . 99
Section 11.13 MERGER OR CONSOLIDATION OF TRUSTEE OR
ADMINISTRATIVE AGENT. . . . . . . . . . . . . . . . . 99
Section 11.14 APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE. . . . . 100
Section 11.15 TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION
OF NOTES. . . . . . . . . . . . . . . . . . . . . . . 101
Section 11.16 TRUSTEE MAY FILE PROOFS OF CLAIM.. . . . . . . . . . . 102
Section 11.17 SUITS FOR ENFORCEMENT. . . . . . . . . . . . . . . . . 103
Section 11.18 RIGHTS OF REQUIRED NOTEHOLDERS TO DIRECT TRUSTEE . . . 103
Section 11.19 REPRESENTATIONS AND WARRANTIES OF
TRUSTEE AND THE ADMINISTRATIVE AGENT. . . . . . . . . 103
Section 11.20 MAINTENANCE OF OFFICE OR AGENCY. . . . . . . . . . . . 105

<PAGE>

ARTICLE XII
LISTS OF NOTEHOLDERS

Section 12.01 ACCESS TO LIST OF NOTEHOLDERS. . . . . . . . . . . . . 105

ARTICLE XIII
SATISFACTION AND DISCHARGE

Section 13.01 SATISFACTION AND DISCHARGE OF INDENTURE. . . . . . . . 106
Section 13.02 DEPOSITED MONEYS, U.S. GOVERNMENT OBLIGATIONS
TO BE HELD IN TRUST . . . . . . . . . . . . . . . . . 107
Section 13.03 REPAYMENT TO THE ISSUER. . . . . . . . . . . . . . . . 107
Section 13.04 RELEASE OF LIENS . . . . . . . . . . . . . . . . . . . 108

ARTICLE XIV
SUPPLEMENTS AND AMENDMENTS TO INDENTURE

Section 14.01 SUPPLEMENTS AND AMENDMENTS TO INDENTURE
WITHOUT CONSENT OF NOTEHOLDERS. . . . . . . . . . . . 108
Section 14.02 SUPPLEMENTS AND AMENDMENTS TO INDENTURE
WITH CONSENT OF THE NOTEHOLDERS . . . . . . . . . . . 109
Section 14.03 CERTAIN MATTERS RELATING TO SUPPLEMENTS
AND AMENDMENTS. . . . . . . . . . . . . . . . . . . . 111
Section 14.04 EFFECT OF SUPPLEMENTS. . . . . . . . . . . . . . . . . 111
Section 14.05 CONFORMITY WITH TRUST INDENTURE ACT. . . . . . . . . . 112
Section 14.06 REFERENCE IN NOTES TO SUPPLEMENTS. . . . . . . . . . . 112

ARTICLE XV
REDEMPTIONS

Section 15.01 REDEMPTION ALLOWED . . . . . . . . . . . . . . . . . . 112
Section 15.02 ELECTION TO REDEEM; NOTICE TO TRUSTEE
AND ADMINISTRATIVE AGENT. . . . . . . . . . . . . . . 112
Section 15.03 SELECTION OF SECURITIES TO BE REDEEMED . . . . . . . . 112
Section 15.04 NOTICE OF REDEMPTION . . . . . . . . . . . . . . . . . 113
Section 15.05 DEPOSIT OF REDEMPTION PRICE. . . . . . . . . . . . . . 114
Section 15.06 NOTES PAYABLE ON REDEMPTION DATE . . . . . . . . . . . 115
Section 15.07 NOTES REDEEMED IN PART . . . . . . . . . . . . . . . . 115

ARTICLE XVI
MISCELLANEOUS PROVISIONS

Section 16.01 LIMITATION ON RIGHTS OF NOTEHOLDERS. . . . . . . . . . 115
Section 16.02 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . 116
Section 16.03 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . 116
Section 16.04 SEVERABILITY OF PROVISIONS . . . . . . . . . . . . . . 117
Section 16.05 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . 117
Section 16.06 NONPETITION COVENANT . . . . . . . . . . . . . . . . . 117
Section 16.07 NO WAIVER; CUMULATIVE REMEDIES . . . . . . . . . . . . 118
Section 16.08 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . 18
Section 16.09 THIRD-PARTY BENEFICIARIES. . . . . . . . . . . . . . . 118
Section 16.10 INTEGRATION. . . . . . . . . . . . . . . . . . . . . . 119
Section 16.11 SURVIVAL OF PROVISIONS . . . . . . . . . . . . . . . . 119
Section 16.12 LIMITATION ON LIABILITY OF THE ISSUER AND
THE SERVICER . . . . . . . . . . . . . . . . . . . . . 119

<PAGE>

Section 16.13 SUBMISSION TO JURISDICTION . . . . . . . . . . . . . . 120
Section 16.14 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . 120
Section 16.15 CERTAIN PARTIAL RELEASES . . . . . . . . . . . . . . . 120
Section 16.16 UNDERTAKING FOR COSTS. . . . . . . . . . . . . . . . . 121

EXHIBITS

Exhibit A - Form of Daily Report
Exhibit B - Form of Settlement Statement
Exhibit C - Form of Monthly Servicer's Certificate
Exhibit D - Form of Summary Settlement Statement to be
Distributed to the Noteholders
Exhibit E - Form of Agreed Upon Procedures Letter

SCHEDULES

Schedule 7.01(i) Offices of the Issuer, the Servicer and the Sellers where
Records are maintained
Schedule 7.01(j) Account Banks
Schedule 7.01(o) Fictitious Names

APPENDIX

Appendix A Definitions

<PAGE>

THIS MASTER TRUST INDENTURE AND SECURITY AGREEMENT dated as of March
14, 1995 (this "INDENTURE"), is by and among STONE RECEIVABLES CORPORATION, a
Delaware corporation, as issuer (the "ISSUER"), STONE CONTAINER CORPORATION, a
Delaware corporation ("STONE CONTAINER"), in its capacity as the initial
Servicer hereunder, MARINE MIDLAND BANK, as Trustee and BANKERS TRUST COMPANY,
as Administrative Agent.

In consideration of the mutual agreements herein contained, each party
agrees as follows for the benefit of the other parties and each of the
Noteholders to the extent provided herein:

RECITALS OF THE ISSUER

The Issuer has duly authorized the creation and issuance of each
Series of Notes, each Series to be of substantially the tenor and amount set
forth herein and in the respective Supplement relating to each such Series of
Notes. In order to provide for the foregoing, the Issuer has duly authorized
the execution and delivery of this Indenture.

The Notes shall each be limited recourse obligations of the Issuer and
shall be secured solely by the Noteholders' respective allocable shares of the
Pledged Assets as set forth herein. If and to the extent that such allocable
share is insufficient to pay all amounts owing with respect to such Notes, then,
except as otherwise expressly provided hereunder, the Noteholders of such Notes
shall have no Claim in respect of such insufficiency against the Issuer or any
of its other assets or properties (including, without limitation, any Pledged
Assets allocable to any other Notes in accordance with the terms hereof), and
the Noteholders, by their acceptance of the Notes, hereby waive any such Claim.

All things necessary to (a) make the Notes, when executed by the
Issuer and authenticated and delivered by the Administrative Agent hereunder and
duly issued by the Issuer, the valid obligations of the Issuer, and (b) make
this Indenture a valid agreement of the Issuer, in each case, in accordance with
their respective terms, have been done.

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

That the Issuer, in consideration of the premises herein contained and
of the purchase of the Notes by the Noteholders, and of other good and lawful
consideration, the receipt of which is hereby acknowledged, and to secure,
equally and ratably without prejudice, priority or distinction, except as
specifically otherwise set forth in this Indenture and in the respective
Supplement relating to such Notes, the payment of the Notes, the payment of all
other amounts due under or in connection with the Notes or with this Indenture,
and the performance and observance of all of the covenants and conditions
contained herein or in such Notes, has hereby executed and

<PAGE>

delivered this Indenture and by these presents does hereby convey, grant,
assign, transfer and pledge a security interest, in each case, in and unto the
Trustee, its successors and assigns and its or their assigns forever, for the
benefit of the Noteholders, with power of sale, all and singular in the property
hereinafter described (said property being sometimes referred to as the "PLEDGED
ASSETS"), to wit:

GRANTING CLAUSE

All of the Issuer's right, title and interest in, to and under, (i)
each Receivable that has been or at anytime hereafter shall be transferred by
any of the Sellers to the Issuer pursuant to the Purchase Agreement at any time
on or prior to the date hereof and continuing hereafter up to but excluding the
Purchase Termination Date (including, without limitation in the case of Stone
Container, any Receivables acquired by Stone Container as a result of the Merger
and which have been or shall hereafter be conveyed to the Issuer pursuant to the
Purchase Agreement any time prior to the Purchase Termination Date), (ii) all
Related Assets, (iii) the Seller Transaction Documents and all of the rights and
remedies thereunder (all of the Issuer's right, title and interest in, to and
under such Seller Transaction Documents and the Related Assets being herein
called the "RELATED TRANSFERRED ASSETS"), (iv) all funds from time to time on
deposit in each of the Trust Accounts and all funds from time to time on deposit
in each of the Bank Accounts representing Collections on, or other proceeds of,
the foregoing and, in each case, all certificates and instruments, if any, from
time to time evidencing such funds, all investments made with such funds, all
claims thereunder or in connection therewith and all interest, dividends,
monies, instruments, securities and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of the foregoing, and (v) all moneys due or to become due and all amounts
received or receivable with respect to any of the foregoing and all products and
proceeds of the foregoing.

AND IT IS HEREBY COVENANTED, DECLARED AND AGREED by and between the
parties hereto that all Notes are to be issued, countersigned and delivered and
that all of the Pledged Assets are to be held and applied, subject to the
further covenants, conditions, releases, uses and trusts hereinafter set forth,
and the Issuer and the Servicer, in each case, for itself and its successors,
does hereby covenant and agree to and with the Trustee, the Administrative Agent
and each of the foregoing's respective successors in said trust, for the benefit
of those who shall hold the Notes, or any of them, as follows:

-2-

<PAGE>

ARTICLE I

DEFINITIONS

Section 1.01 DEFINITIONS. Whenever used in this Indenture,
capitalized terms, unless otherwise defined herein, have the meanings that
APPENDIX A assigns to such terms. In addition, this Indenture shall be
interpreted in accordance with the conventions set forth in PARTS B, C and D of
APPENDIX A.

Section 1.02 INCORPORATION BY REFERENCE TO TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the Trust Indenture Act, the
provision is incorporated by reference in and made a part of this Indenture.
The following Trust Indenture Act terms incorporated by reference in this
Indenture have the following meanings:

"indenture securities" means the Notes.

"indenture security holder" means a Noteholder.

"indenture to be qualified" means this Indenture.

"indenture trustee" or "institutional trustee" means the Trustee.

"obligor" on the indenture securities means the Issuer or any other
obligor on the Notes, if any.

All other Trust Indenture Act terms used or incorporated by reference
in this Indenture that are defined by the Trust Indenture Act, defined by the
Trust Indenture Act's reference to another statute or defined by Commission rule
shall, in each case, have the meanings assigned to them therein.

Section 1.03 COMPLIANCE CERTIFICATES AND OPINIONS.

(a) Upon any application or request by the Issuer to the Trustee
and/or the Administrative Agent to take any action under any provision of this
Indenture, the Issuer shall furnish to the Trustee and the Administrative Agent
(x) an Officer's Certificate stating that all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have been
complied with, and (y) an Opinion of Counsel stating that, in the opinion of
such counsel, all such conditions precedent, if any, have been complied with;
PROVIDED, that in the case of any such application or request as to which the
furnishing of such documents is specifically required by any provision of this
Indenture relating to such particular application or request, no additional
certificate or opinion need be furnished.

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(b) Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than the annual
certificate provided pursuant to SECTION 7.02(F)(V)) shall include:

(1) a statement that each Person signing such certificate or opinion
has read such covenant or condition and the definitions herein relating
thereto;

(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;

(3) a statement that, in the opinion of each such Person, such Person
has made such examination or investigation as is necessary to enable it to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and

(4) a statement as to whether, in the opinion of
each such Person, such covenant or condition has been complied with.

Section 1.04 FORM OF DOCUMENTS DELIVERED TO TRUSTEE AND/OR
ADMINISTRATIVE AGENT. In any case where several matters are required to be
certified by, or covered by an opinion of, any specified Person, it is not
necessary that all such matters be certified by, or covered by the opinion of,
only one such Person, or that they be so certified or covered by only one
document, but one such Person may certify or give an opinion with respect to
some matters and one or more other such Persons as to other matters, and any
such Person may certify or give an opinion as to such matters in one or several
documents.

Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.

Section 1.05 ACTS OF NOTEHOLDERS. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by any Noteholders, or a specified
percentage or number of Noteholders, may be embodied in and evidenced by one or
more instruments of substantially similar tenor signed by such Noteholders, in
person or by an agent duly appointed in writing; and, except as herein otherwise
expressly provided, such action shall become effective when such instrument or
instruments are delivered to the Trustee and/or the Administrative Agent, as
herein provided, and, where it is hereby expressly required, to the Issuer.
Such instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes

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referred to as the "ACT" of the Noteholders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to SECTION 11.02) conclusive in favor of the Trustee, the
Administrative Agent and the Issuer, if made in the manner provided in this
Section.

(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by an acknowledgement of a notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the execution
thereof. Where such execution is by a signer acting in a capacity other than
such signer's individual capacity, such certificate or affidavit shall also
constitute sufficient proof of the signer's authority. The fact and date of the
execution of any such instrument or writing, or the authority of the person
executing the same, may also be proved in any other manner which the Trustee
and/or the Administrative Agent, as applicable, deems sufficient.

(d) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of any Noteholder or the Noteholders of any Series of Notes
shall bind every future holder of the same Note or Series of Notes and the
holder of any Note issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof in respect of anything done, suffered or
omitted to be done by the Trustee, the Administrative Agent or the Issuer in
reliance thereon, whether or not notation of such action is made upon such Note.

(e) The Issuer may, but shall not be obligated to, fix a record date
for the purpose of determining the Noteholders entitled to take any action under
this Indenture by vote or consent. Such record date shall be the later of 30
days prior to the first solicitation of such consent or vote or the date of the
most recent list of Noteholders, furnished by or to the Administrative Agent
pursuant to SECTION 12.01 prior to such solicitation. If a record date is
fixed, those persons who were Noteholders at such record date (or their duly
designated proxies), and only those persons, shall be entitled to take such
action by vote or consent or to revoke any vote or consent previously given,
whether or not such persons continue to be so after such record date.

Section 1.06 CONFLICT WITH TRUST INDENTURE ACT. If at any time this
Indenture becomes or is required to become qualified under the Trust Indenture
Act and any provision hereof limits, qualifies or conflicts with the duties
imposed by any of

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Sections 310 through 317, inclusive, of the Trust Indenture Act through the
operation of Section 318(c) thereof, such imposed duties shall control.

Section 1.07 BENEFITS OF INDENTURE. Nothing in this Indenture or in
the Notes, express or implied, shall give to any Person (other than the parties
hereto or thereto and their successors hereunder, any Paying Agent and the
Noteholders) any benefit or any legal or equitable right, remedy or claim under
this Indenture.

Section 1.08 INCORPORATION OF RECITALS. The Recitals of the Issuer
set forth above in this Indenture are hereby incorporated by this reference
hereto as if, and to the same extent that, such Recitals were contained in the
body of this Indenture.

ARTICLE II

CONVEYANCE OF CERTAIN ASSETS; ISSUANCE
OF NOTES

Section 2.01 ACCEPTANCE BY TRUSTEE. The Trustee hereby acknowledges
its acceptance on behalf of the Noteholders of the security interest in all
Pledged Assets granted pursuant to the Granting Clause of this Indenture and
declares that it shall maintain such security interest upon the trust herein set
forth, for the benefit of all Noteholders on the terms and subject to the
conditions hereinafter set forth.

Section 2.02 CERTAIN MATTERS REGARDING THE GRANT. (a) In connection
with the grant to the Trustee as described in the Granting Clause above, the
Issuer and the Servicer have on or prior to the Closing Date recorded and filed
or caused to be recorded and filed, at the Issuer's expense, financing
statements (including assignments of pre-existing financing statements and
continuation statements with respect to any such financing statements when
applicable) with respect to the Pledged Assets (whether now existing or
hereafter created) meeting the requirements of applicable state law in such
manner and in such jurisdictions as the Issuer and the Servicer reasonably
determined were necessary or desirable to perfect, and maintain perfection of,
the security interests granted hereunder and the ownership interests of the
Issuer in the Receivables and Related Assets purchased from the Sellers.
Neither the Trustee nor the Administrative Agent shall be under any obligation
whatsoever to file such financing statements, or continuation statements to such
financing statements, or to make any other filing under the UCC in connection
with such transfer or grant. In connection with the grant to the Trustee as
described in the Granting Clause above, the Issuer and the Servicer further
agree to deliver to the Trustee each Pledged Asset (including any original
documents

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or instruments included in the Pledged Assets as are necessary to effect such
grant) in which the grant of a security interest is perfected under the UCC or
otherwise by possession. The Issuer or the Servicer shall deliver each such
Pledged Asset in its possession to the Trustee, at the Issuer's or the
Servicer's, as applicable, own expense, immediately upon the effectiveness of
the grant of the security interest in any such Pledged Asset to the Trustee
pursuant to the Granting Clause hereof.

(b) In connection with the grant to the Trustee as described in the
Granting Clause above, the Servicer shall, on behalf of the Issuer, on or prior
to the Closing Date, mark or cause to be marked, the master data processing
records of each Seller evidencing the Receivables with the following legend:

"THE RECEIVABLES DESCRIBED HEREIN HAVE BEEN SOLD OR CONTRIBUTED
TO STONE RECEIVABLES CORPORATION PURSUANT TO A RECEIVABLES
PURCHASE AGREEMENT, DATED AS OF MARCH 14, 1995 AMONG [NAME OF
ORIGINATING SELLER] AND VARIOUS OTHER AFFILIATED CORPORATIONS, AS
THE SELLERS, AND STONE RECEIVABLES CORPORATION AS THE PURCHASER;
AND SUCH RECEIVABLES HAVE BEEN FURTHER PLEDGED AND ASSIGNED TO
MARINE MIDLAND BANK, AS TRUSTEE, PURSUANT TO A MASTER TRUST
INDENTURE AND SECURITY AGREEMENT, DATED AS OF MARCH 14, 1995,
AMONG STONE RECEIVABLES CORPORATION, STONE CONTAINER CORPORATION,
AS SERVICER, MARINE MIDLAND BANK, AS TRUSTEE, AND BANKERS TRUST
COMPANY, AS ADMINISTRATIVE AGENT."

Section 2.03 REPRESENTATIONS AND WARRANTIES OF THE ISSUER RELATING TO
THE PLEDGED ASSETS.

(a) REPRESENTATIONS AND WARRANTIES. The Issuer hereby represents and
warrants that:

(i) VALID GRANT. The grant in favor of the Trustee made by the
Issuer pursuant to this Indenture constitutes a valid grant, pledge and
hypothecation of a security interest in and lien on all of the Issuer's
right, title and interest in, to and under the Receivables and the Related
Transferred Assets, which lien and security interest is perfected and of
first priority under the UCC and otherwise, enforceable against creditors
of, and purchasers from, the Issuer and the applicable Seller, free and
clear of any Adverse Claim (other than any Permitted Adverse Claim).

(ii) QUALITY OF TITLE.

(A) Each Receivable and Related Transferred Asset included in
the Pledged Assets is owned by the Issuer free and clear of any
Adverse Claim (other than any

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Permitted Adverse Claim); and, on or prior to the Closing Date, the
Issuer and the Servicer have made, or have caused to be made, all
filings and have taken all other action under applicable law in each
relevant jurisdiction in order to protect and perfect the Issuer's and
the Trustee's respective interests in such Receivables, such Related
Transferred Assets and the funds in the Trust Accounts against all
creditors of, and purchasers from, the Issuer and the Sellers.

(B) No effective financing statement or other instrument similar
in effect that covers all or part of any Receivable included in the
Pledged Assets, any Related Transferred Asset, any other Pledged Asset
or any interest in any thereof is on file in any recording office
except such as may be filed (1) in favor of a Seller in accordance
with the Contracts, (2) in favor of the Issuer pursuant to the
Purchase Agreement (and assigned to the Trustee pursuant to this
Indenture), and (3) in favor of the Trustee, for the benefit of the
Noteholders, in accordance with this Indenture.

(C) No acquisition (including, without limitation, pursuant to
the Purchase Agreement, the Pre-Existing StoneFin Purchase Agreement,
the Pre-Existing StoneFin II Purchase Agreement, the Merger or
otherwise) of any Receivable or Related Transferred Asset by the
Issuer, StoneFin or StoneFin II nor any grant of security herein to
the Trustee constitutes a fraudulent transfer or fraudulent conveyance
under the United States Bankruptcy Code or applicable state bankruptcy
or insolvency laws or is otherwise void or voidable or subject to
subordination under similar laws or principles or for any other
reason.

(D) The transfers of such Receivables and Related Transferred
Assets (i) prior to the Merger, by each applicable Seller to StoneFin
pursuant to the Pre-Existing StoneFin Purchase Agreement (ii) prior to
the Merger, by each applicable Seller to StoneFin II pursuant to the
Pre-Existing StoneFin II Purchase Agreement, and (iii) by each
applicable Seller to the Issuer pursuant to the Purchase Agreement, in
each case, constitutes a true and valid assignment and transfer for
consideration of such Receivables and Related Transferred Assets under
applicable state law (and not merely a pledge of such Receivables and
Related Transferred Assets for security purposes), enforceable against
the creditors of the applicable Seller, and any Receivables and
Related Transferred Assets so transferred do not constitute property
of the Sellers.

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(iii) GOVERNMENTAL APPROVALS. With respect to each Receivable and
Related Transferred Asset, all consents, licenses, approvals or
authorizations of, or notices to or registrations, declarations or filings
with, any Governmental Authority required to be obtained, effected or made
by the Sellers, the Servicer, the Issuer, StoneFin or StoneFin II in
connection with (a) the conveyance of such Receivable and Related
Transferred Asset by (i) the Sellers to the Issuer or (ii) in the case of
the Receivables and Related Transferred Assets previously conveyed to
StoneFin or StoneFin II under the Pre-Existing StoneFin Purchase Agreement
or the Pre-Existing StoneFin II Purchase Agreement, respectively, by the
applicable Sellers to StoneFin or StoneFin II, respectively, and (b) the
grant of security in the Pledged Assets by the Issuer to the Trustee
pursuant to this Indenture, have, in each case, been duly obtained,
effected or given and are in full force and effect, except where the
failure to so obtain, effect or give or to so maintain in full force and
effect any such consent, license, approval, authorization, notice,
registration, declaration or filings would not, individually or in the
aggregate, have a Material Adverse Effect.

(iv) ELIGIBLE RECEIVABLES. (A) On the date on which a Seller
transfers a Receivable to the Issuer, and on the date upon which the Issuer
grants such Receivable to the Trustee as security hereunder, unless
otherwise identified by the Servicer in the Daily Report for such date,
such Receivable is an Eligible Receivable, and (B) on the date of each
Daily Report or Settlement Statement which identifies a Receivable as an
Eligible Receivable, such Receivable is an Eligible Receivable.

(b) NOTICE OF BREACH. The representations and warranties set forth
in this SECTION 2.03 shall survive the grant and assignment of the Receivables
and the Related Transferred Assets to the Trustee. Upon discovery by the
Issuer, the Servicer, the Trustee or the Administrative Agent of a breach of any
of the representations and warranties set forth in this SECTION 2.03, the party
discovering such breach shall give written notice to the other parties to this
Indenture within three Business Days following such discovery. The obligations
of the Trustee and the Administrative Agent in respect of discovering any such
breach are limited as provided in SECTION 11.02(g).

Section 2.04 NO ASSUMPTION OF OBLIGATIONS RELATING TO RECEIVABLES,
RELATED TRANSFERRED ASSETS OR CONTRACTS. The assignment, pledge, grant, setover
and conveyance described in the Granting Clause does not constitute and is not
intended to result in a creation or an assumption by the Trustee, the
Administrative Agent or any Noteholder of any obligation of the Servicer, the
Issuer, any Seller or any other Person in

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connection with the Receivables or the Related Transferred Assets or under the
related Contracts or any other agreement or instrument relating thereto,
including any obligation to any Obligors. None of the Trustee, the
Administrative Agent or any Noteholder shall have any obligation or liability to
any Obligor or other customer or client of the applicable Seller (including any
obligation to perform any of the obligations of such Seller to any Obligor under
any such Receivables, the related Contracts or any other related purchase orders
or other agreements or otherwise). No such obligation or liability is intended
to be assumed by the Trustee, the Administrative Agent or any Noteholder
hereunder, and any such assumption is hereby expressly disclaimed.

ARTICLE III

ADMINISTRATION AND SERVICING
OF RECEIVABLES

Section 3.01 ACCEPTANCE OF APPOINTMENT AND OTHER MATTERS RELATING TO
THE SERVICER. (a) The servicing, administering and enforcement of collection
of the Receivables and the Related Transferred Assets shall be conducted by the
Persons designated as Servicer under the Purchase Agreement from time to time.
Until the Trustee gives a Termination Notice to Stone Container pursuant to
SECTION 10.01, the Issuer hereby agrees that Stone Container will continue to be
designated by it as, and Stone Container hereby agrees to act as, the Servicer
under the Purchase Agreement and the other Transaction Documents with respect to
the Receivables and the Related Transferred Assets, and the Noteholders, by
their acceptance of the Notes, consent to Stone Container acting as the Servicer
on behalf of the Issuer.

(b) TERMINATION. The duties of the Servicer (and each Sub-Servicer)
under this Indenture shall automatically cease and terminate upon satisfaction
and discharge of this Indenture pursuant to SECTION 13.01. Notwithstanding the
satisfaction and discharge of this Indenture, the duties of the Servicer (and of
any Sub-Servicer) under the Purchase Agreement shall continue until otherwise
terminated as provided in the Purchase Agreement.

(c) RESIGNATION OF THE SERVICER. If the Servicer makes a
determination that it must resign for the reasons stated in SECTION 6.02(c) of
the Purchase Agreement, the Servicer shall, prior to the tendering of its
resignation, deliver to the Trustee and the Administrative Agent an Opinion of
Counsel for the Servicer, in form and substance reasonably satisfactory to the
Trustee and Administrative Agent, confirming the satisfaction of the conditions
set forth in such Section. No resignation by the Servicer shall become
effective until the Administrative Agent or a Successor Servicer shall have
assumed the responsibilities and

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obligations of the Servicer in accordance with SECTION 10.02 hereof. If the
Servicer has tendered its resignation and no Successor Servicer has been
appointed, the Trustee may appoint, or may petition a court of competent
jurisdiction to appoint, a Successor Servicer hereunder. The Trustee or the
Administrative Agent shall give prompt notice to the Applicable Rating Agencies
of the appointment of any Successor Servicer.

Section 3.02 DUTIES OF THE SERVICER AND THE ISSUER.

(a) DUTIES OF SERVICER IN GENERAL. The Servicer shall service and
administer the Receivables and the Related Transferred Assets in accordance with
SECTION 6.03 of the Purchase Agreement for the benefit of the Trustee and the
Noteholders to the same extent as if they were a party thereto. In addition to
the specific duties and powers granted thereunder, the Servicer or its designee
(including the Issuer) is hereby authorized and empowered, unless such power and
authority is revoked by the Trustee on account of the occurrence of a Servicer
Default pursuant to SECTION 10.01, (i) to instruct the Administrative Agent to
make withdrawals and payments from the Trust Accounts as set forth in this
Indenture and (ii) to make any filings, reports, notices, applications and
registrations with, and to seek any consents or authorizations from, the
Commission and any state securities authority on behalf of the Issuer as may be
necessary or appropriate to comply with any federal or state securities laws or
reporting requirements or other laws or regulations in connection with this
Indenture. So long as Stone Container or any other Stone Person acts as
Servicer, Stone Container, the Administrative Agent, the Trustee and the Issuer
hereby agree that the Issuer shall retain the power and authority to instruct
the Administrative Agent to make withdrawals and payments from the Trust
Accounts as described in clause (i) of the immediately preceding sentence unless
such power and authority is revoked by the Trustee pursuant to its rights
hereunder. The Administrative Agent shall promptly comply with the instructions
of the Issuer or the Servicer, as the case may be, to withdraw funds and make
payments from the Trust Accounts pursuant to the terms of this Indenture.

(b) IDENTIFICATION AND TRANSFER OF COLLECTIONS. Each of the Issuer
and the Servicer shall cause Collections and all other Pledged Assets that
consist of cash or cash equivalents to be deposited into the Bank Accounts and
the Trust Accounts pursuant to the terms and provisions of SECTION 3.03 and
ARTICLE IV and shall cause the Sellers to deposit all Collections into the Bank
Accounts and/or the Trust Accounts in accordance with the provisions of SECTION
6.01 of the Purchase Agreement. Following notification from a Seller to the
Servicer or the Issuer or discovery by the Servicer or the Issuer that
collections of any receivable or other intangible asset which is not a
Collection of a Receivable or a Related Transferred Asset have been deposited
into a Bank Account, the Master Collection

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Account or any Trust Account, the Servicer and the Issuer shall cause all such
collections to be segregated, apart and in different accounts, from the Bank
Accounts and the Trust Accounts. The Servicer and, to the extent applicable,
the Trustee and the Administrative Agent shall hold all such funds in trust,
separate and apart from such Person's other funds. On each Business Day, after
such misapplied collections have been reasonably identified by the Servicer or
the Issuer to the Administrative Agent, the Servicer and/or the Issuer shall
instruct the Administrative Agent to, and the Administrative Agent shall, turn
over to the appropriate Lockbox Bank, the Seller or any other applicable Stone
Person all such misapplied collections, LESS all reasonable and appropriate out-
of-pocket costs and expenses, if any, incurred by the Servicer and/or the Issuer
in collecting such receivables or other intangible assets.

Following notification from a Lockbox Bank that any item has been
returned or is uncollected and that such Lockbox Bank has not been otherwise
reimbursed pursuant to the terms of the applicable Lockbox Agreement for any
amounts it credited to the relevant Lockbox Account (and then transferred to the
Master Collection Account), the Servicer or the Issuer, as applicable shall
instruct the Administrative Agent to, and the Administrative Agent shall, turn
over to such Lockbox Bank Collections in such amount from Collections on deposit
in the Master Collection Account.

(c) MODIFICATION OF RECEIVABLES. The Servicer shall not, pursuant to
the authority granted to it under SECTION 6.03(b) of the Purchase Agreement,
extend, amend, or otherwise modify any Receivable except to the extent that such
extension, amendment or modification is permitted under this Indenture
(including, without limitation, SECTION 7.02(h)).

(d) DOCUMENTS AND RECORDS. At any time when Stone Container shall
not be the Servicer, the Issuer, to the extent that it is entitled to do so
under the Purchase Agreement, shall, upon the request of the then-acting
Servicer, cause each Seller to deliver to the Servicer, and the Servicer shall
hold in trust for the Issuer and the Trustee in accordance with their respective
interests, all Records that evidence or relate to the Receivables and Related
Transferred Assets of such Seller.

(e) IDENTIFICATION OF ELIGIBLE RECEIVABLES. The Servicer will (i)
establish and maintain such procedures as are necessary for determining no less
frequently than each Business Day whether each Receivable qualifies as an
Eligible Receivable, and for identifying, on any Business Day, all Receivables
which are not Eligible Receivables, and (ii) include in each Daily Report
information that shows whether, and to what extent, the Receivables described in
such Daily Report are Eligible Receivables.

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(f) AUTHORIZATION TO ACT AS THE ISSUER'S AGENT. Without limiting the
generality of SECTION 3.02(a), the Issuer hereby appoints the Servicer as its
agent for the following purposes: (i) specifying accounts to which payments are
to be made to the Issuer so long as such payments are made in accordance with
SECTION 3.03, (ii) to the extent the Servicer is not a Stone Person, making
transfers among, and deposits to and withdrawals from, all deposit accounts of
the Issuer for the purposes described in this Indenture, and (iii) to the extent
the Servicer is not a Stone Person, arranging payment by the Issuer of all fees,
expenses and other amounts payable by the Issuer pursuant to this Indenture
and/or the other Transaction Documents. The Issuer irrevocably agrees that (A)
it shall be bound by all actions taken by the Servicer pursuant to the preceding
sentence and (B) the Trustee, the Administrative Agent and the banks holding all
deposit accounts of the Issuer are entitled to accept and rely upon (without
liability) submissions, determinations, selections, specifications, transfers,
deposits and withdrawal requests, and payments from the Servicer on behalf of
the Issuer.

(g) REVOCATION OF POWER OF ATTORNEY. The power of attorney granted to
the Servicer by the Issuer hereunder and under the Purchase Agreement may be
revoked by the Trustee, and shall be revoked by the Issuer, on the date on which
the Trustee shall be entitled to exercise the powers granted to the Trustee
pursuant to SECTION 3.07(b) of this Indenture. In exercising its power granted
hereunder and under the Purchase Agreement, the Servicer shall take directions
from the Trustee, if any, arising out of the exercise of the rights granted
under SECTION 11.18 of this Indenture.

(h) TURNOVER OF COLLECTIONS. If the Servicer, the Issuer or any of
their respective agents or representatives shall at any time receive any cash,
checks or other instruments constituting Collections (including any payments
received by the Issuer on account of any Noncomplying Receivables Adjustment or
Dilution Adjustment), such recipient shall segregate such payments and hold such
payments in trust for the Trustee, on behalf of the Noteholders, and shall,
promptly upon receipt (and in any event within one Business Day following
receipt), remit all such cash, checks and instruments, duly endorsed or with
duly executed instruments of transfer, to a Bank Account or the Master
Collection Account.

Section 3.03 LOCKBOX ACCOUNTS; CONCENTRATION ACCOUNTS.
(a) Each Lockbox Account shall be subject to a Lockbox Agreement.
Each Lockbox Bank shall be instructed to remit, on a daily basis (but subject to
the Lockbox Bank's minimum deposit requirements and/or customary funds
availability schedule), all amounts deposited in the Lockbox Accounts maintained
with it to a Concentration Account or the Master Collection Account. Any

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Concentration Account shall be maintained as a segregated trust account pursuant
to a Concentration Account Agreement. Except as expressly provided in this
Indenture and the applicable Account Agreements, none of the Sellers, the
Issuer, the Servicer, or any Person claiming by, through or under either Seller,
the Issuer or the Servicer shall have any control over the use of, or any right
to withdraw any item or amount from, any Lockbox Account or Concentration
Account. The Trustee and the Administrative Agent are hereby irrevocably
authorized and empowered, each as the Issuer's attorney-in-fact, to endorse any
item deposited in a lockbox or presented for deposit in any Lockbox Account or
Concentration Account requiring the endorsement of the Issuer or any Seller,
which authorization is coupled with an interest and is irrevocable. Neither the
Trustee nor the Administrative Agent shall have any duties or liabilities with
respect to (x) the disposition of cash received in the Bank Accounts or (y) the
compliance by any Lockbox Bank or Concentration Account Bank with the terms of
the Account Agreements and, to the extent the terms and provisions of any
Account Agreement purport to impose any duties or liabilities on the
Administrative Agent and/or the Trustee, the terms and provisions of this
Indenture shall supersede the terms of such Account Agreements.

(b) Each of the Issuer and the Servicer shall instruct (or shall
cause each of the Sellers to instruct) all Obligors to make all payments due to
the Issuer or any such Seller relating to or constituting Collections (or any
proceeds thereof) (i) to lockboxes maintained at the Lockbox Banks for deposit
in a Lockbox Account or a Concentration Account or (ii) directly to a Lockbox
Account or a Concentration Account. If the Issuer, the Servicer or any of the
Sellers receives any Collections or any other payment of proceeds of any other
Related Transferred Asset, the Servicer shall cause such recipient to (x)
segregate such payment and hold such payment in trust for the benefit of the
Trustee and the Noteholders and (y) as soon as practicable, but no later than
the first Business Day following receipt of such item by such Person, deposit
such payment in a Bank Account or the Master Collection Account. The Servicer
shall, and shall cause the Issuer and the Sellers to, use reasonable efforts to
prevent the deposit of any amounts other than Collections in any Lockbox Account
or Concentration Account.

(c) (i) The Issuer and the Servicer may, from time to time after the
Closing Date, designate a new account as a Lockbox Account or a Concentration
Account, and such account shall become a Lockbox Account or Concentration
Account (and the bank at which such account is maintained shall become a Lockbox
Bank or a Concentration Bank for purposes of this Indenture); PROVIDED, HOWEVER,
that the Trustee and the Administrative Agent shall have received not less than
ten Business Days' prior written notice of the account and/or the bank that is
proposed to be added as a Bank Account or an Account Bank (as applicable) and,
not less than five Business Days prior to the effective date of any such

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proposed addition, the Trustee and the Administrative Agent shall have received
(x) counterparts of a Lockbox Agreement or a Concentration Account Agreement, as
applicable, with each new Account Bank, duly executed by such new Account Bank
and all other parties thereto and (y) copies of all other agreements and
documents signed by the new Account Bank or such other parties with respect to
any new Lockbox Account or Concentration Account, as applicable.

(ii) The Issuer and the Servicer may, from time to time after the
Closing Date, terminate an account as a Lockbox Account or a Concentration
Account or a bank as an Account Bank; PROVIDED, HOWEVER, that (x) no such
termination shall occur unless the Trustee and the Administrative Agent shall
have received, not less than five Business Days prior to such termination, (a)
written notice of the account and/or the bank that are proposed to be terminated
as a Bank Account or an Account Bank (as applicable) and (b) counterparts of an
agreement, duly executed by the applicable Account Bank and reasonably
satisfactory in form and substance to the Trustee and the Administrative Agent,
pursuant to which such Account Bank agrees that, if it receives any funds or
items that constitute Collections on or after the effective date of the
termination of the applicable Bank Account or the effective date of its
termination as an Account Bank (as the case may be), such Account Bank or former
Account Bank (as applicable) shall cause such funds and items to be delivered in
the form received to another Lockbox or transferred to another Lockbox Account,
Concentration Account or the Master Collection Account promptly after such
Account Bank or former Account Bank (as applicable) discovers that it has
received any such funds or items, and (y) notwithstanding the foregoing clause
(x), the Issuer and the Servicer may at any time establish alternative
collection procedures that do not require the use of Lockbox Accounts with the
prior consent of any Enhancement Provider and upon satisfaction of the Rating
Agency Condition. The Administrative Agent shall cooperate with the Servicer in
executing any acknowledgments required by an Account Bank under the terms of the
Account Agreements in connection with this Section 3.03(c)(ii).

(d) The Servicer shall instruct each Concentration Account Bank (if
any), to transfer on a daily basis in same day funds to the Master Collection
Account all collected funds on deposit in the Concentration Account maintained
with such Concentration Account Bank. All such transfers shall be made in
accordance with the relevant Concentration Account Agreement.

(e) The Trustee hereby appoints the Administrative Agent as its agent
and attorney-in-fact for purposes of executing any Account Agreements or any
amendments thereto or notices regarding the effectiveness thereof.

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Section 3.04 RECORDS OF THE SERVICER AND REPORTS TO BE PREPARED BY
THE SERVICER AND ISSUER.

(a) RECEIVABLES REVIEWS. The Servicer shall (and shall cause each of
the Sellers to) provide the Trustee access to the documentation regarding the
Receivables in such cases where the Trustee is required in connection with the
enforcement of the rights of Noteholders, by applicable statutes or regulations
or pursuant to the terms hereof, to review such documentation, such access being
afforded without charge but only (i) upon reasonable request, (ii) during normal
business hours, (iii) subject to the Servicer's (or, to the extent applicable,
any such Seller's) normal security and confidentiality procedures and (iv) at
reasonably accessible offices in the continental United States designated by the
Servicer (or, to the extent applicable, any such Seller) and reasonably
acceptable to the Trustee. In addition, the Servicer shall (and shall cause
each of the Sellers to) deliver to the Administrative Agent by no later than
10:00 a.m. (New York City time) on the Report Date for each month, computer
tapes containing the information necessary to facilitate the preparation by the
Administrative Agent of a Settlement Statement as provided in Section 3.04(c).

(b) DAILY REPORTS. Prior to 10:45 a.m., Chicago time, on each
Business Day, the Servicer and/or the Issuer shall prepare and deliver to the
Administrative Agent and the Paying Agent (if other than the Administrative
Agent) a report substantially in the form of EXHIBIT A (as the same may be
supplemented in accordance with any Supplement) or in such other form as is
reasonably acceptable to the Trustee, the Issuer and the Servicer (each such
report in the form of EXHIBIT A (as supplemented) or such other forms being
herein called a "DAILY REPORT").

(c) SETTLEMENT STATEMENT. On or prior to 10:45 a.m., Chicago time,
on each Report Date, the Servicer and/or the Issuer shall prepare and deliver to
the Trustee, the Administrative Agent, the Applicable Rating Agencies, and the
Paying Agent (if other than the Administrative Agent) a report substantially in
the form of EXHIBIT B (as the same may be supplemented in accordance with any
Supplement) or in such other form as is reasonably acceptable to the Trustee,
the Administrative Agent, the Issuer and the Servicer (each such report in the
form of EXHIBIT B (as supplemented) or such other forms being herein called a
"SETTLEMENT STATEMENT"). On each Report Date, the Administrative Agent will
verify the mathematical computations contained in such report and shall notify
the Servicer and each of the Applicable Rating Agencies of any discrepancies
therein, whereupon the Servicer shall deliver to the Applicable Rating Agencies
within 5 Business Days thereafter, a certificate describing the nature and cause
of such discrepancies and the actions that the Servicer proposes to take with
respect thereto.

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In addition, within 7 Business Days after the Payment Date, the Administrative
Agent (provided it has received the computer tapes described in the last
sentence of clause (a) above) shall generate a concurrent Settlement Statement
on its computer system utilizing the computer tapes provided by the Servicer and
the Seller. The Administrative Agent shall deliver a copy of such Settlement
Statement generated by it to each of the Applicable Rating Agencies and the
Servicer. The Servicer shall compare its Settlement Statement to the Settlement
Statement prepared by the Administrative Agent and shall deliver within 5 days
after its receipt of such report a certificate to the Applicable Rating Agencies
and the Administrative Agent describing the nature and cause of any such
discrepancies between such reports and setting forth the actions that the
Servicer proposes to take with respect thereto. Notwithstanding anything
contained herein to the contrary, the Administrative Agent shall have no
obligation to confirm the accuracy of any of the information provided to it on
the computer tapes or by it on the Settlement Statement generated by it, and
shall have no liability to any Person in connection therewith.

(d) NOTICE OF SELLER CHANGE EVENTS; SUPPLEMENTS TO SETTLEMENT
STATEMENTS. SECTIONS 2.06 and 2.07 of the Purchase Agreement describe
circumstances under which (i) Subsidiaries of Stone Container may be added to
the Program as Sellers and/or any Seller may add or terminate certain classes of
accounts receivable as Receivables to be sold to the Issuer and (ii) certain
Sellers may terminate their status as Sellers under the Purchase Agreement (each
event being herein called a "SELLER CHANGE EVENT"). Those Sections of the
Purchase Agreement require Stone Container to give written notice to the Issuer
and the Servicer (if other than Stone Container) of the occurrence of a Seller
Change Event not less than 30 days prior to the occurrence thereof, and each of
the Issuer and the Servicer (if other than Stone Container) hereby agrees to
give prompt written notice of its receipt of any such notice to the Trustee, the
Administrative Agent and the Applicable Rating Agencies. Within five Business
Days after its giving any such notice to the Trustee and the Administrative
Agent (or such later date, as specified in such notice, on which the applicable
Seller Change Event shall become effective), the Servicer shall deliver to the
Trustee and the Administrative Agent a supplement to the Settlement Statement
then in effect, which supplement shall show (A) the calculation or recalculation
of the Required Reserves and Subordination Deficits for each Series (together
with all component ratios thereof) reflecting the addition of accounts
receivable originated by any Seller or any such Subsidiary that is being added
to the Purchase Agreement as a Seller, or the exclusion of any Receivables
originated by any such Subsidiary that is terminating its status as a Seller or
eliminating specified accounts receivable (as applicable), and (B) the
calculation or recalculation of the Purchase Price Percentage (together with

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each component thereof) reflecting the addition of any such Subsidiary to the
Program as a Seller or any class of accounts receivable being added to or
eliminated from the Program. For purposes of all calculations hereunder and
under the Purchase Agreement, the recalculated Required Reserves and
Subordination Deficits for each Series and Purchase Price Percentage (together,
in each case, with the recalculated components thereof) shall supersede and/or
supplement the calculation of such items in the then outstanding Settlement
Statement, effective as of the fifth Business Day following the Servicer's
giving of such notice to the Trustee and the Administrative Agent (or such later
date, as specified in such notice, on which the applicable Seller Change Event
shall become effective).

(e) NOTICES TO APPLICABLE RATING AGENCIES. The Servicer shall notify
each of the Applicable Rating Agencies promptly after becoming aware of the
occurrence of any Pay-Out Event, Liquidation Event, Event of Default, Unmatured
Pay-Out Event, Unmatured Liquidation Event or Unmatured Event of Default.

Section 3.05 MONTHLY SERVICER'S CERTIFICATE. On each Report Date,
the Servicer shall deliver to the Trustee, the Administrative Agent, the Paying
Agent, the Issuer and the Applicable Rating Agencies a certificate of an
Authorized Officer of the Servicer substantially in the form of EXHIBIT C
hereto, with such additions as may be required by any Supplement.

Section 3.06 ANNUAL SERVICING REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS; FORMS 10-Q AND 10-K. (a) (i) On or before 180 days after the
Closing Date and annually thereafter (on the anniversary of such date after the
Closing Date, or if such date is not a Business Day, the next succeeding
Business Day), the Servicer shall, as an expense of the Servicer paid out of the
Servicing Fee, cause Price Waterhouse LLP or another firm of nationally
recognized independent public accountants (which may also render other services
to the Servicer, the Sellers or the Issuer) to furnish a report to the Trustee,
the Administrative Agent, the Servicer, the Applicable Rating Agencies and the
Issuer (which report shall be addressed to the Trustee and the Administrative
Agent). The report to be furnished by such accountants shall set forth the
results of such accountants' performance of certain procedures that have been
substantially determined prior to the Closing Date with respect to the
Settlement Statements and Daily Reports delivered to the Trustee and the
Administrative Agent pursuant to SECTION 3.04 during the prior year (or, in the
case of the first such report, such lesser period of time since the Closing
Date). Such procedures to be performed and reported upon will be substantially
consistent with those set forth on EXHIBIT E.

(ii) Each such accountants' report shall state that the accountants
have compared the amounts contained in the

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Settlement Statements and a sample randomly selected from all Daily Reports
delivered to the Administrative Agent during the period covered by such report
with the accounting records (including computer records) from which such amounts
were derived and that the amounts are in agreement with such documents and
records, except for such exceptions as shall be set forth in such report.

(b) Within 30 days after the date such reports are required to be
filed with the Commission under the Securities Exchange Act of 1934 (as amended)
(which dates, as of the Closing Date, are 45 days after the end of each of the
first three calendar quarters (in the case of Form 10-Q's) and 90 days after the
end of the calendar year (in the case of Form 10-K's)), the Servicer shall
provide the Trustee, the Administrative Agent, and each of the Applicable Rating
Agencies with copies of each Quarterly Report on Form 10-Q and each Annual
Report on Form 10-K of the Servicer.

Section 3.07 RIGHTS OF THE TRUSTEE.

(a) NOTICE TO ACCOUNT BANKS. The Trustee has (for the benefit of the
Noteholders) an exclusive lien on and in the Bank Accounts, and the Issuer shall
take any action that the Trustee may reasonably request to effect or evidence
such lien. Neither the Issuer nor the Servicer shall have any authority to make
withdrawals from, or to direct the Account Banks as to the disposition of any
amounts on deposit in, the Bank Accounts except as otherwise expressly provided
herein or in the Account Agreements. At any time following the occurrence of a
Servicer Default, the Trustee is hereby authorized to give notice to the Account
Banks, as provided in the Account Agreements, of the revocation of the Issuer's
and the Servicer's authority to give instructions or take any other actions with
respect to the Bank Accounts that the Issuer or the Servicer would otherwise be
authorized to give or to take pursuant to SECTIONS 3.02 and 3.03.

(b) RIGHTS UPON SERVICER DEFAULT. At any time following the
designation of a Servicer other than Stone Container pursuant to SECTION 10.01
until such time as a Successor Servicer (other than the Administrative Agent)
has been appointed pursuant to SECTION 10.02:

(i) The Trustee may direct any Obligors of Receivables to pay all
amounts payable under any Receivable or any Related Transferred Assets
directly to the Trustee or its designee (including, without limitation, the
Administrative Agent); PROVIDED, HOWEVER, that the Trustee shall provide
the Issuer and each Seller with a copy of such notice at least one Business
Day prior to sending it to any Obligor and consult in good faith with the
Issuer and the Sellers as to the text of such notice.

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(ii) The Trustee may direct any Seller to make payment of all amounts
payable to the Issuer under any Transaction Document to which such Seller
is a party directly to the Trustee or its designee (including, without
limitation, the Administrative Agent).

(iii) The Issuer and the Servicer (if a Stone Person) shall, at their
sole expense to be allocated between themselves as they deem appropriate,
give notice of the Trustee's interest in the Receivables and the Related
Transferred Assets to each Obligor and direct that payments be made
directly to the Trustee or its designee (including, without limitation, the
Administrative Agent).

(iv) The Issuer shall, and shall cause each Seller to, at the
Trustee's request and at such Seller's expense as provided in the Purchase
Agreement, (A) assemble all of the Records which are necessary or
appropriate to collect the Receivables and Related Transferred Assets, and
shall make the same available to the Trustee at one or more places selected
by the Trustee or its designee (including, without limitation, the
Administrative Agent), (B) segregate all cash, checks and other instruments
received by it from time to time constituting Collections in a manner
acceptable to the Trustee and shall, promptly upon receipt (and, subject to
SECTION 3.02(h), in no event later than the first Business Day following
receipt), remit all such cash, checks and instruments, duly endorsed or
with duly executed instruments of transfer, to the Trustee or its designee
(including, without limitation, the Administrative Agent) and (C) permit,
upon not less than two Business Days' prior written notice, the
Administrative Agent or any such interim Servicer and, in either case, any
of such Person's agents, employees and assignees access to the Issuer's
and/or the Seller's respective facilities and their respective Records.

(c) Each of the Issuer and the Servicer hereby authorizes the Trustee
(and its designees, including, without limitation the Administrative Agent) for
the benefit of the Noteholders, from time to time after the designation of a
Servicer other than Stone Container pursuant to SECTION 10.01 (including,
without limitation, the Administrative Agent), to take any and all steps in the
Issuer's name and on behalf of the Issuer and the Servicer which are necessary
or appropriate, in the reasonable determination of the Trustee or such designee
to collect all amounts due under any and all Receivables or Related Transferred
Assets, including endorsing the name of the Issuer or any of the Sellers on
checks and other instruments representing Collections and enforcing such
Receivables and the Related Transferred Assets.

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(d) The Issuer hereby irrevocably appoints the Trustee and its
designees (including, without limitation, the Administrative Agent) to act as
the Issuer's attorney-in-fact, with full authority in the place and stead of the
Issuer and in the name of the Issuer or otherwise, from time to time after the
designation of a Servicer other than Stone Container pursuant to SECTION 10.01,
to take (subject to SECTION 11.18 hereof) any action and to execute any
instrument or document that the Trustee or any such designee, in its reasonable
determination, may deem necessary to accomplish the purposes of this Indenture,
including:

(i) to ask, demand, collect, sue for, recover, compromise, receive
and give acquittance and receipts for moneys due and to become due under or
in respect of any Receivable or any Related Transferred Asset;

(ii) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with CLAUSE (i)
above;

(iii) to file any claims or take any action or institute any
proceedings which the Trustee or any such designee in its reasonable
determination may deem necessary or appropriate for the collection of any
of the Receivables or any Related Transferred Asset or otherwise to enforce
the rights of the Trustee and the Noteholders with respect to any of the
Receivables or any Related Transferred Asset; and

(iv) to perform the affirmative obligations of the Issuer under any
Transaction Document.

The Issuer hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this SECTION 3.07(d) is coupled with an interest and shall
be irrevocable.

(e) It is expressly understood and agreed that neither the Trustee
nor the Administrative Agent shall be under any duty to exercise the rights,
authorizations and powers vested in the Trustee (or its designees) under this
SECTION 3.07 absent the written direction of the Majority Noteholders and that
the Trustee shall be entitled to refrain from such exercise to the extent
provided in Article XI of this Indenture.

Section 3.08 ONGOING RESPONSIBILITIES OF STONE CONTAINER. Anything
herein to the contrary notwithstanding:

(a) If at any time Stone Container shall not be the Servicer, Stone
Container shall, and shall cause its Subsidiaries to, deliver all
Collections received or deemed received by it or its Subsidiaries to the
Successor Servicer will deposit such amounts into the Bank Accounts upon
its

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receipt thereof no later than one Business Day after receipt or deemed
receipt thereof and the Administrative Agent shall distribute such
Collections in accordance with the terms and provisions of Article IV of
this Indenture to the same extent as if such Collections had actually been
received from the related Obligor on the applicable dates. So long as
Stone Container or any of its Subsidiaries shall hold any Collections or
deemed Collections, each of them shall hold such amounts in trust (and
separate and apart from its own funds) and shall clearly mark its records
to reflect that such assets belong to the Issuer and are subject to the
collateral interest of the Trustee. Stone Container hereby grants to the
Trustee or the Administrative Agent (in each case, for the benefit of the
Noteholders) an irrevocable power of attorney, with full power of
substitution, coupled with an interest, upon the occurrence of a Servicer
Default at any time while Stone Container shall be acting as the Servicer
hereunder, to take in the name of Stone Container, in its capacity as
Servicer hereunder, all steps necessary or appropriate to endorse,
negotiate or otherwise realize on any writing or other right of any kind
held by or transmitted to Stone Container or transmitted to and received
by the Trustee or the Administrative Agent (whether or not from Stone
Container) in connection with any Receivable or Related Transferred Asset.

(b) Stone Container hereby irrevocably agrees that, if at any time it
shall cease to be the Servicer hereunder, it shall act (if the then current
Servicer so requests) as the data processing agent of the Servicer and, in
such capacity, Stone Container shall conduct (and shall cause any other
necessary Persons to conduct) the data processing functions of the
administration of the Receivables, the Related Transferred Assets and the
Collections thereon in substantially the same way that Stone Container (or
its Sub-Servicers) conducted such data processing functions while Stone
Container acted as the Servicer. Stone Container and each such other
Person shall be entitled to reasonable compensation for such service to be
paid from the Servicing Fee.

(c) Notwithstanding any termination of Stone Container as Servicer
hereunder, Stone Container shall continue to indemnify the Trustee and the
Administrative Agent on the terms set out in SECTION 11.09 with respect to
any matters arising at a time when Stone Container was acting as Servicer
hereunder.

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Section 3.09 FURTHER ACTION EVIDENCING TRANSFER AND GRANT.

(a) Each of the Issuer and the Servicer agrees that from time to
time, as an expense of the Servicer paid out of the Servicing Fee, it will
promptly execute and deliver (or cause the relevant Sub-Servicer to execute and
deliver) all further instruments and documents, and will promptly take all
further action (or cause the relevant Seller or Sub-Servicer to take all further
action) that may be reasonably required in order to perfect, protect or more
fully evidence (x) the ownership interest of the Issuer in the Transferred
Assets acquired pursuant to the Purchase Agreement and (y) the grant of security
hereunder, or to enable the Trustee (or its designees) and the Noteholders to
exercise or enforce any of their rights hereunder or under any other Transaction
Document. Without limiting the generality of the foregoing, each of the Issuer
and the Servicer shall, and shall cause each of the applicable Sellers to:

(i) execute and file such financing or continuation statements,
or amendments thereto or assignments thereof, and such other
instruments or notices, as may be required from time to time pursuant
to SECTIONS 2.03(a)(ii)(A) and 7.02(c); and

(ii) mark its master data processing records that evidence or
list Receivables or Related Transferred Assets as described in
SECTION 2.02(b).

The Servicer shall cause all financing statements, continuation statements
and all amendments and assignments relating thereto and any other necessary
documents relating to the rights and interests of the Trustee for the benefit of
the Noteholders in the Pledged Assets to be promptly recorded, registered and
filed, and at all times to be kept recorded, registered and filed, all in such
manner and in such places as may be required by law fully to preserve, maintain
and protect the rights and interests of the Trustee hereunder for the benefit of
the Noteholders in all property comprising the Pledged Assets. The Servicer
shall deliver to the Trustee file-stamped copies of, or filing receipts for, any
document recorded, registered or filed as provided above, as soon as available
following such recording, registration or filing. The Issuer shall, and shall
cause each of the Sellers to, cooperate fully with the Servicer in connection
with the obligations set forth above and will execute any and all documents
which are reasonably required to fulfill the intent of this SECTION 3.09.

(b) If (i) The Issuer or the Servicer fails to perform any of its
agreements or obligations under any Transaction Document to which it is a party
and does not remedy such failure within the applicable cure period, if any, and
(ii) the Trustee

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in good faith reasonably believes that the performance of such agreements and
obligations is necessary or appropriate to protect the interests of the
Noteholders under this Indenture, then the Trustee or its designees may (but
shall not be required to) itself perform, or cause performance of, such
agreement or obligation, and the reasonable expenses of the Trustee or such
designee incurred in connection therewith shall be payable by the Servicer (if a
Stone Person) as provided in SECTION 11.09 and/or by the Issuer as provided in
SECTION 7.03, as applicable. If, at any time, the Issuer or the Servicer fails
to file or cause to be filed any financing statement or continuation statement,
or amendment thereto or assignment thereof, that is required to be filed
pursuant to this Indenture or any of the other Transaction Documents, the
Trustee may (but shall not be obligated to), and the Issuer and the Servicer
hereby authorize the Trustee to, file such financing or continuation statements,
and amendments thereto and assignments thereof, relative to all or any of the
Receivables or the Related Transferred Assets now existing or hereafter arising
in the name of the Issuer, the Servicer or, to the extent permitted under the
Purchase Agreement, any applicable Seller, in any case, at the expense of the
Servicer to be paid out of the Servicing Fee.

ARTICLE IV

RIGHTS OF NOTEHOLDERS; ALLOCATION
AND APPLICATION OF COLLECTIONS

Section 4.01 ESTABLISHMENT OF TRUST ACCOUNTS. (a) The
Administrative Agent shall establish and maintain in the name of the Trustee for
the benefit of the Noteholders, the Master Collection Account and the other
segregated trust accounts referred to in CLAUSES (b) and (c) below and, to the
extent required, CLAUSES (e) and (f) below (and such additional accounts as may
be required by any Supplement). Each of the Trust Accounts shall be established
and maintained as a segregated trust account in the corporate trust department
of the Administrative Agent (or in a segregated trust account with any other
federal or state chartered depository institution subject to regulations
regarding fiduciary funds on deposit substantially similar to 12 C.F.R. Section
9.10(b) or whose long-term unsecured senior debt obligations are rated, at the
time of deposit, "AA" or better by S&P and "Aa2" or better by Moody's Investor
Services, Inc. (or, if only rated by one such rating agency, either such rating
by such rating agency). Each Trust Account shall bear a designation clearly
indicating that funds deposited therein are held for the benefit of the
Noteholders (or for any particular Noteholders as the case may be).

(b) All Collections and all other Pledged Assets consisting of cash
or cash equivalents shall be transferred from

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the Bank Accounts and deposited in a segregated trust account maintained by the
Administrative Agent (the "MASTER COLLECTION ACCOUNT"). In addition, on the
Liquidation Commencement Date, any funds in the Equalization Account will be
transferred to the Master Collection Account. Funds on deposit in the Master
Collection Account will be allocated as provided in SECTION 4.02. As described
in SECTION 4.02(e), certain funds in the Master Collection Account shall be
allocated from time to time prior to commencement of the Liquidation Period to
an administrative sub-account of the Master Collection Account or to a separate
trust account created by the Administrative Agent at the direction of the Issuer
(such sub-account or separate account being referred to herein as the "CARRYING
COST ACCOUNT"). Funds shall be withdrawn from the Carrying Cost Account to pay
interest on the Notes and other Carrying Costs when due. If on any day funds
allocated to the Carrying Cost Account are not sufficient to pay all Carrying
Costs then due and there are any funds on deposit in the Equalization Account or
the Defeasance Account, then such funds shall be withdrawn (in an amount equal
to the lesser of the amount of the deficiency and the amount of such funds) and
transferred to the Carrying Cost Account. On the Liquidation Commencement Date,
the Carrying Cost Account shall be closed and all funds in the Carrying Cost
Account shall be transferred to the Master Collection Account for disposition in
the same manner as other funds in the Master Collection Account, as provided in
SECTION 4.02(f).
(c) From time to time prior to the commencement of the Liquidation
Period, funds will be withdrawn from the Master Collection Account for deposit
into a segregated trust account maintained by the Administrative Agent (the
"EQUALIZATION ACCOUNT") and withdrawn from the Equalization Account for deposit
into the Master Collection Account, in either case, to compensate for
fluctuations in the Base Amount, as provided in SECTIONS 4.02(c), 4.02(d) and
4.02(e). On the Liquidation Commencement Date, the Equalization Account shall
be closed and all funds in the Equalization Account shall be transferred to the
Master Collection Account for disposition in the same manner as other funds in
the Master Collection Account, as provided in SECTION 4.02(f).

(d) Any Trust Accounts established pursuant to any Supplement shall
be maintained by the Administrative Agent in name of the Trustee in trust for
the benefit of only the Noteholders of such Series of Notes as are indicated in
such Supplement. Each of the Trust Accounts established pursuant to this
Indenture shall be maintained by the Administrative Agent, as specified herein,
in the name of the Trustee in trust for the benefit of all Noteholders, except
to the extent indicated in any Supplement with respect to the Series of Notes
issued pursuant to such Supplement.

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(e) At the times specified in SECTION 4.02(e), the Servicer shall
allocate funds pursuant to CLAUSES SECOND, FIFTH and SIXTH of SECTION 4.02(e)
an administrative sub-account of the Master Collection Account or to a separate
trust account created by the Administrative Agent at the direction of the Issuer
(such sub-account or separate account being herein called the "DEFEASANCE
ACCOUNT"). Funds shall be withdrawn from the Defeasance Account to make the
payments described in SECTION 4.02(e) to the Noteholders of the relevant Series
of Notes. If the Liquidation Commencement Date occurs at any time when funds
are being allocated to the Defeasance Account, the Servicer shall in the Daily
Report reallocate all funds that are on deposit or would otherwise be allocated
to the Defeasance Account to the Master Collection Account, within one Business
Day after the occurrence of the Liquidation Commencement Date, for allocation
therefrom pursuant to SECTION 4.02(f). On each Payment Date after the
commencement and during the continuation of the Accumulation Period for a
particular Series, the Administrative Agent (in accordance with the instructions
set forth in the Settlement Statement relating thereto) shall withdraw from the
Defeasance Account and deposit into a segregated trust account maintained by the
Administrative Agent (the "PRINCIPAL FUNDING ACCOUNT") an amount equal to the
lesser of (a) the applicable Principal Accumulation Amount for such Payment Date
and (b) the applicable Controlled Deposit Amount, if any, for such Payment Date
to be applied to the repayment of the Outstanding Principal Balance of such
Series on the Expected Final Payment Date for such Series as provided in SECTION
4.02(e).

(f) From time to time prior to the commencement of the Liquidation
Period, funds will be allocated to an administrative sub-account of the Master
Collection Account or to a separate trust account created by the Administrative
Agent at the direction of the Issuer (such sub-account or separate account being
herein called the "DEFERRED ALLOCATION ACCOUNT") for the purposes described in
SECTION 4.02(c)(iii).

(g) The Trustee shall possess (for its benefit and for the benefit of
the Noteholders) all right, title and interest in and to all funds on deposit
from time to time in each of the Trust Accounts and in all proceeds thereof,
PROVIDED, that the Administrative Agent shall be entitled to make withdrawals
therefrom as set forth herein. The Trust Accounts shall be under the exclusive
dominion and control of the Trustee and the Administrative Agent for the benefit
of the applicable Noteholders. Each of the Issuer and the Servicer agrees that
it shall have no right of setoff against, and no right otherwise to deduct from,
any funds held in any of the Trust Accounts for any amount owed to it by each
other or by the Trustee, the Administrative Agent or any Noteholder. Pursuant
to the authority granted to the Issuer in SECTION 3.02, the Issuer shall have
the power, revocable after the occurrence and during the

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continuance of a Servicer Default by the Trustee to instruct the Administrative
Agent to make withdrawals and payments from the Trust Accounts for the purposes
of carrying out the Issuer's, the Servicer's, the Trustee's or the
Administrative Agent's duties hereunder in accordance with and subject to the
terms hereof.

Section 4.02 DAILY CALCULATIONS AND FUNDS ALLOCATIONS.

(a) CALCULATION OF CARRYING COST RESERVE. On each Business Day prior
to the Liquidation Commencement Date, the Servicer will calculate an amount
equal to the Carrying Cost Reserve for such Business Day. The "CARRYING COST
RESERVE" means an amount equal to the sum of the Accrued Carrying Costs (as
defined below). As used herein, "ACCRUED CARRYING COSTS" means, at any time,
the sum of (1) the then accrued and unpaid Carrying Costs, and (2) the amount of
Carrying Costs that will, or are estimated to, have accrued by the next Payment
Date.

(b) CALCULATION OF THE BASE AMOUNT. On each Business Day prior to
the Liquidation Commencement Date, the Servicer will calculate the Base Amount
for such day. On any Business Day, the "BASE AMOUNT" will equal the result of
(i) the Net Eligible Receivables as reported in the Daily Report for that
Business Day, MINUS (ii) the Aggregate Required Reserves as of that Business
Day, MINUS (iii) the Discount Rate Reserve as of the opening of business on that
Business Day.

(i) CALCULATION OF VARIABLE AMOUNT. On each Business Day prior to
the Liquidation Commencement Date, the Servicer shall calculate an amount
(whether positive or negative, the "VARIABLE AMOUNT") equal to (A) the Base
Amount at the opening of business on such day, MINUS (B) the Aggregate Net
Outstandings on such day. The Variable Amount on any Business Day, whether
positive or negative, will be allocated in the manner described hereinafter
and will be reported by the Servicer in the Daily Report for such day.

(ii) ALLOCATION OF POSITIVE VARIABLE AMOUNT. On any Business Day
occurring prior to the Liquidation Commencement Date when the Variable
Amount is zero or a positive number, the Administrative Agent shall, if so
directed by the Issuer, take one or more of the following actions:

(A) If there are funds on deposit in the Deferred Allocation
Account, then the Administrative Agent shall, before taking any of the
other actions referred to below, transfer all such funds to the Master
Collection Account for application along with other funds on deposit
in the Master Collection Account on that day, PROVIDED that there
would not be a negative

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Variable Amount after giving effect to such transfer and such
application(s).

(B) If the positive Variable Amount exceeds the amount on
deposit in the Deferred Allocation Account (or there are no funds on
deposit in the Deferred Allocation Account), the Issuer may direct the
Administrative Agent to (1) transfer funds (if any) on deposit in the
Equalization Account into the Master Collection Account for
application along with other funds on deposit in the Master Collection
Account on that day and/or (2) increase the principal amount of one or
more of the Revolving Notes specified by the Issuer such that the sum
of the amount of any such transfer and the amount(s) of any such
increase(s) equals not more than the remaining (or total) positive
Variable Amount and, after giving effect to any such transfer and/or
increase, the Variable Amount would equal or exceed zero; PROVIDED,
HOWEVER, that any such increase in any Revolving Note shall be subject
to SECTION 6.08.

(iii) ALLOCATION OF NEGATIVE VARIABLE AMOUNT. On any Business Day
occurring prior to the Liquidation Commencement Date when the Variable
Amount is a negative number, the Administrative Agent, at the direction of
the Issuer, shall take one or more of the following actions with respect to
Collections available in the Master Collection Account for applications on
such day:

(A) transfer a portion of such Collections to the Equalization
Account, pursuant to clause Fourth of SECTION 4.02(e); and/or

(B) allocate such Collections to one or more Revolving Notes in
reduction of the respective Outstanding Principal Balances of such
Revolving Notes or to the Defeasance Account in accordance with clause
Second of SECTION 4.02(e);

such that the aggregate amount of such transfer(s), such reduction(s) in
the Revolving Notes and/or allocation(s) to the Defeasance Account equals
the absolute value of the Variable Amount on such date; PROVIDED that if
the amount of Collections available for such purposes on such day, after
any required deposits to the Carrying Cost Account, is less than the
absolute value of the Variable Amount, then (x) any such allocation to any
Revolving Note or to the Defeasance Account shall not exceed an amount
equal to the Allocable Daily Collections of the Series of any such affected
Notes on such day and (y) if any allocation is made to any Revolving Note
or to the Defeasance Account, then the

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remainder of such available Collections shall be transferred to the
Deferred Allocation Account for the benefit of any holder who may be
entitled to receive such Collections pursuant to SECTION 5.01(h).

If, at any time when funds are being allocated to or are on deposit in
the Deferred Allocation Account, the Liquidation Commencement Date occurs,
all funds then allocated to or on deposit in the Deferred Allocation
Account shall be paid to the holders of the then-issued and outstanding
Notes on the next Payment Date in the manner described in SECTION 5.01(h).

(d) WITHDRAWALS FROM EQUALIZATION ACCOUNT AND DEFERRED ALLOCATION
ACCOUNT. On any Business Day prior to the Liquidation Commencement Date, the
Issuer may instruct the Administrative Agent to withdraw funds from the Deferred
Allocation Account and/or the Equalization Account and allocate such funds to:

(i) the reduction of the respective Outstanding Principal Balances of
one or more Revolving Notes (subject to the requirements of SECTION
6.08(b)); and/or

(ii) the Defeasance Account;

so long as (x) there would not be a negative Variable Amount after giving effect
to such transfer and such application(s) and (y) in the case of any such
withdrawal from the Equalization Account, (1) no funds are on deposit in the
Deferred Allocation Account (including as a result of transfers made on that
day), (2) any allocation of such funds from the Equalization Account to any
Revolving Note shall not exceed an amount equal to the applicable Revolving
Noteholder's pro rata share of such funds (prorating on the basis of such
Revolving Noteholder's Outstanding Principal Balance as a percentage of the sum
of the Outstanding Principal Balances of all then-outstanding Notes) and (3) if
any such allocation is made to any Revolving Note, then the remainder of such
funds in the Equalization Account shall be transferred to the Deferred
Allocation Account.

(e) DAILY ALLOCATION OF FUNDS IN THE MASTER COLLECTION ACCOUNT PRIOR
TO THE LIQUIDATION COMMENCEMENT DATE. On each Business Day prior to the
Liquidation Commencement Date, the Servicer shall allocate all collected funds
(including Collections attributable to all Receivables, whether or not such
Receivables are Eligible Receivables or constitute Excess Concentration
Balances) then on deposit in the Master Collection Account (other than funds
which are required to be returned to Stone Persons pursuant to SECTION 3.02(b)
or are required by the terms of any Supplement to be dealt with in some other
manner) to the following items, in the following order of priority, each of

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which (except as expressly provided otherwise below) shall be paid on the next
Payment Date:

FIRST, to the Carrying Cost Account until the amount allocated to the
Carrying Cost Account equals the Carrying Cost Reserve calculated pursuant
to SECTION 4.02(a);

SECOND, to the Defeasance Account in respect of any Series of Notes as
to which an Accumulation Period, Pay-Out Period or Prepayment Accumulation
Period has commenced, an amount on each Business Day equal to the product
of (i) the balance of collected funds on deposit in the Master Collection
Account after allocation to CLAUSE FIRST above and (ii) the applicable
Defeasance Allocation Percentage with respect to each such Series; until
the amount on deposit therein or deposited therein in accordance with this
CLAUSE SECOND in respect of each such Series equals:

(x) in the case of any Series in an Accumulation Period, the
Controlled Deposit Amount for such Series;

(y) in the case of any Series in a Pay-Out Period, the aggregate
Outstanding Principal Balance of such Series; and

(z) in the case of any Series in a Prepayment Accumulation
Period, the amount of principal to be prepaid with respect to such
Series,

PROVIDED, HOWEVER, that (1) funds deposited into the Defeasance Account
shall be payable on account of such Series in accordance with the terms of
the related Supplement and (2) any such allocation shall be subject to the
provisions of SECTION 4.02(c)(iii) if, on any day, the Variable Amount is a
negative number and the Collections to be deposited in the Defeasance
Account are less than the absolute value of such Variable Amount;

THIRD, to make payments on such Business Day (i) to the Revolving
Noteholders in respect of one or more of the Revolving Notes to reduce the
outstanding principal amount of such Revolving Notes, to the extent such
reduction is required or permitted by SECTION 4.02(c) or (d), and (ii)
under the circumstances described in SECTION 4.02(c) and (d), to the
Deferred Allocation Account;

FOURTH, to fund the Equalization Account, to the extent such funding
is required or permitted by SECTION 4.02(c);

FIFTH, to the Defeasance Account in respect of any repayment or
prepayment of any Series of Notes which is to occur during an Accumulation
Period, a Pay-Out Period or a

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Prepayment Accumulation Period in an amount equal to any amounts (other
than in respect of Carrying Costs and principal and amounts assigned to the
following CLAUSE SIXTH by the related Supplements) owed to the Noteholders
of such Series in connection with the Program;

SIXTH, to the Defeasance Account in respect of any other amounts that
are required to be paid as a result of repayments or prepayments of any
Series of Notes during an Accumulation Period, a Pay-Out Period or a
Prepayment Accumulation Period in accordance with the related Supplements;

SEVENTH, to the Carrying Cost Account for payment on the next
succeeding Payment Date of (i) other accrued and unpaid expenses of the
Program (including indemnification payments to be made pursuant to SECTION
7.03), and (ii) all other amounts payable to Noteholders pursuant to the
related Supplements; and

EIGHTH, with respect to any remaining amounts, to the Issuer on such
Business Day; PROVIDED, HOWEVER, that the Issuer may, from time to time,
direct the Administrative Agent to set aside all or any part of the funds
to be paid to the Issuer pursuant to this CLAUSE EIGHTH in order to (i) pay
all or part of such funds to one or more Revolving Noteholders, or (ii)
hold such funds in the Master Collection Account until the Administrative
Agent receives instructions from the Issuer concerning the application of
such funds; and, PROVIDED, FURTHER, that, no such distribution to the
Issuer will be made after a Liquidation Event described in CLAUSE (c) of
SECTION 9.01 has occurred (and has continued for the five Business Days
referred to in such clause).

If, on any day, the amount of Collections that is then allocated to the Carrying
Cost Account exceeds the amount of Collections that are then required to be
allocated to the Carrying Cost Account, the Servicer shall reallocate such
Collections on such day to one or more of the obligations described above in
CLAUSES SECOND through EIGHTH in that order of priority.

Collections in the Master Collection Account that are allocated to the
priority described above in CLAUSE SEVENTH shall be paid on the next Payment
Date; PROVIDED, HOWEVER, that, if the Collections available on such Payment Date
to pay the amount required to be paid pursuant to CLAUSE SEVENTH above are
insufficient to pay the full amount thereof, the portion of such amount that is
not paid on such Payment Date shall be paid on each Business Day following such
Payment Date on which Collections are available to pay such remaining amount
until it is paid in full.

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Payments to be made during a Pay-Out Period will commence on the
Payment Date that occurs in the month following the month in which the Pay-Out
Period Commencement Date occurs, and will be made on each Payment Date that
occurs thereafter until the respective Outstanding Principal Balances of the
Notes that are being paid during such Pay-Out Period have been paid in full.
During a Pay-Out Period with respect to any Series of Notes, the respective
Noteholders who are being paid out during such Pay-Out Period shall receive the
amounts allocated to the Defeasance Account pursuant to CLAUSES SECOND, FIFTH
and SIXTH above in payment of the amounts described in each such clause that are
payable with respect to such Series.

On the Expected Final Payment Date with respect to any Series, all
funds which have been deposited in the Principal Funding Account pursuant to
SECTION 4.01(e) with respect to such Series prior to the end of the most
recently ended Calculation Period shall be applied to the repayment of the
Outstanding Principal Balances of the Notes of such Series.

If, on any day prior to the Liquidation Commencement Date, funds on
deposit in the Master Collection Account and available for allocation under any
of CLAUSES FIRST through SEVENTH above are less than the amount of the
obligations described in such CLAUSE, then the available Collections shall be
allocated by the Servicer to the Persons designated in such CLAUSES with respect
to such obligations PRO RATA according to the respective amounts of such
obligations held by them. All other obligations in lower priority categories
shall remain unsatisfied until the obligations in the preceding category have
been satisfied.

(f) ALLOCATION OF FUNDS IN THE MASTER COLLECTION ACCOUNT DURING
LIQUIDATION. On the Liquidation Commencement Date, the Issuer shall no longer
have the right to increase the outstanding principal balance of any of the
Revolving Notes.

On each Business Day on and after the Liquidation Commencement Date,
the Servicer shall allocate to the Noteholders (i) all collected funds on
deposit in the Defeasance Account, Equalization Account, Deferred Allocation
Account and Carrying Cost Account as of the Liquidation Commencement Date and
(ii) all other collected funds (including Collections attributable to all
Receivables whether or not such Receivables are Eligible Receivables or
constitute Excess Concentration Balances) then on deposit in the Master
Collection Account (other than funds which are required to be returned to Stone
Persons or Lockbox Banks pursuant to SECTION 3.02(b) or are required by the
terms of any Supplement to be dealt with in any other manner). All Collections
which are allocated to the Noteholders as described in the immediately preceding
sentence shall be held in trust by the Administrative Agent on behalf of the
Trustee and, based upon
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and in accordance with the related Settlement Statement, paid to the relevant
Noteholders or other specified payees on the next Payment Date (commencing with
the first Payment Date falling after the Calculation Period during which the
Liquidation Period commences, except that distributions will be made pursuant to
CLAUSE FIRST below on each Payment Date in the Liquidation Period):

FIRST, to pay accrued Carrying Costs; PROVIDED, HOWEVER, that if any
Stone Person is the Servicer, then the allocation to be made pursuant to
this CLAUSE FIRST to pay the Servicing Fee shall equal only the portion of
the Servicing Fee that is to be paid to Persons other than a Stone Person;

SECOND, to make payments of the Principal Payment Amounts with respect
to (x) each outstanding Senior Class until (and only until) the respective
Outstanding Principal Balances thereof have been repaid in full and (y)
thereafter to each outstanding Subordinated Class in the direct order of
its relative priority (i.e., most to least prior) until the respective
Outstanding Principal Balances thereof have been repaid in full;

THIRD, to pay other Obligations owed to the Noteholders (as set forth
in the related Supplement);

FOURTH, to pay the accrued and unpaid Servicing Fee that has not been
paid pursuant to CLAUSE FIRST above;

FIFTH, to pay (i) all other accrued and unpaid expenses of the Program
(including indemnification payments to be made pursuant to SECTION 7.03,
but excluding any such expenses that have been paid pursuant to CLAUSE
THIRD) and (ii) all other amounts payable to the Noteholders pursuant to
the related Supplements; and

SIXTH, with respect to any remaining amounts, to the Issuer.

If, on any day during the Liquidation Period, the amount of funds on
deposit in the Master Collection Account and available for allocation to a
Series under any of CLAUSES FIRST, THIRD or FIFTH above is less than the amount
of the obligations to such Series described in such CLAUSE, then the available
Collections shall be allocated by the Servicer (1) to the holders of such
obligations relating to any Senior Class until the same have been paid in full
and (2) thereafter to the holders of such obligations relating to any
Subordinated Class in the direct order of their relative priority (i.e., most to
least senior) until the same have been paid in full. The allocation among
holders within each such class shall be made PRO RATA according

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to the respective amounts of such obligations held by them. All other
obligations in lower priority categories shall remain unsatisfied until the
obligations in the preceding category have been satisfied.

After the payment in full of all amounts described above in priority
categories FIRST through FIFTH, this Indenture shall be satisfied and discharged
in accordance with SECTION 13.01 and all remaining amounts in the Master
Collection Account and/or any of the other Trust Accounts shall be remitted to
the Issuer.

Section 4.03 INVESTMENT OF FUNDS IN TRUST ACCOUNTS. On any day when
funds on deposit in any Trust Account shall exceed $10,000 (after giving effect
to the allocations of such funds required by this ARTICLE IV), and at such other
times as investment is practicable, the Administrative Agent, at the direction
of the Issuer (or, if the Issuer shall so request, at the direction of the
Servicer on behalf of the Issuer), shall invest and reinvest monies on deposit
in such Trust Account (in the name of the Administrative Agent on behalf of the
Trustee for the benefit of the Noteholders) in such Eligible Investments as are
specified in a notice from the Issuer (or the Servicer, as applicable), subject
to the restrictions set forth hereinafter. The Administrative Agent shall, at
the direction of the Issuer (or, if the Issuer shall so request, at the
direction of the Servicer on behalf of the Issuer): (a) invest the funds in the
Trust Accounts (other than the Carrying Cost Account) in Eligible Investments
that mature not later than 30 days after the date of the initial investment
therein by the Administrative Agent (or, if earlier, the Business Day next
preceding the next Scheduled Accumulation Commencement Date or the next Expected
Final Payment Date); and (b) invest funds in the Carrying Cost Account in
Eligible Investments that mature not later than the earlier of (i) the 30th day
after the date of the initial investment therein by the Administrative Agent and
(ii) the Business Day next preceding the next day on which any such Carrying
Costs must be paid pursuant to SECTION 5.01. All Eligible Investments made from
funds in any Trust Account, and the interest, dividends and income received
thereon and therefrom and the net proceeds realized on the sale thereof, shall
be deposited in such Trust Account. The Administrative Agent may liquidate an
Eligible Investment prior to maturity if such liquidation would not result in a
loss of all or part of the principal portion of such Eligible Investment or if,
prior to the maturity of such Eligible Investment, a default occurs in the
payment of principal, interest or any other amount with respect to such Eligible
Investment. None of the Trustee, the Administrative Agent, or the Servicer
shall have any liability in connection with investment losses incurred on
Eligible Investments.

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Section 4.04 ATTACHMENT OF TRUST ACCOUNTS. If the Trustee or the
Administrative Agent receives written notice that any account designated as a
Trust Account has or will become subject to any writ, judgment, warrant of
attachment, execution or similar process, the Trustee or the Administrative
Agent shall (notwithstanding any other provision of the Transaction Documents)
promptly notify the Issuer, the Servicer, the Noteholders, and the Applicable
Rating Agencies and shall not deposit or transfer funds into such Trust Account
but shall cause funds otherwise required to be deposited into such Trust Account
to be held in another account pending distribution of such funds in the manner
required hereunder.

ARTICLE V

DISTRIBUTIONS AND REPORTS TO
NOTEHOLDERS

Payments on the Notes shall be made as provided in SECTIONS 5.01 and
5.02, except as otherwise provided in the applicable Supplement. All payments
made by the Paying Agent pursuant to SECTIONS 5.01 and 5.02 shall be made based
upon the information set forth in and pursuant to the applicable Daily Report or
Settlement Statement relating to such date and delivered to the Administrative
Agent and the Paying Agent (if different than the Administrative Agent).

Section 5.01 DISTRIBUTIONS TO NOTEHOLDERS.

(a) On each Payment Date and on each other day specified in any
Supplement for the payment of Carrying Costs to the holders of the Notes issued
thereunder, the Paying Agent shall distribute, in respect of the period from the
preceding Payment Date to (but excluding) the then-current Payment Date, to each
Noteholder of record on the Report Date immediately prior to the then-current
Payment Date such Noteholder's PRO RATA share (based on the aggregate amount of
accrued and unpaid Carrying Costs owed to such Noteholder) of the amounts that
(i) prior to the Liquidation Commencement Date, are allocated to the Carrying
Cost Account with respect to accrued but unpaid interest and other Carrying
Costs with respect to the Notes pursuant to CLAUSE FIRST of SECTION 4.02(e), and
(ii) on and after the Liquidation Commencement Date, are on deposit in the
Master Collection Account and allocated to accrued but unpaid interest and other
Carrying Costs with respect to the Notes pursuant to CLAUSE FIRST of (and
subject to the limitations of the penultimate paragraph of) SECTION 4.02(f).

(b) (i) On each Payment Date that occurs during a Pay-Out Period in
which one or more Series of Fixed Principal Notes is being repaid or during the
Liquidation Period (commenc

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ing with the first Payment Date falling after the Calculation Period during
which the Pay-Out Period Commencement Date or Liquidation Period Commencement
Date occurs), the Paying Agent shall distribute to each Noteholder of record of
Fixed Principal Notes of such Series as of the Record Date in respect of such
Payment Date such Noteholder's PRO RATA share (based on the respective aggregate
Outstanding Principal Balances of the Fixed Principal Notes held by such
Noteholder) of (A) in the case of Payment Dates that occur during a Pay-Out
Period, the amounts on deposit in the Defeasance Account that are allocated to
the Outstanding Principal Balance of the related Series pursuant to CLAUSE
SECOND of SECTION 4.02(e) during the most recently ended Calculation Period, (B)
in the case of Payment Dates that occur during the Liquidation Period, the
amounts on deposit in the Master Collection Amount that are allocated to the
Principal Payment Amount of the related Series pursuant to CLAUSE SECOND of (and
subject to the limitations set forth in the penultimate paragraph of) SECTION
4.02(f) and (C) in the case of the first Payment Date on which such
distributions are made in the Liquidation Period or any Pay-Out Period, in
addition to the amount described in CLAUSE (A) or (B) above, as applicable, the
amounts on deposit in the Principal Funding Account that are allocated to the
principal of the Fixed Principal Notes of the related Series.

(ii) On the Expected Final Payment Date with respect to any Series of
Fixed Principal Notes, the Paying Agent shall distribute, to each Noteholder of
record of Fixed Principal Notes of such Series as of the Record Date in respect
of such Payment Date such Noteholder's PRO RATA share (based on the respective
aggregate Outstanding Principal Balances of the Fixed Principal Notes held by
such Noteholder) of the amounts on deposit in the Principal Funding Account that
are allocated to the principal of the Fixed Principal Notes of the related
Series.

(iii) On each Payment Date during the Revolving Period for any Series
of Fixed Principal Notes on which any full or partial prepayment of the
principal amount of the Fixed Principal Notes of that Series is to be made in
accordance with the related Supplement, the Paying Agent shall distribute, to
each Noteholder of record of Fixed Principal Notes of such Series as of the
Record Date in respect of such Payment Date such Noteholder's PRO RATA share
(based on the respective aggregate Outstanding Principal Balances of the Fixed
Principal Notes held by such Noteholder) of the amounts on deposit in the
Defeasance Account that are allocated to the principal of such Fixed Principal
Notes and any other amounts (including any Prepayment Premium) payable under the
terms of the related Series.

(c) On each Business Day prior to the Liquidation Commencement Date,
the Paying Agent shall distribute to each Revolving Noteholder the amounts, if
any, which are allocated to

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reduce the outstanding principal amount thereof pursuant to SECTION 4.02(c) OR
(d) and CLAUSE THIRD or EIGHTH of SECTION 4.02(e).

(d) On each Business Day that occurs during a Pay-Out Period in which
one or more Series of Revolving Notes is being repaid or during the Liquidation
Period, the Paying Agent shall distribute to each Revolving Noteholder of record
of such Series as of such Business Day such Revolving Noteholder's PRO RATA
share (based on the respective aggregate Outstanding Principal Balances of the
Revolving Notes held by such Noteholder) of (i) in the case of Business Days
that occur during a Pay-Out Period, the amounts on deposit in the Defeasance
Account that are allocated to principal of the Revolving Notes of the related
Series pursuant to CLAUSE SECOND of SECTION 4.02(e) during the most recently
ended Calculation Period and (ii) in the case of Business Days that occur during
the Liquidation Period, the amounts on deposit in the Master Collection Account
that are allocated to the principal of the Revolving Notes of the related Series
pursuant to CLAUSE SECOND of (and subject to the limitations set forth in the
penultimate paragraph of) SECTION 4.02(f). On each Business Day during such a
Pay-Out Period, the Paying Agent shall distribute to each such Revolving
Noteholder such amounts as shall be directed by the Servicer in the applicable
Daily Report from amounts allocated to such Series as described in the preceding
sentence.

(e) On each Payment Date that occurs during a Pay-Out Period with
respect to one or more Series of Notes, the Paying Agent shall distribute, in
respect of the period from the preceding Payment Date to (but excluding) the
then-current Payment Date, to each Noteholder of record of the Notes of such
Series as of the Record Date in respect of such Payment Date such Noteholder's
PRO RATA share (based on the aggregate outstanding amount of Obligations owed to
such Noteholder, other than Obligations constituting the Outstanding Principal
Balance of or interest on such Notes, but giving effect to the priorities set
forth in CLAUSES FIFTH and SIXTH of SECTION 4.02(e)) of the amounts on deposit
in the Defeasance Account allocable to such Obligations owed to such Noteholders
pursuant to CLAUSES FIFTH and SIXTH of SECTION 4.02(e).

(f) On each Payment Date that occurs during the Liquidation Period,
the Paying Agent shall distribute, in respect of the period from the preceding
Payment Date to (but excluding) the then-current Payment Date, to each
Noteholder of record on the Record Date in respect of such Payment Date such
Noteholder's PRO RATA share (based on the aggregate outstanding amount of
Obligations owed to such Noteholder pursuant to CLAUSE THIRD of SECTION 4.02(f))
of the amounts on deposit in the Master Collection Account allocable to the
Obligations owed to Noteholders pursuant to CLAUSE THIRD of (and subject to the

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limitations set forth in the penultimate paragraph of) SECTION 4.02(f).

(g) Each distribution to the Noteholders hereunder shall be made by
the Paying Agent (i) by wire transfer of immediately available funds on the date
on which such distribution is required to be made, to an account at a bank or
other entity having appropriate facilities therefor which the Person entitled
thereto specifies in a written notice given to the Administrative Agent on or
prior to the Record Date with respect to the Payment Date on which such payment
is to be made, if such Person is the holder of Notes in an aggregate Stated
Amount or original principal amount equal to or in excess of $1,000,000, and
(ii) in all other cases, by check mailed to each such other Noteholder at such
Noteholder's address appearing in the Note Register, in either case without
presentation or surrender of any Note held by such Noteholder or the making of
any notation thereon; PROVIDED, HOWEVER, that, except as expressly provided
otherwise in SECTION 6.06, the final principal payment to be made on any Note in
connection with the retirement of a Series of Notes will be made to each
Noteholder of such Series only upon presentation and surrender by such
Noteholder of each of its Notes of such Series at the office or offices
specified in a notice of such final principal payment that the Administrative
Agent delivers or causes to be delivered to each such Noteholder not less than
fifteen Business Days prior to such final principal payment date.
(h) Notwithstanding the provisions of the penultimate paragraph of
SECTION 4.02(f), on the first Payment Date that occurs after the Calculation
Period during which the Liquidation Commencement Date occurs, the Paying Agent
shall distribute to each Noteholder of record on the Record Date with respect to
such Payment Date, such Noteholder's pro rata share (based on the respective
aggregate Outstanding Principal Balance of such Noteholder's Notes) of amounts
on deposit in the Deferred Allocation Account as of the Liquidation Commencement
Date in repayment of the aggregate Outstanding Principal Balance owed to such
Noteholder; PROVIDED, HOWEVER, that (i) such pro rata shares shall be calculated
by including in the aggregate amount to be distributed amounts that were
distributed to any Revolving Noteholder in connection with the deposit of such
amounts into the Deferred Allocation Account and (ii) the amounts previously so
distributed to such Noteholders shall be deducted from the amounts distributable
to them pursuant to this CLAUSE (h).

Section 5.02 DISTRIBUTIONS TO THE ISSUER.

(a) On each Business Day prior to the Liquidation Commencement Date,
the Paying Agent shall distribute to the Issuer the amounts payable to the
Issuer pursuant to CLAUSE EIGHTH of SECTION 4.02(e) to the extent that funds are
available to make such payments. On each Business Day after the occurrence

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of the Liquidation Commencement Date, the Paying Agent shall distribute to the
Issuer all amounts not otherwise allocated to the Noteholders pursuant to
SECTION 4.02(f) and all other amounts payable to the Issuer pursuant to CLAUSE
SIXTH of SECTION 4.02(f), in each case, only to the extent that funds are
available therefor.

(b) Distributions to the Issuer hereunder shall be made by the Paying
Agent on the date on which such distribution is required to be made by wire
transfer of immediately available funds, no later than 1:00 p.m., Chicago time
(or later, to the extent delayed by any circumstance outside of the Paying
Agent's reasonable control), on the date on which such distribution is required
to be made, to an account at a bank or other entity having appropriate
facilities therefor which the Issuer specifies in a written notice given to the
Administrative Agent on or prior to the Record Date in respect of the Payment
Date on which such payment is to be made.

Section 5.03 INFORMATION TO NOTEHOLDERS.

(a) SETTLEMENT STATEMENT. Within seven days after each Payment Date,
the Administrative Agent shall send to each Noteholder, upon its request
therefor made to the Administrative Agent, a copy of a monthly report prepared
by the Servicer (but not verified by the Administrative Agent) substantially in
the form of that attached hereto as EXHIBIT D summarizing certain of the
information contained in the Settlement Statement, and shall send to the
Applicable Rating Agencies without any request therefor by any of them, each
Settlement Statement by first-class mail, postage prepaid, to the address of
such Person as described in SECTION 16.03.

(b) ANNUAL TAX INFORMATION. On or before February 15, of each
calendar year, beginning with calendar year 1995, the Servicer (so long as it is
a Stone Person, and thereafter the Issuer), on behalf of the Administrative
Agent, shall furnish or cause to be furnished to each Person who at any time
during the preceding calendar year was a Noteholder such information for such
preceding calendar year, or the applicable portion thereof during which such
Person was a Noteholder of record, as is required to be provided by an issuer of
indebtedness under the Internal Revenue Code (as from time to time in effect) to
the holders of such issuer's indebtedness and such other customary information
as is necessary to enable the Noteholders to prepare their federal income tax
returns. Such obligation of the Servicer shall be deemed to have been satisfied
to the extent

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that substantially comparable information shall be provided by the Paying Agent
to such Noteholder pursuant to any requirements of the Internal Revenue Code as
from time to time in effect.

Section 5.04 NOTICE OF EARLY LIQUIDATION AT THE SELLERS' ELECTION.
If the Issuer shall receive a notice from the Sellers, pursuant to SECTION
8.09(a) or (b) of the Purchase Agreement, to the effect that the Sellers elect
to terminate their agreement to sell Receivables to the Issuer, the Issuer shall
deliver a copy of such notice to the Trustee and to the Administrative Agent
whereupon the Administrative Agent shall (notwithstanding any other provision
hereof to the contrary), within five Business Days after its receipt thereof,
deliver a copy of such notice to each Noteholder and each of the Applicable
Rating Agencies. Notwithstanding anything contained herein to the contrary, the
Liquidation Commencement Date shall occur (x) in the case of any such
termination by the Sellers pursuant to SECTION 8.09(a) of the Purchase
Agreement, on the Business Day immediately after the first Payment Date
occurring not less than 30 days after the Trustee's and the Administrative
Agent's receipt of such notice thereof from the Sellers and (y) in the case of
any such termination by the Sellers pursuant to SECTION 8.09(b) of the Purchase
Agreement, on the Business Day immediately after the first Payment Date
occurring at least 5 Business Days after the Trustee's and the Administrative
Agent's receipt of notice thereof from the Sellers.

ARTICLE VI

THE NOTES

Section 6.01 FORMS OF THE NOTES GENERALLY. The Notes of each Series
shall be substantially in the forms set forth as an Exhibit to the Supplements
pursuant to which such Notes are issued, with such appropriate insertions,
omissions, substitutions and other variations as are required or permitted by
this Indenture and/or the applicable Supplement, and such Notes may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or market, or as may, consistent herewith, be determined by
the officers executing such Notes, as evidenced by their execution thereof.

The Definitive Notes, if any, may be printed, lithographed, engraved
or otherwise produced in any manner, all as determined by the officers of the
Issuer executing such Notes, as evidenced by such officers' execution thereof.

Section 6.02 FORM OF ADMINISTRATIVE AGENT'S CERTIFICATE OF
AUTHENTICATION. The Administrative Agent's

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certificate of authentication on all Notes shall be in substantially the
following form:

"This is one of the Notes referred to in the within-mentioned
Indenture.

[NAME OF ADMINISTRATIVE AGENT]
----------------------------

BY
--------------------------
AUTHORIZED OFFICER";
---------------------

PROVIDED, that, if at any time the Administrative Agent shall appoint an
Authenticating Agent for any of the Notes or any Series of Notes, the Notes or
the Notes of such Series may bear, in the place of the Administrative Agent's
certificate of authentication, an alternate certificate of authentication which
shall be in substantially the following form:

"This is one of the Notes referred to in the within-mentioned
Indenture.

[NAME OF ADMINISTRATIVE AGENT]
----------------------------

By
-------------------------,
-------------------------
as Authenticating Agent

By
--------------------------
--------------------------
Authorized Officer".

Section 6.03 AMOUNT; ISSUABLE IN SERIES. (a) Except as otherwise set
forth in the applicable Supplement pursuant to which any Series of Notes shall
be issued, the aggregate principal amount of the Notes which may be
authenticated and delivered under this Indenture shall be unlimited.

(b) The Notes may be issued in one or more Series. The Issuer may
from time to time issue one or more new Series of Notes pursuant to a
Supplement. Except as may otherwise be provided herein or in any Supplement
pursuant to which any Series of Notes shall be issued, the Notes of all
outstanding Series shall be equally and ratably entitled as provided herein to
the benefits of this Indenture without preference, priority or distinction. All
Notes of each Series shall be substantially identical, except as to denomination
and except as may otherwise

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be provided by the applicable Supplement. All Notes of each Series shall be
denominated in Dollars, and shall be issued in such minimum amounts and in such
multiple integrals in excess of such amount or in such Stated Amounts as shall,
in each case, be set forth in the applicable Supplement pursuant to which such
Notes are to be issued. All Notes of Series need not be issued at the same time
and may be issued from time to time, consistent with the terms of this
Indenture, if and to the extent so provided by or pursuant to the applicable
Supplement.

(c) On or before the Series Sale Date relating to any new Series, the
parties hereto will execute and deliver a Supplement which will specify the
Principal Terms of such new Series. The terms of such Supplement may modify or
amend the terms of this Indenture solely as applied to such new Series.

The Trustee and the Administrative Agent may, but shall not be
obligated to, enter into any such Supplement which affects the Trustee's or the
Administrative Agent's respective rights, duties or immunities under this
Indenture.

Section 6.04 EXECUTION, AUTHENTICATION AND DELIVERY. The Notes shall
be executed on behalf of the Issuer by any of the following officers of the
Issuer: its President, any of its Vice Presidents, its Treasurer or any of its
Assistant Treasurers, or by any attorney-in-fact duly authorized to execute such
Notes on behalf of the Issuer. The signature of any such officer on the Notes
may be manual or facsimile. The seal of the Issuer may be in the form of a
facsimile thereof and may be impressed, affixed, imprinted or otherwise
reproduced on the Notes. Typographical and other minor errors or defects in any
such reproduction of such seal or any such signature shall not affect the
validity or enforceability of any Note which has been duly authenticated and
delivered by the Administrative Agent.

In case any officer of the Issuer who shall have so executed any of
the Notes or of the Administrative Agent or any Authenticating Agent who shall
have authenticated any of the Notes shall, in either case, cease to be a proper
officer of such Person, such execution and/or authentication shall continue to
be valid for all purposes hereunder; and any Note may be so executed and/or
authenticated by such Persons as, at the actual date of such execution and/or
authentication, shall be the proper officers of the Issuer, the Administrative
Agent or any Authenticating Agent, although at the date of the execution and
delivery of this Indenture such Person was not such a proper officer.

At any time and from time to time after the execution and delivery of
this Indenture, the Issuer may deliver Notes of any Series executed by the
Issuer to the Administrative Agent for authentication, together with an Issuer
Order for the

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authentication and delivery of such Notes and the other applicable documents
referred to below in this Section, whereupon the Administrative Agent shall
authenticate and deliver such Notes pursuant to such Issuer Order or pursuant to
procedures acceptable to the Administrative Agent specified from time to time by
an Issuer Order. The obligation of the Administrative Agent to authenticate the
Notes of such Series and of the Administrative Agent and the Trustee to accept
the additional responsibilities under this Indenture and the related Supplement
in respect of such Notes shall be subject to the satisfaction of the following
conditions (PROVIDED, that the conditions specified in clause (2)-(7) below need
only be satisfied on the initial Series Sales Date of any Series of Notes; and
PROVIDED, FURTHER, that the Trustee and the Administrative Agent, in accordance
with SECTION 11.02(a), shall be entitled to conclusively rely on any of the
following instruments, documents and agreements delivered to it pursuant to any
of the following clauses until such time as the Trustee and the Administrative
Agent shall have received written notice that any such instrument, document or
agreement shall have been superseded or revoked):

(1) On or before the 10th Business Day immediately preceding the
proposed Series Sales Date (or, in the case of the initial Series Sales
Date hereunder, no later than such initial Series Sale Date (but prior to
such issuance)), the Issuer shall have delivered to the Trustee, the
Administrative Agent, the Servicer, each Enhancement Provider, and each of
the Applicable Rating Agencies an Issuer Order requesting such
authentication of Notes and setting forth the proposed Series Sales Date
and delivery instructions if the Notes of such Series are not to be
delivered to the Issuer;

(2) The Issuer shall have delivered to the Trustee and the
Administrative Agent an executed Supplement referred to in SECTION 6.03 by
or pursuant to which the form or forms and the Principal Terms of the Notes
of such Series were established and an executed copy of any Enhancement
Agreement relating to such Series, if any;

(3) The Issuer shall have delivered to the Trustee, the
Administrative Agent and each Enhancement Provider an Officers' Certificate
(a) either setting forth the form or forms and the Principal Terms of the
Notes of such Series or stating that such form or forms and Principal Terms
have been established pursuant to SECTIONS 6.01 and 6.03 and comply with
this Indenture and any applicable Supplement relating thereto, (b)
certifying that all conditions to the issuance of such Notes as set forth
in this SECTION 6.04 and in the applicable Supplement shall have been
satisfied on and as of the Series Sales Date with respect to such Notes,
(c) certifying that no Liquidation

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Event, Unmatured Liquidation Event, Payout Event, Unmatured Payout Event, Event
of Default or Unmatured Event of Default has occurred and is continuing or would
result from the issuance of such Notes and (d) covering such other matters as
the Trustee or the Administrative Agent may reasonably request;

(4) the Issuer shall have delivered to the Trustee and the
Administrative Agent, at the option of the Issuer, either an Opinion of
Counsel or a letter addressed to the Trustee and the Administrative Agent
permitting it to rely on an existing Opinion of Counsel, which Opinion of
Counsel shall be substantially to the effect that:

(A) the form or forms of the Notes of such Series have been
duly authorized and established in conformity with the provisions of
this Indenture;

(B) in the case of an underwritten offering, the terms of
the Notes of such Series have been duly authorized and established in
conformity with the provisions of this Indenture; and in the case of
an offering which is not underwritten, certain terms of the Notes of
such Series have been authorized and established pursuant to a
Supplement in accordance with the provisions of this Indenture;

(C) when the Notes of such Series shall have been executed
by the Issuer and authenticated by the Administrative Agent in
accordance with the provisions of this Indenture and delivered to, and
duly paid for by, the Noteholders thereof, such Notes will have been
duly issued under this Indenture and will be valid and legally binding
obligations of the Issuer, enforceable in accordance with their
respective terms, subject to bankruptcy, insolvency, reorganization
and other laws of general applicability relating to or affecting the
enforcement of creditors' rights and to general principles of equity
(regardless of whether enforceability is considered in a proceeding in
equity or at law), and will be entitled to the benefits of this
Indenture;

(D) (i) no consent, approval, authorization, order,
registration or qualification of or with any Governmental Authority
having jurisdiction over the Issuer is required for the execution and
delivery of the Notes of such Series by the Issuer, except such as
have been obtained, but no opinion need be expressed as to state
securities or Blue Sky laws, and (ii) the execution, delivery and
performance of the Notes will not violate (1) the Issuer's Certificate
of Incorporation or By-Laws, (2) this Indenture, any Supplement, or

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to the best of such counsel's knowledge, any term of any other
indenture, loan agreement, mortgage, deed of trust or other
agreement, instrument or document to which the Issuer is a party or
by which its property is bound, the violation of which would have a
Material Adverse Effect, or (3) any law, rule, regulation or, to the
best of such counsel's knowledge, any writ, order, judgment or decree
of any court or governmental authority or agency applicable to the
Issuer or any of its property, the violation of which would have a
Material Adverse Effect; and

(E) that the issuance of such Notes will not cause the
Issuer to become subject to registration as an "investment company"
under and as defined in the Investment Company Act of 1940, as
amended;

(5) the Issuer shall have delivered to the Trustee, the
Administrative Agent, each Applicable Rating Agency and each Enhancement
Provider, a Tax Opinion dated as of the Series Sales Date;

(6) the Rating Agency Condition shall have been satisfied with
respect to such issuance; and

(7) the Trustee and the Administrative Agent shall have received
an Officer's Certificate to the effect that the issuance of the Notes of
such Series or Class will not dilute the benefit of the Required Reserves
to which any pre-existing Series is entitled prior to the effectiveness of
such Supplement.

Each Note shall be dated the date of its authentication.

In connection with each issuance of a Series of Notes, the Issuer will
determine whether such Notes may be purchased by employee benefit plans (as
defined in ERISA) and shall cause the Notes evidencing such Series to bear a
legend describing any restrictions on such purchases.

No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there shall appear on such Note a
certificate of authentication substantially in the form and executed as
hereinabove provided, and such certificate upon any Note shall be conclusive
evidence, and the only evidence, that such Note has been duly authenticated and
delivered hereunder and is entitled to the benefits of this Indenture.

Section 6.05 REGISTRATION OF TRANSFER AND EXCHANGE OF THE NOTES. (a)
The Administrative Agent, as agent for the

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Issuer, shall keep, or shall cause to be kept, at the office or agency to be
maintained by it in accordance with the provisions of SECTION 11.20, a register
in written form or capable of being converted into written form within a
reasonable time (the "NOTE REGISTER"), in which register, subject to such
reasonable regulations as the Administrative Agent may prescribe, a transfer
agent and registrar (which may be the Administrative Agent) (the "TRANSFER AGENT
AND REGISTRAR") shall provide for the registration of the Notes and of transfers
and exchanges of the Notes as herein provided. The Issuer hereby appoints the
Administrative Agent as the initial Transfer Agent and Registrar.

The Issuer may at any time revoke such appointment of any Person as
Transfer Agent and Registrar and remove such Person as Transfer Agent and
Registrar if the Issuer (as applicable) determines, in its respective sole
discretion, that such Person has failed to perform its obligations as Transfer
Agent and Registrar under this Indenture in any material respect. In the event
of such removal, the Issuer shall appoint a successor Transfer Agent and
Registrar. Until such time as such successor shall have accepted such
appointment, the Administrative Agent shall act as the successor Transfer Agent
and Registrar. The then-acting Transfer Agent and Registrar shall be permitted
to resign as Transfer Agent and Registrar upon 30 days' prior written notice to
the Trustee, the Administrative Agent, the Issuer and the Servicer; PROVIDED,
HOWEVER, that such resignation shall not be effective and the then-acting
Transfer Agent and Registrar shall continue to perform its duties as Transfer
Agent and Registrar until the Issuer has appointed a successor Transfer Agent
and Registrar and the Person so appointed has given the Administrative Agent and
the Issuer written notice that it accepts the appointment. The provisions of
SECTIONS 11.01 through 11.06 shall apply to the Transfer Agent and Registrar as
if all references to "the Trustee" and "the Administrative Agent" in the
applicable provisions of SECTIONS 11.01 through 11.06 were references to the
Transfer Agent and Registrar.

It is intended that the registration of Notes which is described in
this SECTION 6.05(a) comply with the registration requirements contained in
Section 163 of the Internal Revenue Code.

(b) Subject to the requirements of the penultimate paragraph of
SECTION 6.04 and any restrictions on, or procedures for, the transfer of Notes
of any Series set forth in the applicable Supplement relating thereto, upon
surrender for registration of transfer of any Note at any office or agency of
the Transfer Agent and Registrar maintained for such purpose, the Issuer shall
execute, and the Administrative Agent shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Notes of the
appropriate Class and Series which (i) in the case of the Fixed

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Principal Notes, are in authorized denominations of like tenor, terms and
principal amount and (ii) in the case of the Revolving Notes, are in authorized
denominations of like aggregate Stated Amount, tenor and terms, and, in the case
of each Note, which bear numbers that are not contemporaneously outstanding.

Except as expressly otherwise provided in the applicable Supplement
relating to any Series or Class of Notes, at the option of the Noteholder, such
Noteholder's Note may be exchanged for other Notes of the same Class and Series
(and bearing the same interest rate as the Note surrendered for registration of
exchange) of authorized denominations of like denomination (in the case of Fixed
Principal Notes), Stated Amount (in the case of Revolving Notes), tenor and
terms (as applicable) and bearing numbers that are not contemporaneously
outstanding, upon surrender of the Notes to be exchanged at any such office or
agency. Whenever any Notes are so surrendered for exchange, the Issuer shall
execute, and the Administrative Agent shall authenticate and deliver, the
appropriate number of Notes of the Class and Series which the Noteholder making
the exchange is entitled to receive. Every Note presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in a form satisfactory to the Administrative Agent or the
Transfer Agent and Registrar duly executed by the Noteholder thereof or his
attorney-in-fact duly authorized in a writing delivered to the Transfer Agent
and Registrar.

No service charge shall be made for any registration of transfer or
exchange of Notes, but the Transfer Agent and Registrar or any co-transfer agent
and co-registrar may require any Noteholder that is transferring or exchanging
one or more Notes to pay a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer or exchange of Notes.

All Notes surrendered for registration of transfer and exchange shall
be cancelled and disposed of in a manner satisfactory to the Administrative
Agent.

(d) The transfer and exchange of Global Notes or interests therein
shall be effected through the applicable Clearing Agency in accordance with this
Agreement, any applicable Supplement and the procedures of Clearing Agency
therefor.

(e) Notes may be surrendered for registration of transfer or exchange
at the office of the Transfer Agent and Registrar designated in SECTION 16.03.

Section 6.06 MUTILATED, DESTROYED, LOST OR STOLEN NOTES. If (a) any
mutilated Note is surrendered to the Transfer Agent and Registrar, or the
Transfer Agent and Registrar receives

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evidence to its satisfaction of the destruction, loss or theft of any Note and
(b) there is delivered to the Transfer Agent and Registrar, the Administrative
Agent and the Trustee such security or indemnity as may be required by them and
the Issuer to hold each of them and the Issuer harmless, then, in the absence of
notice to the Trustee, the Administrative Agent or the Issuer that such Note has
been acquired by a BONA FIDE purchaser, the Issuer shall execute and, upon the
request of the Issuer, the Administrative Agent shall authenticate and deliver,
in exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Note, a new Note of like Class, Series, tenor, terms and principal amount or
Stated Amount and bearing a number that is not contemporaneously outstanding.
In connection with the issuance of any new Note under this SECTION 6.06, the
Trustee, the Administrative Agent or the Transfer Agent and Registrar may
require the payment by the Noteholder of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
expenses (including the reasonable fees and expenses of the Trustee, the
Administrative Agent and the Transfer Agent and Registrar) connected therewith.
Any duplicate Note issued pursuant to this SECTION 6.06 shall be entitled to all
the benefits of this Indenture equally and proportionately with any and all
Notes of the same Class and Series that are duly issued hereunder.

Section 6.07 AUTHENTICATING AGENT. (a) The Administrative Agent may
appoint one or more authenticating agents (each an "AUTHENTICATING AGENT") with
respect to the Notes which shall be authorized to act on behalf of the
Administrative Agent in authenticating the Notes in connection with the
issuance, delivery, registration of transfer, exchange or repayment of the
Notes. Either the Administrative Agent or the Authenticating Agent, if any,
then appointed and acting on behalf of the Administrative Agent shall
authenticate the Notes. Whenever reference is made in this Indenture to the
authentication of Notes by the Administrative Agent or the Administrative
Agent's certificate of authentication, such reference shall be deemed to include
authentication on behalf of the Administrative Agent by an Authenticating Agent
and a certificate of authentication executed on behalf of the Administrative
Agent by an Authenticating Agent. Each authenticating agent must be acceptable
to the Issuer.

(b) Any institution succeeding to the corporate agency business of an
Authenticating Agent shall continue to be an Authenticating Agent without the
execution or filing of any document or any further act on the part of the
Administrative Agent, such Authenticating Agent or any other Person.

(c) An Authenticating Agent may at any time resign by giving written
notice of resignation to the Administrative Agent and to the Issuer. The
Administrative Agent or the Issuer may at

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any time terminate the agency of an Authenticating Agent by giving notice of
termination to such Authenticating Agent and to the Issuer (in the case of such
termination by the Administrative Agent) or the Administrative Agent (in the
case of such termination by the Issuer). Upon receiving such a notice of
resignation or upon such a termination, the Administrative Agent may promptly
appoint a successor Authenticating Agent acceptable to the Issuer, PROVIDED,
that until a successor shall be so appointed, the duties of the Authenticating
Agent shall be performed by the Administrative Agent. Any successor
Authenticating Agent upon acceptance of its appointment hereunder shall become
vested with all the rights, powers and duties of its predecessor hereunder, with
like effect as if originally named as an Authenticating Agent.

(d) The provisions of SECTIONS 11.01 through 11.06 shall be
applicable to any Authenticating Agent as if the references in the applicable
provisions thereof to "the Trustee" and the "Administrative Agent" were
references to the Authenticating Agent.

Section 6.08 CHANGES IN AMOUNT OF REVOLVING NOTES.
(a) The Outstanding Principal Balance under any Revolving Note shall at no time
exceed the Stated Amount then applicable to such Note. The Stated Amount of a
Revolving Note may be increased or decreased from time to time by the Issuer,
with the prior written consent of the Noteholder holding such Revolving Note
and, in the case of any increase thereof, if the following conditions shall have
each been satisfied on or prior to the effective date of such proposed increase:

(i) the Issuer shall have delivered to the Trustee and the
Administrative Agent a Tax Opinion with respect to such proposed increase;
and

(ii) the Rating Agency Condition shall have been satisfied with
respect to such proposed increase.

(b) Notwithstanding the conditions precedent set forth in the
immediately preceding sentence, the Issuer may, pursuant to the Supplement that
applies to a particular Revolving Note, request the Noteholder of such Revolving
Note to provide funds to the Administrative Agent in respect of such Revolving
Note in order to increase the then-Outstanding Principal Balance under such Note
up to an amount not to exceed the Stated Amount thereof, which requested
increase shall be subject to the further provisions of this SECTION 6.08(b) and
to the provisions of such Supplement. Except as otherwise provided in the
related Supplement, all such increases to be made on any day shall be in an
aggregate amount not to exceed an amount which, after giving effect thereto,
would reduce the Variable Amount to zero. The Issuer may make such a request at
any time prior to the earlier

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of (x) the Liquidation Commencement Date and (y) the Pay-Out Period Commencement
Date for such Revolving Note, and shall make any such request in a writing that
is substantially in the form required by the applicable Supplement,
appropriately completed, and that is delivered to the holder of such Revolving
Note, the Trustee and the Administrative Agent at the time required by the
applicable Supplement. On the Business Day on which such Revolving Noteholder
provides the Administrative Agent, on behalf of the Issuer, immediately
available funds in the amount of the requested increase, the Outstanding
Principal Balance under such Noteholder's Revolving Note shall be increased by
an amount equal to the amount of such funds so advanced by such Noteholder.

Section 6.09 BOOK-ENTRY NOTES. If the Issuer shall establish
pursuant to any Supplement that the Notes to be issued thereunder are to be
issued in Book-Entry Form, then the Issuer shall execute and the Administrative
Agent shall, in accordance with this Section and the Issuer Order with respect
to such Series, authenticate and deliver one or more Global Notes, evidencing
the Notes of such Series which (i) shall be an aggregate original principal
amount equal to the aggregate original principal amount of such Notes to be
issued pursuant to the applicable Issuer Order, (ii) shall be registered in the
name of the Clearing Agency therefor or its nominee, which shall initially be
Cede & Co., as nominee for The Depositary Trust Company, the initial Clearing
Agency, (iii) shall be delivered by the Administrative Agent to such Clearing
Agency or such nominee pursuant to such Clearing Agency's or such nominee's
instructions, and (iv) shall bear a legend substantially to the following
effect: "Transfers of this Global Note shall be limited to transfers in whole,
but not in part, to the Clearing Agency or a nominee of the Clearing Agency or
to a successor thereof or such successor's nominee and transfers of portions of
this Global Note shall be limited to transfers made in accordance with the
restrictions set forth in this Indenture."

Each Clearing Agency designated pursuant to this SECTION 6.09 must, at
the time of its designation and at all times while it serves as Clearing Agency
hereunder, be a "clearing agency" registered under the Securities Exchange Act
of 1934, as amended, and any other applicable statute or regulation.

No Noteholder of any such Series of Notes issued in Book-Entry Form
shall receive a Definitive Note representing such Noteholder's interest in any
such Notes, except as provided in SECTION 6.11 or in the applicable Supplement
relating to such Notes. Unless (and until) certificated, fully registered Notes
of any Series (the "DEFINITIVE NOTES") have been issued to the Noteholders of
such Series pursuant to SECTION 6.11 or pursuant to any applicable Supplement
relating thereto:

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(a) the provisions of this SECTION 6.09 shall be in full force and
effect;

(b) the Issuer, the Servicer, the Paying Agent, the Transfer Agent
and Registrar, the Administrative Agent and the Trustee may deal with the
Clearing Agency for all purposes (including the making of distributions on
the Notes of such Series) as the authorized representatives of the
Noteholders of such Series;

(c) to the extent that the provisions of this SECTION 6.09 conflict
with any other provisions of this Indenture, the provisions of this
SECTION 6.09 shall control; and

(d) the rights of Noteholders of such Series shall be exercised only
through the Clearing Agency and the Clearing Agency Participants and shall
be limited to those established by law and agreements between such
Noteholders and the Clearing Agency and/or the Clearing Agency
Participants. Unless and until Definitive Notes are issued pursuant to
SECTION 6.11, the initial Clearing Agency will make book-entry transfers
among the Clearing Agency Participants and receive and transmit
distributions of principal and interest on the Book-Entry Notes to such
Clearing Agency Participants.

Section 6.10 NOTICES TO CLEARING AGENCY. Unless and until Definitive
Notes shall have been issued to Noteholders of such Series pursuant to
SECTION 6.11 or the applicable Supplement relating to such Notes, whenever
notice, payment, or other communication to the holders of Book-Entry Notes of
any Series is required under this Indenture, the Trustee, the Administrative
Agent, the Servicer and the Paying Agent shall give all such notices and
communications specified herein to be given to Noteholders of such Series to the
Clearing Agency.

Section 6.11 DEFINITIVE NOTES. If (i)(A) the Issuer advises the
Trustee and the Administrative Agent in writing that the Clearing Agency is no
longer willing or able to properly discharge its responsibilities under any
Letter of Representations and (B) the Issuer is unable to locate a qualified
successor Clearing Agency, (ii) the Issuer, at its option, advises the Trustee
and the Administrative Agent in writing that, with respect to any Series, it
elects to terminate the book-entry system through the Clearing Agency or (iii)
after the occurrence of a Servicer Default, Noteholders holding Notes
aggregating not less than 50% of the aggregate Outstanding Principal Balance of
any Series of Notes maintained as Book-Entry Notes advise the Trustee, the
Administrative Agent, and the Clearing Agency (through the Clearing Agency
Participants) in writing that the continuation of a book-entry system through
the Clearing Agency is no longer in the best interests of the Note-

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holders of such Series, the Administrative Agent shall notify the Clearing
Agency, the Trustee and all such Noteholders of such Series of the occurrence of
any such event and of the availability of Definitive Notes of such Series to the
Noteholders of such Series requesting the same. Upon surrender to the
Administrative Agent of the Global Notes of such Series by the Clearing Agency
accompanied by registration instructions from such Clearing Agency for
registration, the Administrative Agent shall authenticate and deliver Definitive
Notes of such Series. None of the Issuer, the Transfer Agent and Registrar, the
Administrative Agent or the Trustee shall be liable for any delay in delivery of
such instructions and may conclusively rely on, and shall be protected in
relying on, such instructions. Upon the issuance of Definitive Notes of any
Series, all references herein to obligations with respect to such Series imposed
upon or to be performed by the Clearing Agency shall be deemed to be imposed
upon and performed by the Administrative Agent, to the extent applicable with
respect to such Definitive Notes and the Administrative Agent and the Trustee
shall recognize the holders of the Definitive Notes as the Noteholders
hereunder.

Section 6.12 TEMPORARY NOTES. Pending the preparation of Definitive
Notes of any Series to be issued in accordance with SECTION 6.11, the Issuer may
execute and, upon its receipt of an Issuer Order to such effect, the
Administrative Agent shall authenticate and deliver, temporary Notes for such
Series which are printed, lithographed, typewritten or otherwise produced and
are in any authorized denomination and substantially in the forms of the
Definitive Notes of such Series, but with such omissions, insertions and
variations as may be appropriate for temporary Notes, all as may be determined
by the Issuer as evidenced by the execution thereof by the authorized officers
of the Issuer. Temporary Notes may contain such references to any provisions of
this Indenture as may be appropriate. Every temporary Note of any Series shall
be executed by the Issuer and authenticated by the Administrative Agent upon the
same conditions and in substantially the same manner, and with like effect, as
the Definitive Notes of such Series. If temporary Notes are issued, the Issuer,
without unreasonable delay, shall cause Definitive Notes to be executed and
delivered to the Administrative Agent for authentication; and thereupon the
temporary Notes of such Series shall be exchangeable for Definitive Notes
without charge at each office or agency to be maintained for such purpose in
accordance with SECTION 6.05. The Administrative Agent shall authenticate and
deliver in exchange for temporary Notes of such Series so surrendered Definitive
Notes of equal tenor, denomination (in the case of Fixed Principal Notes) and
Stated Amount (in the case of Revolving Notes). Until so exchanged, the
temporary Notes of any Series shall be entitled to the same benefits under this
Indenture as the Definitive Notes of such Series.

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Section 6.13 CANCELLATION. All Notes surrendered for payment,
redemption, registration of transfer or exchange, if surrendered to the Issuer,
the Paying Agent, the Transfer Agent and Registrar or any other agent of the
Issuer or any agent of the Administrative Agent, shall be delivered to the
Administrative Agent for cancellation or, if surrendered to the Administrative
Agent, shall be cancelled by it; and no Notes shall be issued in lieu thereof
except as expressly permitted by any of the provisions of this Indenture. The
Administrative Agent shall dispose of cancelled Notes held by it and deliver a
certificate of disposition to the Issuer. If the Issuer or its agent shall
acquire any of the Notes, such acquisition shall not operate as a redemption or
satisfaction of the indebtedness represented by such Notes unless and until the
same are delivered to the Administrative Agent for cancellation. All cancelled
Notes delivered to the Administrative Agent for cancellation shall be retained
by the Administrative Agent unless the Issuer, by Issuer Order, shall direct the
Administrative Agent that such cancelled Notes are to be returned to the Issuer.

Section 6.14 CUSIP NUMBER. The Issuer in issuing any Note or Series
of Notes may use a "CUSIP" number and, if so used, the Trustee and the
Administrative Agent shall use the CUSIP number in any notices to the
Noteholders thereof as a convenience to such Noteholders; PROVIDED, that any
such notice may state that no representation is made as to the correctness or
accuracy of the CUSIP number printed in the notice or on the Notes and that
reliance may be placed only on the other identification numbers printed on the
Notes. The Issuer shall promptly notify the Trustee and the Administrative
Agent of any change in the CUSIP number with respect to any Note.

Section 6.15 LETTER OF REPRESENTATIONS. Notwithstanding anything to
the contrary in this Indenture or any Supplement, the parties hereto shall
comply with the terms of each Letter of Representations.

Section 6.16 PERSONS DEEMED OWNERS. Prior to due presentation of a
Note for registration of transfer, the Issuer, the Trustee, the Administrative
Agent, the Paying Agent, the Transfer Agent and Registrar and any agent of any
such Persons may treat the Person in whose name any Note is registered in the
Note Register as the owner of such Note for the purpose of receiving
distributions pursuant to SECTIONS 5.01 and 5.02 and for all other purposes
whatsoever, and none of the Issuer, the Trustee, the Administrative Agent, the
Paying Agent, the Transfer Agent and Registrar or any agent of any such Persons
shall be affected by any notice to the contrary; PROVIDED, HOWEVER, that, in
determining whether the Noteholders of the requisite principal amount or Stated
Amount (as applicable) of Notes have given any request, demand, authorization,
direction, notice, consent or waiver hereunder, Notes owned by the Issuer or any
other Stone

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Person shall be disregarded and deemed not to be outstanding, except that, in
determining whether the Trustee or the Administrative Agent shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Notes which the Trustee or the Administrative Agent
knows to be so owned shall be so disregarded.

Section 6.17 APPOINTMENT OF PAYING AGENT. The Paying Agent shall
initially be the Administrative Agent. The Issuer hereby appoints the Paying
Agent as its agent to make distributions to Noteholders from the Master
Collection Account pursuant to SECTIONS 5.01 and 5.02 and to report the amounts
of such distributions to the Administrative Agent. Any Paying Agent shall have
the revocable power to withdraw funds from the Master Collection Account for the
purpose of making the distributions referred to above. The Issuer may revoke
such power of the Paying Agent and remove the Paying Agent if the Issuer
determines, in its sole discretion, that the Paying Agent shall have failed to
perform its obligations under this Indenture in any material respect. The
Paying Agent shall be permitted to resign as Paying Agent upon 30 days' prior
written notice to the Administrative Agent (if not then the Paying Agent), the
Trustee, the Issuer, the Servicer and the Applicable Rating Agencies. In the
event that the Administrative Agent shall no longer be the Paying Agent, the
Issuer shall appoint a successor Paying Agent (which shall be a bank or trust
company) which appointment shall be effective on the date on which the Person so
appointed gives the Issuer written notice that it accepts the appointment. The
Administrative Agent shall cause such successor Paying Agent or any additional
Paying Agent appointed by the Issuer to execute and deliver to the
Administrative Agent and the Trustee an instrument in which such successor
Paying Agent or additional Paying Agent shall acknowledge and agree that, as
Paying Agent, such successor Paying Agent or additional Paying Agent will hold
all sums, if any, held by it for payment to the Noteholders in trust for the
benefit of the Noteholders entitled thereto until such sums shall be paid to
such Noteholders. The Paying Agent shall return all unclaimed funds to the
Trustee (or its designee), and upon removal of a Paying Agent such Paying Agent
shall also return all funds in its possession to the or the Trustee (or its
designee). The provisions of SECTIONS 11.01 through 11.06 shall apply to the
Paying Agent as if all references in the applicable provisions thereof to "the
Trustee" and "the Administrative Agent" were references to the Paying Agent.

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ARTICLE VII

THE ISSUER

Section 7.01 REPRESENTATIONS AND WARRANTIES OF THE ISSUER RELATING TO
THE ISSUER AND THE TRANSACTION DOCUMENTS. On the date hereof and on each
Subsequent Issuance Date, the Issuer hereby represents and warrants that:

(a) ORGANIZATION AND GOOD STANDING. The Issuer is a corporation duly
organized and validly existing in good standing under the laws of the State
of Delaware and has full power and authority to own its properties and to
conduct its business as such properties are presently owned and such
business is presently conducted. The Issuer had at all relevant times, and
now has, all necessary power, authority, and legal right to acquire, own
and grant a security interest in the Receivables and the Related
Transferred Assets and to issue the Notes.

(b) DUE QUALIFICATION. The Issuer is duly qualified to do business
and is in good standing as a foreign corporation, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of property or the conduct of its business requires such
qualification, licenses or approvals and where the failure so to qualify,
to obtain such licenses and approvals or to preserve and maintain such
qualification, licenses or approvals would have a Material Adverse Effect.

(c) POWER AND AUTHORITY; DUE AUTHORIZATION. The Issuer has (i) all
necessary corporate power and authority to (A) execute and deliver this
Indenture and the other Transaction Documents to which it is a party, (B)
issue the Notes, (C) perform its obligations under this Indenture, the
other Transaction Documents to which it is a party and the Notes, (D)
convey, grant, transfer, assign, set-over, and pledge a security interest
in all of its right, title and interest in, to and under the Receivables,
the Related Transferred Assets and the funds in the Trust Accounts and the
Bank Accounts on the terms and subject to the conditions herein and therein
provided and (ii) duly authorized by all necessary corporate action such
grant, transfer, assignment, set-over and pledge and the execution,
delivery, and performance of this Indenture, the other Transaction
Documents to which it is a party, the issuance and sale of the Notes, and
the consummation of the transactions provided for in this Indenture, the
Notes and the other Transaction Documents to which it is a party.

(d) BINDING OBLIGATIONS. This Indenture and each other Transaction
Document to which the Issuer is a party,

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when executed and delivered, and the Notes, when executed and delivered by the
Issuer and authenticated by the Administrative Agent, will constitute, a legal,
valid and binding obligation of the Issuer, enforceable against the Issuer in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity,
regardless of whether such enforceability is considered in a proceeding in
equity or at law.

(e) NO CONFLICT OR VIOLATION. The execution, delivery and
performance of this Indenture and the other Transaction Documents to which
the Issuer is a party, the issuance and sale of the Notes by the Issuer,
the consummation of the transactions contemplated by this Indenture, the
other Transaction Documents to which the Issuer is a party and the Notes,
and the fulfillment of the terms hereof and thereof will not (i) conflict
with, violate, result in any breach of any of the terms and provisions of,
or constitute (with or without notice or lapse of time or both) a default
under, (A) the Certificate of Incorporation or the Bylaws of the Issuer or
(B) any contract, indenture, loan agreement, mortgage, deed of trust, or
other agreement or instrument to which the Issuer is a party or by which it
or any of its properties is bound, (ii) result in the creation or
imposition of any Adverse Claim (other than a Permitted Adverse Claim) upon
any of the Issuer's properties pursuant to the terms of any such contract,
indenture, loan agreement, mortgage, deed of trust, or other agreement or
instrument, or (iii) conflict with or violate any federal, state, local or
foreign law or any decision, decree, order, rule, or regulation applicable
to the Issuer or any of its properties of any court or of any federal,
state, local or foreign regulatory body, administrative agency, or other
Governmental Authority having jurisdiction over the Issuer or any of its
properties, which conflict, violation, breach, default or Adverse Claim,
individually or in the aggregate, would have a Material Adverse Effect.

(f) NO PROCEEDINGS. (i) There is no action, suit, proceeding or
investigation pending or, to the best knowledge of the Issuer, threatened
against the Issuer before any court, regulatory body, arbitrator,
administrative agency, or other tribunal or Governmental Authority and (ii)
the Issuer is not subject to any order, judgment, decree, injunction,
stipulation or consent order of or with any court or other Governmental
Authority, that, in the case of each of foregoing CLAUSES (i) and (ii), (A)
asserts the invalidity of this Indenture, any other Transaction Document or
any of the Notes, (B) seeks to prevent (x) the grant of

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security interests in any Receivables or Related Transferred Assets to the
Trustee pursuant hereto, (y) the issuance and sale of the Notes or (z) the
consummation of any of the transactions contemplated by this Indenture, any
other Transaction Document to which the Issuer is a party or the Notes, (C)
seeks any determination or ruling that would materially and adversely affect the
performance by the Issuer of its obligations under this Indenture, any of the
other Transaction Document to which the Issuer is a party, or the Notes or the
validity or enforceability of this Indenture, any other Transaction Document to
which the Issuer is a party or the Notes, (D) seeks to affect adversely the
income tax attributes of the Notes as constituting anything other than
indebtedness of the Issuer for purposes of United States federal income taxes or
any state income taxes, or (E) individually or in the aggregate for all such
actions, suits, proceedings and investigations, would have a Material Adverse
Effect.

(g) BULK SALES ACTS. No transaction contemplated by this Indenture
or by any other Transaction Document requires compliance with, or will be
subject to avoidance under, any bulk sales act or similar law.

(h) GOVERNMENTAL APPROVALS. All authorizations, consents, orders and
approvals of, or other action by, any Governmental Authority that are
required to be obtained by the Issuer, and all notices to and filings with
any Governmental Authority that are required to be made by the Issuer, in
the case of each of the foregoing in connection with grant of a security
interest in the Receivables and Related Transferred Assets to the Trustee,
the execution, delivery and performance by the Issuer of this Indenture and
any of the other Transaction Documents to which it is a party, the issuance
and sale of the Notes and the consummation of the transactions contemplated
by this Indenture, the other Transaction Documents to which the Issuer is a
party and the Notes have, in each case, been obtained or made and are in
full force and effect (including (i) the filing of the UCC financing
statements referred to in SECTION 2.03(a)(ii)(A), all of which, at the time
required in SECTION 2.03(a)(ii)(A), shall have been duly made and shall be
in full force and effect and (ii) the registration of all Notes required to
be registered under and in accordance with Section 5 of the Securities Act
and all similar state securities or "Blue Sky Laws"), except where the
failure to obtain or make any such authorization, consent, order, approval,
notice or filing, individually or in the aggregate for all such failures,
would not have a Material Adverse Effect.

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(i) OFFICES. The Issuer's principal place of business and chief
executive office is located at the address set forth under the Issuer's
signature hereto, and the offices where the Issuer, the Servicer and the
Sellers keep all Records and all Contracts, purchase orders and agreements
related to the Receivables and the Related Transferred Assets (and all
original documents relating thereto) are located at the addresses specified
in SCHEDULE 7.01(i) (or at such other locations, notified to the Servicer,
the Trustee and the Administrative Agent in accordance with SECTION
7.02(d), in jurisdictions where all action required by SECTION 7.02(d) has
been taken and completed).

(j) ACCOUNT BANKS. The names and addresses of all of the Account
Banks are specified in SCHEDULE 7.01(j) or, after the Closing Date, have
been provided by the Servicer to the Trustee and the Administrative Agent
pursuant to SECTION 3.03(c), and the account numbers of the Bank Accounts
at such Account Banks have been specified in a letter provided on or prior
to the Closing Date to the Trustee and the Administrative Agent or, after
the Closing Date, have been provided by the Servicer to the Trustee and the
Administrative Agent pursuant to SECTION 3.03(c). The Account Agreements
to which the Issuer is a party constitute the legal, valid and binding
obligations of the Issuer enforceable against the Issuer in accordance with
their respective terms subject to applicable bankruptcy, reorganization,
insolvency, moratorium and other laws affecting creditors' rights generally
and general equitable principles.

(k) INVESTMENT COMPANY ACT. The Issuer is not, and is not controlled
by, an "investment company" registered or required to be registered under
the Investment Company Act of 1940, as amended.

(l) SECURITY INTEREST. The grant of the security interest by the
Issuer to the Trustee in all of the Issuer's Receivables, the Related
Transferred Assets and the Collections pursuant to the Granting Clause
hereof constitutes a valid grant, pledge and assignment to the Trustee of a
security interest in all right, title and interest of the Issuer in, to and
under such Receivables, the Related Transferred Assets and the Collections;
and under the UCC (as in effect in Illinois) there exists a valid,
subsisting and enforceable first priority and perfected security interest
in all of the Issuer's now existing and hereafter acquired or arising
Receivables (and, to the extent such security interest can be perfected by
the filing of UCC financing statements in such jurisdictions, in the
Related Transferred Assets and the Collections relating to such
Receivables) in favor of the Trustee.

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(m) DISCLOSURE. Neither this Indenture, any of the other Transaction
Documents to which the Issuer is a party, or any document, certificate or
statement in writing furnished by or on behalf of the Issuer in connection
with the offering for sale or sale of the Notes hereunder contains any
untrue statement of a material fact or omits to state a material fact
necessary to make the statements contained therein not misleading in light
of the circumstances under which they were made.

(n) REGULATION G. None of the proceeds of any of the sale of any
Notes issued and sold hereunder will be used, directly or indirectly, for
the purpose of purchasing or carrying "margin stock" (as defined in
Regulation G (12 CFR Part 207) of the Board of Governors of the Federal
Reserve System), or for the purpose of maintaining, reducing or retiring
any indebtedness which was originally incurred to purchase or carry any
stock that is currently margin stock or for any other purpose which might
constitute the transactions contemplated hereunder a "purpose credit"
within the meaning of the above-described Regulation G.

(o) FICTITIOUS NAMES. Except as set forth on SCHEDULE 7.01(o)
hereto, neither the Issuer nor any of the Sellers has any tradenames,
fictitious names, assumed names or "doing business as" names or, within the
five years immediately prior to the Closing Date, (a) has been the subject
of any merger or other corporate reorganization that resulted in a change
of its name, identity or corporate structure or (b) had any other name.

(p) PAYMENT OF TAXES. The Issuer and each of its Consolidated
Affiliates with whom the Issuer shares consolidated tax liability has filed
or caused to be filed when due (giving effect to any extensions therefor)
all Federal, state and local tax returns which are reasonably believed to
be required to be filed by it.

(q) SOLVENCY. The Issuer, after giving effect to the initial
Purchase under the Purchase Agreement on the Closing Date, and after giving
effect to each subsequent Purchase under the Purchase Agreement, (i) is not
"insolvent" (as such term is defined in Section 101(31)(A) of the
Bankruptcy Code, (ii) is able to pay its debts as they mature, and (iii)
does not have unreasonably small capital for the business in which it is
engaged.

(r) NO SUBSIDIARIES. The Issuer has no subsidiaries.

(s) BUSINESS ACTIVITIES. Since its incorporation, the Issuer has
conducted no business other than the execution and delivery of the
Transaction Documents and the other

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instruments, documents and agreements contemplated thereby (in each case, as
constituted from time to time) and the performance of the Transactions
contemplated thereunder or which are reasonably incidental thereto (including,
without limitation, the Purchase and administration of Receivables and the
issuance of Notes).

(t) COMPLIANCE WITH LAWS, ETC. The Issuer is in compliance in all
material respects with all applicable laws, rules, regulations, judgments,
decrees and orders (including those relating to the Receivables, the
Related Transferred Assets, the funds in the Trust Accounts and the related
Contracts and any other agreements related thereto), except where the
failure to so to comply, individually or in the aggregate for all such
failures, would not have a Material Adverse Effect.

The representations and warranties set forth in this SECTION 7.01
shall survive the date of the making or the remaking thereof in accordance with
this Indenture and the grant and pledge of the Receivables and the other Pledged
Assets to the Trustee in accordance with the Granting Clause of this Indenture.
Upon discovery by the Issuer, the Servicer, the Trustee, or the Administrative
Agent of a breach of any of the foregoing representations and warranties, the
party discovering such breach shall give written notice to the other parties to
this Indenture within three Business Days following such discovery. The
Trustee's and the Administrative Agent's obligations in respect of discovering
any such breach are limited as provided in SECTION 11.02.

Section 7.02 COVENANTS OF THE ISSUER. From the Closing Date until
the date of the satisfaction and discharge of this Indenture, the Issuer hereby
covenants that:

(a) PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST. The Issuer covenants
and agrees for the benefit of the Noteholders that it shall duly and
punctually pay the principal of (and premium, if any) and interest on the
Notes in accordance with the terms thereof and this Indenture.

(b) COMPLIANCE WITH LAWS, ETC. The Issuer shall comply in all
material respects with all applicable laws, rules, regulations, judgments,
decrees and orders (including those relating to the Receivables, the
Related Transferred Assets, the funds in the Trust Accounts and the related
Contracts and any other agreements related thereto), where the failure so
to comply, individually or in the aggregate for all such failures, would
have a Material Adverse Effect.

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shall preserve and maintain its corporate existence, rights, franchises and
privileges in the jurisdiction of its incorporation, and qualify and remain
qualified in good standing as a foreign corporation in each jurisdiction where
the failure to preserve and maintain such existence, rights, franchises,
privileges and qualifications would have a Material Adverse Effect.

(d) LOCATION OF RECORDS AND OFFICES. The Issuer shall keep its
principal place of business and chief executive office, and the Issuer
shall cause the Servicer and the Sellers to keep substantially all Records,
Contracts, and other agreements related to the Receivables and the Related
Transferred Assets (and all original documents relating thereto), at the
addresses referred to in SCHEDULE 7.01(i) or, upon not less than 30 days'
prior written notice given by the Issuer to the Servicer, the Trustee, and
the Administrative Agent at such other locations in jurisdictions where all
action required pursuant to SECTION 3.09 shall have been taken and
completed (except that purchase orders may be located at the specific
plants where the goods giving rise to any Receivables were manufactured
and/or processed). The Issuer shall at all times maintain its chief
executive offices within the United States of America, and will cause the
Servicer to maintain at all times each office from which the Servicer
services, collects or administers Receivables and Related Transferred
Assets and the Servicer's chief executive offices within the United States
of America.

(e) USE OF FUNDS. The Issuer shall apply all cash payments made to
it hereunder to make payments in the order of priority set out in SECTIONS
2.03 and 6.01 of the Purchase Agreement.

(f) REPORTING REQUIREMENTS OF THE ISSUER. The Issuer shall furnish
to the Trustee, the Administrative Agent, and the Applicable Rating
Agencies:

(i) LIQUIDATION EVENTS, ETC. As soon as possible, and in any
event within five Business Days after an Authorized Officer of the
Issuer has obtained knowledge of the occurrence of any Liquidation
Event, Unmatured Liquidation Event, Pay-Out Event, Unmatured Pay-Out
Event, Event of Default, or Unmatured Event of Default, a written
statement of an Authorized Officer of the Issuer describing such event
and the action that the Issuer proposes to take with respect thereto,
in each case in reasonable detail;

(ii) MATERIAL ADVERSE EFFECT. As soon as possible and in any
event within five Business Days

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after an Authorized Officer of the Issuer has knowledge thereof, written notice
that describes in reasonable detail any Adverse Claim against the Pledged Assets
(other than those created hereunder in favor of the Trustee) or any other event
or occurrence which, individually or in the aggregate for all such events or
occurrences, has had, or would have a substantial likelihood of having, in the
reasonable, good faith judgment of the Issuer, a Material Adverse Effect;

(iii) PROCEEDINGS. As soon as possible and in any event within
five Business Days after an Authorized Officer of the Issuer has
knowledge thereof, written notice of (A) any litigation, investigation
or proceeding of the type described in SECTION 7.01(f) not previously
disclosed to the Trustee and the Administrative Agent and (B) any
material adverse development that has occurred with respect to any
such previously disclosed litigation, investigation or proceeding;

(iv) OPINIONS OF COUNSEL. (1) Promptly after the execution and
delivery of this Indenture, an Opinion of Counsel either stating that
in the opinion of such counsel this Indenture has been properly filed
and recorded so as to make effective the lien on the Pledged Assets
intended to be created hereby, and reciting the details of such
action, or stating that in the opinion of such counsel no such action
is necessary to make such lien effective and (2) on or prior to the
date of each one year anniversary of the execution and delivery of
this Indenture, an Opinion of Counsel either stating than in the
opinion of such counsel such action has been taken with respect to the
recording, filing, rerecording and refiling of this Indenture as is
necessary to make effective the lien on the Pledged Assets intended to
be created hereby, and reciting the details of such action, or stating
that in the opinion of such counsel no such action is necessary to
make such lien effective.

(v) ANNUAL COMPLIANCE CERTIFICATE. Within 120 days after the
end of each fiscal year of the Issuer (which on the date hereof is
December 31), a certificate from the principal executive officer,
principal financial officer or principal accounting officer of the
Issuer, stating whether or not, to the best knowledge of such officer,
the Issuer has complied with all conditions and covenants under this
Indenture, and, if any Pay-Out Event, Unmatured Pay-Out Event,
Liquidation Event, Unmatured Liquidation Event, Event of Default or
Unmatured Event of Default shall have

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occurred and be continuing, specifying all such events and the nature thereof of
which such officer may have knowledge. For the purposes of this clause (v),
compliance shall be determined without regard to any period of grace or
requirement of notice under this Indenture or any applicable Supplement.

(vi) REPORTS. The Issuer shall deliver to the Trustee and the
Administrative Agent:

(1) promptly but in no event later than one hundred and
twenty (120) days after the end of each fiscal year of the
Issuer, a copy of the annual statement of operations, of cash
flows and of stockholders' equity of the Issuer for such fiscal
year, and the related balance sheet as at the end of such fiscal
year, setting forth in each case in comparative form the
corresponding figures for the preceding fiscal year, if any, and
prepared in accordance with GAAP consistently applied (except for
such changes in application disclosed by the Issuer therein),
together with an opinion thereon by Price Waterhouse LLP or such
other independent certified public accountants of recognized
national standing selected by the Issuer, which opinion shall
state that said financial statements fairly present, in all
material respects, the financial position, results of operations
and cash flows of the Issuer as at the end of and for such fiscal
year in accordance with GAAP, (it being expressly understood that
this clause (1) may be satisfied by delivery to the above-named
parties of an annual report of the Issuer on Form 10-K to the
Commission for the appropriate fiscal year); and

(2) promptly but in no event later than fifty (50) days
after the end of the first three fiscal quarters of each fiscal
year of the Issuer, a copy of (A) the unaudited statement of
operations and retained earnings of the Issuer for such fiscal
quarter and for the period from the beginning of the respective
fiscal year to the end of such fiscal quarter; (B) the unaudited
statement of cash flows of the Issuer for such fiscal quarter,
and (C) an unaudited balance sheet of the Issuer as at the end of
such fiscal quarter, setting forth in each case in comparative
form the corresponding figures for the preceding fiscal year, if
any, and all of the foregoing to be prepared in accordance with
GAAP consistently applied (except for such changes in application

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which are disclosed by the Issuer therein) (it being expressly understood that
this CLAUSE (2) may be satisfied by delivery to the above-named parties of a
quarterly report of the Issuer on Form 10-Q to the Commission for the
appropriate fiscal quarter);

The Trustee shall have no duty with respect to the preparation,
delivery or review of any such reports. The Administrative Agent's
sole duty with respect to such reports shall be to maintain any such
reports received by it and make such reports available to any
Noteholder upon its request therefor.

(vii) OTHER. Promptly, from time to time, such other
information, documents, records or reports regarding the Receivables
or the Related Transferred Assets or such other information regarding
the condition or operations, financial or otherwise, of the Issuer, in
each case as the Trustee or the Administrative Agent may from time to
time reasonably request in order to protect the interests of the
Trustee, the Administrative Agent or the Noteholders under or as
contemplated by this Indenture.

(g) SALES, LIENS, ETC. Except for the grants, pledges and
conveyances hereunder and under the other Transaction Documents, the Issuer
will not (i)(A) sell, assign (by operation of law or otherwise) or
otherwise transfer to any Person, (B) pledge any interest in, (C) grant,
create, incur or assume or permit to exist any Adverse Claim (other than a
Permitted Adverse Claim) to or in favor of any Person upon or with respect
to, or (D) cause to be filed any financing statement or equivalent document
relating to perfection that covers any Receivable conveyed to the Issuer,
any related Contract, Related Transferred Asset or other Pledged Asset, or
any interest therein, or (ii) assign to any Person any right to receive
income from or in respect of any of the foregoing. The Issuer shall defend
the right, title and interest of the Trustee in, to and under the Pledged
Assets, whether now existing or hereafter created, against all claims of
third parties claiming through or under the Issuer.

In the event that the Issuer fails to keep any Pledged Assets free and
clear of any Adverse Claim (other than any Permitted Adverse Claim), the
Trustee may (without limiting its other rights with respect to the Issuer's
breach of its obligations hereunder) make reasonable expenditures necessary
to release such Adverse Claim. The Trustee shall be entitled to
indemnification for any such expenditures pursuant to the indemnification
provisions of SECTION 7.03.

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Alternatively, the Trustee may deduct such expenditures as an offset to any
amounts owed to the Issuer hereunder.

(h) EXTENSION OR AMENDMENT OF RECEIVABLES; CHANGE IN CREDIT AND
COLLECTION POLICY OR CONTRACTS. The Issuer will not (i) extend, amend or
otherwise modify the terms of any Receivable or Contract except as
permitted by the Credit and Collection Policy and in a manner that would
not have a material adverse effect on the Noteholders or (ii) permit the
Sellers to make any change in their respective Credit and Collection
Policies that would materially impair the collectibility of a significant
portion of the Receivables or result in a material delay in the collection
thereof or otherwise would have a material adverse effect on the
Noteholders; PROVIDED, HOWEVER, that the Issuer or the Servicer, as
applicable, may change the terms and provisions of the Credit and
Collection Policy if (x) with respect to any material change of collection
policies, the Rating Agency Condition is satisfied with respect thereto,
(y) with respect to any material change of collection procedures, no
material adverse effect on any Series of Notes would, in the reasonable,
good faith judgment of the Issuer, result therefrom, as evidenced by an
Officer's Certificate of the Issuer, and (z) with respect to any material
change in accounting policies relating to Receivables that become Charged-
Off Receivables, such change is made in accordance with GAAP.

(i) MERGERS, ACQUISITIONS, SALES, ETC. The Issuer shall not:

(i) (A) be a party to any merger or consolidation, or directly
or indirectly purchase or otherwise acquire all or substantially all
of the assets or any stock of any class of, or any partnership or
joint venture interest in, any other Person, or (B) except pursuant to
the Transaction Documents, directly or indirectly, sell, transfer,
assign, convey or lease, whether in one transaction or in a series of
transactions, all or substantially all of its assets, or sell or
assign with or without recourse any Receivables or Related Transferred
Assets (other than pursuant hereto) unless:

(x) (1) the corporation formed by such consolidation or into
which the Issuer is merged or the Person which acquires by
conveyance or transfer the properties and assets of the Issuer
substantially as an entirety shall be, if the Issuer is not the
surviving entity, organized and existing under the laws of the
United States of America or any state thereof or the District of

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Columbia, and shall expressly assume, by an agreement
supplemental hereto, executed and delivered to the Trustee and
the Administrative Agent, in form satisfactory to the Trustee,
the performance of every covenant and obligation of the Issuer
hereunder (including its obligations under SECTION 7.03) and
under each Supplement; and (2) the Issuer has delivered to the
Trustee and the Administrative Agent an Officer's Certificate
and an Opinion of Counsel each stating that (A) such
consolidation, merger, conveyance or transfer and such
supplemental agreement comply with this Section, (B) such
supplemental agreement is a valid and binding obligation of
such surviving entity, enforceable against such surviving entity
in accordance with its terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights
generally from time to time in effect and except as such
enforceability may be limited by general principles of equity
(whether considered in a suit at law or in equity), (C) all
actions necessary to maintain the perfection of the security
interests of the Trustee in connection with such consolidation,
merger, conveyance or transfer have been taken, and (D) all
conditions precedent herein provided for relating to such
transaction have been complied with;

(y) the Rating Agency Condition shall have been satisfied
with respect to such consolidation, merger, conveyance or
transfer; and

(z) the Issuer shall have delivered to the Trustee, the
Administrative Agent, each Applicable Rating Agency and each
Enhancement Provider, a Tax Opinion, dated the date of such
consolidation, merger, conveyance or transfer, with respect
thereto;

(ii) except as contemplated in the Purchase Agreement in
connection with the Issuer's purchases of Receivables and Related Assets
from the Sellers, (A) make, incur or suffer to exist an investment in,
equity contribution to, or payment obligation in respect of the deferred
purchase price of property or services from, any Person; PROVIDED, that
the Issuer may incur trade payables in respect of its reasonable and
customary operating expenses and may defer the payment thereof in
accordance with the terms of any such obligation, or (B) make any loan or
advance to any

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Person other than for reasonable and customary operating expenses; or

(iii) create any direct or indirect Subsidiary or otherwise
acquire direct or indirect ownership of any equity interests in any
other Person.

(j) CHANGE IN NAME. The Issuer shall not change its corporate name
or the name under or by which it does business, or permit any Seller to
change its corporate name or the name under or by which it does business,
unless the Issuer shall have given the Servicer, the Trustee and the
Administrative Agent 30 days' prior written notice thereof and unless,
prior to any such change in name, the Issuer shall have filed (or shall
have caused to be filed) such financing statements or amendments as the
Servicer, the Trustee, or the Administrative Agent determines may be
necessary to continue the perfection of the Trustee's interest in the
Receivables, the Related Transferred Assets and the proceeds thereof.

(k) AMENDMENT OF CERTIFICATE OF INCORPORATION; CHANGE IN BUSINESS.
The Issuer shall not amend its Certificate of Incorporation or Bylaws, or
engage in any business other than as contemplated by the Transaction
Documents, unless the Rating Agency Condition has been satisfied in
connection with any such amendment or engagement in business.

(l) AMENDMENTS TO PURCHASE AGREEMENT. Except as expressly provided
otherwise in this Indenture, no amendment or modification shall be made to
the Purchase Agreement nor shall any consent, approval or waiver be granted
thereunder that, in any case, would adversely affect in any material
respect the interests of the Noteholders or any Enhancement Provider.

(m) ENFORCEMENT OF PURCHASE AGREEMENT. The Issuer shall perform all
its obligations under, and otherwise comply with, the Purchase Agreement
and, if requested by the Trustee, will enforce, for the benefit of the
Trustee (on behalf of the Noteholders), the covenants and agreements of the
Sellers in the Purchase Agreement and/or the rights and remedies of the
Issuer thereunder.

(n) OTHER INDEBTEDNESS. The Issuer shall not (i) create, incur or
permit to exist any Indebtedness, Guaranty or liability or (ii) cause or
permit to be issued for its account any letters of credit or bankers'
acceptances, except for (A) Indebtedness incurred under the Notes and any
Enhancement therefor, (B) other liabilities specifically permitted to be
created, incurred or owed by the Issuer pursuant to or in connection with
the Transaction Documents

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and (C) reasonable and customary operating expenses in an amount not to
exceed $100,000 per month.

(o) SEPARATE CORPORATE EXISTENCE. The Issuer hereby acknowledges
that the Trustee, the Administrative Agent, and the Noteholders are, and
will be, entering into the transactions contemplated by the Transaction
Documents in reliance upon the Issuer's identity as a legal entity separate
from the Sellers, the Servicer and any other Person. Therefore, the Issuer
shall take all reasonable steps to continue its identity as a separate
legal entity and to make it apparent to third Persons that the Issuer is an
entity with assets and liabilities distinct from those of the Servicer, the
Sellers and any other Person, and that the Issuer is not a division of the
Servicer, any of the Sellers or any other Person. In that regard, and
without limiting the foregoing in any manner, the Issuer shall (i) maintain
its own board of directors, (ii) maintain at least two directors and one
principal corporate officer who is not a direct, indirect or beneficial
stockholder, officer, director, employee, affiliate, associate, customer or
supplier of any Stone Person nor a relative of any thereof, nor a trustee
in bankruptcy for any other Stone Person, (iii) maintain separate and
clearly delineated office space evidenced by a written lease, maintain its
assets in a manner which facilitates their identification and segregation
from those of any other Stone Person, and maintain a separate telephone
number which will be answered only in its own name, (iv) conduct all
intercompany transactions with other Stone Persons on terms which the
Issuer reasonably believes to be on an arm's-length basis, (v) not
guarantee any obligation of any other Stone Person, nor have any of its
obligations guaranteed by any Stone Person or hold itself out as
responsible for the debts of any Stone Person or for the decisions or
actions with respect to the business and affairs of any other Stone Person,
(vi) shall not, except as otherwise expressly acknowledged under the
Transaction Documents, permit the commingling or pooling of its funds or
other assets with the assets of any other Stone Person, (vii) maintain
separate deposit and other bank accounts to which no other Stone Person
(other than as Servicer) has any access, (viii) maintain financial records
which are separate from those of any other Stone Person, (ix) compensate
all employees, consultants and agents, or reimburse Stone, from the
Issuer's own funds, for services provided to the Issuer by such employees,
consultants and agents, (x) have agreed with Stone Container and the other
Sellers to allocate among themselves shared corporate operating services
and expenses which are not reflected in the Servicer Fee (including without
limitation the services of shared employees, consultants and agents and
reasonable legal and auditing

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expenses) on the basis of actual use or the value of services rendered, and
otherwise on a basis reasonably related to actual use or the value of
services rendered, (xi) pay directly for its own account for accounting and
payroll services, rent, lease and other expenses and not have such
operating expenses paid by any other Stone Person, (xii) conduct all of its
business (whether in writing or orally) solely in its own name, and (xiii)
otherwise practice and adhere to corporate formalities such as complying
with its By-laws and corporate resolutions and the holding of regularly
scheduled board of directors meetings.

(p) MAINTENANCE OF OFFICE OR AGENCY. The Issuer shall maintain in
the City of Chicago, Illinois an office or agency where the Notes may be
presented or surrendered for payment, where the Notes may be surrendered
for registration of transfer or exchange and where notices and demands to
or upon the Issuer in respect of the Notes and this Indenture may be
served. The Issuer shall give prompt written notice to the Trustee and the
Administrative Agent of the location, and any change in the location, of
such office or agency. If at any time the Issuer shall fail to maintain
any such required office or agency or shall fail to furnish the Trustee and
the Administrative Agent with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Administrative
Agent Corporate Trust Office. The Issuer hereby appoints the
Administrative Agent as its agent to receive all presentations, surrenders,
notices and demands.

The Issuer may also from time to time designate one or more other
offices or agencies (in or outside of the City of Chicago, Illinois) where
the Notes may be presented or surrendered for any or all of such purposes,
and may from time to time rescind such designations; PROVIDED, HOWEVER,
that no such designation or rescission shall in any manner relieve the
Issuer of its obligation to maintain an office or agency in the City of
Chicago, Illinois, for such purposes. The Issuer shall give prompt written
notice to the Trustee and the Administrative Agent of any such designation
and any change in the location of any such other office or agency.

(q) MONEY FOR THE PAYMENTS OF NOTES TO BE HELD IN TRUST. Whenever
the Issuer shall have one or more Paying Agents with respect to the Notes,
it shall cause all such Paying Agents to hold in trust all sums deposited
with it for the benefit of the Persons entitled thereto, and (unless such
Paying Agent is the Trustee or the Administrative Agent) the Paying Agent
shall promptly notify the Trustee and the Administrative Agent of its
action or failure so to act.

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(r) REPORTING OF EXCESS CONCENTRATION BALANCES. On or before April
30, 1995, the Issuer shall implement such procedures as shall be necessary
to enable it to calculate Excess Concentration Balances on a daily basis
and shall thereafter report such amounts on each Daily Report.

(s) PAYMENT OF TAXES, ETC. The Issuer will pay promptly when due all
taxes, assessments and governmental charges or levies imposed upon it, on
any of the Receivables or on any of the other Pledged Assets, or in respect
of its income or profits therefrom, and any and all other material claims
of any kind (including, without limitation, claims for labor, materials and
supplies), except that no such amount need be paid if (i) such nonpayment
would not subject the Trustee, the Administrative Agent, any Noteholder or
any Enhancement Provider to any civil or criminal penalty or liability or
involve any risk of the sale, forfeiture or loss of any of the Pledged
Assets hereunder or the Transferred Assets under the Purchase Agreement,
(ii) the charge or levy is being contested in good faith and by proper
proceedings and (iii) the obligations to pay such amount is adequately
reserved against in accordance with and to the extent required by generally
accepted accounting principles.

(t) ACCOUNTING OF PURCHASES. The Issuer will not prepare any
financial statements which shall account for the transactions contemplated
by the Purchase Agreement in any manner other than as sales of the
Receivables and the Related Assets thereunder (it being understood that
non-recognition of sale due to the consolidated reporting of the Issuer and
the Sellers for financial or tax purposes shall not be deemed a violation
of this covenant).

The covenants set forth in this SECTION 7.02 shall survive the
execution hereof and the grant of security in the Receivables and the other
Pledged Assets to the Trustee in accordance with the Granting Clause of this
Indenture. Upon discovery by the Issuer, the Servicer, the Trustee or the
Administrative Agent of a breach of any of the foregoing covenants, the party
discovering such breach shall give written notice to the other parties to this
Indenture within three Business Days following such discovery. The Trustee's
and the Administrative Agent's obligations in respect of discovering any such
breach are limited as provided in SECTION 11.02.

Section 7.03 INDEMNIFICATION BY THE ISSUER. (a) Without limiting any
other rights which any Indemnified Party (as hereinafter defined) may have
hereunder or under applicable law, the Issuer hereby agrees to indemnify the
Trustee, the Administrative Agent, each Noteholder and each of the successors,
permitted transferees and assigns of any such Person and all

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officers, directors, shareholders, controlling Persons, employees and agents of
any of the foregoing (each of the foregoing Persons being individually called an
"INDEMNIFIED PARTY"), from and against any and all damages, losses, claims
(whether on account of settlements or otherwise, and whether or not the relevant
Indemnified Party is a party to any action or proceeding that gives rise to any
Indemnified Losses (as defined below)), judgments, liabilities and related
reasonable costs and expenses (including reasonable attorneys' fees and
disbursements) (all of the foregoing being collectively called "INDEMNIFIED
LOSSES") awarded against or incurred by any of them that arise out of or relate
to any of the following:

(i) reliance on any representation or warranty made by the
Issuer (or any of its officers) in writing under or in connection with
this Indenture, or reliance on any other information or report
(including any Daily Report, Settlement Statement or certificate of
the Servicer described in SECTION 3.05) delivered pursuant hereto
containing an untrue fact or a materially misleading omission;

(ii) the failure by the Issuer to comply with any term,
provision or covenant contained in this Indenture, any other
Transaction Document or with any applicable law, rule or regulation
with respect to any Receivable or Related Transferred Assets, or the
nonconformity of any Receivable or Related Transferred Asset with any
such applicable law, rule or regulation;

(iii) the failure to vest and maintain vested in the Issuer,
legal and equitable title to and ownership of the Receivables and
other Transferred Assets which are, or are purported to be, sold or
otherwise transferred by the Sellers to the Issuer under the Purchase
Agreement, and the failure by the Issuer to vest in the Trustee a
first priority security interest in all of the Pledged Assets, in each
of the above cases, free and clear of any Adverse Claim (other than
Adverse Claims created under the Transaction Documents in favor of the
Issuer and/or the Trustee);

(iv) the failure to file, or any delay in filing, financing
statements or other similar instruments or documents under the UCC of
any applicable jurisdiction or other applicable laws with respect to
any Receivables and other Pledged Assets in which a security interest
is, or is purported to be, granted by the Issuer hereunder;

(v) the failure by the Issuer to be duly qualified to do
business, to be in good standing or to

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have filed appropriate fictitious or assumed name registration documents in any
jurisdiction;

(vi) any dispute, claim, offset or defense of an Obligor (other
than discharge in bankruptcy) to the payment of any Receivable
included in the Pledged Assets (including, without limitation, a
defense based on such Receivable or the related Contract not being a
legal, valid and binding obligation of such Obligor enforceable
against it in accordance with its terms), or any other claim resulting
from the sale of the merchandise related to such Receivable;

(vii) any products liability claim or personal injury or
property damage suit or other similar or related claim or action of
whatever nature arising out of or in connection with the goods and/or
merchandise or services that are the subject of any Receivable or
related Contract included in the Pledged Assets;

(viii) the failure of the Issuer or any Seller to pay when due
(A) any taxes or charges imposed on the Issuer or such Seller or (B)
any sales taxes or other governmental fees or charges imposed in
connection with the transfer of the Transferred Assets under the
Purchase Agreement or the grant of security under this Indenture;

(ix) the failure of the Issuer or any of its agents or
representatives (including, without limitation, agents,
representatives and employees of the Servicer acting pursuant to
authority granted under SECTION 6.02 of the Purchase Agreement) to
remit to the Trustee or the Administrative Agent any Collections of
Pledged Assets as required under this Indenture; and

(x) the performance by any such Indemnified Party of its duties under
(and in accordance with the terms of) the Indenture, any Supplement or any
other Transaction Document.

Any Indemnified Losses shall be paid by the Issuer to the applicable
Indemnified Party within 5 Business Days following such Indemnified Party's
written demand therefor, setting forth, in reasonable detail, the calculation of
such amount and the basis of such demand. Payments to be made pursuant to this
SECTION 7.03 shall be paid to the extent that funds are available to make such
payments after all other amounts to be paid to the Noteholders pursuant to
SECTION 4.02(e) or (f) (as applicable) shall have been paid, and there shall be
no recourse to, and the Indemnified Party shall have no Claim against, the
Issuer for all or any part of any amounts payable pursuant to this SECTION 7.03

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if such funds are at any time insufficient to make all or part of any such
payments.

Notwithstanding the foregoing (and, with respect to CLAUSE (B) below,
without prejudice to the rights that the Trustee or the Administrative Agent may
have pursuant to the other provisions of this Indenture or the provisions of any
of the other Transaction Documents), in no event shall any Indemnified Party be
indemnified for any Indemnified Losses (A) resulting from the gross negligence
or wilful misconduct on the part of such Indemnified Party (or the gross
negligence or wilful misconduct on the part of any of such Indemnified Party's
officers, directors, employees or agents), (B) to the extent the same includes
Indemnified Losses in respect of Receivables and reimbursement therefor that
would constitute credit recourse to the Issuer for the amount of any Receivable
or Related Transferred Asset not paid by the related Obligor, (C) to the extent
such Indemnified Losses represent, or result from, lost profits, (D) to the
extent such Indemnified Losses are or result from taxes (including interest and
penalties thereon) asserted with respect to (1) payments of principal of,
interest on, or other amounts owed with respect to, the Notes, (2) franchise or
withholding taxes imposed on or payable by any Indemnified Party, or (3)
Federal, state, local or other income taxes on or measured by the gross or net
income or receipts of such Indemnified Party and costs and expenses in defending
against the same, or (e) to the extent such Indemnified Losses constitute
consequential, special or punitive damages.

(b) The agreements contained in this SECTION 7.03 shall survive the
satisfaction and discharge of this Indenture and the resignation or removal of
the Trustee or the Administrative Agent, as the case may be.

ARTICLE VIII

THE SERVICER

Section 8.01 REPRESENTATIONS AND WARRANTIES OF THE SERVICER. On the
date hereof and on each Subsequent Issuance Date, the Servicer hereby makes, and
any Successor Servicer also shall be deemed to make by its acceptance of its
appointment hereunder, the following representations and warranties for the
benefit of the Trustee, the Administrative Agent, and the Noteholders:

(a) ORGANIZATION AND GOOD STANDING. The Servicer is a corporation
duly organized and validly existing in good standing under the laws of its
jurisdiction of incorporation and has full power and authority to own its
properties and

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to conduct its business as such properties are presently owned and as such
business is presently conducted.

(b) DUE QUALIFICATION. The Servicer is duly qualified to do business
and is in good standing as a foreign corporation (or is exempt from such
requirements), and has obtained all necessary licenses and approvals, in
all jurisdictions in which the servicing of the Receivables and the Related
Transferred Assets as required by this Indenture requires such
qualification, licenses or approvals and where the failure so to qualify,
to obtain such licenses and approvals or to preserve and maintain such
qualification, licenses or approvals would have a Material Adverse Effect.

(c) POWER AND AUTHORITY; DUE AUTHORIZATION. The Servicer has (i) all
necessary power and authority to (A) execute and deliver this Indenture and
the other Transaction Documents to which it is a party, and (B) perform its
obligations under this Indenture and the other Transaction Documents to
which it is a party, and (ii) duly authorized by all necessary action the
execution, delivery, and performance of this Indenture and the other
Transaction Documents to which it is a party and the consummation of the
transactions provided for in this Indenture and the other Transaction
Documents to which it is a party.

(d) BINDING OBLIGATIONS. This Indenture constitutes, and each other
Transaction Document to which the Servicer is party when executed and
delivered will constitute, a legal, valid and binding obligation of the
Servicer, enforceable against the Servicer in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity, regardless
of whether such enforceability is considered in a proceeding in equity or
at law.

(e) NO CONFLICT OR VIOLATION. The execution and delivery by the
Servicer of this Indenture and the other Transaction Documents to which it
is a party, the performance by the Servicer of its obligations hereunder
and thereunder and the fulfillment by the Servicer of the terms hereof and
thereof that are applicable to it will not (i) conflict with, violate,
result in any breach of any of the terms and provisions of, or constitute
(with or without notice or lapse of time or both) a default under, (A) the
Certificate of Incorporation or the Bylaws of the Servicer or (B) any
indenture, loan agreement, mortgage, deed of trust, or other material
agreement or instrument to which the Servicer is a party or by which it or
any of its properties is bound or (ii) conflict with or violate any

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federal, state, local or foreign law or any decision, decree, order,
rule, or regulation applicable to the Servicer or any of its
properties of any court or of any federal, state, local or foreign
regulatory body, administrative agency, or other Governmental
Authority having jurisdiction over the Servicer or any of its
properties, which conflict, violation, breach or default described in
CLAUSE (i) or CLAUSE (ii) immediately above, individually or in the
aggregate, would have a Material Adverse Effect.

(f) GOVERNMENTAL APPROVALS. All authorizations, consents, orders and
approvals of, or other action by, any Governmental Authority that are
required to be obtained by the Servicer, and all notices to and filings
with any Governmental Authority that are required to be made by the
Servicer, in the case of each of the foregoing in connection with the
execution, delivery and performance by the Servicer of this Indenture and
any other Transaction Documents to which it is a party and the consummation
of the transactions contemplated by this Indenture and such other
Transaction Documents, have been obtained or made and are in full force and
effect (other than the filing of the UCC financing statements referred to
in SECTION 2.03(a)(ii)(A), all of which, at the time required in SECTION
2.03(a)(ii)(A), will be duly made), except where the failure to obtain or
make such authorization, consent, order, approval, notice or filing would
not have a Material Adverse Effect.

(g) NO PROCEEDINGS. (i) There is no action, suit, proceeding or
investigation pending or, to the best knowledge of the Servicer, threatened
against the Servicer before any court, regulatory body, arbitrator,
administrative agency, or other tribunal or governmental instrumentality
and (ii) the Servicer is not subject to any order, judgment, decree,
injunction, stipulation or consent order of or with any court or other
Governmental Authority, that, in the case of foregoing CLAUSES (i) and
(ii), (A) seeks to affect adversely the income tax attributes of the Notes
under the United States federal income tax system or any state income tax
system, or (B) individually or in the aggregate for all such actions,
suits, proceedings and investigations, would have a Material Adverse
Effect.

The representations and warranties set forth in this SECTION 8.01 shall survive
the date of the making thereof by the Servicer and the grant of the Receivables
and the other Pledged Assets to the Trustee in accordance with the Granting
Clause of this Indenture. Upon discovery by the Issuer, the Servicer, the
Trustee, or the Administrative Agent of a breach of any of the foregoing
representations and warranties, the party discovering such breach shall give
written notice to the other parties to this Indenture within three Business Days
following such discovery. The

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Trustee's and the Administrative Agent's obligations in respect of discovering
any such breach are limited as provided in SECTION 11.02.

Section 8.02 COVENANTS OF THE SERVICER. From the Closing Date until
the date of the satisfaction and discharge of this Indenture, the Servicer
hereby covenants and agrees, and any Successor Servicer by its acceptance of its
appointment hereunder shall be deemed to covenant and agree, as follows for the
benefit of the Trustee, the Administrative Agent, and the Noteholders:

(a) COMPLIANCE WITH LAWS, ETC. The Servicer shall maintain in effect
all qualifications required under applicable law in order to service
properly the Receivables and shall comply in all material respects with all
applicable laws, rules, regulations, judgments, decrees and orders, in each
case to the extent the failure to comply with which, individually or in the
aggregate for all such failures, would have a Material Adverse Effect.

(b) PRESERVATION OF CORPORATE EXISTENCE. Except as otherwise
permitted pursuant to SECTION 8.03, the Servicer shall preserve and
maintain its corporate existence, rights, franchises and privileges in the
jurisdiction of its incorporation, and qualify and remain qualified in good
standing as a foreign corporation in each jurisdiction where the failure to
preserve and maintain such existence, rights, franchises, privileges and
qualification would have a Material Adverse Effect.

(c) COMPLIANCE WITH TRANSACTION DOCUMENTS. The Servicer will comply
with the terms and provisions of each of the Transaction Documents to which
it is a party.

The covenants set forth in this SECTION 8.02 shall survive the date of the
making thereof by the Servicer and the grant of security in the Receivables and
the other Pledged Assets to the Trustee in accordance with the Granting Clause
of this Indenture. Upon discovery by the Issuer, the Servicer, the Trustee, or
the Administrative Agent of a breach of any of the foregoing covenants, the
party discovering such breach shall give written notice to the other parties to
this Indenture within three Business Days following such discovery. The
Trustee's and the Administrative Agent's obligations in respect of discovering
any such breach are limited as provided in SECTION 11.02.

Section 8.03 MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, THE SERVICER. The Servicer shall not consolidate with or merge
into any other Person or convey, transfer or sell all or substantially all of
its properties and assets to any Person, unless:

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(a) (i) the Servicer is the surviving entity thereof or, if the
Servicer is not the surviving entity thereof, the Person formed by such
consolidation or into which the Servicer is merged or the Person which
acquires by conveyance, transfer or sale all or substantially all of the
properties and assets of the Servicer shall, in any such case, be a
corporation organized and existing under the laws of the United States of
America or any State thereof or the District of Columbia and, if the
Servicer is not the surviving entity, such corporation shall expressly
assume, by an agreement supplemental hereto, executed and delivered to the
Trustee and the Administrative Agent and in form and substance satisfactory
to the Trustee, the performance of every covenant and obligation of the
Servicer hereunder and under the other Transaction Documents to which the
Servicer is a party; and (ii) the Servicer shall have delivered to the
Trustee and the Administrative Agent an Officer's Certificate and an
Opinion of Counsel for the Servicer each stating that such consolidation,
merger, conveyance, transfer or sale and such supplemental agreement comply
with this SECTION 8.03(a), that such supplemental agreement is a valid and
binding obligation of such surviving entity enforceable against such
surviving entity in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and by general principles of equity, and that all
conditions precedent in this SECTION 8.03(a) that relate to such
transaction have been complied with; and

(b) the Rating Agency Condition shall have been satisfied in
connection with such merger, consolidation or succession;

IT BEING ACKNOWLEDGED AND AGREED, that the foregoing restrictions shall not
apply to any merger of any subsidiary of the Servicer which was existing and was
wholly-owned by the Servicer as of the Closing Date with and into the Servicer,
which mergers shall be permitted hereunder without notice or consent so long as
the Servicer shall be the surviving entity thereof.

Section 8.04 INDEMNIFICATION BY THE SERVICER. Without limiting any
other rights which any Indemnified Party may have hereunder or under applicable
law, the Servicer hereby agrees to indemnify the Trustee, the Administrative
Agent, and the other Indemnified Parties from and against any and all
Indemnified Losses awarded against or incurred by any of them that arise out of
or relate to the Servicer's performance of, or failure to perform, any of its
obligations under or in connection with any Transaction Document while it was
acting as Servicer hereunder; PROVIDED, HOWEVER, that no Successor Servicer (if
other than a Stone Person) shall have any liability hereunder for any such

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Indemnified Loss except to the extent such loss was caused by such Successor
Servicer's own negligence or wilful misconduct in the performance of, or failure
to perform, its obligations under the Transaction Documents. Any Indemnified
Losses shall be paid by the Servicer to the applicable Indemnified Party within
5 Business Days following such Indemnified Party's written demand therefor,
setting forth, in reasonable detail, the calculation of such amount and the
basis of such demand.

Notwithstanding the foregoing (and, with respect to CLAUSE (b) below,
without prejudice to the rights that such Indemnified Party may have pursuant to
the other provisions of this Indenture or the provisions of any of the other
Transaction Documents), in no event shall any Indemnified Party be indemnified
against any Indemnified Losses (a) resulting from gross negligence or wilful
misconduct on the part of such Indemnified Party (or the gross negligence or
wilful misconduct on the part of any of such Indemnified Party's officers,
directors, employees or agents), (b) to the extent the same includes Indemnified
Losses in respect of Receivables and reimbursement therefore that would
constitute credit recourse to the Servicer for the amount of any Receivable or
Related Transferred Asset not paid by the related Obligor, (c) to the extent
such Indemnified Losses represent or result from lost profits, (d) to the extent
such Indemnified Losses are or result from taxes (including interest and
penalties thereon) asserted with respect to (i) payments of principal of,
interest on, or other amounts owed with respect to, the Notes, (ii) franchise or
withholding taxes imposed on or payable by any Indemnified Party or (iii)
Federal, state, local or other income taxes on or measured by the gross or net
income or receipts of such Indemnified Party and costs and expenses in defending
against the same, or (e) to the extent that such Indemnified Losses constitute
consequential, special or punitive damages.

The agreements of the Servicer contained in this SECTION 8.04 shall
survive (i) the replacement or termination of any Person acting as Servicer
hereunder with respect to any Indemnified Losses arising in connection with such
Person's acting as Servicer, (ii) the satisfaction and discharge of this
Indenture and (iii) the resignation or removal of the Trustee or the
Administrative Agent, as the case may be.

Section 8.05 SERVICER LIABILITY. The Servicer shall be liable in
accordance with this Indenture only to the extent of the obligations
specifically undertaken by the Servicer in such capacity herein and as set forth
herein.

The Servicer shall not be under any obligation to appear in, prosecute
or defend any legal action which is not incidental to its duties to service the
Receivables in accordance with this Indenture, any Supplement or any of the
other

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Transaction Documents to which it is a party, which in its reasonable opinion
may involve it in any expense or liability. The Servicer may, in its sole
discretion, undertake any such legal action relating to the servicing,
collection or administration of Receivables and Related Transferred Assets that
it may reasonably deem necessary or appropriate for the benefit of the
Noteholders with respect to this Indenture or any of the other Transaction
Documents to which it is a party, and the rights and duties of the parties
hereto and thereto and the interests of the Noteholders hereunder and
thereunder.

ARTICLE IX

LIQUIDATION EVENTS; EVENTS OF DEFAULT

Section 9.01 LIQUIDATION EVENTS. Any of the following events shall
constitute a "LIQUIDATION EVENT":

(a) an Event of Bankruptcy shall occur with respect to the Issuer or
any Seller, or any Seller shall become unable for any reason to, or shall
for any other reason cease to, transfer interests in the Receivables or
Related Transferred Assets to the Issuer in accordance with the Purchase
Agreement; PROVIDED, HOWEVER, that if, at any time prior to the Liquidation
Commencement Date, a Liquidation Event occurs pursuant to this SECTION
9.01(a) as a result of a bankruptcy proceeding being filed by or against
the Issuer or any Seller, then, notwithstanding anything to the contrary in
this SECTION 9.01(a) or in the definition of "LIQUIDATION COMMENCEMENT
DATE," on and after the day on which such a bankruptcy proceeding is filed,
the Issuer shall cease to purchase Receivables and the Related Purchased
Assets from all of the Sellers and the Purchase Termination Date shall be
deemed to have automatically occurred;

(b) the Issuer shall become an "investment company" within the
meaning of the Investment Company Act of 1940, as amended;

(d) the occurrence and continuance of a Servicer Default; or

(e) any failure by the Issuer to make any payment, transfer or
deposit required by this Indenture or any Supplement to be made by it or to
give instructions or to give notice to the Trustee, the Administrative
Agent or the Paying Agent (if other than the Administrative Agent) to

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make such payment, transfer or deposit, which failure continues
unremedied (A) in the case of payments of interest on the Notes,
for five Business Days and (B) in the case of all payments not
included in CLAUSE (A) above, for seven Business Days after the
date on which an Authorized Officer of the Issuer has actual
knowledge of such failure.

Upon the occurrence of any event described in SUBSECTION (a) or (b) above, the
Liquidation Commencement Date and the Purchase Termination Date shall occur
without any notice or other action on the part of the Trustee or the
Noteholders, immediately upon the occurrence of such Liquidation Event. On the
tenth day after the Issuer receives notice of or becomes aware of (as evidenced
by the Daily Reports for the Business Days in question), the occurrence of the
event described in SUBSECTION (c) above, the Liquidation Commencement Date shall
occur without any notice or other action on the part of the Trustee or the
Noteholders. Upon the occurrence and during the continuance of any event
described in SUBSECTION (d) or (e) above, after the applicable grace period, if
any, set forth in such subsection, the Majority Noteholders may (or the Trustee,
at the direction of the Majority Noteholders, shall) by notice then given in
writing to the Issuer, the Administrative Agent, and the Servicer, declare that
the Liquidation Commencement Date and the Purchase Termination Date shall have
occurred as of the date of Issuer's receipt of such notice.

Notwithstanding the foregoing, a delay in or failure in performance
referred to in SUBSECTION (e) above for a period of 10 Business Days after the
applicable grace period shall not (unless such delay or failure continues after
such 10 Business Day period) constitute a Liquidation Event if such delay or
failure could not have been prevented by the exercise of reasonable diligence by
the Issuer and such delay or failure was caused by an act of God or the public
enemy, riots, acts of war, acts of terrorism, epidemics, flood, embargoes,
weather, landslides, fire, earthquakes or similar causes. The preceding
sentence shall not relieve the Issuer from using its best efforts to perform its
obligations in a timely manner in accordance with the terms hereof and of the
other Transaction Documents, and the Issuer shall promptly give the Trustee and
the Administrative Agent an Officer's Certificate notifying them of such failure
or delay by it.

Section 9.02 EVENTS OF DEFAULT. Any of the following events shall
constitute an "EVENT OF DEFAULT":

(a) an Event of Bankruptcy shall occur with respect to the Issuer;

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(b) a Liquidation Event described in SECTION 9.01(e) shall have
occurred and been continuing for thirty consecutive days;

(c) the Issuer shall have failed, as of any Payment Date and for any
reason, to have paid all accrued interest on the Notes, and such failure
shall not have been cured by the next succeeding Payment Date; and

(d) the Issuer shall have failed to pay in full the entire
Outstanding Principal Balance of any Note on or prior to the respective
Maturity Date therefor.

Upon the occurrence and during the continuance of an Event of Default, after the
applicable grace period, if any, set forth above in this SECTION 9.02, the
Trustee may (and, at the direction of the Required Noteholders, shall) by notice
then given in writing to the Issuer and the Servicer (with a copy thereof to the
Administrative Agent), declare that the Notes and all other obligations owed
hereunder to the Noteholders have become immediately due and payable, in the
event of which declaration the Purchase Termination Date and the Liquidation
Commencement Date shall occur as of the date of Issuer's receipt of such notice;
PROVIDED, however, that if an Event of Bankruptcy occurs with respect to the
Issuer, the Notes and all other obligations owed hereunder to the Noteholders
shall immediately and automatically become due and payable upon the occurrence
of such Event of Bankruptcy and the Purchase Termination Date and Liquidation
Commencement Date shall each occur, in each case without any notice or other
action on the part of the Trustee, the Administrative Agent or the Noteholders;
and PROVIDED, FURTHER, that, subject to the limitations on recourse set forth
herein, all unpaid principal and interest owing with respect to any Note shall
be due and payable on the Stated Maturity Date therefor without any notice or
action on the part of the Trustee, the Administrative Agent or the Noteholders
(other than the surrender of such Note by the holder thereof to the Paying
Agent).

Section 9.03 REMEDIES. Upon the occurrence of an Event of Default,
the Trustee shall have, in addition to all other rights and remedies available
to the Trustee under this Indenture or otherwise, (a) the right to apply
Collections to the payment of the Obligations of the Issuer and the Servicer
under this Indenture or under any of the other Transaction Documents, as
provided herein, and (b) all rights and remedies of a secured party under the
UCC and all other rights and remedies provided under any and all other
applicable laws, which rights, in the case of each and all of the foregoing,
shall be cumulative. The Trustee shall exercise such rights at the direction of
the Noteholders pursuant to (and subject to the limitations specified in)
SECTION 11.18; PROVIDED, that without the consent of all of

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the Noteholders, the Trustee shall not be permitted to sell, transfer or
otherwise convey the Pledged Assets to any third-party for an amount less than
the aggregate Outstanding Principal Balance of all of the Notes, together with
all accrued but unpaid interest thereon.

ARTICLE X

SERVICER DEFAULTS

Section 10.01 SERVICER DEFAULTS. Any of the following events shall
constitute a "SERVICER DEFAULT":

(a) any failure by the Servicer (in its capacity as Servicer) to make
any payment, transfer or deposit required by this Indenture or any of the
other Transaction Document to be made by it or to give instructions or to
give notice to the Trustee, the Administrative Agent, or the Paying Agent
(if other than the Administrative Agent) to make such payment, transfer or
deposit, which failure continues unremedied (A) in the case of payments of
interest on the Notes, for five Business Days and (B) in the case of all
payments not included in CLAUSE (A) above, for seven Business Days after
the date on which an Authorized Officer of the Servicer has actual
knowledge of such failure;

(b) failure on the part of the Servicer duly to observe or perform in
any material respect any other covenants or agreements of the Servicer set
forth in this Indenture or any other Transaction Document, which failure
has a material adverse effect on the Noteholders of any Series of Notes and
continues unremedied for a period of 30 days after the date on which
written notice of such failure, requiring the same to be remedied, shall
have been given to the Servicer by the Trustee or the Administrative Agent,
or to the Servicer, the Trustee, and the Administrative Agent by any
Noteholder;

(c) the Servicer shall assign its duties under this Indenture, except
for delegations to Sub-Servicers contemplated under the Purchase Agreement
or as permitted by SECTIONS 3.01(c) and 8.03;

(d) any representation, warranty or certification made by the
Servicer hereunder or under any of the other Transaction Document or in any
certificate or other document or instrument delivered pursuant to this
Indenture or any of the other Transaction Document shall prove to have been
incorrect in any material respect when made or delivered and which has a
material adverse effect on the Noteholders of any Series of Notes which
material adverse effect continues

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unremedied for a period of 30 days after the date on which written
notice of such circumstance, requiring the same to be remedied, shall
have been given to the Servicer by the Trustee or the Administrative
Agent, or to the Servicer, the Trustee, and the Administrative Agent
by any Noteholder; or

(e) any Event of Bankruptcy shall occur with respect to the Servicer.

Upon the occurrence and during the continuance of any Servicer Default or any
Event of Default, the Trustee, at the direction of the Majority Noteholders,
shall, by notice then given in writing to the Servicer (a "TERMINATION NOTICE"),
terminate all (but not less than all) the rights and obligations of the Servicer
as Servicer under this Indenture and in and to the Receivables, the Related
Transferred Assets and the proceeds thereof.

As soon as possible, and in any event within five Business Days, after
an Authorized Officer of the Servicer has obtained knowledge of the occurrence
of any Servicer Default, the Servicer shall furnish notice thereof to the
Trustee, the Administrative Agent, and the Applicable Rating Agencies, and the
Issuer and the Administrative Agent shall promptly upon receipt of such notice
furnish notice thereof to each Noteholder.

Notwithstanding the foregoing, a delay in or failure in performance
referred to in SUBSECTION (a) above for a period of 10 Business Days after the
applicable grace period, or in SUBSECTION (b) or (d) above for a period of 30
Business Days after the applicable grace period, shall not (unless such delay or
failure continues after such 10 or 30 Business Day period, as applicable)
constitute a Servicer Default if such delay or failure could not have been
prevented by the exercise of reasonable diligence by the Servicer and such delay
or failure was caused by an act of God or the public enemy, riots, acts of war,
acts of terrorism, epidemics, flood, embargoes, weather, landslides, fire,
earthquakes or similar causes. The preceding sentence shall not relieve the
Servicer from using its best efforts to perform its obligations in a timely
manner in accordance with the terms hereof and of the other Transaction
Documents, and the Servicer shall promptly give the Trustee, the Administrative
Agent, and the Issuer an Officer's Certificate notifying them of such failure or
delay by it.

Section 10.02 ADMINISTRATIVE AGENT TO ACT; APPOINTMENT OF SUCCESSOR.
(a) On and after the Servicer's receipt of a Termination Notice pursuant to
SECTION 10.01, the Servicer shall continue to perform all servicing functions
under this Indenture until the date specified in the Termination Notice or
otherwise specified by the Trustee in writing or, if no such date is specified
in such Termination Notice, or otherwise specified by the Trustee, until a date
mutually agreed upon by the Servicer

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and the Trustee. The Trustee shall, as promptly as possible after the giving of
a Termination Notice, nominate an Eligible Servicer as successor servicer (the
"SUCCESSOR SERVICER"). Any Person who is nominated to be a Successor Servicer
shall accept its appointment by a written assumption in form and substance
acceptable to the Trustee and which satisfies the Rating Agency Condition. In
the event that a Successor Servicer has not been appointed or has not accepted
its appointment at the time when the Servicer ceases to act as Servicer, the
Administrative Agent without further action shall automatically, upon its
receipt of notice thereof from the Trustee, be appointed the Successor Servicer.
If the Administrative Agent is prohibited by applicable law from performing the
duties of the Servicer hereunder or is unwilling or otherwise unable to act as
such, the Trustee may act as Servicer or may appoint, or petition a court of
competent jurisdiction to appoint, a Successor Servicer hereunder. The
Administrative Agent, or the Trustee, as applicable, may delegate any of its
servicing obligations to an affiliate or agent in accordance with SECTION
6.02(b) of the Purchase Agreement. The Trustee shall give prompt notice to the
Administrative Agent, the Issuer, the Applicable Rating Agencies and each
Noteholder upon the appointment of a Successor Servicer.

(b) After the Servicer's receipt of a Termination Notice, and on the
date that a Successor Servicer shall have been appointed by the Trustee and
shall have accepted such appointment pursuant to SECTION 10.02(a), all authority
and power of the Servicer under this Indenture shall pass to and be vested in
the Successor Servicer (a "SERVICE TRANSFER"); and the Trustee is hereby
authorized and empowered to execute and deliver, on behalf of the Servicer, as
attorney-in-fact or otherwise, all documents and instruments, and to do and
accomplish all other acts or things that the Trustee reasonably determines are
necessary or appropriate to effect the purposes of such Service Transfer. Upon
the appointment of such Successor Servicer and its acceptance thereof, the
departing Servicer agrees that it will terminate its activities as Servicer
hereunder in a manner that the Trustee indicates will facilitate the transition
of the performance of such activities to the Successor Servicer. The departing
Servicer agrees that it shall use reasonable efforts to assist the Successor
Servicer in assuming the obligations to service and administer the Receivables
and the Related Transferred Assets, on the terms and subject to the conditions
set forth herein, and to effect the termination of the responsibilities and
rights of the departing Servicer to conduct servicing hereunder, including the
transfer to such Successor Servicer of all authority of the departing Servicer
to service the Receivables and Related Transferred Assets provided for under
this Indenture and all authority over all cash amounts which shall thereafter be
received with respect to the Receivables or the Related Transferred Assets. The
departing Servicer shall, within five Business Days after the designation of a
Successor

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Servicer, transfer its electronic records (including software) relating to the
Receivables, the related Contracts and the Related Transferred Assets to the
Successor Servicer in such electronic form as the Successor Servicer may
reasonably request and shall promptly transfer to the Successor Servicer all
other records, correspondence and documents necessary for the continued
servicing of the Receivables and the Related Transferred Assets in the manner
and at such times as the Successor Servicer shall request. To the extent that
compliance with this SECTION 10.02(b) shall require the departing Servicer to
disclose to the Successor Servicer information of any kind which the departing
Servicer reasonably deems to be confidential, the Successor Servicer shall be
required to enter into such customary licensing and confidentiality agreements
as the departing Servicer shall reasonably deem necessary to protect its
interest prior to the transfer contemplated by the preceding sentence. All
reasonable costs and expenses (including attorneys' fees and disbursements)
incurred in connection with transferring the Receivables, the Related
Transferred Assets and all related Records (including the related Contracts) to
the Successor Servicer and amending this Indenture and the other Transaction
Documents to reflect such succession as Servicer pursuant to this SECTION
10.02(b) shall be paid by the departing Servicer (or, if the Administrative
Agent or the Trustee serves as Successor Servicer on an interim basis, the
departing Servicer in whose place the Administrative Agent or the Trustee was
then acting) within 15 days after presentation of reasonable documentation of
such costs and expenses.

(c) Upon its appointment and acceptance thereof, the Successor
Servicer shall be the successor in all respects to the departing Servicer with
respect to servicing functions under this Indenture and shall be subject to all
the responsibilities and duties relating thereto placed on the Servicer by the
terms and provisions hereof, and all references in this Indenture to the
Servicer shall be deemed to refer to the Successor Servicer.

(d) All authority and power granted to the Servicer under this
Indenture shall automatically cease and terminate upon satisfaction and
discharge of this Indenture pursuant to SECTION 13.01, and shall pass to and be
vested in the Issuer and, without limitation, the Issuer is hereby authorized
and empowered, on and after the effective date of such termination, to execute
and deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, all
documents and other instruments and to do and accomplish all other acts or
things that the Issuer reasonably determines are necessary or appropriate to
effect the purposes of such transfer of servicing rights. The Servicer agrees
to cooperate with the Issuer in effecting the termination of the
responsibilities and rights of the Servicer to conduct servicing of the
Receivables and the Related Transferred Assets. The Servicer (if other than
Stone Container) shall, within five Business Days after such termination,
transfer its electronic

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records relating to the Receivables and the Related Transferred Assets to the
Issuer in such electronic form as the Issuer may reasonably request and shall
transfer all other records, correspondence and documents relating to the
Receivables and the Related Transferred Assets to the Issuer in the manner and
at such times as the Issuer shall reasonably request. To the extent that
compliance with this SECTION 10.02(d) shall require the Servicer (if other than
Stone Container) to disclose to the Issuer information of any kind which the
Servicer deems to be confidential, the Issuer shall be required to enter into
such customary licensing and confidentiality agreements as the Servicer shall
reasonably deem necessary to protect its interests. All reasonable costs and
expenses (including attorneys' fees and disbursements) incurred by the
Administrative Agent, if any, in its capacity as a Successor Servicer, in
connection with such termination shall be paid by the Issuer within 15 days
after presentation of reasonable documentation of such costs and expenses.

ARTICLE XI

THE TRUSTEE AND THE ADMINISTRATIVE AGENT

Section 11.01 DUTIES OF TRUSTEE AND THE ADMINISTRATIVE AGENT. (a)
Except after the occurrence of a Servicer Default or an Event of Default, each
of the Trustee and the Administrative Agent undertakes to perform such duties
and only such duties as are specifically set forth in this Indenture and/or the
other Transaction Documents, and no implied covenants, obligations or duties
shall be read in to this Indenture or any of the other Transaction Documents as
against such Person. The provisions of this ARTICLE XI shall apply to the
Administrative Agent solely in its capacity as Administrative Agent, and not in
its capacity as a Successor Servicer to the extent it acts as such in accordance
with SECTION 10.02. Following the occurrence of a Servicer Default or an Event
of Default of which a Responsible Officer of the Trustee has received written
notice, the Trustee shall exercise such of the rights and powers vested in it by
this Indenture and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs; PROVIDED, FURTHER, that if the Administrative Agent
shall assume the duties of the Servicer pursuant to SECTION 10.02, the
Administrative Agent in performing such duties shall use the degree of skill and
attention customarily exercised by a servicer with respect to trade receivables
that it services for itself or others. Neither the Trustee nor the
Administrative Agent shall have any power to create, assume or incur
indebtedness or other liabilities in the name of the Issuer or the Noteholders,
other than as contemplated in, or incidental to the performance of its duties
under, this Indenture.

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(b) Each of the Trustee or the Administrative Agent, upon its receipt
of all resolutions, certificates, statements, opinions, reports, documents,
orders or other instruments which are specifically required to be furnished to
it pursuant to any provision of this Indenture or any of the other Transaction
Documents, shall examine them to determine whether they are complete and in the
form required by this Indenture or such other Transaction Document. The Trustee
or the Administrative Agent, as the case may be, shall give prompt written
notice to the Person who furnished any item of the type listed in the preceding
sentence of any lack of completeness or conformity of any such item to the
applicable requirements of this Indenture or such other Transaction Document.
In addition, the Trustee or the Administrative Agent, as the case may be, shall
give prompt written notice to the Noteholders of any material lack of
completeness or conformity of any such instrument to the applicable requirements
of this Indenture or any of the other Transaction Documents discovered by the
Trustee or the Administrative Agent, as the case may be, if such lack of
completeness or non-conformity would entitle all or a specified percentage of
the Noteholders of all or any Series of Notes to take any action pursuant to
this Indenture.

(c) Subject to SECTION 11.01(a), no provision of this Indenture shall
be construed to relieve the Trustee or the Administrative Agent from liability
for its own negligent action, its own negligent failure to act or its own wilful
misconduct; PROVIDED, HOWEVER, that:

(i) neither the Trustee nor the Administrative Agent shall be liable
for an error of judgment made in good faith by Responsible Officers of the
Trustee or the Administrative Agent, as the case may be, unless it shall be
proved that the Trustee or the Administrative Agent, as applicable, was
negligent in ascertaining the pertinent facts;

(ii) the Trustee shall not be liable with respect to any action taken,
suffered or omitted to be taken by it in good faith in accordance with the
direction (as applicable) of the Majority Noteholders, the Required
Noteholders, all Noteholders, or the Required Series Holders relating to
the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred upon
the Trustee, under this Indenture or any of the other Transaction
Documents;

(iii) neither the Trustee nor the Administrative Agent shall be
charged with knowledge of (A) any failure by the Servicer (if other than
the Trustee or the Administrative Agent) to comply with the obligations of
the Servicer referred to in SUBSECTIONS (a), (b) or (c) of SECTION 10.01,
(B) any breach of the representations and warranties of the

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Issuer set forth in SECTION 2.03 or 7.01 or the representations and
warranties of the Servicer set forth in SECTION 8.01, (C) any breach of
the covenants of the Issuer set forth in SECTION 7.02 or the covenants
of the Servicer set forth in SECTION 8.02, (D) the ownership of any Note
for purposes of SECTION 6.16, or (E) the occurrence of any Liquidation
Event, Unmatured Liquidation Event, Pay- Out Event, Unmatured Pay-Out
Event, Event of Default, Unmatured Event of Default or Servicer Default,
in each case unless a Responsible Officer of the Trustee or the
Administrative Agent, as the case may be, receives written notice of
such matter from the Servicer, the Issuer or any Noteholder;

(iv) in the absence of bad faith on the part of the Trustee or the
Administrative Agent, the Trustee or the Administrative Agent, as the case
may be, may conclusively rely on the truth of the statements and the
correctness of the opinions expressed in any certificates or opinions that
are furnished to the Trustee or the Administrative Agent, as applicable,
and that conform to the requirements of this Indenture or the other
applicable Transaction Documents; and

(v) without limiting the generality of this SECTION 11.01 or SECTION
11.02, neither the Trustee nor the Administrative Agent shall have any duty
(A) to see to any recording, filing, or depositing of this Indenture or any
agreement referred to herein or any financing statement or continuation
statement evidencing a security interest in the Receivables or the Related
Transferred Assets, or to see to the maintenance of any such recording or
filing or depositing or to any rerecording, refiling or redepositing of any
thereof, (B) to see to the payment or discharge of any tax, assessment, or
other governmental charge or any Adverse Claim or encumbrance of any kind
owing with respect to, assessed or levied against, all or any of the
Pledged Assets, (C) to confirm or verify the contents of any reports or
certificates of the Servicer delivered to the Trustee or the Administrative
Agent, as applicable, pursuant to this Indenture that are believed by the
Trustee or the Administrative Agent, as applicable, to be genuine and to
have been signed or presented by the proper party or parties or (D) to
ascertain or inquire as to the performance or observance of any of the
Issuer's or the Servicer's representations, warranties or covenants or the
Servicer's duties and obligations as Servicer.

(d) Neither the Trustee nor the Administrative Agent shall be
required to expend or risk its own funds or otherwise incur financial liability
in the performance of any of its duties hereunder or in the exercise of any of
its rights or powers, if the Trustee or the Administrative Agent, as the case
may be, reasonably believes that the repayment of such funds or adequate

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indemnity against such risk or liability is not reasonably assured to it, and
none of the provisions contained in this Indenture or any of the other
Transaction Documents shall in any event require the Trustee or the
Administrative Agent to perform, or be responsible for the manner of performance
of, any obligations of the Servicer under this Indenture or any of the other
Transaction Documents, except during such times, if any, as the Administrative
Agent or the Trustee shall be the successor to, and be vested with the rights,
duties, powers and privileges of, the Servicer in accordance with the terms of
this Indenture.

(e) Except for actions expressly authorized by this Indenture,
neither the Trustee nor the Administrative Agent shall take any action
reasonably likely to impair its or the Noteholders' interests in any of the
Pledged Assets which are now existing or hereafter created or to impair the
value of any Pledged Asset which are now existing or hereafter created.

(f) Except to the extent expressly otherwise provided in this
Indenture, the Trustee shall have no right to release its lien (for the benefit
of the Noteholders) on any of the Pledged Assets, to accept any other obligation
or property for any Pledged Assets, or to withdraw any Pledged Asset, except, in
each case, upon the satisfaction and discharge of this Indenture or with the
consent of each of the Noteholders.

(g) In the event that the Paying Agent or the Transfer Agent and
Registrar (in either case, if other than the Administrative Agent) shall fail to
perform any obligation, duty or agreement in the manner or on the day on which
such obligation, duty or agreement is required to be performed by the Paying
Agent or the Transfer Agent and Registrar, as the case may be, under this
Indenture, the Administrative Agent shall be obligated, promptly upon receipt by
a Responsible Officer of the Administrative Agent of written notice thereof, to
perform such obligation, duty or agreement in the manner so required.

(h) The Administrative Agent shall transmit by mail notice of any
Pay-Out Event, Liquidation Event or Event of Default with respect to the Notes
of any Series (i) within 10 Business Days after any Responsible Officer of the
Administrative Agent shall have received written notice of the occurrence
thereof, to all affected Noteholders, as their names and addresses appear in the
Note Register, unless such event shall have been cured or waived prior to such
time and (ii) within 5 Business Days after any Responsible Officer of the
Administrative Agent receives written notice of the occurrence thereof, to each
of the Applicable Rating Agencies.

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Section 11.02 CERTAIN MATTERS AFFECTING THE TRUSTEE AND THE
ADMINISTRATIVE AGENT. Except as otherwise provided in SECTION 11.01:

(a) each of the Trustee and the Administrative Agent may rely on and
shall be protected in acting on, or in refraining from acting in accordance
with, any resolution, Officer's Certificate, Opinion of Counsel,
certificate of auditors or any other certificate, statement, instrument,
instruction, opinion, report, notice, request, consent, order, appraisal,
bond or other paper or document and any information contained therein
believed by it to be genuine and to have been signed or presented to it
pursuant to this Indenture or any of the other Transaction Documents by the
proper party or parties including, but not limited to, reports and records
required by ARTICLE III;

(b) each of the Trustee and the Administrative Agent may consult with
counsel and any advice or Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken or permitted or
omitted by it hereunder or under any of the other Transaction Documents in
good faith and in accordance with such advice or Opinion of Counsel;

(c) neither the Trustee nor the Administrative Agent (including the
Administrative Agent in its role as Successor Servicer, to the extent that
it ever acts in such capacity) shall be under any obligation to exercise
any of the rights or powers vested in it by this Indenture, or to
institute, conduct or defend any litigation or other proceeding hereunder
or thereunder or in relation hereto or thereto, at the request, order or
direction of any of the Noteholders pursuant to the provisions of this
Indenture or any of the other Transaction Documents, unless such
Noteholders shall have offered to the Trustee and/or the Administrative
Agent, as the case may be, reasonable security or indemnity against the
costs, expenses and liabilities which may be incurred therein or thereby;
PROVIDED, HOWEVER, that nothing contained herein shall relieve the Trustee
of the obligation, upon the occurrence and continuance of a Servicer
Default which has not been cured, to exercise such of the rights and powers
vested in it by this Indenture and to use the same degree of care and skill
in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs;

(d) neither the Trustee nor the Administrative Agent shall be
personally liable for any action taken, permitted or omitted by it in good
faith and believed by it to be authorized or within the discretion or
rights or powers

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conferred upon it by this Indenture or by any of the other Transaction
Documents;

(e) neither the Trustee nor the Administrative Agent shall be bound
to (but may in its sole discretion) make any investigation into the facts
or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond or other
paper or document, unless requested in writing to do so by the Required
Noteholders; PROVIDED, HOWEVER, that if the payment within a reasonable
time to the Trustee or the Administrative Agent of the costs, expenses, or
liabilities likely to be incurred by it in connection with making such
investigation shall, in the opinion of the Trustee or the Administrative
Agent, not be reasonably assured to the Trustee or the Administrative
Agent, as the case may be, by the security afforded to it by the terms of
this Indenture, the Trustee or the Administrative Agent, as the case may
be, may require reasonable indemnity against such costs, expenses, or
liabilities as a condition to proceeding with such investigation. The
reasonable expense of every such examination shall be paid by the Issuer;

(f) the Trustee or the Administrative Agent may execute any of the
trusts, powers or rights hereunder or under any of the other Transaction
Documents or perform any duties hereunder or thereunder either directly or
by or through agents, representatives, attorneys or a custodian, and
neither the Trustee nor the Administrative Agent shall be responsible for
any misconduct or negligence on the part of any such agent, representative,
attorney or custodian appointed with due care by it hereunder;

(g) except as may be required by SECTION 11.01(b) hereof, neither the
Trustee nor the Administrative Agent shall be required to make any initial
or periodic examination of any documents or records related to the Pledged
Assets for the purpose of establishing the presence or absence of defects
or for any other purpose;

(h) whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee or the Administrative Agent shall be
subject to the provisions of SECTION 11.01 and this SECTION 11.02;

(i) neither the Trustee nor the Administrative Agent shall have any
liability with respect to the acts or omissions of the Servicer (except and
to the extent the Administrative Agent or the Trustee is the Servicer),
including, but not limited to, acts or omissions in connection with: the
servicing, management or

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administration of the Receivables or the Related Transferred Assets;
calculations made by the Servicer, whether or not reported to the
Trustee or the Administrative Agent; and deposits into or withdrawals
from any Bank Accounts or Trust Accounts established pursuant to the
terms of this Indenture;

(j) in the event that either of the Trustee or the Administrative
Agent is also acting as Paying Agent or Transfer Agent and Registrar
hereunder, the rights and protections afforded to the Trustee and the
Administrative Agent pursuant to this ARTICLE XI shall also be afforded to
the Trustee or the Administrative Agent, as the case may be, so acting as
Paying Agent or as Transfer Agent and Registrar; and

(k) whenever in the administration of this Indenture or any of the
other Transaction Documents the Trustee or the Administrative Agent shall
deem it desirable that a matter be proved or established prior to the
Trustee's or the Administrative Agent's taking, suffering or omitting any
action hereunder or thereunder, the Trustee or the Administrative Agent, as
the case may be, (unless other evidence be herein specifically prescribed)
may, in the absence of bad faith on its part, rely upon an Officers'
Certificate.

Section 11.03 MAY HOLD NOTES. The Trustee, the Administrative Agent,
any Paying Agent, the Transfer Agent and Registrar or any other agent of the
Issuer, in its individual or any other capacity, may become the owner or pledgee
of the Notes and, subject to SECTIONS 11.05 through (and including) 11.07, may
otherwise deal with the Issuer with the same rights it would have if it were not
Trustee, Administrative Agent, Paying Agent, Transfer Agent and Registrar or
such other agent.

Section 11.04 MONEY HELD IN TRUST. Money held by the Trustee or the
Administrative Agent in trust hereunder need not be segregated from other funds
of such Person, except to the extent required by law or this Indenture. Neither
the Trustee nor the Administrative Agent shall be under any liability for
interest on any money received by it hereunder except as otherwise agreed in
writing with the Issuer.

Section 11.05 DISQUALIFICATION; CONFLICTING INTERESTS. If, at any
time after this Indenture has been qualified under the Trust Indenture Act, the
Trustee has or shall acquire any "conflicting interest" within the meaning of
Section 310(b) of the Trust Indenture Act, the Trustee and the Issuer shall in
all respects comply with the provisions of Section 310(b) of the Trust Indenture
Act. Without limiting the foregoing, if a conflicting interest is deemed to
arise under said Section 310(b)

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by virtue of the fact that the Trustee is acting as Trustee for more than one
Series of Notes outstanding concurrently, and such conflicting interest is not,
or is not reasonably expected to be, cured within ninety (90) days of its
occurrence, then, in such event, the Trustee may resign or assign to a separate
trustee such of its duties under the Transaction Documents as may be necessary
to eliminate any such conflicting interest in accordance with SECTION 11.14
hereof.

Section 11.06 PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER. At
all times after this Indenture becomes qualified under the Trust Indenture Act,
The Trustee shall comply with Section 311(a) of the Trust Indenture Act,
excluding any creditor relationship described in Section 311(b) of the Trust
Indenture Act, and a Trustee who has resigned or been removed shall be subject
to Section 311(a) of the Trust Indenture Act to the extent indicated therein.

Section 11.07 LIMITATION ON LIABILITY OF TRUSTEE AND ADMINISTRATIVE
AGENT; ADMINISTRATIVE AGENT NOT A FIDUCIARY. Neither the Trustee nor the
Administrative Agent shall at any time have any responsibility or liability for
or with respect to the correctness of the recitals contained herein, in any of
the other Transaction Documents, or in the Notes (other than the certificate of
authentication of the Administrative Agent on the Notes). Except as set forth
in SECTION 11.19, neither the Trustee nor the Administrative Agent makes any
representations as to the validity or sufficiency of this Indenture, any of the
other Transaction Documents, the Notes (other than the certificate of
authentication of the Administrative Agent on the Notes), any other Transaction
Document or any Pledged Asset or related document. Neither the Trustee nor the
Administrative Agent shall be accountable for the use or application by the
Issuer of any of the Notes, or of the proceeds of such Notes, or for the use or
application of any funds paid to the Issuer or the Servicer in respect of the
Pledged Assets or deposited by the Servicer in, or withdrawn by the Servicer
from, the Bank Accounts, the Trust Accounts or any other accounts hereafter
established to effectuate the transactions contemplated herein or in the other
Transaction Documents in accordance with the terms hereof or thereof.

Neither the Trustee nor the Administrative Agent shall at any time
have any responsibility or liability for or with respect to (A) the legality,
validity, or enforceability of any ownership or security interest in any Pledged
Asset, (B) the perfection or priority of such a security interest, (C) the
maintenance of any such perfection or priority, (D) the efficacy of the Granting
Clause hereunder, (E) the ability of the Pledged Assets to generate the payments
to be distributed to Noteholders under this Indenture, (F) the existence and
substance of any Pledged Asset or any related Record or any computer or other

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record thereof; (G) the validity of the grant of security in any Pledged Asset
to the Trustee as contemplated pursuant to the Granting Clause hereunder or of
any preceding or intervening grant pursuant thereto; (H) the performance or
enforcement of any Pledged Asset; (I) the compliance by the Issuer or the
Servicer with any warranty or representation made under this Indenture or in any
other Transaction Document and the accuracy of any such warranty or
representation prior to the Trustee's and the Administrative Agent's receipt of
actual notice of any noncompliance therewith or any breach thereof; (J) any
investment of monies pursuant to SECTION 4.03 or any loss resulting therefrom;
(K) the acts or omissions of the Issuer, the Servicer, or any Obligor; (L) any
action of the Servicer taken in the name of the Trustee or the Administrative
Agent; or (M) any action by the Trustee or the Administrative Agent taken at the
instruction of the Servicer; PROVIDED, HOWEVER, that the foregoing shall not
relieve either of the Trustee or the Administrative Agent of its obligation to
perform its duties under this Indenture and the other Transaction Documents in
accordance with the terms hereof and thereof.

Except with respect to a claim based on the failure of either of the
Trustee or the Administrative Agent to perform its respective duties under this
Indenture or under any of the other Transaction Documents or based on the
Trustee's or the Administrative Agent's negligence or wilful misconduct, no
recourse shall be had against the Trustee or the Administrative Agent in its
individual capacity for any claim based on any provision of this Indenture, any
other Transaction Document, the Notes, any Pledged Asset or any assignment
thereof. Neither the Trustee nor the Administrative Agent shall have any
personal obligation, liability, or duty whatsoever to any Noteholder or any
other Person with respect to any such claim, and any such claim shall be
asserted solely against the Pledged Assets, the Issuer or any indemnitor who
shall furnish indemnity to the Trustee or the Administrative Agent, as the case
may be, as provided in this Indenture. Any obligation of the Trustee or the
Administrative Agent to give any notice or statement to any rating agency
hereunder shall constitute only a best efforts obligation and such notice or
statement shall be so provided only as a matter of courtesy and accommodation.
Neither the Trustee nor the Administrative Agent shall have any liability to any
rating agency or any other Person for any failure to so provide such notice or
statement.

The Administrative Agent shall not have any duties or responsibilities
except those expressly set forth in this Indenture or in the other Transaction
Documents. The duties of the Administrative Agent shall be mechanical and
administrative in nature. Notwithstanding anything contained herein to the
contrary, the Administrative Agent shall not be deemed to have, by reason of
this Indenture or any of the other Transaction

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Documents to which it is a party thereto, a fiduciary relationship in
respect of any Noteholder. Nothing in this Indenture or any of the other
Transaction Documents, expressed or implied, is intended to or shall be
construed to impose upon the Administrative Agent any obligations in
respect of this Indenture or any of the other Transaction Documents, except
as expressly set forth herein or therein.

The provisions of this SECTION 11.07 shall survive and continue to
inure to the benefit of each of the Trustee and the Administrative Agent
notwithstanding the termination of this Indenture or the removal or
resignation of the Trustee or the Administrative Agent, as applicable.

Section 11.08 TRUSTEE AND ADMINISTRATIVE AGENT MAY DEAL WITH OTHER
PARTIES. Subject to any restrictions that may otherwise be imposed by
Section 406 of ERISA or Section 4975(e) of the Internal Revenue Code and/or
the Trust Indenture Act (if applicable), each of the Trustee and the
Administrative Agent, in its individual or any other capacity, may deal with
the other parties hereto (other than the Issuer) and their respective
affiliates, with the same rights as it would have if it were not the Trustee
or the Administrative Agent.

Section 11.09 SERVICER TO PAY TRUSTEE'S AND THE ADMINISTRATIVE
AGENT'S FEES AND EXPENSES. (a) To the extent not paid by the Servicer to
the Trustee or the Administrative Agent from funds constituting the Servicing
Fee, the Servicer covenants and agrees to pay to each of the Trustee and the
Administrative Agent from time to time, and each of the Trustee and the
Administrative Agent shall be entitled to receive, such reasonable
compensation as is agreed upon in writing between the Trustee and the
Servicer, in the case of any such fees payable to the Trustee, and between
the Administrative Agent and the Servicer, in the case of any such fees
payable to the Administrative Agent (which amount shall not, in either case,
be limited by any provision of law in regard to the compensation of a trustee
of an express trust) for all services rendered by it in the execution of the
trust hereby created and in the exercise and performance of any of the
powers and duties of the Trustee or the Administrative Agent, as applicable,
hereunder and under the other Transaction Documents, and the Servicer will
pay or reimburse each of the Trustee and the Administrative Agent upon its
request for all reasonable expenses, disbursements and advances incurred or
made by the Trustee or the Administrative Agent, as the case may be, in
accordance with any of the provisions of this Indenture and the other
Transaction Documents to which it is a party (including the reasonable fees
and expenses of its agents, any co-trustee and counsel), except any such
expense, disbursement or advance as may arise from the Trustee's or the
Administrative Agent's own negligence or wilful

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misconduct and except as otherwise provided in the following subsection.

(b) In addition, the Servicer (if other than the Administrative Agent
or the Trustee) agrees to indemnify each of the Trustee and the Administrative
Agent from, and hold it harmless against, any and all losses, liabilities,
damages, claims or expenses (including, without limitation, the reasonable fees
and expenses of counsel) incurred by the Trustee or the Administrative Agent in
the exercise or performance of any of its powers or duties hereunder and the
other Transaction Documents or as a result of the Trustee's action as Trustee or
the Administrative Agent's action as Administrative Agent hereunder and/or
thereunder, in each case, other than those resulting from the gross negligence
or wilful misconduct of the Trustee or the Administrative Agent.

(c) If the Administrative Agent or the Trustee is appointed Successor
Servicer pursuant to SECTION 10.02, the provisions of this SECTION 11.09 shall
not apply to expenses, disbursements and advances made or incurred by the
Administrative Agent or the Trustee, as the case may be, in its capacity as
Successor Servicer, which accounts shall be paid out of the Servicing Fee. The
Servicer's covenant to pay the fees, expenses, disbursements and advances
provided for in this SECTION 11.09 shall survive the resignation or removal of
the Trustee or the Administrative Agent and the satisfaction and discharge of
this Indenture.

Section 11.10 CORPORATE TRUSTEE REQUIRED; ELIGIBILITY. There shall
at all times be a Trustee hereunder which shall:

(a) be a corporation organized and doing business under the laws
of the United States of America, any State or Territory thereof or the
District of Columbia, authorized under such laws to exercise corporate trust
powers, and subject to supervision or examination by Federal, State,
Territorial or District of Columbia authority; (b) not be an Enhancement
Provider; (c) have, in the case of an entity that is subject to risk-based
capital adequacy requirements, risk-based capital of at least $50,000,000 or,
in the case of an entity that is not subject to risk-based capital adequacy
requirements, a combined capital and surplus of at least $50,000,000; and (d)
with respect to any successor Trustee, have a long-term unsecured senior debt
rating of "BBB" or better from S&P and "Baa2" or better from Moody's
Investors Service, Inc. If such corporation or association publishes reports
of condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then, for the purpose of this
SECTION 11.10, the combined capital and surplus of such corporation or
association shall be deemed to be its combined capital and surplus as set
forth in its most recent report of

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condition so published. If at any time the Trustee shall cease to be eligible
in accordance with the provisions of this SECTION 11.10, the Trustee shall
resign immediately in the manner and with the effect specified in SECTION 11.11.

Section 11.11 RESIGNATION OR REMOVAL OF TRUSTEE OR ADMINISTRATIVE
AGENT. (a)(i) The Trustee may at any time resign and be discharged from the
trust hereby created by giving at least 30 days' prior written notice thereof to
the Issuer, the Servicer, the Administrative Agent, the Applicable Rating
Agencies and the Noteholders. Upon receiving such notice of resignation, the
Issuer shall promptly appoint a successor trustee who meets the eligibility
requirements set forth in SECTION 11.10 by written instrument, in duplicate, one
copy of which instrument shall be delivered to the resigning Trustee and one
copy to the successor trustee. If no successor trustee shall have been so
appointed and shall have accepted such appointment within 30 days after the
giving of such notice of resignation, the resigning Trustee may, upon notice to
the Issuer, petition any court of competent jurisdiction to appoint a successor
trustee who meets the eligibility requirements set forth in SECTION 11.10.

(ii) If at any time:

(1) after this Indenture is qualified or required to be qualified
under the Trust Indenture Act, the Trustee shall fail to comply with
Section 310(b) of the Trust Indenture Act pursuant to SECTION 11.05 hereof
after written request therefor by the Issuer, the Servicer or any
Noteholder (unless the Trustee's duty to resign is stayed in accordance
with the provisions of Section 310(b) of the Trust Indenture Act); or

(2) the Trustee shall otherwise cease to be eligible under SECTION
11.10 hereof and shall fail to resign after written request therefor by the
Servicer, the Issuer or the Majority Noteholders; or

(3) the Trustee shall become incapable of acting or shall become the
subject of an Event of Bankruptcy,

then, in any such case, the Servicer may (or, at the request of the Issuer or
any Noteholder, shall) remove the Trustee and, promptly appoint a successor
Trustee by written instrument, in duplicate, one copy of which instrument shall
be delivered to the Trustee being so removed (who shall send a copy thereof to
each of the Applicable Rating Agencies) and the other copy thereof shall be
delivered to the successor Trustee. If no successor trustee shall have been
appointed and shall have accepted such appointment within 30 days after the
Issuer's or any such Noteholder's giving of any such notice, the Issuer or any
such

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Noteholder may petition any court of competent jurisdiction to appoint a
successor trustee meeting the eligibility requirements set forth in SECTION
11.10.

(iii) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this SECTION 11.11 shall
not become effective until acceptance of appointment by the successor trustee as
provided in SECTION 11.12 hereof.

(b)(i) The Administrative Agent may at any time resign hereunder by
giving at least 30 days' prior written notice thereof to the Issuer, the
Servicer, the Trustee and the Applicable Rating Agencies. Upon receiving such
notice of resignation, the Issuer shall promptly appoint a successor
Administrative Agent who meets the eligibility requirements set forth in clauses
(a) and (c) of SECTION 11.10 by written instrument, in duplicate, one copy of
which instrument shall be delivered to the resigning Administrative Agent and
one copy to the successor Administrative Agent. Until such time as a successor
Administrative Agent shall be so appointed and shall have accepted such
appointment, the Trustee shall act as the Administrative Agent. If no such
successor Administrative Agent shall have been appointed and shall have accepted
its appointment within 30 days after the giving of such notice of resignation,
the Trustee may (but shall have no obligation to), petition any court of
competent jurisdiction to appoint a successor Administrative Agent which meets
such eligibility requirements.

(ii) If at any time the Administrative Agent shall become incapable
of acting or shall become the subject of an Event of Bankruptcy, then, in any
such case, the Servicer may (or, at the request of the Issuer or any Noteholder,
shall) remove the Administrative Agent. In addition, if the Administrative
Agent shall fail to perform any of its duties hereunder and such failure shall
remain unremedied for 60 days after its receipt of notice of such failure given
by any Noteholder, the Trustee, the Issuer or the Servicer in writing (with a
copy thereof to the Trustee), then the Servicer at the direction of the Issuer
or the Required Noteholders, shall remove the Administrative Agent. In either
of the foregoing cases, the Issuer shall promptly appoint a successor
Administrative Agent who meets the eligibility requirements set forth in clauses
(a) and (c) of SECTION 11.10 by written instrument, in duplicate, one copy of
which instrument shall be delivered to the terminated Administrative Agent and
one copy to the successor Administrative Agent. Until such time as a successor
Administrative Agent shall be so appointed and shall have accepted such
appointment, the Trustee shall act as the Administrative Agent. If no such
successor Administrative Agent shall have been appointed and accepted its
appointment within 30 days after the giving of such notice of resignation or
removal, the Trustee may (but shall have

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no obligation to), petition any court of competent jurisdiction to appoint a
successor Administrative Agent which meets such eligibility requirements.

(iii) Any resignation or removal of the Administrative Agent and
appointment of a successor Administrative Agent pursuant to any of the
provisions of this SECTION 11.11(b) shall not become effective until acceptance
of appointment by the successor Administrative Agent as provided in SECTION
11.12 hereof.

Section 11.12 SUCCESSOR TRUSTEE OR ADMINISTRATIVE AGENT. (a) Any
successor Trustee or Administrative Agent appointed as provided in SECTION 11.11
hereof shall execute, acknowledge and deliver to the Issuer, the Servicer, the
Noteholders and the predecessor Trustee or Administrative Agent, as the case may
be, an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the predecessor Trustee or Administrative Agent shall,
upon payment of its fees and expenses and other amounts owed to it pursuant to
SECTION 11.09, become effective and such successor Trustee or Administrative
Agent, as the case may be, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with like effect as if originally named herein as Trustee
or the Administrative Agent, as the case may be. The predecessor Trustee or
Administrative Agent shall deliver to the successor Trustee or Administrative
Agent, as the case may be, at the expense of the Servicer, all documents or
copies thereof and statements held by it hereunder; and the Issuer and the
predecessor Trustee or Administrative Agent, as the case may be, shall execute
and deliver such instruments and do such other things as may reasonably be
required for fully vesting and confirming in the successor Trustee or
Administrative Agent, as the case may be, all such rights, powers, duties and
obligations.

(b) No successor Trustee shall accept appointment as provided in this
SECTION 11.12 unless at the time of such acceptance such successor Trustee shall
be eligible to become the Trustee under the provisions of this Indenture.

(c) Upon acceptance of appointment by a successor Trustee or
Administrative Agent as provided in this SECTION 11.12, such successor Trustee
or Administrative Agent, as the case may be, shall mail notice of such
succession hereunder to each of the Applicable Rating Agencies, the Issuer, the
Servicer, the Trustee, the Administrative Agent and each of the Noteholders.

Section 11.13 MERGER OR CONSOLIDATION OF TRUSTEE OR ADMINISTRATIVE
AGENT. Any Person into which the Trustee or Administrative Agent may be merged
or converted or with which it

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may be consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Trustee or Administrative Agent shall be a party, or
any Person succeeding to all or substantially all of the corporate trust
business of the Trustee or Administrative Agent, shall be the successor of the
Trustee or Administrative Agent hereunder, provided such Person meets the
requirements of this Indenture, without the execution or filing of any paper or
any further act on the part of any of the parties hereto. The Trustee or the
Administrative Agent, as the case may be, shall promptly give notice to the
Applicable Rating Agencies, the Issuer, the Servicer, the Trustee (in the case
of a notice to be delivered by the Administrative Agent), the Administrative
Agent (in the case of a notice to be delivered by the Trustee) and the
Noteholders upon any such merger or consolidation of the Trustee or the
Administrative Agent, as the case may be.

Section 11.14 APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE. (a)
Notwithstanding any other provisions of this Indenture, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Pledged Assets may at the time be located, or for the purpose of
compliance with the Trust Indenture Act (to the extent applicable), the Trustee
shall have the power and may execute and deliver all instruments to appoint one
or more Persons (which may be an employee or employees of the Trustee) to act as
a co-trustee or co-trustees, or separate trustee or separate trustees, with
respect to all or any part of its duties hereunder or with respect to the
Pledged Assets, and to vest in such Person or Persons, in such capacity and for
the benefit of the Noteholders, subject to the other provisions of this SECTION
11.14, such powers, duties, obligations, rights and trusts and with respect to
the Pledged Assets, or any part thereof, as the Trustee may consider necessary
or appropriate. No co-trustee or separate trustee hereunder shall be required
to meet the terms of eligibility of a successor trustee under SECTION 11.10 and
no notice to the Noteholders or the Applicable Rating Agencies of the
appointment of any such co-trustee or separate trustee shall be required under
SECTION 11.12; PROVIDED, HOWEVER, that, in the event this Indenture is qualified
under the Trust Indenture Act, each separate "indenture trustee" must qualify
under the Trust Indenture Act. The Trustee shall give the Servicer and the
Issuer notice of any such appointment as promptly as practicable.

(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:

(i) except for any appointment of a separate Trustee pursuant to
SECTION 11.05 hereof, all rights, powers, duties and obligations conferred
or imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by

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the Trustee and such separate trustee or co-trustee jointly and such
separate trustee or co-trustee shall not be authorized to act separately
without the Trustee joining in any such act, except to the extent that
under any law of any jurisdiction in which any particular act or acts
are to be performed (whether as the Trustee hereunder or as successor to
the Servicer hereunder), the Trustee shall be incompetent or unqualified
to perform such act or acts, in which event such rights, powers, duties
and obligations shall be exercised and performed singly by such separate
trustee or co-trustee, but solely at the direction of the Trustee;

(ii) no trustee hereunder shall be personally liable by reason of any
act or omission of any other trustee hereunder; and

(iii) the Trustee may at any time accept the resignation of or
(except with respect to a separate trustee appointed pursuant to SECTION
11.05 hereof) remove any separate trustee or co-trustee.

(c) Any notice, request or other writing given to the Trustee shall
be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Indenture and
the conditions of this ARTICLE XI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the provisions
of this Indenture, specifically including every provision of this Indenture
relating to the conduct of, affecting the liability of, or affording protection
or indemnity to, the Trustee. Every such instrument shall be filed with the
Trustee and a copy thereof given to the Servicer.

(d) Any separate trustee or co-trustee may at any time constitute the
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect to this
Indenture or any other Transaction Document on its behalf and in its name. If
any separate trustee or co-trustee shall die, become incapable of acting, resign
or be removed, all its estates, properties, rights, remedies and trusts shall
vest in and be exercised by the Trustee, to the extent permitted by law, without
the appointment of a new or successor trustee.

Section 11.15 TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF NOTES.
All rights of action and claims under this Indenture, the Notes and/or any of
the other Transaction Documents may be prosecuted and enforced by the Trustee
without the

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possession of any of the Notes or the production thereof in any proceeding
relating thereto, and any such proceeding instituted by the Trustee shall be
brought in its own name as trustee. Any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be
distributed to the Noteholders in respect of which such judgment has been
obtained in the manner specified in SECTION 4.02(e) or 4.02(f), as applicable.

Section 11.16 TRUSTEE MAY FILE PROOFS OF CLAIM. In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceedings, or any voluntary or involuntary case under the Bankruptcy Code or
any similar state bankruptcy or insolvency laws, in each case, as now or
hereafter constituted, relative to the Issuer, the Trustee (irrespective of
whether the principal of the Notes shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand on the Issuer for the payment of overdue principal or
interest) shall be entitled and empowered, by intervention in such proceeding or
otherwise,

(i) to file and prove a claim for the whole Outstanding Principal
Balance (and premium, if any) and interest owing and unpaid in respect of
the Notes and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim
for the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel) and the Noteholders allowed in such
judicial proceeding, and

(ii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and any
custodian, receiver, assignee, trustee, liquidator, sequestrator (or other
similar official) in any such proceeding is hereby authorized by each
Noteholder to make such payments to the Trustee, and in the event that the
Trustee shall consent to the making of such payments directly to the
Noteholders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel, and any other amounts due the Trustee under SECTION
11.09.

Nothing contained herein shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Noteholder any plan
of reorganization, arrangement, adjustment or composition affecting the Notes or
of any Note

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holder, or to authorize the Trustee to vote in respect of the claim of any
Noteholder in any such proceeding.

Section 11.17 SUITS FOR ENFORCEMENT. If a Liquidation Event, Event
of Default or a Servicer Default shall occur and be continuing, the Trustee, in
its discretion may, subject to the provisions of SECTIONS 11.01 and 11.18,
proceed to protect and enforce its rights and the rights of the Noteholders
under this Indenture and/or the other Transaction Documents by suit, action or
proceeding in equity or at law or otherwise, whether for the specific
performance of any covenant or agreement contained in this Indenture or any
other Transaction Document or in aid of the execution of any power granted in
this Indenture or any other Transaction Document or for the enforcement of any
other legal, equitable or other remedy as the Trustee, being advised by counsel,
shall deem most effectual to protect and enforce any of the rights of the
Trustee or the Noteholders.

Section 11.18 RIGHTS OF REQUIRED NOTEHOLDERS TO DIRECT TRUSTEE. The
Required Noteholders shall have the right to direct the Trustee to perform any
of its duties as Trustee hereunder (including, without limitation, directing the
time, method and location for conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred on the Trustee);
PROVIDED, HOWEVER, that if any provision of this Indenture or any Supplement
requires the approval or other action of Noteholders holding a specified
percentage of any Class or Series of Notes, then the Trustee shall perform such
duty only at the direction of such requisite percentage of Noteholders as is
specified in such provision; and PROVIDED, FURTHER, that, subject to SECTION
11.01, the Trustee may decline to follow any such direction if the Trustee,
being advised by counsel, determines that the action so directed may not
lawfully be taken, or if a Responsible Officer or Responsible Officers of the
Trustee shall determine, in good faith, that the proceedings so directed would
be illegal or involve the Trustee in personal liability or be unduly prejudicial
to the rights of the Noteholders not giving such direction; and, PROVIDED,
FURTHER that nothing in this Indenture shall impair the right of the Trustee to
take any action deemed proper by the Trustee and which is not inconsistent with
such direction of the Required Noteholders or such other required percentage of
Noteholders, as applicable.

Section 11.19 REPRESENTATIONS AND WARRANTIES OF TRUSTEE AND THE
ADMINISTRATIVE AGENT. (a) The Trustee represents and warrants that:

(i) the Trustee is a New York banking corporation and trust company
organized, existing and in good standing under the laws of the State of New
York;

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(ii) the Trustee has full power, authority and right to execute,
deliver and perform this Indenture and each of the Supplements executed by
it on the date hereof, and has taken all necessary action to authorize the
execution, delivery and performance by it of this Indenture and such
Supplements;

(iii) this Indenture and each of the Supplements executed by it on
the date hereof have been duly executed and delivered by the Trustee and
are legal, valid and binding obligations of the Trustee, enforceable in
accordance with their respective terms, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity, regardless of whether such enforceability is
considered in a proceeding in equity or at law; and

(iv) until notified to the contrary by the Trustee in accordance with
SECTION 11.10, the Trustee satisfies the eligibility requirements set forth
in such Section.

(b) The Administrative Agent represents and warrants that:

(i) the Administrative Agent is a New York banking corporation
organized, existing and in good standing under the laws of the jurisdiction
of its incorporation;

(ii) the Administrative Agent has full power, authority and right to
(x) execute, deliver and perform this Indenture and each of the Supplements
executed by it on the date hereof, and (y) to authenticate and deliver each
of the Notes authenticated and delivered by it on the date hereof and has
taken all necessary action to authorize the execution, delivery,
performance and/or authentication, as applicable, by it of this Indenture,
such Supplements and such Notes; and

(iii) this Indenture, each of the Supplements and each of the Notes
executed or authenticated by it on the date hereof have been duly executed
and delivered by the Administrative Agent and, in the case of the Indenture
and each such Supplement, are legal, valid and binding obligations of the
Administrative Agent, enforceable in accordance with their respective
terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement
of creditors' rights generally and by general principles of equity,
regardless of whether such

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enforceability is considered in a proceeding in equity or at law.

Section 11.20 MAINTENANCE OF OFFICE OR AGENCY. Each of the Trustee
and the Administrative Agent will maintain, at its address designated pursuant
to SECTION 16.03, an office or offices or agency or agencies where notices and
demands to or upon the Trustee or the Administrative Agent in respect of the
Notes, this Indenture and the other Transaction Documents to which it is a party
may be served. Each of the Trustee and the Administrative Agent will give
prompt written notice to the Servicer, the Administrative Agent (in the case of
a notice to be delivered by the Trustee), the Trustee (in the case of a notice
to be delivered by the Administrative Agent), the Issuer, and to the Noteholders
of any change in the location of the Note Register or any such office or agency.

ARTICLE XII

LISTS OF NOTEHOLDERS

Section 12.01 ACCESS TO LIST OF NOTEHOLDERS. (a) The Administrative
Agent will furnish or cause to be furnished to the Trustee, the Issuer, the
Servicer, the Sellers or the Paying Agent, within ten (10) Business Days after
receipt by the Administrative Agent of a request therefor from the Trustee, the
Issuer, the Servicer or the Paying Agent, respectively, in writing, a list in
such form as the Trustee, the Issuer, the Servicer or the Paying Agent, as
applicable, may reasonably require, of the names and addresses of the
Noteholders as of the most recent Record Date.

(b) If at any time the Administrative Agent shall cease to be the
Transfer Agent and Registrar for the Notes, the Issuer shall furnish or cause to
be furnished to the Administrative Agent.

(i) monthly at least 5 days prior to the Payment Date during such
month, a list, in such form as the Administrative Agent may reasonably
require, of the names and addresses of the Noteholders as of the
immediately preceding Record Date, and

(ii) at such other times as the Administrative Agent may request in
writing, within 5 days after the receipt by the Issuer of any such request,
a list of similar form and content as of the Record Date immediately
preceding the date upon which such list is to be provided.

Notwithstanding the requirements of the immediately preceding CLAUSE (a), the
obligation of the Administrative Agent to furnish

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the list of Noteholders pursuant to such clause at any time when it is no longer
acting as the Transfer Agent and Registrar for the Notes shall be subject to its
receipt of any such list pursuant to this CLAUSE (b). The Administrative Agent
shall preserve, in as current a form as is reasonably practicable, the names and
addresses of Noteholders contained in the most recent list furnished to the
Administrative Agent as provided above, and the names and addresses of
Noteholder received by the Administrative Agent in its capacity as Transfer
Agent and Registrar, if so acting. The Administrative Agent may destroy any
list furnished to it as provided above upon receipt of a new list so furnished.

(c) The Noteholders may communicate as provided in Section 312(b) of
the Trust Indenture Act (without regard as to whether this Indenture has been or
at such time remains qualified under the Trust Indenture Act) with all other
Noteholders with respect to their rights under this Indenture, the other
Transaction Documents or under the Notes; PROVIDED, that application by the
Noteholders under such Section of such Act shall be made to the Administrative
Agent in lieu of the Trustee as provided under such Act. The Administrative
Agent shall comply in all material respects with the provisions of such Act to
facilitate such communications by and among Noteholders.

(d) Every Noteholder by receiving and holding a Note, agrees with the
Trustee, the Administrative Agent, and the Issuer that neither the Trustee, the
Administrative Agent, the Transfer Agent and Registrar, the Issuer, the
Servicer, the Sellers nor any of their respective agents, shall be held
accountable by reason of the disclosure of any such information as to the names
and addresses of the Noteholders in accordance with Section 312(b) of the Trust
Indenture Act, regardless of the sources from which such information was
derived, and that neither the Trustee nor the Administrative Agent shall be held
accountable by reason of mailing any material pursuant to a request made under
Section 312(b) of the Trust Indenture Act.

ARTICLE XIII

SATISFACTION AND DISCHARGE

Section 13.01 SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture
and all obligations of the Issuer hereunder and under the other Transaction
Documents shall (except to the extent expressly otherwise provided herein or
therein with respect to certain provisions hereof or thereof which shall survive
the satisfaction and discharge hereof) cease to be of further effect at such
time (i) after the Liquidation Commencement Date as the entire Outstanding
Principal Balance of all outstanding Notes and all other Obligations owing by
the Issuer hereunder and under the

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other Transaction Documents have been reduced to zero or (ii) such earlier time
as all outstanding Notes theretofore authenticated and issued hereunder have
been delivered (other than any Notes which shall have been destroyed, lost or
stolen and which shall have been replaced or paid as provided in SECTION 6.06)
to the Administrative Agent for cancellation and the Issuer has paid all sums
payable hereunder, under the other Transaction Documents and under the Notes;
PROVIDED, HOWEVER, that this Indenture and the trusts created hereby shall
earlier terminate and this Indenture be satisfied and discharged upon any sale
or final disposition by the Trustee of all property constituting the Pledged
Assets from and after an Event of Default and the final distribution by the
Trustee of all proceeds thereof in accordance with ARTICLE IV hereof.

Section 13.02 DEPOSITED MONEYS, U.S. GOVERNMENT OBLIGATIONS TO BE
HELD IN TRUST. All moneys and U.S. Government Obligations deposited with the
Trustee or the Administrative Agent, as the case may be, in respect of the Notes
shall be held in trust and applied by it, in accordance with the provisions of
the Notes and this Indenture to the payment, either directly or through any
Paying Agent (including the Issuer or the Servicer acting as Paying Agent), to
the Noteholders of all sums due and to become due thereon for principal,
premium, if any, and interest.

Section 13.03 REPAYMENT TO THE ISSUER. The Trustee, the
Administrative Agent, and any Paying Agent shall promptly pay or return to the
Issuer, upon the Issuer's request, any money or securities held by them at any
time that are not required for the payment of the principal of (and premium, if
any) and interest on the Notes and for other payments provided for in this
Indenture or the other Transaction Documents.

Any money deposited with the Trustee, the Administrative Agent, or any
Paying Agent in trust for the payment of the principal of (or premium, if any)
or interest on any Notes and remaining unclaimed for two years after the date
upon which such payment shall have become due, shall be paid to the Issuer, upon
the Issuer's request; PROVIDED, HOWEVER, that the Issuer shall cause to be
published at least once in a newspaper of general circulation in New York, New
York and Chicago, Illinois or mailed to each Noteholder entitled to such
unclaimed money, notice that such money remains unclaimed and that, after a date
specified therein, which date shall not be less than 30 days from the date of
such publication or mailing, any unclaimed balance of such money remaining shall
be repaid to the Issuer. After repayment to the Issuer, any Noteholder entitled
to such money shall thereafter, as an unsecured general creditor, look (unless
an applicable law designates another Person) only to the Issuer for payment, and
all liability of the
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Trustee, the Administrative Agent, or such Paying Agent with respect to such
trust money, shall thereupon cease.

Section 13.04 RELEASE OF LIENS. Upon the satisfaction and discharge
of this Indenture pursuant to SECTION 13.01, the Trustee, at the request of the
Issuer, shall release (and shall, at the expense of the Issuer, execute and
deliver to the Issuer all necessary UCC releases and other releases in respect
thereof) the Pledged Assets from the lien of the Trustee effected pursuant to
the Granting Clause hereof.

ARTICLE XIV

SUPPLEMENTS AND AMENDMENTS TO INDENTURE

Section 14.01 SUPPLEMENTS AND AMENDMENTS TO INDENTURE WITHOUT CONSENT
OF NOTEHOLDERS. Without the consent of any of the Noteholders (unless otherwise
required pursuant to any Supplement), the Issuer, when authorized by its Board
of Directors, the Servicer, the Trustee, and the Administrative Agent at any
time and from time to time, may enter into one or more Supplements hereto or one
or more amendments to this Indenture or any Supplement to:

(1) evidence the succession of another Person to the Issuer and the
assumption by such successor of the covenants of the Issuer herein, under
any Supplement or under the Notes, in each case, to the extent permitted
pursuant to SECTION 7.02(i) hereof; or

(2) add to the covenants of the Issuer, for the benefit of the
Noteholders of all of the Notes, or to surrender any right or power
conferred upon the Issuer hereby, or by any Supplement or the Notes; or

(3) add any additional Liquidation Events or Events of Default or to
further secure the Notes; or

(4) provide for certificated Notes in addition to or in place of
uncertificated Notes; or

(5) change or eliminate any of the provisions of this Indenture or
any Supplement, PROVIDED that any such change or elimination shall not
adversely affect in any material respect the interests of any Noteholder;
or

(6) evidence and provide for the acceptance of appointment hereunder
by a successor Trustee or Co-Trustee or successor Administrative Agent and
to add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of

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the trusts hereunder by more than one Trustee or Administrative Agent, pursuant
to the requirements of SECTION 11.14; or

(7) cure any ambiguity, to correct or supplement any provision herein
or in any Supplement which may be inconsistent with any other provision
herein or therein or to make any other provisions with respect to matters
or questions arising under this Indenture or any of the other Transaction
Documents, PROVIDED such actions shall not materially and adversely affect
the interests of any Noteholder; or

(8) comply with the requirements of the Commission in order to effect
or maintain the qualification of this Indenture under the Trust Indenture
Act; or

(9) issue additional Notes and/or Series of Notes in accordance with
the provisions of SECTIONS 6.03 and 6.04; or

(10) upon the request of the Issuer and subject to the limitations
imposed by the Applicable Rating Agencies with respect thereto, provide for
the inclusion in the Program of those receivables which, but for the fact
that they are owing from a Foreign Obligor, would otherwise constitute
"Receivables" for purposes of this Indenture and the other Transaction
Documents.

No such Supplement or amendment to this Indenture or any Supplement
pursuant to this SECTION 14.01 shall become effective unless a copy thereof
shall have been sent to each of the Applicable Rating Agencies and the Rating
Agency Condition shall have been satisfied with respect thereto.

Section 14.02 SUPPLEMENTS AND AMENDMENTS TO INDENTURE WITH CONSENT OF
THE NOTEHOLDERS. Except as otherwise permitted by SECTIONS 6.03 and 14.01 and
this SECTION 14.02, and with the consent of the Noteholders of not less than the
Required Series Holders of all Series of Notes affected thereby (and any other
holders of Notes from whom consent may be required in accordance with the terms
of the applicable Supplement pursuant to which such Notes were issued), by Act
of said Noteholders delivered to the Issuer, the Trustee, and the Administrative
Agent, the Issuer, when authorized by its Board of Directors, the Servicer, the
Trustee, and the Administrative Agent may enter into one or more Supplements or
one or more amendments to this Indenture, any Supplement or any Series of Notes
to which it is a party, grant one or more consents or waivers hereto or thereto,
or execute one or more instructions or other documents pursuant hereto or
thereto, in each case, for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of this Indenture, any
Supplement or any Series of Notes, or for

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the purpose of waiving or modifying in any manner the rights of the Noteholders
or the rights or obligations of the parties to this Indenture or any Supplement
or taking any actions pursuant hereto or thereto; PROVIDED, HOWEVER, that no
such Supplement, amendment, consent or waiver to, or instruction or other
document in respect of, this Indenture or any Supplement shall, without the
consent of the Noteholder of each outstanding Note which is affected thereby
(and any other holders of Notes from whom consent may be required in accordance
with the terms of the applicable Supplement pursuant to which such Notes were
issued):

(1) change the Stated Maturity Date or the time for payment of the
principal of, or any installment of interest on, any such outstanding Note
(including, without limitation, any redemption or required repurchase
provisions); or reduce the principal amount of any outstanding Note (or any
premium, if any) or the interest thereon, that would be due and payable
thereon, or change the place of payment where, or the coin or currency in
which, any Note or any interest thereon is payable, or impair any rights
hereunder or under any of the other Transaction Documents to institute suit
for the enforcement of any such payment on or after the respective Stated
Maturity Date or specified time for payment thereof, or

(2) reduce the percentage in principal amount of the outstanding
Notes the consent of which is required for any such Supplement or
amendment, or the consent of which is required for any waiver of compliance
with certain provisions of this Indenture or any applicable Supplement, or
certain Liquidation Events or Events of Default hereunder and their
respective consequences, provided for in this Indenture, or

(3) modify any of the provisions of this SECTION 14.02, except (x) to
increase any percentage required to approve any amendment, modification or
waiver to this Indenture or any applicable Supplement or (y) to provide
that certain other provisions of this Indenture or any applicable
Supplement cannot be modified or waived without the consent of each
Noteholder which is affected thereby.

No such Supplement or amendment to this Indenture or any Supplement
pursuant to this Section shall become effective unless a copy thereof shall have
been sent to each of the Applicable Rating Agencies and either (i) the Rating
Agency Condition shall have been satisfied with respect thereto or (ii) if the
Rating Agency Condition is not so satisfied, the Noteholders of not less than
66-2/3% of the respective Outstanding Principal Balance of any Series or Class
of Notes whose rating is or would be adversely affected thereby shall have
consented thereto in writing.

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Section 14.03 CERTAIN MATTERS RELATING TO SUPPLEMENTS AND AMENDMENTS.
(a) The Issuer, the Trustee, and the Administrative Agent shall establish a
record date in accordance with SECTION 1.05(e) hereof for determining which
Noteholders may give any waivers or consents.

(b) Notwithstanding anything contained in SECTIONS 14.01 or 14.02 to
the contrary, no Supplement, amendment, waiver or consent which adversely
affects in any material respect the rights, duties or immunities of any
Enhancement Provider under this Indenture or any Supplement or any other
Transaction Document shall be effective without the consent of such affected
Enhancement Provider.

(c) It shall not be necessary for any Act of Noteholders under this
Section to approve the particular form of any such proposed Supplement,
amendment, consent or waiver, but it shall be sufficient if such Act shall
approve the substance thereof. Promptly after the execution of any Supplement,
amendment, consent or waiver described in SECTION 14.01 or SECTION 14.02, the
Administrative Agent shall furnish written notification of the substance thereof
to each affected Noteholder and Enhancement Provider, if any, and to each of the
Applicable Rating Agencies.

(d) In executing or accepting the additional trusts created by any
Supplement or any amendment to this Indenture or any of the other Transaction
Documents permitted by this Article or the modifications thereby of the trusts
created by this Indenture and the other Transaction Documents, the Trustee and
the Administrative Agent shall be entitled to receive, and (subject to SECTION
11.02(a)) shall be fully protected in relying upon, an Opinion of Counsel
stating that the execution of such Supplement or amendment is authorized or
permitted by this Indenture and/or the other applicable Transaction Documents
and that all conditions precedent to the execution and delivery thereof shall
have been satisfied. Each of the Trustee, the Administrative Agent, and the
Servicer may, but shall not be obligated to, enter into any such Supplement or
amendment which affects the Trustee's, the Administrative Agent's, or the
Servicer's own rights, duties or immunities under this Indenture or the other
Transaction Documents to which it is a party or otherwise.

(e) Any Supplement executed in accordance with the provisions of
SECTION 6.03, shall not be deemed to be transactions subject to the requirements
of SECTION 14.02.

Section 14.04 EFFECT OF SUPPLEMENTS. Upon the execution of any
Supplement under this Article, this Indenture shall be modified in accordance
therewith, and such Supplement shall form a part of this Indenture for all
purposes; and all

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affected Noteholders, the Trustee, the Administrative Agent, the Servicer, and
the Issuer shall be bound thereby.

Section 14.05 CONFORMITY WITH TRUST INDENTURE ACT. In the event this
Indenture shall become qualified under the Trust Indenture Act, every Supplement
executed pursuant to this Article shall conform to the requirements of the Trust
Indenture Act as then in effect.

Section 14.06 REFERENCE IN NOTES TO SUPPLEMENTS. Notes authenticated
and delivered after the execution of any Supplement pursuant to this Article
may, and shall if required by the Trustee, the Issuer or the Administrative
Agent, bear a notation in form approved by such Person as to any matter provided
for in such Supplement. If the Issuer shall so determine, new Notes so modified
as to conform to any such Supplement may be prepared and executed by the Issuer
and authenticated and delivered by the Administrative Agent in exchange for any
outstanding Notes.

ARTICLE XV

REDEMPTIONS

Section 15.01 REDEMPTION ALLOWED. The Issuer may at its option
redeem the Notes of any Series which are redeemable before their Stated Maturity
Date in accordance with the terms of such Series of Notes and this Article.

Section 15.02 ELECTION TO REDEEM; NOTICE TO TRUSTEE AND
ADMINISTRATIVE AGENT. The election of the Issuer to redeem any Notes shall be
evidenced by a resolution of the Board of Directors of the Issuer. In case of
any such redemption at the election of the Issuer, the Issuer shall, at least 35
Business Days prior to the redemption date (the "REDEMPTION DATE") fixed by the
Issuer (unless a shorter notice shall be acceptable to the Trustee and the
Administrative Agent), notify the Trustee and the Administrative Agent of such
Redemption Date and of the principal amount of the Notes of such Series to be
redeemed. In the case of any redemption of the Notes of any Series prior to the
expiration of any restriction on such redemption provided in the terms of such
Series of Notes or elsewhere in this Indenture, the Issuer shall furnish the
Trustee and the Administrative Agent with an Officers' Certificate evidencing
compliance with such restriction.

Section 15.03 SELECTION OF SECURITIES TO BE REDEEMED. If less than
all the Notes of any Series or Class are to be redeemed, the particular Notes of
such Series to be redeemed shall be selected, not less than 30 days prior to the
Redemption Date, by the Trustee from among the outstanding Notes of such

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Series not previously called for redemption, by such method as the Trustee shall
deem fair and appropriate in accordance with the terms of any applicable
Supplement and which may provide for the selection for redemption of portions of
the principal amount of the Notes of such Series of a denomination larger than
the minimum authorized denomination for the Notes of such Series; PROVIDED,
HOWEVER, that in case the Notes of such Series have different terms and/or
Stated Maturity Dates, the Notes of such Series to be redeemed shall be selected
by the Issuer in accordance with the terms of this Indenture, and the Issuer
shall give notice thereof to the Trustee and the Administrative Agent.

The Administrative Agent shall promptly notify the Issuer in writing
of the Notes selected for redemption and, in the case of any Notes selected for
partial redemption, the principal amount thereof to be redeemed.

For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Notes shall relate, in
the case of any Notes redeemed or to be redeemed only in part, to the portion of
the principal amount of such Notes which has been or is to be redeemed.

Section 15.04 NOTICE OF REDEMPTION. Unless otherwise provided in any
applicable Supplement pursuant to which Notes are issued, at least 30 but not
more than 60 days before a Redemption Date, the Issuer shall mail a notice of
redemption by first-class mail to each Noteholder whose Notes are to be
redeemed, at the addresses of such Noteholders as they appear in the Note
Register. Any notice which is mailed in the manner herein provided shall be
conclusively presumed to have been duly given, whether or not the Noteholder
actually receives such notice. Failure to give notice by mail, or any defect in
the notice to the Noteholder of any Note of any Series designated for redemption
in whole or in part, shall not affect the validity of the proceedings for the
redemption of any other Notes of such Series.

The notice of redemption shall identify the Notes to be redeemed and
shall also state:

(1) the Redemption Date;

(2) the redemption price (including the amount of accrued and unpaid
interest to be paid and any premium payable in connection therewith) (the
"REDEMPTION PRICE");

(3) the name and address of the Paying Agent;

(4) the place or places where such Notes are to be surrendered for
payment of the Redemption Price; and

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(5) that, unless the Issuer defaults in making the redemption
payment, interest on the Notes or any portion thereof called for redemption
ceases to accrue on and after the specified Redemption Date and the only
remaining right of the Noteholders thereof will be to receive payment of
the Redemption Price upon surrender to the Administrative Agent or the
Paying Agent (if other than the Administrative Agent) of the Notes;

(6) if less than all of the outstanding Notes of any Series are
to be redeemed, the identification of the particular Notes to be
redeemed, in whole or in part; and

(7) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, on or after the
Redemption Date, upon surrender of such Note, a new Note or Notes in an
aggregate principal amount equal to the unredeemed portion thereof will be
issued.

At the Issuer's request, the Administrative Agent shall give the
notice of redemption in the Issuer's name and at its expense. In such event the
Issuer will provide the Trustee and the Administrative Agent with the
information required by clauses (1), (2), (3), (4), (6) and (7) above.

Section 15.05 DEPOSIT OF REDEMPTION PRICE. On or prior to any
Redemption Date, the Issuer shall deposit with the Administrative Agent or (if
other than the Administrative Agent) the Paying Agent an amount of money
sufficient to pay the Redemption Price of, and accrued interest on (unless such
interest has otherwise been paid on such date), all of the Notes which are to be
redeemed on the Redemption Date.

So long as the Issuer complies with the preceding paragraph and the
other provisions of this Article, interest on the Notes (or portion thereof) to
be redeemed on the applicable Redemption Date shall cease to accrue from and
after such date and such Notes (or portions thereof) shall be deemed not to be
entitled to any benefit under this Indenture or the related Supplement except to
receive payment of the Redemption Price on the Redemption Date.

The provisions of the second paragraph of SECTION 13.03 shall apply to
any money held by the Trustee, the Administrative Agent or any Paying Agent
under this Article that remains unclaimed for two years after the Redemption
Date for any Notes called for redemption pursuant to the provisions of this
Article.

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Section 15.06 NOTES PAYABLE ON REDEMPTION DATE. Notice of redemption
having been given as aforesaid, the Notes (or portions thereof) to be so
redeemed shall, on the Redemption Date, become due and payable at the Redemption
Price therein specified. Upon surrender of any such Note for redemption in
accordance with such notice, such Notes (or portions thereof) shall be paid at
the Redemption Price, together with accrued interest to the Redemption Date.

If any Note (or portion thereof) called for redemption shall not be so
paid upon surrender for redemption, then, from the Redemption Date until such
principal is paid, interest shall be paid on the unpaid principal and, to the
extent permitted by law, on any accrued but unpaid interest thereon, in each
case at the rate prescribed therefor by such Notes.

Section 15.07 NOTES REDEEMED IN PART. Upon surrender of a Note that
is redeemed in part, the Issuer shall issue and the Administrative Agent shall
authenticate a new Note or Notes equal in aggregate principal amount to the
unredeemed portion of the Note so surrendered.

ARTICLE XVI

MISCELLANEOUS PROVISIONS

Section 16.01 LIMITATION ON RIGHTS OF NOTEHOLDERS. (a) No
Noteholder shall have any right by virtue of any provisions of this Indenture to
institute any suit, action or proceeding in equity or at law upon or under or
with respect to this Indenture, unless such Noteholder shall have previously
given the Trustee, and unless the majority of the Noteholders of the affected
Notes or Series of Notes shall have made, a written request upon the Trustee to
institute such action, suit or proceeding in its own name as Trustee hereunder
and shall have offered to the Trustee such reasonable indemnity as it may
require against the costs, expenses and liabilities to be incurred therein or
thereby, and the Trustee, for 60 days after its receipt of such notice, request
and offer of indemnity, shall have neglected or refused to institute any such
action, suit or proceeding; it being understood and intended, and being
expressly covenanted by each Noteholder with every other Noteholder and the
Trustee, that no one or more Noteholders shall have any right in any manner
whatever by virtue of, or by availing itself or themselves of, any provisions of
this Indenture to affect, disturb or prejudice the rights of any other
Noteholder or any Noteholder of any other Series of Notes, or to obtain or seek
to obtain priority over or preference to any such other Noteholder or any such
Noteholder of any other Series of Notes, or to enforce any right under this
Indenture, except in the manner herein provided and for the equal, ratable and
common benefit of,

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in the case of actions affecting the Noteholders as a class, all Noteholders or,
in the case of actions affecting the Noteholders of any Series of Notes, all
Noteholders of such Series. For the protection and enforcement of the
provisions of this SECTION 16.01, each and every Noteholder and the Trustee
shall be entitled to such relief as can be given either at law or in equity.

(b) By their acceptance of Notes pursuant to this Indenture and the
applicable Supplement, the Noteholders agree to the provisions of this SECTION
16.01.

Section 16.02 GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO CONFLICT
OF LAWS PRINCIPLES EXCEPT AS CONTEMPLATED IN SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.

Section 16.03 NOTICES. All demands, notices, instructions and
communications hereunder shall be in writing and shall be deemed to have been
duly given if personally delivered, four Business Days after mailing if mailed
by registered mail, return receipt requested, or the day on which the notice is
sent by facsimile transmission or, if such day is not a Business Day, then the
first Business Day after such transmission (a) in the case of the Issuer, to its
address set forth below its signature hereto; (b) in the case of Stone
Container, to its address set forth below its signature hereto; (c) in the case
of the Trustee, to the address of the Trustee set forth on the signature pages
hereof; and (d) in the case of the Administrative Agent, the Paying Agent or the
Transfer Agent and Registrar, to the address of the Administrative Agent set
forth on the signature pages hereof; or, as to each party, at such other address
or facsimile number as shall be designated by such party in a written notice to
each other party given in accordance with this SECTION 16.03. Except to the
extent expressly provided otherwise in an applicable Supplement, any notice
required or permitted to be mailed to a Noteholder shall be sent by first-class
mail, postage prepaid, to the address of such Noteholder as shown in the Note
Register. Except to the extent expressly provided otherwise in an applicable
Supplement, any notice so mailed within the time prescribed in this Indenture
shall be conclusively presumed to have been duly given on the fourth Business
Day after such notice is so mailed, whether or not the Noteholder receives such
notice. Each certificate and report required to be prepared, forwarded or
delivered to any of the Applicable Rating Agencies pursuant to SECTION 3.04
(excluding the Daily Reports) or 3.05 and a copy of any amendment, notice,
request, consent or waiver to or with respect to this Indenture, as required
pursuant hereto, in each case, required to be delivered thereto pursuant to this
Indenture

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<PAGE>

or any of the other Transaction Documents, shall, in each case, be sent to the
address of such Applicable Rating Agency as shall be designated by such
Applicable Rating Agency from time to time in a written notice to the Servicer.

Where this Indenture or any of the other Transaction Documents
provides for notice in any manner, such notice may be waived in writing by any
Person entitled to receive such notice, either before or after the event, and
such waiver shall be the equivalent of such notice. Waivers of notice by the
Noteholders, or any of them, shall be filed with the Trustee and the
Administrative Agent, but such filing shall not be a condition precedent to the
validity of any action taken in reliance upon such waiver.

In the event that, by reason of the suspension of regular mail service
as a result of a strike, work stoppage, riot, war, act of god or similar event,
it shall become impracticable to give notice of any event to any Person
hereunder in the manner provided in this SECTION 16.03 when such notice is
required to be given, then any manner of giving notice as shall be acceptable to
the Trustee or the Administrative Agent, as applicable, shall be deemed
sufficient giving of any such notice.

Section 16.04 SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions or terms of this Indenture or any of the other
Transaction Documents shall for any reason whatsoever be held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Indenture or such
other Transaction Document (as applicable) and shall in no way affect the
validity or enforceability of the other provisions of this Indenture, the Notes
or any of the other Transaction Documents or the rights of the Noteholders.

Section 16.05 FURTHER ASSURANCES. The Issuer and the Servicer agree
to do and perform, from time to time, any and all acts and to execute any and
all further instruments required or reasonably requested by the Trustee or the
Administrative Agent more fully to effect the purposes of this Indenture and the
other Transaction Documents, including the execution of any financing statements
or continuation statements relating to the Receivables for filing under the
provisions of the UCC or other applicable law of any applicable jurisdiction.

Section 16.06 NONPETITION COVENANT. Notwithstanding any prior
termination of this Indenture, each of the Trustee, the Administrative Agent,
the Servicer, the Issuer, the Paying Agent, the Authenticating Agent and the
Transfer Agent and Registrar (but not any Noteholder) agrees that it shall not
institute or join any other Person in instituting against, or with respect to,
the Issuer any proceeding of a type referred to in the definition

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<PAGE>

of "EVENT OF BANKRUPTCY" so long as any of the Notes issued by the Issuer shall
be outstanding or there shall not have elapsed one year plus one day since the
last day on which any such Notes shall have been outstanding. The foregoing
shall not limit the right of the Servicer, the Issuer, the Trustee, the
Administrative Agent, the Paying Agent, the Authenticating Agent and the
Transfer Agent and Registrar to file any claim in or otherwise take any action
with respect to any such insolvency proceeding that was instituted against the
Issuer by any Person other than the Servicer, the Issuer, the Trustee, the
Administrative Agent, the Paying Agent, the Authenticating Agent or the Transfer
Agent and Registrar. In addition, each of the Noteholders, the Servicer, the
Trustee, the Administrative Agent, the Paying Agent, the Authenticating Agent,
and the Transfer Agent and Registrar agree that all amounts owed to them by the
Issuer shall be payable solely from amounts from the allocable share of the
Pledged Assets available for the payment therefor pursuant to and in accordance
with the priorities set forth in this Indenture and the Purchase Agreement, and
no such unpaid amounts shall constitute a Claim against the Issuer or any of its
other assets or properties (including, without limitation, any other Pledged
Assets allocable to the payment of any other amounts owing hereunder, under the
Notes or under any of the other Transaction Documents) to the extent that they
are in excess of the amounts available for their payment. The provisions of
this SECTION 16.06 shall survive the satisfaction and discharge of this
Indenture.

Section 16.07 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise
and no delay in exercising, on the part of the Trustee, the Administrative
Agent, or the Noteholders any right, remedy, power or privilege hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
are not exhaustive of any rights, remedies, powers and privileges provided by
law.

Section 16.08 COUNTERPARTS. This Indenture may be executed in any
number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original,
and all of which together shall constitute one and the same instrument.

Section 16.09 THIRD-PARTY BENEFICIARIES. This Indenture will inure
to the benefit of and be binding upon the parties hereto and the Noteholders and
their respective successors and permitted assigns; PROVIDED HOWEVER, that the
Issuer shall not delegate or assign any of such Noteholders' duties or
obligations hereunder. Except as otherwise expressly provided in this
Indenture, nothing contained in this Indenture shall confer any

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<PAGE>

rights upon any Person which is not a party to, or a permitted assignee of a
party to, this Indenture.

Section 16.10 INTEGRATION. This Indenture and the other Transaction
Documents contain a final and complete integration of all prior expressions by
the parties hereto with respect to the subject matter hereof and thereof and
shall together constitute the entire agreement among the parties hereto with
respect to the subject matter hereof and thereof, superseding all prior oral or
written understandings.

Section 16.11 SURVIVAL OF PROVISIONS. This Indenture shall create
and constitute the continuing obligations of the parties hereto in accordance
with its terms, and shall remain in full force and effect until the satisfaction
and discharge hereof pursuant to ARTICLE XIII. The rights and remedies with
respect to (a) any breach of any representation and warranty made by the Issuer
in SECTION 2.03 or SECTION 7.01, (b) any breach of any representation and
warranty made by the Servicer in SECTION 8.01 and (c) the indemnification and
payment provisions in SECTIONS 3.08, 7.03, 8.04, and 11.09 shall be continuing
and shall survive the satisfaction and discharge of this Indenture.

Section 16.12 LIMITATION ON LIABILITY OF THE ISSUER AND THE SERVICER.
No recourse under or upon any obligation or covenant of the Issuer and/or the
Servicer, as applicable, under this Indenture, any Supplement, any Note or any
other Transaction Document, or for any claim based thereon or otherwise in
respect thereof shall be had against any incorporator, shareholder, officer or
director, as such, past, present or future, of the Issuer and/or Servicer, as
applicable; it being expressly understood that this Indenture, any Supplement,
the Notes and all other relevant Transaction Documents and the obligations
incurred by the Issuer and/or the Servicer hereunder or thereunder are solely
corporate obligations, and that no such personal liability whatsoever shall
attach to, or is or shall be incurred by the incorporators, shareholders,
employees, officers or directors, as such, of the Issuer or Servicer or of any
successor corporation and that any and all such personal liability of, either at
common law or in equity or by constitution or statute, and any and all such
rights and claims against, every such incorporator, shareholder, employee,
officer or director, as such, because of the creation of the indebtedness hereby
authorized, or under or by reason of the obligations or covenants contained in
this Indenture, any Supplement, any of the Notes or any other Transaction
Documents, or implied therefrom, are hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Indenture and
any Supplement. Each of the Issuer and the Servicer and any director, officer,
incorporator, shareholder, employee or agent of either of them may rely in good
faith on any document of any kind PRIMA FACIE properly executed

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<PAGE>

and submitted by any other Person respecting any matters arising hereunder.

Section 16.13 SUBMISSION TO JURISDICTION. EACH PARTY HERETO HEREBY
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY NEW YORK STATE OR
FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN NEW YORK, NEW YORK OVER ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE OR ANY OTHER
TRANSACTION DOCUMENT, AND HEREBY (A) IRREVOCABLY AGREES THAT ALL CLAIMS IN
RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH STATE
OR FEDERAL COURT; AND (B) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF
SUCH ACTION OR PROCEEDING. SERVICE OF PROCESS IN ANY ACTION OR PROCEEDING MAY
BE MADE BY MAILING OR DELIVERING A COPY OF SUCH PROCESS TO THE ISSUER AT ITS
ADDRESS SET FORTH ON THE SIGNATURE PAGES HERETO. NOTHING IN THIS SECTION 16.13
SHALL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE LEGAL PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF ANY PARTY HERETO TO BRING ANY
ACTION OR PROCEEDING AGAINST ANY OR ALL OF THE OTHER PARTIES HERETO OR ANY OF
THEIR RESPECTIVE PROPERTIES IN THE COURTS OF ANY OTHER JURISDICTION.

Section 16.14 WAIVER OF JURY TRIAL. EACH PARTY HERETO WAIVES ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS UNDER OR RELATING TO THIS INDENTURE, ANY OTHER TRANSACTION DOCUMENT, OR
ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN),
ACTIONS OF ANY OF THE PARTIES HERETO OR ANY OTHER RELATIONSHIP EXISTING IN
CONNECTION WITH THIS INDENTURE OR ANY OTHER TRANSACTION DOCUMENT, AND AGREES
THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE
A JURY.

Section 16.15 CERTAIN PARTIAL RELEASES. (a) In the event that the
Sellers exercise their rights under SECTION 2.07 of the Purchase Agreement to
terminate the sale of any or all of the categories of Receivables, the Trustee
shall, upon the request (and at the expense) of the Sellers, execute and deliver
to the Sellers such statements of partial release relating to the UCC-1
financing statements filed pursuant to the Purchase Agreement as shall be
prepared by the Sellers and provided to the Trustee to evidence such
termination; PROVIDED, HOWEVER, that the Trustee shall have received an
Officer's Certificate of the Servicer to the effect that all conditions to such
termination specified in such SECTION 2.07 have been satisfied (and shall not
have received notice from any Noteholder to the contrary), together with such
other certificates as the Trustee may reasonably request.

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<PAGE>

(b) In the event that any Seller (other than Stone Container) is
discontinued as a Seller pursuant to SECTION 2.07 of the Purchase Agreement, the
Trustee shall, upon the request (and at the expense) of such Seller, execute and
deliver to such Seller such statements of partial release and/or amendment
relating to the UCC-1 financing statements filed against such Seller pursuant to
the Purchase Agreement as shall be prepared by such Seller or the Servicer and
provided to the Trustee to evidence such termination; PROVIDED, HOWEVER, that
the Trustee shall have received (i) an Officer's Certificate of the Servicer to
the effect that all conditions to such termination specified in such SECTION
2.07 have been satisfied (and shall not have received notice from any Noteholder
to the contrary); (ii) an Opinion of Counsel to the effect that the filing of
such statements of partial release and/or amendment will not impair the
validity, perfection or priority of the Issuer's or the Trustee's rights in and
to (A) any Receivables or Related Assets conveyed prior to the effective date of
such termination or (B) any Receivables or Related Assets generated by any of
the other Sellers on or after the effective date of such termination; and (iii)
such other certificates as the Trustee may reasonably request. In addition,
after such a termination that complies with the requirements set out in the
preceding sentence, the Trustee shall, upon the request (and at the expense) of
such Sellers, execute and deliver to such Sellers such termination statements
relating to the UCC-1 financing statements filed against such Seller pursuant to
the Purchase Agreement as shall be prepared by such Seller or the Servicer and
provided to the Trustee to evidence such termination; PROVIDED, HOWEVER, that
the Trustee shall have received an Officer's Certificate of the Servicer to the
effect that the Trustee no longer holds any interest in any Receivables
generated by such terminated Seller.

Section 16.16 UNDERTAKING FOR COSTS. Except as expressly otherwise
provided in any applicable Supplement, all parties to this Indenture agree, and
each Noteholder by its acceptance of any Note shall be deemed to have agreed,
that any court may in its discretion require, in any suit for the enforcement of
any right or remedy under this Indenture or any of the other Transaction
Documents, or in any suit against the Trustee or the Administrative Agent for
any action taken, suffered or omitted by it as Trustee or Administrative Agent,
respectively, the filing by any party litigant in such suit of an undertaking to
pay the costs of such suit and that such court may in its discretion assess
reasonable costs, including reasonable attorneys' fees, against any party
litigant in such suit, having due regard to the merits and good faith of the
claims or defenses made by such party litigant; but the provisions of this
SECTION 16.16 shall not apply to any suit instituted by the Trustee or the
Administrative Agent, to any suit instituted by any Noteholder, or group of
Noteholders, holding in the aggregate more than 10% of the aggregate principal
amount of the

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outstanding Notes, or to any suit instituted by any Noteholder for the
enforcement of the payment of the principal of (or premium, if any) or interest
on any Note on or after its Maturity Date.

[THE REMAINDER OF THIS PAGE WAS LEFT BLANK INTENTIONALLY]

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IN WITNESS WHEREOF, the Issuer, the initial Servicer, the Trustee and
the Administrative Agent have caused this Indenture to be executed by their
respective officers thereunto duly authorized as of the day and year first above
written.

STONE RECEIVABLES CORPORATION,
as the Issuer

By
----------------------------------
Name: Leslie T. Lederer
Title: Vice President and Secretary

Address: 150 North Michigan Avenue,
17th Floor,
Chicago, Illinois 60601-7568

Attention: Assistant Treasurer
Telephone: (312) 553-1123
Facsimile: (312) 553-0238

STONE CONTAINER CORPORATION
as initial Servicer

By
-----------------------------------
Name: Michael B. Wheeler
Title: Vice President and Treasurer

Address: 150 North Michigan Avenue
Chicago, Illinois 60601-7568

Attention: Legal Department
Telephone: (312) 346-6600
Facsimile: (312) 580-2299

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<PAGE>
MARINE MIDLAND BANK,
as the Trustee

By
--------------------------------
Name: BarbaraJean McCauley
Title: Assistant Vice President

Address: 140 Broadway, 12th Floor
New York, New York 10005-1180
Attention: Corporate Trust Services
Telephone: (212) 658-6084
Facsimile: (212) 658-6425

BANKERS TRUST COMPANY,
as the Administrative Agent

By
---------------------------------
Name: Melissa J. Kaye
Title: Vice President

Address: Four Albany Street
10th Floor
New York, New York 10006
Attention: Corporate Trust and Agency
Group, Structured Finance
Team, Attention: Kevin Healey
Telephone: (212) 250-8360
Facsimile: (212) 250-6439

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<PAGE>

STATE OF ILLINOIS )
) SS
COUNTY OF COOK )

On the __th day of March, 1995 before me personally came Leslie T.
Lederer to me known, who, being by me duly sworn, did depose and say that he is
the Vice President and Secretary of Stone Receivables Corporation, a Delaware
corporation, the corporation described in and which executed the foregoing
instrument; and that he signed his name thereto by order of the board of
directors of said corporation.

Given under my hand and notarial seal, this __th day of March, 1995.

-----------------------------
Notary Public

Name:
-------------------
Commission expires:

<PAGE>

STATE OF ILLINOIS )
) SS
COUNTY OF COOK )

On the __th day of March, 1995 before me personally came Michael B.
Wheeler to me known, who, being by me duly sworn, did depose and say that he is
a Vice President and Treasurer of Stone Container Corporation, a Delaware
corporation, the corporation described in and which executed the foregoing
instrument; and that he signed his name thereto by order of the board of
directors of said corporation.

Given under my hand and notarial seal, this __th day of March, 1995.

-----------------------------
Notary Public

Name:
-------------------
Commission expires:

<PAGE>

STATE OF ILLINOIS )
) SS
COUNTY OF COOK )

On the __th day of March, 1995 before me personally came BarbaraJean
McCauley to me known, who, being by me duly sworn, did depose and say that she
is an Assistant Vice President of Marine Midland Bank, a New York banking
corporation and trust company, which executed the foregoing instrument; and that
she signed her name thereto by order of the board of directors of said bank.

Given under my hand and notarial seal, this __th day of March, 1995.

----------------------------
Notary Public

Name:
--------------------
Commission expires:

<PAGE>

STATE OF ILLINOIS )
) SS
COUNTY OF COOK )

On the __th day of March, 1995 before me personally came Melissa J.
Kaye to me known, who, being by me duly sworn, did depose and say that she is a
Vice President of Bankers Trust Company which executed the foregoing instrument;
and that she signed her name thereto by order of the board of directors of said
bank.

Given under my hand and notarial seal, this __th day of March, 1995.

-----------------------------
Notary Public

Name:
-------------------
Commission expires:

<PAGE>

S&A DRAFT
3/13/95-A

APPENDIX A

DEFINITIONS

This is APPENDIX A to (a) the Purchase Agreement (as hereinafter
defined) and (b) the Indenture (as hereinafter defined).

A. DEFINED TERMS. As used in the Purchase Agreement, the Indenture
or any Supplement, as the case may be (unless the context requires a different
meaning), the following terms have the following meanings (such meanings to be
equally applicable to the singular and plural forms thereof):

"ACCOUNT AGREEMENTS" means the Concentration Account Agreements and
the Lockbox Agreements, as the same may be amended, supplemented, amended and
restated, or otherwise modified from time to time in accordance with the
Indenture.

"ACCOUNT BANKS" means the Concentration Account Banks and the Lockbox
Banks.

"ACCRUED CARRYING COSTS" is defined in SECTION 4.02(a) of the
Indenture.

"ACCUMULATION PERIOD" means, with respect to any Series of Notes, the
period commencing on the Scheduled Accumulation Commencement Date with respect
to such Series of Notes and ending on the earliest to occur of (i) the
Liquidation Commencement Date, (ii) the Pay-Out Period Commencement Date for
such Series or (iii) the Expected Final Payment Date for such Series.

"ACT" is defined in SECTION 1.05 of the Indenture.

"ADMINISTRATIVE AGENT" means Bankers Trust Company, in its capacity as
Administrative Agent under the Indenture, or its successor-in-interest or any
successor Administrative Agent appointed as provided in the Indenture.

"ADMINISTRATIVE AGENT CORPORATE TRUST OFFICE" means the principal
office of the Administrative Agent in New York City, New York, which office on
the Closing Date is located at Four Albany Street, 10th Floor, New York, New
York 10006.

"ADVERSE CLAIM" means any ownership interest or any security interest,
mortgage, deed of trust, lien (statutory or otherwise), charge, pledge, equity,
hypothecation, assignment, deposit arrangement, encumbrance, preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever, including, without limitation, any conditional

<PAGE>

sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing.

"AFFILIATE" when used with respect to a Person means any other Person
directly or indirectly controlling, controlled by, or under common control with,
such Person. As used in this definition of "AFFILIATE," the term "control"
means the power, directly or indirectly, to direct or cause the direction of the
management and policies of a Person, whether through the ownership of such
Person's voting securities, by contract or otherwise, and the terms
"affiliated," "controlling" and "controlled" have meanings correlative to the
term "control."

"AGED RECEIVABLES RATIO" means, as calculated in each Settlement
Statement as of the Cut-Off Date for the related Calculation Period, a fraction
(expressed as a percentage) having (a) a numerator which is the sum of (i) the
aggregate Unpaid Balance of Receivables that were 121 to 150 days past invoice
date, as determined as of the Cut-Off Date for the most recently ended
Calculation Period, and (ii) the aggregate Unpaid Balance of Receivables that
were written off as uncollectible during the most recently ended Calculation
Period and that were not more than 150 days past invoice date as of that Cut-Off
Date (and PROVIDED that the amount added pursuant to this CLAUSE (ii) on account
of Receivables of any Obligor (or affiliated group of Obligors) shall in no
event exceed the aggregate Unpaid Balance of Receivables owed by such Obligor
(or group) MINUS the Excess Concentration Balance for such Obligor (or group),
in each case, as determined as of such Cut-Off Date) and (b) a denominator which
is the aggregate amount payable pursuant to invoices giving rise to Receivables
that were generated by the Sellers during the Calculation Period that occurred
four Calculation Periods prior to the most recently ended Calculation Period, as
determined as of the Cut-Off Date for such fourth prior Calculation Period.

"AGGREGATE NET OUTSTANDINGS" means, as of any date, (i) the sum of the
Outstanding Principal Balances of all Series of Notes as of the opening of
business on such date MINUS (ii) any funds which, as of such date, are on
deposit in the Equalization Account, the Deferred Allocation Account, the
Defeasance Account or the Principal Funding Account (or, during the Liquidation
Period, in the Master Collection Account) for repayment or prepayment of the
principal amount of one or more Series of Notes.

"AGGREGATE REQUIRED RESERVES" means, at any time with respect to all
Notes, the sum of (i) the aggregate sum of the Required Reserves for the
Subordinated Class or Classes of Notes ranking most junior in priority as among
all other Classes outstanding at such time, (ii) the sum of the Subordination
Deficits, if any, for all Classes of Notes outstanding at such time which are
senior in priority to the Notes described in the

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<PAGE>

immediately preceding clause (i), and (iii) the sum of any other additional
amounts (without duplication) specifically required pursuant to the terms of any
Supplement to be deducted from Net Eligible Receivables in the calculation of
the Base Amount in accordance with SECTION 4.02(b) of the Indenture.

"ALLOCABLE DAILY COLLECTIONS" means, with respect to any payment in
respect of any Series on any day, an amount equal to the product of:

(a) a fraction, (i) the numerator of which is the Outstanding
Principal Balance of such Series and (ii) the denominator of which is the
sum of the Outstanding Principal Balances of all then-outstanding Notes;
and

(b) the amount of collected funds on deposit in the Master Collection
Account on that day and available for such payment.

"ALTERNATIVE DILUTION RESERVE RATIO" means, as calculated in each
Settlement Statement for any Class or Series of Notes, the result (expressed as
a percentage), calculated as of the most recent Cut-Off Date, equal to the
product of:

(a) the sum of

(i) the product of (A) the Applicable Ratings Factor, multiplied
by (B) the average of the Dilution Ratios for the 12
consecutive Calculation Periods ending on the most recent
Cut-Off Date, plus

(ii) the product of (A) the statistical standard deviation of the
Dilution Ratios for the 12 consecutive Calculation Periods
ending on the most recent Cut-Off Date, multiplied by (B)
the Applicable Z-Value for such Series or Class, and

(b) the product of

(i) a fraction, having (A) a numerator equal to the sum of the
aggregate amounts payable pursuant to invoices giving rise
to Receivables generated by the Sellers during the
Calculation Period ending on the most recent Cut-Off Date
(as calculated on such Cut-Off Date) and (B) a denominator
equal to the aggregate Unpaid Balance of all Eligible
Receivables, as calculated on the most recent Cut-Off Date,
multiplied by

(ii) 1.15.

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<PAGE>

"ALTERNATIVE LOSS RESERVE RATIO" means, as calculated for any Class or
Series of Notes in each Settlement Statement, the sum of (i) the applicable Loss
Reserve Ratio for such Class or Series plus (ii) the product of (a) the
statistical standard deviation of the Aged Receivables Ratios for the twelve
consecutive Calculation Periods ending on the most recent Cut-Off Date,
multiplied by (b) the Applicable Z-Value for such Class or Series.

"APPLICABLE RATING AGENCIES" means each of the nationally recognized
statistical rating agencies that, at the request of the Sellers or the Issuer,
has rated any then-outstanding Series of Notes.

"APPLICABLE RATINGS FACTOR" with respect to any Class or Series of
Notes, the amounts specified as such in the applicable Supplement pursuant to
which such Class or Series of Notes was issued.

"APPLICABLE RESERVE RATIO" means, at any time with respect to any
Class or Series of Notes, the ratio specified as such in the applicable
Supplement pursuant to which such Class or Series of Notes was issued.

"APPLICABLE Z-VALUE" means, at any time with respect to any Class or
Series of Notes, the amount specified as such in the applicable Supplement
pursuant to which such Class or Series of Notes was issued.

"AUTHENTICATING AGENT" means any authenticating agent appointed
pursuant to SECTION 6.07 of the Indenture.

"AUTHORIZED OFFICER" means, (a) with respect to the Issuer, the
President, the Chief Financial Officer and any Vice President of the Issuer, (b)
with respect to each of the Sellers, the President, the Chief Financial Officer
and any Vice President of such Seller, and (c) with respect to the Servicer, the
President, the Chief Financial Officer and any Vice President of the Servicer.

"BAG RECEIVABLE" means the right to payment from, or other
indebtedness of, an Obligor under a Contract (including all interest or finance
charges and other obligations of such Obligor with respect thereto) (i) arising
prior to the Consolidation from the sale of goods, merchandise or services by
Stone Bag or Stone Packaging or (ii) arising from the sale of paper bags,
plastic bags, paper sacks or services relating thereto by any of the other
Sellers; excluding, however any such rights to payment or other indebtedness
owing from an Obligor which is either (a) a Consolidated Affiliate of Stone
Container or (b) a Foreign Obligor.

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"BANK ACCOUNTS" means the Lockbox Accounts and the Concentration
Accounts.

"BANKRUPTCY CODE" means the Bankruptcy Code of 1978 (11 U.S.C.
Section 101 ET SEQ.), as amended.

"BASE AMOUNT" is defined in SECTION 4.02(b) of the Indenture.

"BOOK-ENTRY FORM" means, with respect to any Note or Series of Notes,
that such Notes or Series are not certificated and the ownership and transfers
thereof shall be made through the book entries by a Clearing Agency as described
in SECTION 6.09 of the Indenture and the applicable Supplement pursuant to which
such Notes were issued.

"BOOK-ENTRY NOTES" means any Note or Notes issued in Book-Entry Form,
PROVIDED, HOWEVER, that after the occurrence of a condition whereupon book-entry
registration and transfer are no longer permitted and Definitive Notes are to be
issued to the holder of such Notes, such Notes shall no longer be "Book-Entry
Notes".

"BOX PLANT" means, with respect to any Box Receivable, the plant of
the applicable Seller from which the sale giving rise to such Receivable was
made.

"BOX RECEIVABLE" means the right to payment from, or other
indebtedness of, an Obligor under a Contract (including all interest or finance
charges and other obligations of such Obligor with respect thereto) (i) arising
prior to the Consolidation from the sale of goods, merchandise or services by
Stone Corrugated or (ii) arising from the sale of corrugated boxes, containers
or services relating thereto by any of the other Sellers, excluding, however any
such rights to payment or other indebtedness owing from an Obligor which is
either (a) a Consolidated Affiliate of Stone Container or (b) a Foreign Obligor.

"BUSINESS DAY" means a day (other than a Saturday or Sunday) on which
commercial banks in Chicago, Illinois or New York, New York are not authorized
or required to be closed for business; PROVIDED, HOWEVER, that the term
"BUSINESS DAY" shall not include any other day on which the Servicer, with not
less than ten days' prior written notice to the Issuer, the Administrative Agent
and the Trustee, closes its corporate headquarters, so long as the Servicer does
not so close its headquarters for more than five additional days in any one
calendar year and no more than two of such additional days are consecutive.

"CALCULATION PERIOD" means each period commencing on the first day of
a calendar month and ending on the last day of such calendar month.

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"CARRYING COST ACCOUNT" is defined in SECTION 4.01(b) of the
Indenture.

"CARRYING COST RESERVE" is defined in SECTION 4.02(a) of the
Indenture.

"CARRYING COSTS" means, for any period, (a) accrued but unpaid
interest on the Notes, (b) the Servicing Fee for such period, (c) the operating
expenses described in SECTION 7.02(n)(ii)(C) of the Indenture for such period,
and (d) other fees (including, without limitation, any commitment fees, non-
usage fees, facility fees or other similar fees), costs and expenses incurred by
the Issuer for such period and paid to third Persons who are not Stone Persons
and fees, costs and expenses incurred by the Trustee and/or the Administrative
Agent for such period in connection with its duties under the Indenture and the
other Transaction Documents (in the case of the Trustee and the Administrative
Agent, to the extent not included in the Servicing Fee).

"CBM RECEIVABLE" means the right to payment from, or other
indebtedness of, an Obligor under a Contract (including all interest or finance
charges and other obligations of such Obligor with respect thereto) arising from
the sale by any of the Sellers (prior to or after the Consolidation) of
containerboard, kraft paper, newsprint or services relating thereto.

"CHARGED-OFF RECEIVABLE" means any Receivable that, consistent with
the Credit and Collection Policy, has been or should have been charged off as
uncollectible.

"CLAIM" means a "claim" as defined in Section 101(5) of the Bankruptcy
Code.

"CLASS" means, with respect to any Series, any class of Notes of that
Series.

"CLASS ALLOCATION PERCENTAGE" means, with respect to any Class on any
Payment Date at any type after the Liquidation Commencement Date, a fraction
with (a) a numerator which equals the Outstanding Principal Balance of such
Class at such time; and (b) a denominator of which equals the sum of the
Outstanding Principal Balances of each Subordinated Class (if the Class
Allocation Percentage is being calculated for a Subordinated Class) or of each
Senior Class (if the Class Allocation Percentage is being calculated for a
Senior Class), in either case, which ranks PARI PASSU with such Class.

"CLEARING AGENCY" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended.

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<PAGE>

"CLEARING AGENCY PARTICIPANT" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.

"CLOSING DATE" means March 14, 1995.

"COLLECTION DATE" means the earlier of (i) that date following the
Purchase Termination Date on which the aggregate Unpaid Balances of the
Receivables transferred to the Issuer have been reduced to zero or (ii) that
date designated by the Issuer and the Sellers from and after both the Purchase
Termination Date and the repayment in full of all Notes and other amounts owed
to the holders thereof under the Transaction Documents.

"COLLECTIONS" means all funds which are received by a Seller, the
Issuer, the Servicer, the Administrative Agent or the Trustee from or on behalf
of any Obligor in payment of any amounts owed (including invoice prices, finance
charges, interest and all other charges, if any) in respect of any Receivable or
Related Asset, or otherwise applied to repay or discharge any Receivable
(including insurance payments that a Seller, the Issuer or the Servicer applies
in the ordinary course of its business to amounts owed in respect of such
Receivable and net proceeds of sale or other disposition of repossessed goods
that were the subject of such Receivable).

"COMMISSION" means the Securities Exchange Commission, as constituted
from time to time, or if at any time after the execution of the Indenture such
Commission is no longer existing and/or performing the duties now assigned to it
under the Trust Indenture Act, the Person performing such duties at such time.

"COMPETITOR" means a Person (other than Stone Container or any of its
Consolidated Affiliates) engaged in the manufacture and sale of paperboard,
paper packaging products and related wood products, including, without
limitation, containerboard, kraft paper, boxboard, corrugated containers,
newsprint, paper bags, sacks, plywood, lumber, wood veneer and folding cartons.

"CONCENTRATION ACCOUNT" means any bank account that is created in
accordance with, and to perform the functions contemplated for "Concentration
Accounts" in, SECTION 3.03 of the Indenture.

"CONCENTRATION ACCOUNT AGREEMENT" means a letter agreement,
substantially in the form of EXHIBIT E to the Purchase Agreement (or such other
form as is reasonably acceptable to the Trustee), among the Issuer, the Sellers
and a Concentration Account Bank and which relates to one or more Concentration
Account, as the same may be amended, supplemented, amended and restated, or
otherwise modified, from time to time.

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"CONCENTRATION ACCOUNT BANKS" means any of the banks at which one or
more Concentration Account is maintained from time to time.

"CONSOLIDATED AFFILIATE" means, with respect to any Person, any other
Person whose financial statements should, under GAAP, be consolidated with the
financial statements of such Person.

"CONSOLIDATED SUBSIDIARY" means any Subsidiary or any other Person,
some or all of the stock of which, or other equity interests in which, is owned
(directly or indirectly) by Stone Container and the accounts of which would be
consolidated with those of Stone Container in its consolidated financial
statements as of such time in accordance with GAAP. For the purposes of this
definition, the term "CONSOLIDATED SUBSIDIARY" shall include the Issuer, unless
otherwise specified in a Transaction Document.

"CONSOLIDATION" means the merger of (i) SCNI, Stone Bag, Stone
Packaging and certain other Subsidiaries of Stone Container with and into Stone
Container and (ii) the merger of Stone Corrugated and certain other Subsidiaries
of Stone Southwest with and into Stone Southwest, in each case, which occurred
on September 30, 1994.

"CONTRACT" means an agreement between a Seller and any Person
(including but not limited to, a written contract, oral contract, purchase order
or open account agreement) pursuant to or under which such Person shall be
obligated to make payments in respect of any Receivable or Related Asset to such
Seller from time to time, as evidenced by an invoice in substantially one of the
forms attached as EXHIBIT B to the Purchase Agreement.

"CONTRIBUTED ASSETS" is defined in SECTION 2.01(a) of the Purchase
Agreement.

"CONTROLLED ACCUMULATION AMOUNT" means, with respect to any Series,
for any Payment Date during an Accumulation
Period with respect to such Series, the amount, if any, specified as the
Controlled Accumulation Amount in the related Supplement.

"CONTROLLED DEPOSIT AMOUNT" means, with respect to any Series, for any
Payment Date during an Accumulation Period, an amount equal to the sum of the
Controlled Accumulation Amount, if any, for such Payment Date and the Deficit
Controlled Accumulation Amount, if any, for the immediately preceding Payment
Date.

"CORPORATE TRUST OFFICE" means the principal office of the Trustee in
New York City, New York at which at any particular time its corporate trust
business shall be principally administered, which office on the Closing Date is
located at 140 Broadway, 12th Floor, New York, New York 10005-1180.

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<PAGE>

"CREDIT AND COLLECTION POLICY" means, with respect to a Seller, those
credit and collection policies and practices of a Seller relating to the
Contracts and Receivables of such Seller, a copy of which has been provided to
the Issuer, the Trustee and the Administrative Agent by such Seller prior to the
Closing Date, as such credit and collection policies may be modified without
violating SECTION 5.03(c) of the Purchase Agreement or SECTION 7.02(h) of the
Indenture. Notwithstanding the foregoing, as applied to any Successor Servicer,
"CREDIT AND COLLECTION POLICY" means the collection policies and practices of
that Successor Servicer with respect to receivables similar to the Receivables.

"CUT-OFF DATE" means the last day of any Calculation Period.

"DAILY REPORT" is defined in SECTION 3.04(b) of the Indenture.

"DEFEASANCE ACCOUNT" is defined in SECTION 4.01(e) of the Indenture.

"DEFEASANCE ALLOCATION PERCENTAGE" means, on any Business Day
occurring prior to the Liquidation Commencement Date with respect to any Series
of Notes that is in an Accumulation Period, a Pay-Out Period or a Prepayment
Accumulation Period:

(a) if no other Series of Notes is in an Accumulation Period, a Pay-
Out Period or a Prepayment Accumulation Period on that Business Day, the
Noteholder Allocation Percentage on that Business Day; and

(b) if at least one other Series of Notes is in an Accumulation
Period, a Pay-Out Period or a Prepayment Accumulation Period on that
Business Day, the product of (i) the Noteholder Allocation Percentage on
that Business Day MULTIPLIED BY (ii) a fraction (A) the numerator of which
is the Outstanding Principal Balance of the Series for which the Defeasance
Allocation Percentage is being calculated as of the Scheduled Accumulation
Commencement Date, Pay-Out Period Commencement Date or Prepayment
Accumulation Commencement Date for that Series and (B) the denominator of
which is the sum of the Outstanding Principal Balances of each Series that
is in an Accumulation Period, a Pay-Out Period or Prepayment Accumulation
Period, as of the Scheduled Accumulation Commencement Date, Pay-Out Period
Commencement Date or Prepayment Accumulation Commencement Date for each
such Series.

"DEFERRED ALLOCATION ACCOUNT" is defined in SECTION 4.01(f) of the
Indenture.

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<PAGE>

"DEFICIT CONTROLLED ACCUMULATION AMOUNT" means, with respect to any
Series, (a) on the first Payment Date with respect to an Accumulation Period,
the excess, if any, of the Controlled Accumulation Amount for such Payment Date
over the amount distributed from the Defeasance Account as the Principal Payment
Amount for such Payment Date and (b) on each subsequent Payment Date with
respect to an Accumulation Period, the excess, if any, of the Controlled Deposit
Amount for such subsequent Payment Date over the amount distributed from the
Defeasance Account as the Principal Payment Amount for such subsequent Payment
Date.

"DEFINITIVE NOTES" is defined in SECTION 6.09 of the Indenture.

"DILUTION" means, with respect to any Receivable, the aggregate
reduction in the Original Balance of such Receivable on account of discounts,
incorrect billings, credits, rebates, allowances, chargebacks, returned or
repossessed goods, allowances for early payments, and any other such reductions
granted in the ordinary course of business that are unrelated to the inability
of the applicable Obligor to pay such Receivables (including, without
limitation, any such reductions in such Receivable made by the applicable Seller
in respect of volume incentives relating to the Obligor thereof), in each case,
whether such reductions are effected through the granting of credits against
such Receivable or by the issuance of a check or other payment in respect of
(and as payment for) such reduction by the applicable Seller to the Obligor
thereon.

"DILUTION ADJUSTMENT" means, with respect to Receivables sold by any
Seller, and as of any Payment Date, an amount equal to (i) Dilution during the
applicable Calculation Period with respect to such Receivables, minus (ii) the
Forecasted Dilution Amounts for all Purchases of such Receivables during that
Calculation Period, it being understood that such Forecasted Dilution Amount
shall equal zero for any Calculation Period during which no Purchases occurred.

"DILUTION DISCOUNT RATIO" is defined in SECTION 2.02(b) of the
Purchase Agreement.

"DILUTION RATIO" means, as calculated in each Settlement Statement as
of the most recent Cut-Off Date, a fraction (expressed as a percentage) having
(a) a numerator equal to the aggregate amount of Dilution on the Receivables
during the Calculation Period ending on the most recent Cut-Off Date, and (b) a
denominator equal to the aggregate amounts payable pursuant to invoices giving
rise to Receivables that were generated by the Sellers during the Calculation
Period immediately preceding the Calculation Period referred to in clause (a)
(so that, for example, if the Calculation Period specified in CLAUSE (a)
corresponded to the month of February, the Calculation Period in

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this CLAUSE (b) would be the one corresponding to the month of January).

"DILUTION RESERVE RATIO" means, as calculated in each Settlement
Statement for each Class of Notes, the result (expressed as a percentage),
calculated as of the most recent Cut-Off Date, equal to the product of:

(a) the sum of

(i) the product of (A) the Applicable Ratings Factor for such
Class and (B) the average of the Dilution Ratios during the preceding
twelve consecutive Calculation Periods ending on the most recent
Cut-Off Date, and

(ii) the product of

(A) the difference of (1) the highest Dilution Ratio for
any Calculation Period during the preceding twelve consecutive
Calculation Periods ending on the most recent Cut-Off Date, MINUS
(2) the amount described in CLAUSE (a)(i)(B) above, MULTIPLIED BY

(B) a fraction, having a numerator equal to the amount
described above in SUBCLAUSE (a)(ii)(A)(1) and a denominator
equal to the amount described above in SUBCLAUSE (a)(i)(B), and

(b) the product of (i) a fraction, having (A) a numerator equal to
the aggregate amounts payable pursuant to invoices giving rise to Receivables
generated by the Sellers during the Calculation Period ending on the most recent
Cut-Off Date (as calculated on such Cut-Off Date) and (B) a denominator equal to
the aggregate Unpaid Balance of all Eligible Receivables, as calculated on the
most recent Cut-Off Date and (ii) 1.15.

"DISCOUNT RATE" is defined in SECTION 2.02(b) of the Purchase
Agreement.

"DISCOUNT RATE RESERVE" means, at any time, an amount equal to the
following:

DRR = AECC + EIC - CCR

where:

DRR = the Discount Rate Reserve;

AECC = the accrued and unpaid Carrying Costs (other than interest on the
Notes) for the current Calculation

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Period at such time, plus the amount of the Carrying Costs (other
than interest on the Notes) estimated to accrue for the period
from such date of determination through the Calculation Period
ending immediately on or after the date occurring a number of
days equal to two times the then current number of Turnover Days
(as set forth in the then-effective Settlement Statement) after
such date of determination, provided that for purposes of
calculating the carrying costs which will occur during such
period, the Servicing Fee shall be deemed to accrue at the rate
set forth in clause(i)(y)(1) of the PROVISO in SECTION 6.07 of
the Purchase Agreement; and

EIC = the sum at such time of:

(a) WR x AOPB
---------
12;

(b) [(WR(x) + 3.00%)] x [(2 x TD) - 30] x AOPB(x)
---------------------------------------------
360; and

where:

WR = a per annum rate equal to weighted average of the Note
Rates of all Notes of all Series outstanding at such
time;

AOPB = the aggregate Outstanding Principal Balance of the
Notes of all Series outstanding at such time;

WR(x) = a per annum rate equal to weighted average of the Note
Rates of all Notes of all Series outstanding at such
time which bear interest at a variable rate;

AOPB(x) = the aggregate Outstanding Principal Balance of the
Notes of all Series outstanding at such time which bear
interest at a variable rate;

WR(y) = a per annum rate equal to weighted average of the Note
Rates of the Notes of all Series outstanding at such
time which bear interest at a fixed rate;

AOPB(y) = the aggregate Outstanding Principal Balance of the
Notes of all Series

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outstanding which bear interest at a fixed rate; and

TD = Turnover Days (as set forth in the then effective
Settlement Statement); and

CCR = the balance in the Carrying Cost Account as of such time.

"DOLLARS" means dollars in lawful money of the United States of
America.

"DUFF & PHELPS" means Duff & Phelps Credit Rating Co.

"ELIGIBLE INVESTMENTS" means any of the following:

(a) deposit accounts that are established and maintained at a
financial institution, the short-term debt securities or certificates of
deposit of which have at the time of investment the highest short-term debt
or certificate of deposit rating (as the case may be) available from S&P
and (if rated by Duff & Phelps) by Duff & Phelps, and that are held in the
name of the Trustee in trust for the benefit of the Noteholders, subject to
the exclusive custody and control of the Trustee and/or the Administrative
Agent and for which the Trustee and/or the Administrative Agent have sole
signature authority; PROVIDED, HOWEVER, that this CLAUSE (a) shall not
apply to the Bank Accounts or to the Trust Accounts;

(b) marketable obligations of the United States of America, the full
and timely payment of principal and interest on which is backed by the full
faith and credit of the United States of America, which have a maturity
date not later than the next succeeding Payment Date;

(c) marketable obligations directly and fully guaranteed by the
United States of America, the full and timely payment of principal and
interest on which is backed by the full faith and credit of the United
States of America, which have a maturity date not later than the next
succeeding Payment Date;

(d) banker's acceptances, certificates of deposit and other interest-
bearing obligations (x) issued by institutions the short-term unsecured
obligations of which have at the time of investment a rating of not less
than "A-1+" or the equivalent thereof by S&P and (if rated by Duff &
Phelps) of not less than "D-1+" or the equivalent thereof by Duff & Phelps
and the long-term unsecured obligations have a rating of not less than
"AA-" or the equivalent thereof by S&P and (if rated by Duff & Phelps) by
Duff & Phelps, (y) which are denominated in Dollars and (z)

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which have a maturity date not later than the next succeeding Payment Date;
PROVIDED, HOWEVER, that the banker's acceptances, certificates of deposit
and other obligations described in this clause (d) shall only constitute
"Eligible Investments" if and to the extent that the Servicer is satisfied
that the Trustee will have a perfected security interest therein for the
benefit of the Noteholders;

(e) repurchase agreements (i) that are entered into with any
financial institution having the ratings referred to in clause (a) at the
time of investment and (ii) that are secured by a perfected first priority
security interest in an obligation of the type described in CLAUSE (b) or
(c) above; PROVIDED, HOWEVER, that such obligation may mature later than
the next succeeding Payment Date if such bank is required to repurchase
such obligation not later than the next succeeding Payment Date; and,
PROVIDED, FURTHER, that (x) the market value of the obligation with respect
to which such bank has a repurchase obligation, determined as of the date
on which such obligation is originally purchased, shall equal or exceed
102% of the repurchase price to be paid by such bank and (y) the Trustee or
a custodian acting on its behalf (including, without limitation, the
Administrative Agent) shall have possession of the instruments or documents
evidencing such obligations;

(f) guaranteed investment contracts entered into with any financial
institution, having the rating referred to in clause (a) at the time of
investment and which, in each case, have a maturity date not later than the
next succeeding Payment Date;

(g) commercial paper (except for commercial paper issued by the
Issuer, any Seller or any Affiliate of the Issuer or any Seller) rated at
the time of investment not less than "A-1+" or the equivalent thereof by
S&P and (if rated by Duff & Phelps) of not less than "D-1+" or the
equivalent thereof by Duff & Phelps and having a maturity date not later
than the next succeeding Payment Date; and

(h) freely redeemable shares in open-end money market mutual funds
(including such mutual funds that are offered by the Person who is acting
as the Trustee or Administrative Agent or by any agent of either of the
foregoing) which (i) seek to maintain a constant net-asset value and (ii)
at the time of such investment have been rated not less than "AAA" or the
equivalent thereof by S&P and (if rated by Duff & Phelps) by Duff & Phelps.

"ELIGIBLE OBLIGOR" means, at any time, an Obligor which satisfies the
following criteria:

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(a) it is not a Foreign Obligor, Governmental Authority or any
department, agency or instrumentality of any of Governmental Authority;

(b) it is not a direct or indirect Subsidiary of Stone Container or
any other entity with respect to which Stone Container or any Subsidiary of
Stone Container owns, directly or indirectly, more than 50% of such
entity's equity interests;

(c) with respect to which no Event of Bankruptcy had occurred and was
continuing as of the end of the most recent Calculation Period; and

(d) as of the end of the most recent Calculation Period, none of the
Receivables of such Obligor were evidenced by Receivables Notes.

"ELIGIBLE RECEIVABLE" means, at any time, a Receivable:

(a) which arises from the sale of goods, merchandise or services by a
Seller in the ordinary course of its business;

(b) which represents a BONA FIDE obligation resulting from a sale of
goods or merchandise which have been shipped or delivered or services which
have been performed and is due and payable not more than 120 days after the
date on which the invoice for services, goods or merchandise, the sale of
which gave rise to such Receivable, is provided or delivered;

(c) which, as of the end of the previous Calculation Period, (i) has
not aged more than 90 days past its invoice date, (ii) if a Box Receivable,
no more than 50% of the aggregate Unpaid Balances of all Box Receivables
owing by the Obligor thereon which arose from sales from the same Box Plant
as such Box Receivable were (for reasons other than disputes) outstanding
more than 120 days past their respective invoice dates, and (iii) if other
than a Box Receivable, no more than 50% of the aggregate Unpaid Balances of
all Receivables (other than Box Receivables) owing by the Obligor thereon
and its Consolidated Affiliates were (for reasons other than disputes)
outstanding more than 120 days past their respective invoice dates;

(d) which (i) if the perfection of the Issuer's and the Trustee's
interests therein is governed by the laws of a jurisdiction where the UCC
is in force, constitutes an account or a general intangible and not chattel
paper or an instrument, as each such term is defined in the UCC and (ii) if
the perfection of the Issuer's and the Trustee's respective interests
therein is governed by the law of any

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jurisdiction where the UCC is not in force, the Seller of such Receivable
has furnished to the Trustee an Opinion of Counsel to the effect that the
ownership interest of the Issuer in such Receivables and the security
interest of the Trustee in such Receivables and the other Pledged Assets
with respect thereto are not significantly less protected and favorable
than such rights would be if secured by a perfected security interest under
(and as such term is used in) the UCC;

(e) the Obligor of which is an Eligible Obligor;

(f) with regard to which both the representation and warranty of the
Issuer in SECTION 2.03(a)(i) and (ii) of the Indenture and the
representation and warranty of the relevant Seller in SECTION 4.01(e) of
the Purchase Agreement are true and correct;

(g) the transfer of which by the Issuer to the Seller and the grant
and pledge of a security interest and lien in which by the Issuer to the
Trustee does not, in either case, contravene or conflict with any law, rule
or regulation or any contractual or other restriction, limitation or
encumbrance that applies to either Seller, the Issuer or the Trustee, and
the sale, assignment or transfer of which, and the granting of a security
interest in which, does not require the consent of the Obligor thereof or
any other Person, other than any such consent that has been previously
obtained;

(h) which is denominated and payable only in Dollars in the United
States of America and is non-interest bearing; PROVIDED, HOWEVER, that such
Receivable shall not be deemed to be interest-bearing solely as a result of
the relevant Seller's imposition of an interest or other charge on any such
Receivable which remains unpaid after its scheduled due date; and,
PROVIDED, FURTHER, that such interest charge or other charge shall not be
included in the Unpaid Balance of such Receivable for purposes of
calculating the Base Amount;

(i) which arises under a Contract that has been duly authorized and
that, together with such Receivable, is in full force and effect and
constitutes the legal, valid and binding obligation of the Obligor of such
Receivable enforceable against such Obligor in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity, regardless
of whether such enforceability is considered in a proceeding in equity or
at law;

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(j) which is not subject to any asserted reduction (including any
reduction on account of any offsetting account payable of the Issuer or the
applicable Seller to an Obligor or funds of an Obligor held by the Issuer
or the applicable Seller), cancellation, rebate (including any advertising
rebate) or refund or any dispute, offset, counterclaim, lien or defense
whatsoever; PROVIDED, HOWEVER, that a Receivable (or any group of
Receivables) that is subject only in part to any of the foregoing shall
constitute Eligible Receivables to the extent such Receivable (or group of
Receivables) is not subject to reduction, cancellation, refund, rebate,
dispute, offset, counterclaim, lien or other defense and otherwise
satisfies the eligibility criteria set forth herein;

(k) which, together with the Contract related thereto, conforms in
all material respects with all applicable laws, rules, regulations, orders,
judgments, decrees and determinations of all courts and other governmental
authorities (whether federal, state, local or foreign and including usury
laws);

(l) which satisfies all applicable requirements of the Credit and
Collection Policy of the relevant Seller and, to the extent relevant, any
Successor Servicer;

(m) which has not been compromised, adjusted or modified (including
by extension of time or payment or the granting of any discounts,
allowances or credits), except as permitted by SECTION 7.02(h) of the
Indenture; and

(n) which is an account receivable representing all or part of
the sales price of goods, merchandise, insurance or services within
the meaning of Section 3(c)(5) of the Investment Company Act of 1940,
as amended.

"ELIGIBLE SERVICER" means (a) at any time prior to its termination as
Servicer pursuant to SECTION 10.01 of the Indenture, Stone Container, (b) the
Trustee, (c) the Administrative Agent, or (d) any other Person which, at the
time of its appointment as Servicer, (i) is servicing a portfolio of trade
receivables, (ii) is legally qualified and has the capacity to service the
Receivables, (iii) has demonstrated the ability to service professionally and
competently a portfolio of trade receivables similar to the Receivables in
accordance with high standards of skill and care, (iv) is qualified to use the
software that is then being used to service the Receivables or obtains the right
to use or has its own software which is adequate to perform its duties under the
Indenture, (v) has a net worth of at least $50,000,000 as of the end of its most
recent fiscal quarter, (vi) is acceptable to each Applicable Rating Agency as
evidenced by satisfaction of the Rating Agency

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<PAGE>

Condition, and (vii) is not, and is not a Subsidiary of or otherwise controlled
by, a Competitor.

"ENHANCEMENT" means, with respect to any Series, any surety bond,
letter of credit, guaranteed rate agreement, maturity guaranty facility, cash
collateral account or guaranty, tax protection agreement, interest rate swap or
other contract or agreement for the benefit of Noteholders of such Series. The
drawing on or payment of any Enhancement for the benefit of a Series or Class of
Notes shall not be available to the Noteholders of any other Series or Class.

"ENHANCEMENT PROVIDER" shall mean the Person providing any
Enhancement, other than any Holders of Notes of which are subordinated to any
other Series or Class of Notes.

"EQUALIZATION ACCOUNT" is defined in SECTION 4.01(c) of the Indenture.

"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended and in effect from time to time, and any successor statute of similar
import, together with any regulations thereunder, in each case as in effect from
time to time. References to sections of ERISA also refer to any successor
sections.

"ERISA AFFILIATE" means, with respect to any Person, any other person
(as defined in Section 3(9) of ERISA) which is under common control with such
Person within the meaning of Section 4001(b) of ERISA and the regulations
thereunder or a member of the same "controlled group" or "affiliated service
group" as such Person within the meaning of Section 414(b), (c), (m) or (o) of
the Internal Revenue Code.

"EVENT OF BANKRUPTCY" shall be deemed to have occurred with respect to
a Person if either:

(a) a case or other proceeding shall be commenced, without the
application or consent of such Person, in any court, seeking the
liquidation, reorganization, debt arrangement, dissolution, winding up, or
composition or readjustment of debts of such Person, the appointment of a
trustee, receiver, custodian, liquidator, assignee, sequestrator or the
like for such Person or any substantial part of its assets, or any similar
action with respect to such Person under any law (foreign or domestic)
relating to bankruptcy, insolvency, reorganization, winding up or
composition or adjustment of debts, and such case or proceeding shall
continue undismissed, or unstayed and in effect, for a period of (i) in the
case of any Person other than the Issuer, 60 days, and (ii) in the case of
the Issuer, 10 days; or an order for relief in respect of such Person shall
be entered in an involuntary case under the

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<PAGE>

federal bankruptcy laws or other similar laws (foreign or domestic) now or
hereafter in effect; or

(b) such Person shall commence a voluntary case or other proceeding
under any applicable bankruptcy, insolvency, reorganization, debt
arrangement, dissolution or other similar law now or hereafter in effect,
or shall consent to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator (or other similar
official) for, such Person or for any substantial part of its property, or
shall make any general assignment for the benefit of creditors, or shall
fail to, or admit in writing its inability to, pay its debts generally as
they become due.

"EVENT OF DEFAULT" is defined in SECTION 9.02 of the Indenture.

"EXCESS CONCENTRATION BALANCE" means, on any day and with respect to
an Obligor, the amount of otherwise Eligible Receivables due from such Obligor
as of such date (expressed as a percentage of the aggregate Unpaid Balances of
all Eligible Receivables owing by all Obligors as of such date) (such percentage
being the "OBLIGOR PERCENTAGE"), which exceeds the percentage set forth below
for the applicable category of Obligors, or such larger percentage in respect of
which the Rating Agency Condition has been satisfied; PROVIDED, HOWEVER, that
if, and to the extent that, the Servicer or the applicable Seller is unable to
make a determination as to the eligibility of the Receivables or any group of
Receivables owing by a particular Obligor, then the Servicer (at its option) may
calculate the Obligor Percentage with respect to such Obligor using the total
Unpaid Amounts of all such Receivables owing by such Obligor on such date as a
percentage of the aggregate Unpaid Balances of all Eligible Receivables owing by
all Obligors as of such date:

Minimum Rating

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

Duff &
S&P Phelps Percentage

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

A-1+ or AA- D-1+ or AA- 10%
A-1 or A+ D-1 or A+ 10%
A-2 or BBB+ D-2 or BBB+ 8%
A-3 or BBB- D-3 or BBB- 5%
Not rated/other Less than D-3 or BBB- 2.6%

PROVIDED, HOWEVER, that in the case of an Obligor which is a member of a group
of two or more Consolidated Affiliates, the Excess Concentration Balances shall
be calculated as if such

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Obligor and each of its Consolidated Affiliates were one and the same Obligor,
and the applicable debt rating of such consolidated group of Obligors for
purposes of this definition shall be the debt rating of the ultimate parent of
such consolidated group of Obligors.

The percentage applicable to any Obligor (or the ultimate parent of
the consolidated group of Obligors of which such Obligor is a member, as the
case may be) shall be the percentage associated with the lower of such Obligor's
(or such ultimate parent's, as the case may be) short-term senior debt ratings
issued by S&P and (if so rated by Duff & Phelps) Duff & Phelps; PROVIDED, that
(i) if (x) such short-term debt is not rated by S&P or (y) such short-term debt
is rated by S&P and not by Duff & Phelps, but the actual or implied long-term
senior debt rating issued by Duff & Phelps is in a category that is lower than
the category relating to S&P's short-term debt rating, then, in either case, the
percentage applicable to such Obligor (or such ultimate parent, as the case may
be) shall be the percentage associated with the lower of such Obligor's (or such
ultimate parent, as the case may be) actual or implied long-term senior debt
ratings, if any, issued by S&P and (if so rated by Duff & Phelps) Duff & Phelps
and (ii) if no short-term or actual or implied long-term debt rating from the
Applicable Rating Agencies is then in effect with respect to such Obligor (or
such ultimate parent, as the case may be), then the percentage applicable to
such Obligor (or such ultimate parent, as the case may be) shall be the
percentage associated with the "Not rated/other" and "Less than D-3 or BBB-"
category set forth above. The ratings specified in the table are minimums for
each percentage category, so that a rating not shown in the table falls in the
category associated with the highest rating shown in the table that is lower
than that rating.

Without in any way limiting the foregoing paragraph, the Issuer may
elect to report Excess Concentration Balances on a monthly basis for any
Business Day prior to April 30, 1995, in which event the Excess Concentration
Balances during such period shall be calculated according to the following table
in lieu of the table set forth above:

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<PAGE>

Minimum Rating

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

Duff &
S&P Phelps Percentage

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

A-1+ or AA- D-1+ or AA- 4%
A-1 or A+ D-1 or A+ 4%
A-2 or BBB+ D-2 or BBB+ 4%
A-3 or BBB- D-3 or BBB- 2.5%
Not rated/other Less than D-3 or BBB- 1.0%

"EXPECTED FINAL PAYMENT DATE" means, with respect to any Series, the
date specified as the Expected Final Payment Date in the related Supplement.

"FEDERAL RESERVE BOARD" means the Board of Governors of the Federal
Reserve System, or any successor thereto or to the functions thereof.

"FIXED PRINCIPAL NOTE" means any Note of any Series that is not
designated as a Series of Revolving Notes in the Supplement pursuant to which
such Series is issued.

"FORECASTED DILUTION AMOUNT" means, for any Purchase or series of
Purchases during a Calculation Period, the Dilution Discount Ratio(s) utilized
in calculation of the applicable Purchase Price for such Purchase or Purchases
multiplied by the aggregate Original Balances of the Receivables included in
such Purchase or Purchases.

"FOREIGN OBLIGOR" means any Obligor which is not a resident of, or
located in, the United States of America.

"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, as in effect from time to time.

"GLOBAL NOTE" means a Note evidencing all or any part of a Series of
Notes to be issued to the Holders thereof in Book-Entry Form, which Global Note
shall be issued to the Clearing Agency, or its nominee, for such Series, in
accordance with SECTION 6.09 of the Indenture and the applicable Supplement
pursuant to which such Note is issued.

"GOVERNMENTAL AUTHORITY" means the United States of America and any
other country from time to time in existence, and, in each case, any state,
province, or other political subdivision thereof, any other entity in the United
States of America or any other country that exercises executive,

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legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any agency, department or instrumentality of any of the
foregoing.

"GUARANTY" means any agreement, undertaking or arrangement by which
any Person guarantees, endorses, agrees to purchase or otherwise becomes or is
contingently liable upon (by direct or indirect agreement, contingent or
otherwise, to provide funds for payment, to supply funds to, or otherwise to
invest in, a debtor, or otherwise to assure a creditor against loss) the
Indebtedness, obligation or any other liability of any other Person (other than
by endorsements of instruments in the course of collection), or guarantees the
payment of dividends or other distributions upon the shares of any other Person.

"INDEBTEDNESS" of any Person means, without duplication:

(a) all of such Person's obligations for borrowed money and all of
such Person's obligations evidenced by bonds, debentures, notes or other
similar instruments;

(b) all of such Person's obligations as lessee under leases which
have been or should be, in accordance with GAAP, recorded as capitalized
leases; and

(c) whether or not so included as liabilities in accordance with
GAAP, all of such Person's obligations to pay the deferred purchase price
of property or services, and indebtedness (excluding prepaid interest
thereon) secured by an Adverse Claim on property owned or being purchased
by such Person (including indebtedness arising under conditional sales or
other title retention agreements), whether or not such indebtedness shall
have been assumed by such Person or is limited in recourse.

For purposes of the Transaction Documents, the Indebtedness of any Person shall
include the Indebtedness of any partnership or joint venture in which such
Person is a general partner or a joint venturer.

"INDEMNIFIED LOSSES" is defined in SECTION 7.03 of the Indenture.

"INDEMNIFIED PARTY" is defined in SECTION 7.03 of the Indenture.

"INDENTURE" means that certain Master Indenture and Security Agreement
dated as of March 14, 1995 among the Issuer, Stone Container, the Administrative
Agent and the Trustee, as the same may be amended, restated, supplemented or
otherwise modified from time to time (including, by any Supplement thereto).

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<PAGE>

"INITIAL CUT-OFF DATE" means the date occurring two Business Days
prior to the Closing Date.

"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended from time to time.

"ISSUER" means Stone Receivables Corporation, a Delaware corporation.

"ISSUER ORDER" means a written order or request of the Issuer signed
by an Authorized Officer of the Issuer.

"LETTER OF REPRESENTATIONS" means any applicable agreement among the
Issuer, the Trustee, the Administrative Agent and the applicable Clearing
Agency, with respect to such Clearing Agency's rights and obligations (in its
capacity as a Clearing Agency) with respect to any Book-Entry Notes, as the same
may be amended, supplemented, restated or otherwise modified from time to time.

"LIQUIDATION COMMENCEMENT DATE" means the earlier to occur of (a) the
date upon which the Liquidation Commencement Date is declared or occurs
automatically pursuant to SECTION 9.01 or 9.02 of the Indenture and (b) the
Purchase Termination Date.

"LIQUIDATION EVENT" is defined in SECTION 9.01 of the Indenture.

"LIQUIDATION PERIOD" means the period commencing on the Liquidation
Commencement Date.

"LOCKBOX ACCOUNTS" means those certain bank accounts, maintained at
those certain locations, described in SCHEDULE 7.01(j) to the Indenture, into
which Collections from Receivables are deposited, and any bank account that is
hereafter created in accordance with, and to perform the functions contemplated
for "Lockbox Accounts" in, SECTION 3.03 of the Indenture.

"LOCKBOX AGREEMENT" means any of the letter agreements delivered in
connection with the Indenture and any other letter agreement, substantially in
the form of EXHIBIT D to the Purchase Agreement (or such other form as is
reasonably acceptable to the Trustee), among a Lockbox Bank, the applicable
Seller and the Issuer that relates to one or more Lockbox Accounts, as the same
may be amended, supplemented, amended and restated, or otherwise modified, from
time to time.

"LOCKBOX BANK" means any of the banks at which one or more Lockbox
Accounts are maintained from time to time.

"LOSS DISCOUNT" is defined in SECTION 2.02(b) of the Purchase
Agreement.

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<PAGE>

"LOSS RESERVE RATIO" means with respect to any Series or Class, as
calculated in each Settlement Statement, the result (expressed as a percentage)
equal to the product of (a) the Applicable Ratings Factor of such Series or
Class, as applicable, (b) the highest average of the Aged Receivables Ratio for
any three consecutive Calculation Periods that occurred during the preceding 12
consecutive Calculation Periods ending on the most recent Cut-Off Date
(PROVIDED, that for purposes of calculating this amount with respect to any
Calculation Period ending before July 31, 1995 for which the Issuer does not
have actual information, the Issuer shall use the applicable estimated Aged
Receivables Ratios set forth on the table attached hereto as ANNEX I), and (c) a
fraction having (i) a numerator equal to the sum of the aggregate amounts
payable pursuant to invoices giving rise to Receivables generated by the Sellers
during the three Calculation Periods preceding or ending on the most recent
Cut-Off Date, as determined on the Cut-Off Dates for those three Calculation
Periods, and (ii) a denominator equal to the aggregate Unpaid Balance of all
Eligible Receivables, as determined on the most recent Cut-Off Date.

"LOSS TO LIQUIDATION RATIO" means, as calculated in each Settlement
Statement, a fraction (a) the numerator of which is the aggregate Unpaid Balance
of all Receivables (net of Recoveries) which became Charged-Off Receivables or
(without duplication) were converted into Receivables Notes during the three
preceding Calculation Periods in accordance with the Credit and Collection
Policy of the applicable Seller, and (b) the denominator of which is the
aggregate amount of Collections on the Receivables received during such three
Calculation Periods.

"MAJORITY NOTEHOLDERS" means, at any time, the Holders of Notes the
aggregate Outstanding Principal Balances of which, collectively, represent more
than 50% of the aggregate Outstanding Principal Balances of the outstanding
Notes of all Series at such time.

"MASTER COLLECTION ACCOUNT" is defined in the SECTION 4.01(b) of the
Indenture.

"MATERIAL ADVERSE EFFECT" means, as to any Seller, the Issuer or the
Servicer and/or to any event or circumstance and at any time, a material adverse
effect on (a) the ability of such Person to perform its obligations under any
Transaction Document to which it is a party or (b) the validity, enforceability,
or collectibility of any Receivables, Related Assets or Contracts that,
individually or in the aggregate, represent or evidence a right to payment in
excess of 2.6% of the aggregate Unpaid Balance of the Receivables at such time.

"MATURITY DATE" with respect to any Series, shall be the date
specified in the applicable Supplement relating thereto.

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<PAGE>

"MERGER" means the merger of StoneFin and StoneFin II with and into
Stone Container pursuant to the Merger Certificate.

"MERGER CERTIFICATE" means that certain Certificate of Ownership and
Merger effective as of the Closing Date pursuant to which the Merger shall be
consummated.

"MULTIEMPLOYER PLAN" means a "multiemployer" plan as defined in
Section 4001(a)(3) of ERISA that is maintained for the employees of the Sellers,
the Issuer, Stone Container or any ERISA Affiliate of any of the foregoing.

"NET ELIGIBLE RECEIVABLES" means, at any time, the then aggregate
Unpaid Balance of all Eligible Receivables at such time, MINUS the sum of (a)
the then aggregate amount of all Excess Concentration Balances with respect to
all Obligors at such time and (b) the dollar amount of any Adverse Claims then
outstanding, other than Permitted Adverse Claims of the type described in
clauses (i), (iv) or (v) of the definition thereof or any other Permitted
Adverse Claim relating to the payment of amounts described in the definition
thereof which are not yet due and payable and which have been fully bonded. For
purposes of calculating Net Eligible Receivables, all Collections which have
been received but have not been applied to any specific Receivables will be
presumed to be Collections of Eligible Receivables.

"NONCOMPLYING RECEIVABLE" means any Receivable which, as of the date
of origination thereof, did not meet the criteria for an Eligible Receivable as
of such date.

"NONCOMPLYING RECEIVABLES ADJUSTMENT" shall mean, as of any Settlement
Date, and with respect to any Seller's Receivables, as the case may be, an
amount equal to (i) the aggregate Unpaid Balances on the most recent Cut-Off
Date of all such Seller's Receivables which were first reported to be
Noncomplying Receivables during such Collection Period MINUS (ii) the aggregate
amount of Collections received by the Issuer during such Calculation Period with
respect to any such Seller's Receivables which were reported to be Noncomplying
Receivables in any prior Settlement Statement MINUS (iii) the "Allocated Loss
and Dilution Amount" (as such term is hereinafter defined).

As used herein, the "ALLOCATED LOSS AND DILUTION AMOUNT" shall be
determined as follows:

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ALDA = UB x (LD + DD)

where:

ALDA = the Allocated Loss and Dilution Amount.

UB = the aggregate Unpaid Balances as of the most recent
Cut-Off Date of the applicable Noncomplying Receivables
reported during the Calculation Period ended as of such
Cut-Off Date.

LD = the Loss Discount applicable to such Receivables as of
the most recent Cut-Off Date.

DD = the Dilution Discount Ratio applicable to such
Receivables as of the most recent Cut-Off Date.

"NONCOMPLYING RECEIVABLES AND DILUTION ADJUSTMENT" means as to any
Seller at any time, the sum of the Dilution Adjustment and Noncomplying
Receivables Adjustment owed to or from such Seller.

"NOTE" or "NOTES" means any one or more of the promissory notes issued
by the Issuer under the Indenture, including any such notes issued as a
replacement for a previously issued Note pursuant to SECTION 6.06 of the
Indenture.

"NOTEHOLDER" or "HOLDER" of Notes means, in each case, the Person in
whose name a Note is registered in the Note Register.

"NOTEHOLDER ALLOCATION PERCENTAGE" means:

(1) on any Business Day occurring prior to the Liquidation
Commencement Date, a fraction (expressed as a percentage) (a) the numerator
of which is the sum of the aggregate Outstanding Principal Balances of all
outstanding Series of Notes as of (i) in the case of a Series of Notes that
is in an Accumulation Period, Pay-Out Period or Prepayment Accumulation
Period, the applicable Scheduled Accumulation Commencement Date, Pay-Out
Period Commencement Date or Prepayment Accumulation Commencement Date and
(ii) in the case of a Series of Notes that is in a Revolving Period and is
not in a Prepayment Accumulation Period, that Business Day and (b) the
denominator of which is the sum of (i) the amount determined under clause
(a) immediately above and (ii) the excess, if any, of (x) the Variable
Amount, if positive, as of that day, OVER (y) the amount of funds, if any,
then on deposit in the Defeasance Account and the Principal Funding
Account;

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(2) on any Business Day occurring after the Liquidation Commencement
Date, 100%.

"NOTE RATE" means, with respect to any Series or Class of Notes, the
fixed or variable rate or rates of interest applicable thereto as set forth
therein and/or the applicable Supplement relating thereto.

"NOTE REGISTER" means the register maintained pursuant to SECTION 6.05
of the Indenture, providing for the registration of the Notes and transfers and
exchanges thereof.

"OBLIGATIONS" means (a) all obligations of the Issuer, the Sellers,
and the Servicer to the Trustee, the Administrative Agent, any other Indemnified
Party, the Noteholders and each of the foregoing's respective successors,
permitted transferees and assigns, arising under or in connection with the
Transaction Documents, and (b) all obligations of the Sellers to the Issuer, any
other RPA Indemnified Party and their respective successors, transferees and
assigns, arising under or in connection with the Transaction Documents, in each
of the cases of (a) and (b) above, howsoever such obligations shall be created,
arising or evidenced, whether direct or indirect, absolute or contingent, now or
hereafter existing, or due or to become due.

"OBLIGOR" means a Person obligated to make payments on a Receivable.

"OFFICER'S CERTIFICATE" means, unless otherwise specified in the
Indenture or in any Supplement, a certificate signed by an Authorized Officer of
the Issuer or the initial Servicer, as the case may be, or, in the case of a
Successor Servicer, a certificate signed by the President, any Vice President or
the financial controller (or an officer holding an office with equivalent or
more senior responsibilities) of such Successor Servicer, which, in the case of
any of the foregoing, is delivered to the Trustee and the Administrative Agent
(if it is not the Person delivering such Officer's Certificate).

"OPINION OF COUNSEL" means a written opinion of counsel, who shall be
reasonably acceptable to the Trustee.

"ORIGINAL BALANCE" means, with respect to any Receivable, the Unpaid
Balance of such Receivable on the date it was purchased by, or otherwise
transferred to, the Issuer, which face amount shall be calculated net of any
credits issued on or accrued through the date of Purchase.

"OUTSTANDING PRINCIPAL BALANCE" means, at any time, (a) with respect
to any Note, the outstanding principal balance of such Note at such time, and
(b) with respect to any Class or

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Series of Notes, the aggregate outstanding principal balance of all Notes in
such Class or Series, as applicable, at such time.

"PAYING AGENT" means any paying agent appointed pursuant to SECTION
6.17 of the Indenture and shall initially be the Administrative Agent.

"PAYMENT DATE" means the 15th day of each calendar month, or if such
day is not a Business Day, the next succeeding Business Day.

"PAY-OUT EVENT" means, with respect to any Series of Notes, any event
defined as such in the Supplement pursuant to which such Series was issued.

"PAY-OUT PERIOD" means, with respect to one or more Series of Notes,
the period commencing on the Pay-Out Period Commencement Date that applies to
such Series of Notes and ending on the date on which all such Series of Notes
shall have been paid in full.

"PAY-OUT PERIOD COMMENCEMENT DATE" means, with respect to one or more
Series of Notes, the date on which a Pay-Out Event for such Series occurs.

"PBGC" means the Pension Benefit Guaranty Corporation and any
successor thereto.

"PENSION PLAN" shall mean any employer plan that is subject to the
provisions of Part 3 of Title 1B of ERISA or to Title IV of ERISA and that is
maintained for employees of any of the Sellers, the Issuer or any of the
foregoing's ERISA Affiliates, but shall not include any Multiemployer Plan.

"PERMITTED ADVERSE CLAIMS" shall mean (i) Adverse Claims created under
the Transaction Documents (x) in favor of the Issuer (and assigned to the
Trustee) or the Trustee, in either case, as against the Sellers and (y) in favor
of the Trustee as against the Issuer; (ii) Adverse Claims for taxes, assessments
or charges of any Governmental Authority for amounts not yet due or which are
being contested in good faith by appropriate proceedings and with respect to
which adequate reserves or other appropriate provisions are being maintained in
accordance with GAAP; (iii) Adverse Claims of landlords, carriers, warehousemen,
mechanics and materialmen imposed by law and created in the ordinary course of
business for amounts not yet due or which are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves or other
appropriate provisions are being maintained in accordance with GAAP; (iv) any
right of offset of an Obligor with respect to payment of a Receivable which has
the economic effect of a priority claim; (v) Adverse Claims of a collecting bank
under Section 4-210 of the UCC; and (vi) other Adverse Claims not

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described in clause (ii) above in favor of the PBGC or the Internal Revenue
Service which either (a) do not exceed $2,000,000 in the aggregate at any one
time outstanding or (b) have been bonded in full by or on behalf of the
applicable Sellers or the Issuer, as the case may be.

"PERSON" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture, government or any agency or political subdivision thereof or any other
entity.

"PLEDGED ASSETS" is defined in Granting Clause of the Indenture.

"PRE-EXISTING STONEFIN PURCHASE AGREEMENT" means that certain
Receivables Purchase Agreement dated as of August 15, 1991 (as amended) among
StoneFin, Stone Container, Stone Corrugated and Stone Southwest.

"PRE-EXISTING STONEFIN II PURCHASE AGREEMENT" means that certain
Receivables Purchase Agreement dated as of August 18, 1992 (as amended) among
StoneFin II, Stone Container, SCNI, Stone Bag, Stone Packaging, and Stone
Southwest.

"PREPAYMENT ACCUMULATION COMMENCEMENT DATE" means, with respect to any
Series, so long as the Pay-Out Period Commencement Date with respect to such
Series or the Liquidation Commencement Date shall not have occurred, the date
specified in any notice of optional prepayment or redemption given by the Issuer
to the Trustee and the Administrative Agent pursuant to the Supplement relating
to such Series.

"PREPAYMENT ACCUMULATION PERIOD" means, with respect to any Series,
the period commencing on the Prepayment Accumulation Commencement Date with
respect to such Series and ending on the earlier to occur of (a) the Liquidation
Commencement Date, (b) the Pay-Out Commencement Date with respect to such
Series, and (c) the date on which the entire principal balance of the Notes of
such Series to be prepaid or redeemed, plus the applicable prepayment premium,
if any, shall have been accumulated in the Defeasance Account.

"PRINCIPAL ACCUMULATION AMOUNT" means, with respect to any Series, for
any Payment Date occurring during the Accumulation Period, the sum of the
amounts set aside in the Defeasance Account with respect to such Series during
the preceding Calculation Period; and the amount so set aside on each Business
Day during the Accumulation Period (until the Outstanding Principal Balance of
such Series has been provided for in full) will equal the product of (a) the
Defeasance Allocation Percentage for such Series and (b) the balance of
Collections available in the Master Collection Account, after making any
required transfers to the Carrying Cost Account.

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"PRINCIPAL FUNDING ACCOUNT" is defined in SECTION 4.01(e) of the
Indenture.

"PRINCIPAL PAYMENT AMOUNT" means: (i) for any Payment Date occurring
after the Calculation Period in which the Liquidation Period commences, with
respect to any Class of Notes, the product of (a) the balance of Collections in
the Master Collection Account that were deposited therein prior to the end of
the preceding Calculation Period remaining after application thereof as provided
in CLAUSE FIRST of SECTION 4.02(f) of the Indenture (and, in the case of any
Subordinated Class, after application thereof to the repayment in full of the
respective Outstanding Principal Balances all Classes of Notes senior in
priority thereto) and (b) the Class Allocation Percentage of such Class; and

(ii) for any Payment Date occurring after the Calculation Period in
which a Pay-Out Period commences with respect to any Series, an amount equal to
the amount calculated in the same manner as the Principal Accumulation Amount
with respect to a Payment Date in the Accumulation Period.

"PRINCIPAL TERMS" means, with respect to any Series of Notes: (a) the
name or designation thereof and of any Classes thereof and, if more than one
class, the relative rights and priorities thereof; (b) the initial aggregate
principal amount thereof; (c) whether such Notes are to be Fixed Principal Notes
or Revolving Notes and the denominations (if such Notes are Fixed Principal
Notes) or Stated Amounts (if such Notes are Revolving Notes) thereof; (d) the
applicable Note Rates thereof and the manner of the calculation thereof; (e) the
designation of any Trust Accounts with respect thereto; (f) the Maturity Date
and Stated Maturity Date thereof; (g) the terms of any Enhancement therefor; (g)
the Pay-Out Events with respect thereto; (h) the terms for the redemption or
prepayment thereof; (i) whether such Notes will be certificated or in Book-Entry
Form; (j) any required reserves with respect thereto; and (k) any other terms
supplementing or modifying those contained in the Indenture with respect to such
Series of Notes.

"PROCESSING DATE" means, with respect to any Receivable, the date that
the existence of such Receivable is first recorded on the applicable Seller's
and/or the Servicer's master data processing records.

"PROGRAM" means the transactions contemplated in the Transaction
Documents.

"PURCHASE" means, on any Business Day, the sale, contribution and
conveyance of all Receivables from the Sellers to the Issuer under the Purchase
Agreement for which the Purchase Price has not been previously paid or which
have not previously

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<PAGE>

been contributed to the Issuer by Stone Container, in either case, in accordance
with the terms of SECTION 2.02 thereof.

"PURCHASE AGREEMENT" means that certain Receivables Purchase
Agreement, dated as of March 14, 1995, by and among the Sellers and the Issuer,
as the same may be further amended, supplemented, amended and restated or
otherwise modified from time to time in accordance with the terms thereof and of
the Indenture.

"PURCHASED ASSETS" is defined in SECTION 2.01(a) of the Purchase
Agreement.

"PURCHASE DISCOUNT RESERVE RATIO" is defined in SECTION 2.02(b) of the
Purchase Agreement.

"PURCHASE PRICE" is defined in SECTION 2.02(b) of the Purchase
Agreement.

"PURCHASE PRICE PERCENTAGE" is defined in SECTION 2.02(b) of the
Purchase Agreement.

"PURCHASE TERMINATION DATE" means the earlier to occur of (i) date
upon which all of the Sellers have ceased to sell Receivables to the Issuer in
accordance with the provisions of SECTION 8.09 of the Purchase Agreement and
(ii) the date upon which the Liquidation Commencement Date is declared or
automatically occurs pursuant to SECTION 9.01 or SECTION 9.02 of the Indenture.

"RATING AGENCY CONDITION" means, with respect to any action, that each
Applicable Rating Agency has notified the Servicer, the Trustee, and the
Administrative Agent in writing that such action will not result in a reduction
or withdrawal of the rating of any outstanding Series or Class with respect to
which it is an Applicable Rating Agency.

"RECEIVABLE" means (i) a Bag Receivable, (ii) a Box Receivable or
(iii) any other right to payment from, or other indebtedness of, an Obligor
(including all interest or finance charges and other obligations of such Obligor
with respect thereto) which (x) arises from the sale of goods, merchandise or
services by any Seller (other than any such sale of goods, merchandise or
services giving rise to a CBM Receivable) and (y) is designated as a
"Receivable" in accordance with SECTION 2.06 of the Purchase Agreement.

"RECEIVABLE NOTES" means any promissory notes issued by an Obligor to
evidence a past-due or otherwise delinquent Receivable.

"RECITALS" means the "Recitals of the Issuer" contained in the
Indenture.

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<PAGE>

"RECORD DATE" means, with respect to any Payment Date, the third
Business Day immediately preceding such Payment Date.

"RECORDS" means all Contracts, purchase orders, invoices and other
agreements, documents, books, records and other media for the storage of
information (including tapes, disks, punch cards, computer programs and
databases and related property) maintained by the Issuer, the Sellers or the
Servicer with respect to the Transferred Assets, the Pledged Assets and/or the
related Obligors.

"RECOVERIES" means all Collections received by the Issuer, the
Servicer, the Administrative Agent or the Trustee from time to time in respect
of any Charged-Off Receivable.

"REDEMPTION DATE" is defined in SECTION 15.02 of the Indenture.

"REDEMPTION PRICE" is defined in SECTION 15.04 of the Indenture.

"RELATED ASSETS" is defined in SECTION 2.01(a) of the Purchase
Agreement.

"RELATED SECURITY" means, with respect to any Receivable: (a) all of
the applicable Seller's right, title and interest in and to the goods (including
returned goods), if any, relating to the sale which gave rise to such
Receivable; (b) all other security interests or liens and property subject
thereto from time to time purporting to secure payment of such Receivable,
whether pursuant to the Contract related to such Receivable or otherwise; (c)
all letters of credit, guarantees and other agreements or arrangements of
whatever character from time to time supporting or securing payment of such
Receivable whether pursuant to the Contract related to such Receivable or
otherwise; and (d) all proceeds of any of the foregoing.

"RELATED TRANSFERRED ASSETS" is defined in Granting Clause of the
Indenture.

"REPORT DATE" means the Business Day immediately preceding the Payment
Date in any month.

"REQUIRED NOTEHOLDERS" means, at any time, the Holders of Notes the
aggregate Outstanding Principal Balances of which, collectively, represent more
than 66-2/3% of the aggregate Outstanding Principal Balances of the outstanding
Notes of all Series at such time.

"REQUIRED RESERVES" means, at any time as to any Class of Notes, the
product of (a) the Applicable Reserve Ratio with respect to such Class at such
time, (b) the Net Eligible Receivables at such time and (c) a fraction, (i) the
numerator of

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<PAGE>

which is the Outstanding Principal Balance with respect to such Class at such
time and (ii) the denominator of which is the sum of the Outstanding Principal
Balances of all Classes of Notes of equal priority with such Class at such time.

"REQUIRED SERIES HOLDERS" means, at any time with respect to any
action to be taken by Holders of any Series of Notes, the holders of such Notes
of such Series the aggregate Outstanding Principal Balance of which,
collectively, represent more than 66-2/3% of the aggregate Outstanding Principal
Balances of all of the outstanding Notes of such Series at such time, PROVIDED,
that with respect to any outstanding Series of Revolving Notes in respect of
which there is no Outstanding Principal Balance at such time, "REQUIRED SERIES
HOLDERS" shall mean the holders of such Notes of such Series the aggregate
Outstanding Principal Balance of which, collectively, represent more than 66-
2/3% of the aggregate Stated Amount of all of the outstanding Notes of such
Series at such time.

"RESPONSIBLE OFFICER" means, when used with respect to the Trustee or
the Administrative Agent, (a) any officer within the structured finance group of
the corporate trust department (or any successor group) of the Trustee or the
Administrative Agent, as applicable, including any vice president, assistant
vice president, assistant secretary, assistant treasurer, corporate trust
officer or any other officer or assistant officer of the Trustee or
Administrative Agent, as applicable, customarily performing functions similar to
those performed by the persons who hold the office of vice president, assistant
vice president, assistant secretary, assistant treasurer or corporate trust
officer and (b) any other officer of the Trustee or the Administrative Agent, as
applicable, within such corporate trust department with direct responsibility
for the administration of the Indenture or to whom any corporate trust matter is
referred at the Trustee's Corporate Trust Office or the Administrative Agent
Corporate Trust Office, as applicable, because of his knowledge of or
familiarity with the particular subject.

"REVOLVING NOTE or REVOLVING NOTES" means any Notes of any Series that
are designated to be "Revolving Notes" in the Supplement pursuant to which such
Series is issued.

"REVOLVING NOTEHOLDER" means the Person in whose name an Revolving
Note is registered in the Note Register.

"REVOLVING PERIOD" means, with respect to any Series or Class of
Notes, that period during which such Series is outstanding prior to the
occurrence of the Accumulation Period, the Prepayment Accumulation Period, the
Pay-Out Period or the Liquidation Period.

"RPA INDEMNIFIED LOSSES" is defined in SECTION 7.01 of the Purchase
Agreement.

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<PAGE>

"RPA INDEMNIFIED PARTY" is defined in SECTION 7.01 of the Purchase
Agreement.

"S&P" means Standard & Poor's Ratings Group and its successors.

"SCHEDULED ACCUMULATION COMMENCEMENT DATE" means, with respect to any
Series of Notes, the date specified as such in the Supplement pursuant to which
such Series of Notes is issued.

"SCNI" means Stone Consolidated Newsprint, Inc., formerly a New York
corporation which was merged with and into Stone Container pursuant to the
Consolidation.

"SECURITIES ACT" means the Securities Act of 1933, as it may be
amended from time to time.

"SELLER" means each of the "Sellers" party to the Purchase Agreement;
PROVIDED, HOWEVER, that such term shall also include any Subsidiary of Stone
that becomes a party to the Purchase Agreement pursuant to SECTION 2.06 thereof
and shall exclude any Person that is terminated as a Seller pursuant to SECTION
2.07 of the Purchase Agreement; and PROVIDED FURTHER, that as it relates to any
Receivable generated prior to the Consolidation, the term "SELLER" shall also
include Stone Bag, Stone Corrugated and Stone Packaging.

"SELLER CHANGE EVENT" is defined in SECTION 3.04(d) of the Indenture.

"SELLER LOANS" means those certain loans which the Sellers advance to
the Issuer from time to time in lieu of cash payment of the Purchase Price as
provided in SECTION 2.02(c) of the Purchase Agreement, which Seller Loans are
evidenced by and subject to the terms of the SRC Intercompany Notes.

"SELLER'S RECEIVABLE" means, with respect to any Seller, a Receivable
originated by such Seller without regard to whether such Receivable has been or
will be transferred to the Issuer under the Purchase Agreement.

"SELLER TRANSACTION DOCUMENTS" means the Purchase Agreement and the
Account Agreements.

"SENIOR CLASS" means any Class of Notes that is identified as a
"Senior Class" in the applicable Supplement.

"SERIES" means any Series of Notes issued pursuant to SECTION 6.03 of
the Indenture.

"SERIES SALE DATE" means, with respect to any Series, the date
specified as such in the Supplement pursuant to which such Series was issued.

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<PAGE>

"SERVICER" means at any time the Person then authorized and appointed
pursuant to ARTICLE VI of the Purchase Agreement and SECTION 3.01 of the
Indenture to service, administer and collect Receivables and Related Transferred
Assets, including any Successor Servicer appointed pursuant to ARTICLE X of the
Indenture.

"SERVICER DEFAULT" is defined in SECTION 10.01 of the Indenture.

"SERVICE TRANSFER" is defined in SECTION 10.02(b) of the Indenture.

"SERVICING FEE" is defined in SECTION 6.07 of the Purchase Agreement.

"SETTLEMENT" means the payments and other actions provided for on each
Payment Date.

"SETTLEMENT DATE" means the eighteenth day of each calendar month, or
if such day is not a Business Day, the next succeeding Business Day.

"SETTLEMENT STATEMENT" is defined in SECTION 3.04(c) of the Indenture.

"SRC INTERCOMPANY NOTES" is defined in SECTION 2.02(d) of the Purchase
Agreement.

"STATED AMOUNT" means, as to any Revolving Note, the maximum principal
amount that may be required to be funded by the Holder of such Revolving Note,
as applicable, as determined pursuant to the applicable Supplement.

"STATED MATURITY DATE" with respect to any Series, shall be the date
specified in the applicable Supplement relating thereto.

"STONE BAG" means Stone Bag Corporation, formerly a Delaware
corporation which was merged with and into Stone Container pursuant to the
Consolidation.

"STONE CONTAINER" means Stone Container Corporation, a Delaware
corporation.

"STONE CORRUGATED" means Stone Corrugated, Inc., formerly a Delaware
corporation which was merged with and into Stone Container pursuant to the
Consolidation.

"STONEFIN" means Stone Financial Corporation, formerly a Delaware
corporation which was merged with and into Stone Container pursuant to the
Merger.

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<PAGE>

"STONEFIN II" means StoneFin II Receivables Corporation, formerly a
Delaware corporation which was merged with and into Stone Container pursuant to
the Merger.

"STONE PACKAGING" means Stone Packaging Corporation, formerly a
Delaware corporation which was merged with and into Stone Container pursuant to
the Consolidation.

"STONE PERSON" means Stone Container and each of its Subsidiaries and
Affiliates.

"STONE SOUTHWEST" means Stone Southwest, Inc., a Delaware corporation.

"SUBORDINATED CLASS" means any Class of Notes that is identified as
being a "Subordinated Class" in the applicable Supplement. With respect to any
Subsequent Issuance of a Subordinated Class, the Supplement pursuant to which
such new Notes are to be issued shall specify the priority in payment of such
new Subordinated Class relative to each other Subordinated Class outstanding as
of such Subsequent Issuance Date.

"SUBORDINATION DEFICIT" means, at any time with respect to any Class
of Notes (other than the Subordinated Class or Classes of Notes ranking most
junior in priority as among all of the other Classes of Notes then outstanding),
the positive excess, if any, of (i) the Required Reserves for such Class at such
time OVER (ii) the product of (a) the sum of (i) the aggregate Outstanding
Principal Balances of all outstanding Notes of any Class which are junior in
priority to such Class of Notes and (ii) the sum of the Required Reserves for
all outstanding Notes which are junior in priority to such Class of Notes and
(b) a fraction, (x) the numerator of which is the Outstanding Principal Balance
of such Class at such time and (y) the denominator of which is the sum of the
Outstanding Principal Balances of all Classes of Notes of equal priority with
such Class at such time.

"SUBSEQUENT ISSUANCE" means any issuance of Notes on any date after
the Closing Date.

"SUBSEQUENT ISSUANCE DATE" means, with respect to any Subsequent
Issuance, the Series Sale Date of the Notes to be issued in connection
therewith.

"SUB-SERVICER" is defined in SECTION 6.02(b) of the Purchase
Agreement.

"SUBSIDIARY" means, with respect to any Person, any corporation of
which more than 50% of the outstanding capital stock having ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether at the time capital stock of any other class or classes
of such

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<PAGE>

corporation shall or might have voting power upon the occurrence of any
contingency) is at the time directly or indirectly owned by such Person.

"SUCCESSOR SERVICER" is defined in SECTION 10.02(a) of the Indenture.

"SUPPLEMENT" means, with respect to each Series of Notes, each
supplement hereto executed by the Issuer, the Servicer, the Trustee and the
Administrative Agent, into each of which agreements the Principal Terms of the
Indenture shall be incorporated by reference and in each of which the terms and
provisions applicable to the Series of Notes to be issued thereunder shall be
set out, as the same may be amended, supplemented, amended and restated or
otherwise modified from time to time in accordance with the terms thereof and
with the Indenture.

"TAX OPINION" means, with respect to any action, an Opinion of Counsel
to the effect that, for Federal income tax purposes, (a) with respect to any
Notes of any Series or Class to be issued on the Closing Date or on any
Subsequent Issuance Date, such Notes will be properly characterized as debt and
(b) such action (including, without limitation, any Subsequent Issuance) will
not adversely affect the characterization of the Notes of any outstanding Series
or Class as debt.

"TERMINATION NOTICE" is defined in SECTION 10.01 of the Indenture.

"TRANSACTION DOCUMENTS" means the Purchase Agreement, the Indenture,
each Supplement, the Notes and, with respect to any Series, any other agreement
specified in the applicable Supplement relating thereto as being a "Transaction
Document."

"TRANSFER AGENT AND REGISTRAR" means any transfer agent and registrar
appointed pursuant to SECTION 6.05 of the Indenture and shall initially be the
Administrative Agent.

"TRANSFERRED ASSETS" is defined in SECTION 2.01(a) of the Purchase
Agreement.

"TRUST ACCOUNTS" means the accounts described in SECTIONS 4.01(b),
(c), (e) and (f) of the Indenture and any accounts required to be established
pursuant to any Supplement that are designated as Trust Accounts in that
Supplement.

"TRUSTEE" means Marine Midland Bank, in its capacity as trustee on
behalf of the Noteholders under the Indenture, or its successor-in-interest, or
any successor trustee appointed as provided in the Indenture.

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<PAGE>

"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, as
amended by the Trust Indenture Reform Act of 1990, as in force on the Closing
Date, except as set forth in SECTION 14.05 of the Indenture.

"TURNOVER DAYS" means, at any time, that number of days calculated in
the most recent Settlement Statement for the Receivables in accordance with the
following formula:
x y
TD = (UB + UB ) X 1 X ED
----------- ---
2 NR
where:

TD = the Turnover Days for the Receivables;

x
UB = the aggregate Unpaid Balances of all of the Receivables as
of the first day of the Calculation Period to which such
Settlement Statement relates.

y
UB = the aggregate Unpaid Balances of all of the Receivables as
of the most recent Cut-Off Date.

NR = the aggregate Original Balances of all of the Receivables
which were generated during such Calculation Period.

ED = the actual days elapsed during such Calculation Period.

"UCC" means the Uniform Commercial Code as from time to time in effect
in the applicable jurisdiction or jurisdictions.

"UNFUNDED CURRENT LIABILITY" means, with respect to any Pension Plan,
the amount, if any, by which the present value of the accrued benefits under
such Pension Plan as of the close of its most recent plan year exceeds the fair
market value of the assets allocable thereto, in each case, as determined in
accordance with Section 412 of the Internal Revenue Code.

"UNMATURED EVENT OF DEFAULT" means any event or condition which, with
the giving of notice, lapse of time and/or passage of a vote in respect thereof,
would become an Event of Default.

"UNMATURED LIQUIDATION EVENT" means any event or condition which, with
the giving of notice, lapse of time and/or passage of a vote with respect
thereto, would become a Liquidation Event.

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<PAGE>

"UNMATURED PAY-OUT EVENT" means any event or condition which, with the
giving of notice, lapse of time and/or passage of a vote with respect thereto,
would become a Pay-Out Event.

"UNPAID BALANCE" of any Receivable means at any time the unpaid amount
thereof. If a Receivable becomes evidenced by a Receivable Note, then the
Unpaid Balance of such Receivable shall be reduced by the principal amount of
such Receivable Note.

"U.S. GOVERNMENT OBLIGATIONS" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America, the payment of which is unconditionally Guaranteed as a full faith and
credit obligation by the United States of America, which, in either case under
clauses (i) or (ii) are not callable or redeemable at the option of the issuer
thereof or (iii) depository receipts issued by a bank or trust company as
custodian with respect to any such U.S. Government Obligations or a specific
payment of interest on or principal of any such U.S. Government Obligation held
by such custodian for the account of the holder of a depository receipt,
provided that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the U.S.
Government Obligation or the specific payment of interest on or principal of the
U.S. Government Obligation evidenced by such depository receipt.

"VARIABLE AMOUNT" is defined in SECTION 4.02(c) of the Indenture.

B. OTHER TERMS. All accounting terms not specifically defined herein
shall be construed in accordance with United States generally accepted
accounting principles. To the extent that the definitions of accounting terms
in any Transaction Document are inconsistent with the meanings of such terms
under generally accepted accounting principles or regulatory accounting
principles, the definitions contained in such Transaction Document shall
control. All terms used in Article 9 of the UCC in the State of New York and
not specifically defined herein, are used herein as defined in such Article 9.
As used in the Transaction Documents, the term "INCLUDING" means "including
without limitation," and other forms of the verb "to include" have correlative
meanings. All references to any Person shall include such Person's permitted
successors.

C. COMPUTATION OF TIME PERIODS. Unless otherwise stated in the
Purchase Agreement, the Indenture or any Supplement, as the case may be, in the
computation of a period of time from a specified date to a later specified date,
the word

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<PAGE>

"from" means "from and including" and the words "to" and "until" each means "to
but excluding".

D. REFERENCE; CAPTIONS. The words "hereof", "herein" and "hereunder"
and words of similar import when used in any Transaction Document shall refer to
such Transaction Document as a whole and not to any particular provision of such
Transaction Document; and references to "SECTION", "SUBSECTION", "SCHEDULE" and
"EXHIBIT" in any Transaction Document are references to Sections, subsections,
Schedules and Exhibits in or to such Transaction Document unless otherwise
specified in such Transaction Document. The various captions (including the
tables of contents) in each Transaction Document are provided solely for
convenience of reference and shall not affect the meaning or interpretation of
any Transaction Document.

<PAGE>

Annex I

ESTIMATED AGED RECEIVABLES RATIOS

Calculation Period Ratio
------------------ -----

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<PAGE>

EXECUTION COPY

STONE RECEIVABLES CORPORATION
ISSUER

STONE CONTAINER CORPORATION
INITIAL SERVICER

MARINE MIDLAND BANK
TRUSTEE

and

BANKERS TRUST COMPANY
ADMINISTRATIVE AGENT

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

SERIES 1995-1 SUPPLEMENT

dated as of March 14, 1995

MASTER TRUST INDENTURE AND SECURITY AGREEMENT

dated as of March 14, 1995

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

$220,000,000 FLOATING RATE CLASS A
RECEIVABLES-BACKED NOTES, SERIES 1995-1,

$40,000,000 FLOATING RATE CLASS B
RECEIVABLES-BACKED NOTES, SERIES 1995-1,

<PAGE>

TABLE OF CONTENTS
<TABLE>
<CAPTION>

Page
----
<S> <C>
ARTICLE I
DEFINITIONS; INCORPORATION OF TERMS OF
THE INDENTURE

SECTION 1.01 Definitions . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02 Incorporation of Terms and Conditions of
the Indenture . . . . . . . . . . . . . . . . . . . . 8

ARTICLE II
DESIGNATION; MATTERS RELATING TO THE SERIES 1995-1 NOTES
SECTION 2.01 Designation . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.02 Limitations on the Sale or Transfer of
Series 1995-1 Notes . . . . . . . . . . . . . . . . . 10
SECTION 2.03 Delivery of Settlement Statements and
Daily Reports to Placement Agents . . . . . . . . . . 17

ARTICLE III
CONDITIONS TO ISSUANCE OF NOTES

SECTION 3.01 Conditions to Issuance. . . . . . . . . . . . . . . . . 17

ARTICLE IV
PAYMENTS

SECTION 4.01 Payments. . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 4.02 Interest. . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 4.03 Optional Redemption; Prepayments. . . . . . . . . . . . 18
SECTION 4.04 Application of Payments between Senior
and Subordinated Classes of Series
1995-1 Notes. . . . . . . . . . . . . . . . . . . . . 22

ARTICLE V
PAY-OUT EVENTS

SECTION 5.01 Pay-Out Events. . . . . . . . . . . . . . . . . . . . . 23

ARTICLE VI
MISCELLANEOUS

SECTION 6.01 Governing Law . . . . . . . . . . . . . . . . . . . . . 26
SECTION 6.02 Execution in Counterparts . . . . . . . . . . . . . . . 26
SECTION 6.03 Effect of Unenforceable Provisions. . . . . . . . . . . 26
SECTION 6.04 Amendment, Waiver, Etc. . . . . . . . . . . . . . . . . 26
SECTION 6.05 The Trustee and The Administrative Agent. . . . . . . . 27
SECTION 6.06 Instructions in Writing . . . . . . . . . . . . . . . . 27
</TABLE>

-i-

<PAGE>

<TABLE>
<CAPTION>
Page
----
EXHIBITS
- --------
<S> <C>
Exhibit A -- Form of Floating Rate Class A Receivables-Backed Notes,
Series 1995-1
Exhibit B -- Form of Floating Rate Class B Receivables-Backed Notes,
Series 1995-1
Exhibit C -- Form of Investor Letter (Institutional Accredited Investors)
Exhibit D -- Form of Noteholder Reg S Certification
Exhibit E -- Form of Transferee Reg S Certification
Exhibit F -- Form of Depositary Reg S Certification
Exhibit G -- Form of Transfer to Regulation S Certification
Exhibit H -- Form of Placement Agent Exchange Instructions
</TABLE>

-ii-

<PAGE>

SERIES 1995-1 SUPPLEMENT

THIS SERIES 1995-1 SUPPLEMENT, dated as of March 14, 1995 (this
"SUPPLEMENT"), is made by and among STONE RECEIVABLES CORPORATION, a Delaware
corporation, as issuer (the "Issuer"), STONE CONTAINER CORPORATION, a Delaware
corporation, as initial Servicer (in such capacity, together with any successor
in such capacity, the "SERVICER"), MARINE MIDLAND BANK, as Trustee (in such
capacity, together with any successor in such capacity, the "TRUSTEE"), and
BANKERS TRUST COMPANY, as Administrative Agent (in such capacity, together with
any successor in such capacity, the "ADMINISTRATIVE AGENT).

Pursuant to the Master Trust Indenture and Security Agreement dated as
of March 14, 1995 (as the same may be amended, restated, supplemented or
otherwise modified from time to time and as supplemented hereby, the
"INDENTURE"), among the Issuer, the Servicer, the Trustee and the Administrative
Agent, the Issuer may from time to time, among other things, issue one or more
Series of Notes secured by the Pledged Assets. Certain terms applicable to any
such Series of Notes are to be set forth in a Supplement.

Pursuant to this Supplement, the Issuer shall create for
authentication and delivery by or on behalf of the Administrative Agent a Series
of Fixed Principal Notes and shall specify certain terms thereof.

ARTICLE I

DEFINITIONS; INCORPORATION OF TERMS OF
THE INDENTURE

SECTION 1.01 DEFINITIONS. (a) Capitalized terms that are used but
not defined herein shall have the meanings assigned in APPENDIX A to the
Indenture. In addition, this Supplement shall be interpreted in accordance with
the conventions set forth in PARTS B, C and D of APPENDIX A to the Indenture.
Except as expressly provided otherwise herein, references herein to an
"Article," "Section," "Exhibit" or "clause" refer to an Article, Section,
Exhibit or clause of or to this Supplement.

(b) Each capitalized term defined herein relates only to the Series
1995-1 Notes and to no other Series of Notes issued by the Issuer. Whenever
used in this Supplement, the following words and phrases shall have the
following meanings:

"144A GLOBAL NOTES" is defined in SECTION 2.01(b).

"ALTERNATIVE REQUIRED RESERVE RATIOS" means, at any time with respect
to either the Series 1995-1, Class A Notes or the Series 1995-1, Class B Notes,
the sum of (a) the Alternative Loss Reserve Ratio with respect to such Class and
(b) the Alternative Dilution Reserve Ratio with respect to such Class, in each
case, as set forth in the most recent Settlement Statement.

<PAGE>

"APPLICABLE RATING AGENCIES" means each nationally recognized rating
agency that, at the request of the Issuer, from time to time maintains a credit
rating of the Series 1995-1, Class A Notes or the Series 1995-1, Class B Notes.

"APPLICABLE RATINGS FACTOR" means (a) with respect to the Series
1995-1 Class A Notes, 2.5 and (b) with respect to the Series 1995-1, Class B
Notes, 1.5.

"APPLICABLE RESERVE RATIO" means, at any time with respect to the
Series 1995-1, Class A Notes or the Series 1995-1, Class B Notes, an amount
calculated in the then effective Settlement Statement to be the greatest of:

(a) the Minimum Reserve Ratio with respect to such Class;

(b) the Required Reserve Ratio calculated in such Settlement
Statement with respect to such Class;

(d) the sum of either (x) for purposes of the calculation of the
Required Reserves for the Series 1995-1, Class B Notes, 9% or (y) for
purposes of the calculation of the Required Reserves for the Series 1995-1,
Class A Notes, 16%, in each case, plus the product of:

(i) the average of the Dilution Ratios during the period of
twelve consecutive Calculation Periods ending on the most recent Cut-
Off Date;

(ii) a fraction, having (A) a numerator equal to the aggregate
amount payable pursuant to all invoices generated by the Sellers
during the preceding Calculation Period ended on the most recent Cut-
Off Date (as calculated on such Cut-Off Date) and (B) a denominator
equal to the aggregate Unpaid Balance of all Eligible Receivables, as
calculated on the most recent Cut-Off Date; and

(iii) 1.15.

"APPLICABLE Z-VALUE" means (a) for purposes of calculating the
Alternative Dilution Reserve Ratio or the Alternative Loss Ratio Reserve as
elements of the Class A Required Reserves, 2.58 and (b) for purposes of
calculating the Alternative Dilution Reserve Ratio or the Alternative Loss Ratio
Reserve as elements of the Class B Required Reserves, 1.0.

"BENEFIT PLAN" shall mean any "employee benefit plan" as defined in
and which is subject to ERISA or any "plan" as defined in Section 4975 of the
Internal Revenue Code.

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"CASTLEWOOD" means Castlewood Funding Corporation, a Delaware
corporation.

"CEDEL" means CEDEL Bank, Societe Anonyme.

"CLASS A INITIAL ISSUANCE AMOUNT" means $220,000,000.

"CLASS B INITIAL ISSUANCE AMOUNT" means $40,000,000.

"CONTROLLED ACCUMULATION AMOUNT" means, for any Payment Date with
respect to the Accumulation Period, an amount equal to one-third of the unpaid
principal balance of the Series 1995-1 Notes outstanding immediately prior to
the commencement of the Accumulation Period.

"DEPOSITARY REG S CERTIFICATION" is defined in SECTION 2.02(d)(i).

"EUROCLEAR" means the Euroclear System.

"EURODOLLAR PERIOD" means each period that commences on a Payment Date
(or, if no Payment Date has yet occurred, the Series Sale Date) and ends on the
day immediately preceding the next Payment Date.

"EXCHANGE DATE" is defined in SECTION 2.01(b).

"EXISTING PROGRAM AGENT" means collectively, Caisse Nationale de
Credit Agricole, as facility agent and Citibank, N.A., as collateral agent.

"EXISTING PROGRAM DOCUMENTS" means, collectively, (i) the StoneFin
Credit Agreement, the StoneFin Master Program Agreement and all other
instruments, documents and agreements executed and delivered by StoneFin to or
for the benefit of the Existing StoneFin Lenders, Castlewood or the Existing
Program Agent pursuant to or in connection with either such agreement (other
than the Receivables Purchase Agreement dated as of August 15, 1991 (as amended)
among StoneFin and the "Sellers" named therein)) and (ii) the StoneFin II Credit
Agreement, the StoneFin II Master Program Agreement and all other instruments,
documents and agreements executed and delivered by StoneFin II to or for the
benefit of the Existing StoneFin II Lenders, South Shore or the Existing Program
Agent pursuant to or in connection with either such agreement (other than the
Receivables Purchase Agreement dated as of August 18, 1992 (as amended) among
StoneFin II and the "Sellers" named therein)).

"EXISTING PROGRAM OBLIGATIONS" means all amounts owing by Stone
Container (as successor by the Merger to Stone-Fin and StoneFin II) to
Castlewood, the Existing StoneFin Lenders, South Shore, the Existing Stone Fin
II Lenders and/or the Existing Program Agent under the Existing Program
Documents or in

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connection with the transactions contemplated thereby, including, without
limitation, for interest, principal and fees.

"EXISTING STONEFIN LENDERS" means those financial institutions parties
to the StoneFin Credit Agreement as lenders.

"EXISTING STONEFIN II LENDERS" means those financial institutions
parties to the StoneFin II Credit Agreement as lenders.

"EXPECTED FINAL PAYMENT DATE" means, with respect to the Series 1995-1
Notes, March 15, 2000.

"INSTITUTIONAL ACCREDITED INVESTOR" has the meaning given to
institutional "accredited investor" in Rule 501(a)(1), (2), (3) or (7) of the
Securities Act.

"LIBOR" means, with respect to any Eurodollar Period, the offered
rates for deposits in United States dollars having a maturity of one month (the
"Index Maturity") commencing on the related LIBOR Determination Date (as
hereinafter defined) which (subject to the circumstances described below)
appears on the Reuters Screen LIBO Page (as hereinafter defined) as of
approximately 11:00 a.m., London time, on such LIBOR Determination Date. "LIBOR
DETERMINATION DATE" will be the date that is two London business days prior to
the first day of such Eurodollar Period. If at least two such offered rates
appear on the Reuters Screen LIBO Page, LIBOR will be the arithmetic mean
(rounded upwards, if necessary, to the nearest one-sixteenth of a percent) of
such offered rates. The Issuer will determine LIBOR based on the foregoing
procedure and shall report its determination to the Administrative Agent who
shall verify such calculation. If fewer than two such quotations appear, LIBOR
with respect to such Eurodollar Period will be determined at approximately
11:00 a.m., London time, on such LIBOR Determination Date on the basis of the
rate at which deposits in United States dollars having the Index Maturity are
offered to prime banks in the London interbank market by four major banks in the
London interbank market selected by the Administrative Agent and in a principal
amount equal to an amount of not less than $1,000,000 and that is representative
for a single transaction in such market at such time. The Administrative Agent
will request the principal London office of each of such banks to provide a
quotation of its rate. If at least two such quotations are provided, LIBOR will
be the arithmetic mean (rounded upwards as aforesaid) of such quotations. If
fewer than two quotations are provided, LIBOR with respect to such Eurodollar
Period will be the arithmetic mean (rounded upwards as aforesaid) of the rates
quoted at approximately 11:00 a.m., New York City time, on such LIBOR
Determination Date by three major banks in New York, New York selected by the
Administrative Agent for loans in United States dollars to leading European
banks having the Index Maturity and in a principal amount equal to the amount of
not less than $1,000,000 and that is representative for a single

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transaction in such market at such time; PROVIDED, HOWEVER, that if the banks
selected as aforesaid are not quoting as mentioned in this sentence, LIBOR in
effect for the applicable Eurodollar Period will be LIBOR in effect for the
immediately preceding Eurodollar Period. For purposes of calculating LIBOR, a
"LONDON BUSINESS DAY" will be any Business Day on which dealings in deposits in
United States dollars are transacted in the London interbank market and "REUTERS
SCREEN LIBO PAGE" will be the display designated as page "LIBO" on the Reuters
Monitor Money Rates Service (or such other page as may replace the LIBO page on
that service for the purpose of displaying London interbank offered rates of
major banks).

"MATURITY DATE" means the earlier to occur of (i) the Stated Maturity
Date and (ii) either (a) in the case of the Series 1995-1, Class A Notes, the
fourth Payment Date following the commencement of the Pay-Out Period with
respect to such Class or the Liquidation Period and (b) in the case of the
Series 1995-1, Class B Notes, the fifth Payment Date following the commencement
of the Pay-Out Period with respect to such Class or the Liquidation Period.

"MEMBER ORGANIZATION" is defined in SECTION 2.01(b).

"MINIMUM RESERVE RATIO" means (a) for purposes of calculating the
Applicable Reserve Ratio as an element of determining the Required Reserves for
the Series 1995-1, Class A Notes, 19% and (b) for purposes of calculating the
Applicable Reserve Ratio as an element of determining the Required Reserves for
the Series 1995-1, Class B Notes, 11%.

"NOTEHOLDER REG S CERTIFICATION" is defined in SECTION 2.02(d)(i).

"NOTE PURCHASE AGREEMENT" means that certain Purchase Agreement dated
as of March 2, 1995 (as the same may be amended, restated, supplemented or
otherwise modified from time to time) among the Issuer and each of the Placement
Agents.

"PAR DATE" means March 15, 1999.

"PAY-OUT EVENT" with respect to Series 1995-1, shall have the meaning
set forth in SECTION 5.01.

"PLACEMENT AGENT EXCHANGE INSTRUCTIONS" is defined in SECTION
2.02(d)(iv).

"PLACEMENT AGENTS" means BT Securities Corporation, Bankers Trust
International PLC, Chemical Securities Inc., and Citicorp Securities, Inc.

"PREPAYMENT BASE RATE" is defined in SECTION 4.03(d).

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<PAGE>

"PREPAYMENT PREMIUM" means, with respect to any redemption of any
Class that entitles the Noteholders of that Class to receive a Prepayment
Premium, an amount equal to the present value of the amount of interest that
would have accrued on the amount of principal prepaid through the Par Date at an
interest rate equal to the applicable Prepayment Spread, with such amount being
discounted on a monthly basis at a rate equal to the applicable Prepayment Base
Rate, as of the date of such redemption.

"PREPAYMENT SPREAD" is defined in SECTION 4.03(d).

"QUALIFIED INSTITUTIONAL BUYER" has the meaning given such term in
Rule 144A.

"REGULATION S" shall mean Regulation S promulgated under the
Securities Act.

"REGULATION S GLOBAL NOTES" is defined in SECTION 2.01(b).

"REGULATION S TEMPORARY GLOBAL NOTES" is defined in SECTION 2.01(b).

"REQUIRED RESERVE RATIO" means, at any time with respect to either the
Series 1995-1, Class A Notes or the Series 1995-1, Class B Notes, the sum of (a)
the Loss Reserve Ratio with respect to such Class and (b) the Dilution Reserve
Ratio with respect to such Class, in each case, as set forth in the most recent
Settlement Statement.

"RULE 144A" means Rule 144A promulgated under the Securities Act.

"SALE," "SELL" and "SOLD" are defined in SECTION 2.02(a).

"SCHEDULED ACCUMULATION COMMENCEMENT DATE" means the close of business
on December 15, 1999.

"SERIES 1995-1, CLASS A NOTE" means any one of the Floating Rate Class
A Receivables-Backed Notes, Series 1995-1 executed by the Issuer and
authenticated by or on behalf of the Administrative Agent that is substantially
in the form of EXHIBIT A and is issued pursuant to this Supplement; and "SERIES
1995-1, CLASS A NOTES" means all such Notes, collectively.

"SERIES 1995-1, CLASS A NOTE RATE" means, at any time during a
Eurodollar Period, a rate equal to LIBOR for such Eurodollar Period plus 0.35%
PER ANNUM, calculated on the basis of a 360-day year for the actual number of
days (including the first day but excluding the last day) that occur in the
applicable Eurodollar Period for which such interest is payable.

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<PAGE>

"SERIES 1995-1, CLASS B NOTE" means any one of the Floating Rate Class
B Receivables-Backed Notes, Series 1995-1 executed by the Issuer and
authenticated by or on behalf of the Administrative Agent that is substantially
in the form of EXHIBIT B and is issued pursuant to this Supplement; and "SERIES
1995-1, CLASS B NOTES" means all such Notes, collectively.

"SERIES 1995-1, CLASS B NOTE RATE" means, at any time during a
Eurodollar Period, a rate equal to LIBOR for such Eurodollar Period plus 0.70%
PER ANNUM, calculated on the basis of a 360-day year for the actual number of
days (including the first day but excluding the last day) that occur in the
applicable Eurodollar Period for which such interest is payable.

"SERIES 1995-1 NOTES" means, collectively, the Series 1995-1, Class A
Notes and the Series 1995-1, Class B Notes.

"SERIES 1995-1 OUTSTANDING PRINCIPAL BALANCE" means, at any time, the
aggregate Outstanding Principal Balance of all of the Series 1995-1 Notes
outstanding as of such time.

"SERIES SALE DATE" means, with respect to the Series 1995-1 Notes,
March 14, 1995.

"SOUTH SHORE" means South Shore Funding Corporation, a Delaware
corporation.

"STATED MATURITY DATE" means, with respect to the Series 1995-1 Notes,
December 15, 2000.

"STONEFIN CREDIT AGREEMENT" means that certain Revolving Credit
Agreement dated as of August 15, 1991 (as the same has been amended, modified or
otherwise supplemented) among Castlewood, the Existing StoneFin Lenders and the
Existing Program Agent.

"STONEFIN MASTER PROGRAM AGREEMENT" means that certain Master Program
Agreement dated as of August 15, 1991 (as the same has been amended, modified or
otherwise supplemented) among Castlewood, StoneFin and the "Sellers" named
therein.

"STONEFIN II CREDIT AGREEMENT" means that certain Revolving Credit
Agreement dated as of August 18, 1992 (as the same has been amended, modified or
otherwise supplemented) among South Shore, the Existing StoneFin II Lenders and
the Existing Program Agent.

"STONEFIN II MASTER PROGRAM AGREEMENT" means that certain Master
Program Agreement dated as of August 18, 1992 (as the same has been amended,
modified or otherwise supplemented) among South Shore, StoneFin II and the
"Sellers" named therein.

"TRANSFER TO REGULATION S CERTIFICATION" is defined in SECTION
2.02(d)(iii).

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<PAGE>

"TRANSFEREE REG S CERTIFICATION" is defined in SECTION 2.02(d)(i).

"UNRESTRICTED GLOBAL NOTE" is defined in SECTION 2.01(b).

"U.S. PERSON" means any Person that is a "U.S. Person" as such term is
defined in Regulation S.

SECTION 1.02 INCORPORATION OF TERMS AND CONDITIONS OF THE INDENTURE.
This Supplement hereby incorporates by reference the terms and provisions of the
Indenture as if such terms and conditions were set forth in full herein. As
supplemented by this Supplement, the Indenture is hereby in all respects
ratified and confirmed and the Indenture, as so supplemented by this Supplement,
shall be read, taken and construed as one and the same agreement. In the event
of any conflict or inconsistency between the terms of this Supplement and the
terms of the Indenture as such terms apply to any of the Series 1995-1 Notes,
the terms of this Supplement shall control with respect to the Series 1995-1
Notes.

ARTICLE II

DESIGNATION; MATTERS RELATING TO THE SERIES 1995-1 NOTES

SECTION 2.01 DESIGNATION. (a) There is hereby created a series of
Fixed Principal Notes to be issued pursuant to the Indenture and this Supplement
to be known as "Series 1995-1 Notes," which shall consist of a senior tranche to
be known as the "Floating Rate Class A Receivables-Backed Notes, Series 1995-1"
and a subordinated tranche to be known as the "Floating Rate Class B
Receivables-Backed Notes, Series 1995-1." The Series 1995-1 Notes shall be
issued in a minimum denomination of $500,000 and in integral multiples of
$100,000 in excess thereof. No Series 1995-1 Note may be subdivided into an
amount of less than $500,000. Subject to the conditions set forth in ARTICLE
III, the Administrative Agent shall authenticate and deliver the Series 1995-1
Notes, to or upon the written order of the Issuer, (i) in the case of the Series
1995-1, Class A Notes, in an aggregate principal amount equal to the Class A
Initial Issuance Amount and (ii) in the case of the Series 1995-1, Class B
Notes, in an aggregate principal amount equal to the Class B Initial Issuance
Amount. Each of the Series 1995-1 Notes shall be authenticated and delivered in
the manner and at the times for authentication and delivery of Fixed Principal
Notes as are specified in ARTICLE VI of the Indenture and the aforementioned
Issuer Order. The Series 1995-1, Class A Notes shall be a Senior Class. The
Series 1995-1, Class B Notes shall be a Subordinated Class.

(b) The Series 1995-1 Notes shall, unless expressly otherwise
provided herein, be issued in Book-Entry Form and shall

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be evidenced by one or more Global Notes registered in the name of the Clearing
Agency or its nominee, which shall initially be Cede & Co., as the nominee of
the Clearing Agency (which shall initially be The Depository Trust Company).
Except as expressly otherwise provided in this Supplement, all Series 1995-1
Notes issued in Book-Entry Form shall be subject to the provisions of Section
6.09 of the Indenture.

Series 1995-1 Notes sold to Qualified Institutional Buyers in reliance
on Rule 144A under the Securities Act shall be represented by a Global Note (the
"144A GLOBAL NOTE"), in registered form, without coupons, and deposited upon the
order of the Issuer with the Administrative Agent as custodian for, and
registered in the name of, Cede & Co., as nominee of the Clearing Agency. A
144A Global Note will bear a legend regarding restrictions on transfer as set
forth in the forms of Series 1995-1 Notes set forth in EXHIBITS A and B hereto.

Series 1995-1 Notes sold outside of the United States of America (and
to Persons other than U.S Persons) in reliance on Regulation S shall be
represented initially by temporary Global Notes (the "REGULATION S TEMPORARY
GLOBAL NOTES"). The Regulation S Temporary Global Notes shall be exchanged on
the later of (i) 40 days after the later of (x) the Series Sales Date and (y)
the completion of the initial distribution of the Series 1995-1 Notes, as
certified by each of the Placement Agents to the Transfer Agent and Registrar
and (ii) the date on which the requisite certifications are due to and are
provided to the Transfer Agent and Registrar as set forth in SECTION 2.01(c)
(the later of clauses (i) and (ii) is referred to herein as the "EXCHANGE DATE")
for permanent Global Notes in respect of such offshore transactions (such
permanent Notes being the "UNRESTRICTED GLOBAL NOTES", and together with the
Regulation S Temporary Global Notes, the "REGULATION S GLOBAL NOTES"). The
Regulation S Global Notes shall be issued in registered form, without coupons,
and deposited upon the order of the Issuer with the Administrative Agent as
custodian for, and registered in the name of, Cede & Co. as nominee of the
Clearing Agency for credit by the Clearing Agency to the account of the
depositaries for Euroclear and Cedel, which depositaries shall, on behalf of
Euroclear and Cedel, hold such interests on behalf of account holders (each a
"MEMBER ORGANIZATION"), which have rights in respect of such Notes credited to
their securities accounts with Euroclear or Cedel from time to time.

(c) The Paying Agent shall make payment of the full amount of
accrued interest in respect of any Regulation S Temporary Global Note to the
Clearing Agency which is the registered holder thereof, without deduction or
withholding, in accordance with the terms hereof and the Indenture.
Notwithstanding the foregoing, a beneficial owner of an interest in a Regulation
S Temporary Global Note (or any interest therein) may receive interest payments
from Euroclear or Cedel, as the case may be, in respect of such Note (or such
interest therein)

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<PAGE>

only after delivery by such holder to Euroclear or Cedel, as the case may be, of
a written certification substantially in the form of the Noteholder Reg S
Certification set forth in EXHIBIT D hereto. The delivery by such holder of
such certification shall constitute an irrevocable instruction by such holder to
Euroclear or Cedel, as the case may be, to arrange for the exchange of such
holder's interest in such Regulation S Temporary Global Note for a beneficial
interest in the Unrestricted Global Note after the Exchange Date in accordance
with the immediately succeeding paragraph. The Paying Agent shall have no
responsibility or liability for monitoring whether or not such certifications
have been made, all of which shall be the obligation and responsibility of
Euroclear or Cedel, as applicable.

After (i) the Exchange Date, and (ii) receipt by the Transfer Agent
and Registrar of written instructions from Euroclear or Cedel, as the case may
be, the Transfer Agent and Registrar shall reduce the principal amount of the
applicable Regulation S Temporary Global Note and increase the principal amount
of the Unrestricted Global Note, in each case, by the principal amount of the
beneficial interest in the Regulation S Temporary Global Note to be so
transferred.

Upon return of the entire principal amount of any applicable
Regulation S Temporary Global Note to the Administrative Agent in exchange for
an Unrestricted Global Note or Notes in an equivalent aggregate principal
amount, the Administrative Agent shall cancel such Regulation S Temporary Global
Note by perforation and shall forthwith destroy such Regulation S Temporary
Global Note.

SECTION 2.02 LIMITATIONS ON THE SALE OR TRANSFER OF SERIES 1995-1
NOTES. (a) None of the Series 1995-1 Notes may be sold, transferred or
otherwise disposed of (any such sale, transfer or other disposition, as defined
for purposes of this Section, being called a "SALE", with "SELL" and "SOLD"
having a correlative meaning), except in compliance with the following:

(i) No holder may Sell any of the Series 1995-1 Notes unless
such Sale is made:

(A) to the Issuer;

(B) in the United States of America to a limited number of
Institutional Accredited Investors in a transaction exempt from
the registration requirements of the Securities Act upon delivery
to the Trustee, the Administrative Agent (or any designated agent
of either of the foregoing) and the Issuer of an investor letter,
substantially in the form of EXHIBIT C hereto (or, with respect
to the initial sale thereof to the Placement Agents under the
Note Purchase Agreement, representations in the Note Purchase

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<PAGE>

Agreement to the similar effect) and, if requested by the
Trustee, the Administrative Agent (or any designated agent of
either of the foregoing) or the Issuer, an opinion of counsel
confirming the availability of such exemption to any such Sale,
in a form and substance satisfactory to the Trustee, the
Administrative Agent (or any designated agent of either of the
foregoing) or the Issuer, as the case may be;

(C) by a holder to a transferee that such holder reasonably
believes is a Qualified Institutional Buyer purchasing such Notes
for its own account or for the account of another Person that is
a Qualified Institutional Buyer in a transaction exempt from the
registration requirements under the Securities Act pursuant to
Rule 144A, and which proposed transferee is aware that the
proposed Sale is being made in reliance on Rule 144A and to whom
such Sale is being made pursuant to an available exemption from
the registration requirements of applicable state securities
laws;

(D) in the United States of America by a holder to a
transferee to whom such Sale, transfer or disposition is being
made pursuant to the exemption from the registration requirements
under the Securities Act pursuant to Rule 144 under the
Securities Act, and under all applicable state securities laws
and, if requested by the Trustee, the Administrative Agent (or
any designated agent of either of the foregoing) or the Issuer,
prior to the proposed Sale, transfer or disposition, such holder
and the proposed transferee provide the Trustee, the
Administrative Agent (or any designated agent of either of the
foregoing) or the Issuer with an opinion of counsel in form and
substance satisfactory to the Trustee, the Administrative Agent
(or any designated agent of either of the foregoing) or the
Issuer, as the case may be, concerning such proposed Sale,
transfer or disposition and confirming the availability of such
exemption in connection therewith; or

(E) outside of the United States of America by a holder to a
transferee (other than a U.S. Person) and to whom such Sale,
transfer or disposition is being made pursuant to an applicable
exemption from the registration requirements under the Securities
Act pursuant to Regulation S.

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<PAGE>

(ii) No Series 1995-1 Notes shall be offered for sale, sold or
delivered, directly or indirectly, nor shall any circular, prospectus,
form of application, or other offering material or advertisement
relating to the Series 1995-1 Notes be distributed or published in or
from any country or jurisdiction, except under circumstances that will
result in compliance with all applicable laws and regulations of any
such country or jurisdiction and the terms and restrictions contained
herein. Without limiting the foregoing in any manner, no holder of
any Series 1995-1 Notes or any other Person acting on behalf of such a
holder shall use any means of general solicitation or distribution in
connection with the marketing, Sale, transfer or other disposition of
such Notes. The Series 1995-1 Notes shall bear a legend regarding the
restrictions on transfer as set forth herein which shall be in
substantially the forms set forth in the forms of the Series 1995-1
Notes attached hereto as EXHIBIT A and B.

(iii) Each holder of any Series 1995-1 Notes will be deemed to
have acknowledged and agreed that (A) the Series 1995-1 Notes have not
been and will not be registered under the Securities Act and may not
be sold, transferred or otherwise disposed of except as permitted in
this SECTION 2.02(a), (B) such holder will notify any purchaser,
pledgee or other transferee of any Series 1995-1 Notes from such
holder of the transfer restrictions referred to in this SECTION
2.02(a), and (C) each Series 1995-1 Note will bear one or more of the
legends set forth in the forms of the Series 1995-1, Class A Notes and
Series 1995-1, Class B Notes attached hereto as EXHIBIT A and B,
respectively.

(iv) Resales, pledges or transfers of Series 1995-1 Notes will
be made as follows: (A) if the applicable Series 1995-1 Notes are
evidenced by Global Notes held through the Clearing Agency in Book-
Entry Form and the resale, pledge or transfer is among Qualified
Institutional Buyers or holders of interests in the Unrestricted
Global Notes, through such system, in accordance with such Clearing
Agency's rules and procedures; or (B) if the applicable Series 1995-1
Notes are in Book-Entry Form and the buyer, pledgee or transferee is
purchasing pursuant to SUBCLAUSE (A), (C) or (D) of SECTION 2.02(a)(i)
or is not a Qualified Institutional Buyer or the Notes are in
definitive form, such resale, pledge or transfer will be effected by
the delivery to the transferee of Definitive Notes registered in the
name of the transferee (or in the name of the transferee's nominee) on
the books maintained by the Transfer Agent and Registrar and any such
resale, pledge or transfer of Definitive Notes shall be conditional
upon the completion of the

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documentation described in the Indenture and this Supplement.

(v) Each Benefit Plan that purchases a Series 1995-1 Note or
interest therein will be deemed to represent and warrant that the
acquisition and holding of such Note or interest therein will not
result in a nonexempt prohibited transaction under ERISA or the
Internal Revenue Code.

(vi) None of the Series 1995-1 Notes may be issued or Sold in a
transaction registered under the Securities Act of 1933.

(b) The Issuer shall make available to any selling holder of Series
1995-1 Notes and any prospective transferee of such Notes such information
as is required under Rule 144A(d)(4) in connection with the resale of any
such Notes, promptly after the same is requested.

(c) Subject to the requirements specified above having been
fulfilled, upon surrender for registration of transfer of any Series 1995-1
Note to the Administrative Agent, the Issuer shall execute, and the
Administrative Agent shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Series 1995-1 Notes
in accordance with the terms hereof and of the Indenture. The transfer and
exchange of Global Notes or beneficial interests therein shall be effected
through the applicable Clearing Agency, in accordance with (x) the terms of
this Supplement (including the restriction on transfer set forth herein)
and the Indenture and (y) the procedures of the Clearing Agency therefor.

(d) Subject to the remaining provisions of this SECTION 2.02(d),
unless and until it is exchanged in whole or in part for Definitive Notes,
a Global Note evidencing any Series 1995-1 Note may not be transferred,
except as a whole by the applicable Clearing Agency to a nominee of the
Clearing Agency or by a nominee of the Clearing Agency to the Clearing
Agency or to another nominee of the Clearing Agency or by the Clearing
Agency or any such Nominee of such Clearing Agency to a successor Clearing
Agency or a nominee of such successor Clearing Agency. Any Series 1995-1
Note authenticated and delivered upon registration of a transfer of, or in
exchange for, or in lieu of, any Global Note evidencing a Series 1995-1
Note, shall also be a Global Note:

(i) For transfers within Regulation S Temporary Global Notes, if
the owner of an interest in a Regulation S Temporary Global Note
wishes at any time to transfer such interest to a Person who wishes to
take delivery thereof in the form of a beneficial

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interest in such Regulation S Temporary Global Note, such transfer may
be effected in accordance with this CLAUSE (i). Upon delivery (x) by
the owner of such beneficial interest in such Regulation S Temporary
Global Note to Euroclear or Cedel, as the case may be, of a
certification in the form set forth in EXHIBIT D (an "NOTEHOLDER REG S
CERTIFICATION"), (y) by the transferee of such beneficial interest in
the Regulation S Temporary Global Note to Euroclear or Cedel, as the
case may be, of a written certification in the form set forth in
EXHIBIT E (a "TRANSFEREE REG S CERTIFICATION"), and (z) by Euroclear
or Cedel, as the case may be, to the Transfer Agent and Registrar of a
certification in the form set forth in EXHIBIT F (a "DEPOSITARY REG S
CERTIFICATION").

(ii) For transfers of an interest in an Unrestricted Global Note
evidencing any Series 1995-1 Note for an interest in a 144A Global
Note, if the owner of a beneficial interest in the Unrestricted Global
Note deposited with the Clearing Agency wishes at any time to exchange
its interest in such Unrestricted Global Note for an interest in the
144A Global Note, or to transfer its interest in such Unrestricted
Global Note to a Person who wishes to take delivery thereof in the
form of an interest in the 144A Global Note, such transferring
beneficial owner may, subject to the rules and procedures of Euroclear
or Cedel and the Clearing Agency, as the case may be, give directions
to Euroclear or Cedel, as applicable, which shall thereafter instruct
the Transfer Agent and Registrar to exchange or cause the exchange or
transfer of such interest for an equivalent beneficial interest in the
144A Global Note. Upon receipt by the Transfer Agent and Registrar of
instructions from Euroclear or Cedel (based on instructions from a
Member Organization) or from a Clearing Agency Participant, as
applicable, or the Clearing Agency, as the case may be, directing the
Transfer Agent and Registrar to credit or cause to be credited a
beneficial interest in the 144A Global Note equal to the beneficial
interest in the Unrestricted Global Note to be exchanged or
transferred (such instructions to contain information regarding the
Clearing Agency Participant account to be credited with such increase,
and, with respect to an exchange or transfer of an interest in the
Unrestricted Global Note, information regarding the Clearing Agency
Participant account to be debited with such decrease), the Transfer
Agent and Registrar shall instruct the Clearing Agency to reduce the
Unrestricted Global Note by the aggregate principal amount of the
beneficial interest in the Unrestricted Global Note to be exchanged or
transferred, and the Transfer Agent and Registrar shall instruct the
Clearing Agency,

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concurrently with such reduction, to increase the principal amount of
the 144A Global Note by the aggregate principal amount of the
beneficial interest in the Unrestricted Global Note to be so exchanged
or transferred, and to credit or cause to be credited to the account
of the Person specified in such instructions (which Person must be a
U.S. Person) a beneficial interest in the 144A Global Note equal to
the reduction in the principal amount of the Unrestricted Global Note.

(iii) For transfers of an interest in a 144A Global Note
evidencing any Series 1995-1 Notes for an interest in a Regulation S
Global Note, if the owner of a beneficial interest in such 144A Global
Note wishes at any time to exchange its interest in such 144A Global
Note for an interest in the Regulation S Global Note, or to transfer
its interest in such 144A Global Note to a Person who wishes to take
delivery thereof in the form of an interest in the Regulation S Global
Note, such transferring beneficial owner may, subject to the rules and
procedures of the Clearing Agency, give directions for the Transfer
Agent and Registrar to exchange or cause the exchange or transfer or
cause the transfer of such interest for an equivalent beneficial
interest in the Regulation S Global Note; it being understood that any
transfers or exchanges of interests in such 144A Global Note being
made prior to the Exchange Date shall be effected by transfers to the
Regulation S Temporary Global Note and any benefical owner or
transferee thereof shall be required to deliver the certifications
required pursuant to SECTION 2.01(b) before such owner's or person's
interest in the Regulation S Temporary Global Note will be exchanged
for an interest in the Unrestricted Global Note in accordance with
SECTION 2.01(c). Upon receipt by the Transfer Agent and Registrar of
(1) instructions given in accordance with the Clearing Agency's
procedures from a Clearing Agency Participant directing the Transfer
Agent and Registrar to credit or cause to be credited a beneficial
interest in the Regulation S Global Note in an amount equal to the
beneficial interest in the 144A Global Note to be exchanged or
transferred, (2) a written order given in accordance with the Clearing
Agency's procedures containing information regarding the account of
the depositaries for Euroclear or Cedel or another Clearing Agency
Participant, as the case may be, to be credited with such increase and
the name of such account, and (3) a certificate in the form of EXHIBIT
G (a "TRANSFER TO REGULATION S CERTIFICATION") attached hereto given
by such transferring beneficial interest, the Transfer Agent and
Registrar shall instruct the Clearing Agency to reduce the 144A Global
Note by the aggregate

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principal amount of the beneficial interest in the 144A Global Note to
be so exchanged or transferred and the Transfer Agent and Registrar
shall instruct the Clearing Agency, concurrently with such reduction,
to increase the principal amount of the Regulation S Global Note by
the aggregate principal amount of the beneficial interest in the 144A
Global Note to be so exchanged or transferred, and to credit or cause
to be credited to the account of the person specified in such
instructions a beneficial interest in the Regulation S Global Note
equal to the reduction in the principal amount of the 144A Global
Note.

(iv) Notwithstanding any other provisions of this SECTION
2.02(d), a Placement Agent for the Series 1995-1 Notes may exchange
beneficial interests in the Regulation S Temporary Global Note held by
it for interests in the 144A Global Note only after delivery by such
Placement Agent of instructions for such exchange substantially in the
form of EXHIBIT H (the "PLACEMENT AGENT EXCHANGE INSTRUCTIONS"). Upon
receipt of the instructions provided in the preceding sentence, the
Transfer Agent and Registrar shall instruct the Clearing Agency to
reduce the principal amount of the Regulation S Temporary Global Note
by the principal amount of the beneficial interest in the Regulation S
Temporary Global Note to be so transferred and shall instruct the
Clearing Agency to increase the principal amount of the 144A Global
Note.

(v) In the event that a Global Note evidencing the Series 1995-1
Notes (or any interests therein) is exchanged for Definitive Notes in
accordance herewith and the Indenture, such Definitive Notes may be
exchanged or transferred for one another only in accordance with such
procedures as are substantially consistent with the provisions of
CLAUSES (i) through (iii) immediately above (including the
certification requirements intended to ensure that such exchanges or
transfers comply with Rule 144A or Regulation S under the Securities
Act, as the case may be) and as may be from time to time adopted by
the Administrative Agent.

(vi) Any Noteholder that holds Series 1995-1 Notes evidenced by
Definitive Notes (other than under Regulation S) may, subject to the
limitations set forth herein, exchange such Definitive Notes for a
book-entry interest in a Series 1995-1 Note (to be substantially in
the form of a 144A Global Note), registered in the name of CEDE & Co.,
as nominee for the Clearing Agency, in accordance with the customary
procedures of the applicable Clearing Agency.

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(vii) No holder of a beneficial interest in any Regulation S
Global Note shall be permitted to exchange any of its interest
thereunder for interests in Definitive Notes other than as permitted
pursuant to SECTION 6.11 of the Indenture.

SECTION 2.03 DELIVERY OF SETTLEMENT STATEMENTS AND DAILY REPORTS TO
PLACEMENT AGENTS. Until the Series 1995-1 Notes shall have been repaid in full
(or such earlier time as shall be agreed upon by the Placement Agents), the
Servicer or the Issuer shall deliver to each of the Placement Agents a copy of
each Settlement Statement and, if requested by any such Placement Agent, each
Daily Report concurrently with the delivery thereof by the Issuer or the
Servicer to the Trustee and/or the Administrative Agent pursuant to subsections
3.04(c) and (b), respectively, of the Indenture.

ARTICLE III

CONDITIONS TO ISSUANCE OF NOTES

SECTION 3.01 CONDITIONS TO ISSUANCE. The Administrative Agent will
not authenticate any Series 1995-1 Notes to be issued hereunder on the Series
Sales Date for Series 1995-1 unless:

(a) the Trustee and the Administrative Agent shall have received
written certification from the Issuer and the Servicer that the Indenture,
the Purchase Agreement, and the Note Purchase Agreement shall have become
effective and continue to be effective on the Series Sales Date for the
Series 1995-1 Notes;

(b) the Trustee and the Administrative Agent shall have received
written certification from the Issuer and the Servicer that all conditions
to the issuance of the Series 1995-1 Notes under Section 6.04 of the
Indenture shall have been satisfied;

(c) on or prior to the Series Sales Date for the Series 1995-1 Notes,
the Merger shall have been consummated and the Trustee and the
Administrative Agent shall have received written confirmation (including by
telecopy) from the Office of the Secretary of State of Delaware confirming
that the Merger Certificate evidencing the effectiveness of the Merger was
accepted and filed in such office;

(d) the Administrative Agent and the Trustee shall have received
fully-executed copies of (x) a pay-off letter executed by the Existing
Program Agent, Southshore and Castlewood evidencing the repayment of all of
the Existing Program Obligations and a discharge of all liens, claims and
encumbrances securing such obligations and (y) all releases

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of any liens, claims or encumbrances filed by any of the foregoing securing
any of the Existing Program Obligations (all of which will be delivered
concurrently with the sale of Series 1995-1 Notes on the Series Sales Date
and the delivery of the proceeds thereof to the Existing Program Agent in
satisfaction and discharge of the Existing Program Obligations), which pay-
off letter and releases shall be sufficient (as evidenced by an Opinion of
Counsel for the Issuer) to release all such liens, claims and encumbrances
securing any of the Existing Program Obligations; and

(e) on the Series Sale Date for the Series 1995-1 Notes, the Trustee
and the Administrative Agent shall have received ratings letters from the
Applicable Rating Agencies confirming that the Series 1995-1, Class A Notes
shall be rated at least "AAA" by each of S&P and Duff & Phelps and the
Series 1995-1, Class B Notes shall be rated at least "BBB" by each of S&P
and Duff & Phelps.

ARTICLE IV

PAYMENTS

SECTION 4.01 PAYMENTS. Except as expressly provided otherwise in
this Supplement, interest and principal shall be distributed in respect of the
Series 1995-1 Notes at the times described in, and in the amounts calculated
pursuant to, ARTICLES IV and V of the Indenture for payments that are to be made
with respect to Fixed Principal Notes.

SECTION 4.02 INTEREST. The Series 1995-1, Class A Notes shall bear
interest on and after the Series Sales Date of such Class of Notes until the
entire Outstanding Principal Balance thereof shall have been repaid in full at
the Series 1995-1, Class A Note Rate. The Series 1995-1, Class B Notes shall
bear interest on and after the Series Sales Date of such Class of Notes until
the entire Outstanding Principal Balance thereof shall have been repaid in full
at the Series 1995-1, Class B Note Rate. Interest with respect to the Series
1995-1 Notes due but not paid on any Payment Date will be due on the next
succeeding Payment Date with additional interest on such amount at the
applicable Note Rate to the extent permitted by law.

SECTION 4.03 OPTIONAL REDEMPTION; PREPAYMENTS. (a) On any Payment
Date prior to the occurrence of the commencement of the Liquidation Period or
the Pay-Out Period with respect to the Series 1995-1 Notes, the Issuer shall
have the right, upon not less than 35 Business Days' prior written notice to the
Trustee and the Administrative Agent, to cause the Series 1995-1 Notes to be
redeemed in full, or, in part, PROVIDED, that (i) any such partial redemption of
the Series 1995-1 Class A Notes shall be in the minimum principal amount of
$22,000,000 or in integral

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multiples of $1,000,000 in excess of such amount and (ii) any such partial
redemption of the Series 1995-1 Class B Notes shall be in the minimum principal
amount of $4,000,000 or in integral multiples of $1,000,000 in excess of such
amount. The price at which such Notes shall be redeemed shall be equal to sum
of (i) the Outstanding Principal Balance (or portion thereof) of such Notes
being redeemed, PLUS (ii) accrued and unpaid interest (and accrued and unpaid
interest with respect to interest amounts that were due but not paid on any
prior Payment Date) on the principal amount of the Notes being so redeemed
through the day preceding the date of such redemption at the Note Rate
applicable to such Notes, PLUS (iii) to the extent that such redemption occurs
prior to the Par Date, the Prepayment Premium, if any, with respect to the
principal amount of such Notes being redeemed. Such price shall be payable to
the holders of the Series 1995-1 Notes being redeemed upon such holders' tender
of the affected Notes to the Administrative Agent for payment thereof. The
Issuer shall, within five Business Days of notifying the Trustee and the
Administrative Agent of such redemption, mail a notice of redemption to the
holders of the Series 1995-1 Notes in accordance with the terms and provisions
of Section 15.04 of the Indenture. Optional redemptions of the Series 1995-1
Notes pursuant to this Section may be funded only out of (1) proceeds of
borrowings or issuances of the Issuer's securities by the Issuer or (2) by the
accumulation of Collections and other proceeds of the Pledged Assets allocable
to the Series 1995-1 Notes to be redeemed, as shall be specified by the Issuer
in the applicable notice of redemption.

(b) If such Notes are to be redeemed through the accumulation of
Collections and other proceeds of the Pledged Assets allocable to the Series
1995-1 Notes, then commencing upon the date specified in such notice to the
Trustee and the Administrative Agent (until an amount equal to the amount of the
affected Notes to be redeemed, plus the related Prepayment Premium, if any,
payable in respect thereof has been so accumulated), the Servicer shall allocate
a portion of the Collections available in the Master Collection Account (after
making any required transfers therefrom to the Carrying Cost Account) to the
Defeasance Account for purposes of such prepayment. The portion of Collections
so allocated and transferred on account of the principal to be prepaid shall be
as set forth in CLAUSE SECOND of Section 4.02(e) of the Indenture, subject to
the further limitations thereon set forth in Section 4.02(e) of the Indenture.
In addition, on each such Business Day a portion of the Collections available
for application pursuant to CLAUSE FIFTH of Section 4.02(e) of the Indenture
equal to the product of (x) such Defeasance Allocation Percentage and (y) the
amount of such available Collections shall be allocated to the Defeasance
Account on account of the Prepayment Premium, if any, payable on account of such
prepayment until the full amount of any such Prepayment Premium has been
provided for. If such redemption is to be effected with the proceeds of
borrowings or the issuance of other securities by the Issuer, such proceeds in

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the amount of the redemption price for such affected Notes shall be remitted by
the Issuer to the Administrative Agent and deposited by the Administrative Agent
directly into the Principal Funding Account with respect to the Series 1995-1
Notes. The redemption of the affected Notes shall be made on the later to occur
of (a) the Payment Date specified in the notice of redemption and (b) if such
Notes are to be redeemed by the accumulation of Collections and proceeds of the
Pledged Assets, the Payment Date on which sufficient funds (including funds to
cover the related Prepayment Premium) have been accumulated in the Defeasance
Account.

(c) In the event of any partial redemption of the Series 1995-1
Notes, the holders of those Notes shall be paid their pro rata share of such
partial redemption calculated in accordance with the Outstanding Principal
Balance of such Notes as of the related Record Date. Notwithstanding anything
contained herein or in the Indenture to the contrary, no Series 1995-1, Class B
Notes may be redeemed (in whole or in part) until the Series 1995-1, Class A
Notes (together with any Prepayment Premium owing in respect thereof) have been
redeemed in full.

(d) The Prepayment Spread for purposes of the Series 1995-1, Class A
Notes is 0.35%, and the Prepayment Spread for purposes of the Series 1995-1,
Class B Notes is 0.70% (as to each such Class, its "PREPAYMENT SPREAD"). The
Prepayment Base Rate with respect to each such Class is LIBOR (the "PREPAYMENT
BASE RATE"), as determined for purposes of the Eurodollar Period commencing on
the Payment Date on which the prepayment is made.

(e) In addition to the foregoing, at any time after the commencement
of the Pay-Out Period for the Series 1995-1 Notes or the Liquidation Period, the
Issuer shall have the right, upon not less than 35 Business Days' prior written
notice to the Trustee and the Administrative Agent, to cause the Series 1995-1
Notes to be redeemed in full (but not in part). Except as otherwise set forth
in the immediately succeeding clause (f), no Prepayment Premium or other penalty
or premium shall be payable with respect to any such optional redemption made
pursuant to this paragraph. The price at which such Notes shall be redeemed
shall be equal to sum of (i) the Series 1995-1 Outstanding Principal Balance as
of the date of such redemption PLUS (ii) accrued and unpaid interest (and
accrued and unpaid interest with respect to interest amounts that were due but
not paid on any prior Payment Date) on the principal amount of the Notes being
so redeemed through the day preceding the date of such redemption at the
applicable Note Rate applicable to such Notes, PLUS (iii) to the extent payable
pursuant to the immediately succeeding paragraph (f), the Prepayment Premium, if
any, with respect to the principal amount of the Notes being redeemed. The
amounts to be paid by the Issuer for the optional redemption of the Series
1995-1 Notes pursuant to this CLAUSE (e) shall be (x) payable only out of
(1) the proceeds of borrowings or the issuance of the Issuer's securities by
the Issuer or (2) the accumulation of

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Collections and other proceeds of the Pledged Assets allocable to the Series
1995-1 Notes to be redeemed, as shall be specified by the Issuer in such notice
of redemption, and (y) remitted and deposited in accordance with SECTION 4.03(b)
(other than with respect to the Prepayment Premium payable pursuant to SECTION
4.03(b)). The Issuer shall, within five (5) Business Days of notifying the
Trustee and the Administrative Agent of such redemption, mail a notice of
redemption to the holders of the Series 1995-1 Notes in accordance with the
terms and provisions of Section 15.04 of the Indenture. The redemption of the
affected Notes pursuant to this Section shall be made on the later to occur of
(A) the Payment Date specified in the notice of redemption and (B) if such Notes
are to be redeemed by the accumulation of collections and proceeds of the
Pledged Assets, the Payment Date on which sufficient funds have been accumulated
in the Defeasance Account. Upon the tender of all of the outstanding Series
1995-1 Notes by the holders thereof, the Paying Agent shall distribute all such
amounts, together with all other funds, if any, on deposit in the Defeasance
Account and the Principal Funding Account allocable to the Series 1995-1 Notes,
to the holders of the Series 1995-1 Notes on such redemption date in repayment
of the principal amount and accrued and unpaid interest owing to such
Noteholders. Following any such redemption, the Noteholders of Series 1995-1
Notes shall have no further rights with respect to the Receivables or the other
Pledged Assets. In the event that the Issuer fails for any reason to deposit
the aggregate redemption amount for the Series 1995-1 as aforesaid in this
CLAUSE (e), payments to or for the account of the Noteholders in respect of the
outstanding Series 1995-1 Notes shall continue to be made as otherwise set forth
herein and in the Indenture.

(f) Notwithstanding anything contained in this Agreement or the
Indenture to the contrary, in the event that the Liquidation Commencement Date
occurs as a result of the Sellers' termination of sales of Receivables to the
Issuer in accordance with Section 8.09 of the Purchase Agreement, the Prepayment
Premium shall continue to be payable with respect to any portion of principal of
the Series 1995-1 Notes which is prepaid (including as a result of an optional
redemption by the Issuer pursuant to clause (e) above) prior to the Par Date.
In the event that any such Prepayment Premium shall be required to be paid in
respect of the Series 1995-1 Notes, a portion of the Collections available for
application pursuant to CLAUSE THIRD of Section 4.02(f) of the Indenture equal
to the product of (x) the Noteholder Allocation Percentage and (y) the amount of
such available Collections shall be allocated to the Master Collection Account
on account of the Prepayment Premium, if any, payable on account of such
prepayment until the full amount of any such Prepayment Premium has been
provided for.

(g) Promptly, and in any case within 5 Business Days, after the
Administrative Agent's receipt of any notice from the Issuer of any full or
partial redemption or prepayment of any of

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the Series 1995-1 Notes pursuant to this SECTION 4.03, the Administrative Agent
shall notify (in writing) each of the Applicable Rating Agencies thereof.

SECTION 4.04 APPLICATION OF PAYMENTS BETWEEN SENIOR AND SUBORDINATED
CLASSES OF SERIES 1995-1 NOTES. Except as otherwise set forth in SECTION 4.03
above with respect to optional redemptions of the Series 1995-1 Notes, on each
Payment Date, the Paying Agent, acting upon written instructions from the
Servicer set forth in the most recent Settlement Statement, will make the
following distributions to the holders of the Series 1995-1 Notes in the
following order of priority from amounts available for allocation thereto as
follows:

(i) to holders of the Series 1995-1, Class A Notes, the sum of (a)
interest accrued on the Series 1995-1, Class A Notes during the immediately
preceding Eurodollar Period and (b) the aggregate amount of shortfalls in
distributions of interest to holders of the Series 1995-1, Class A Notes as
provided in clause (i)(a) for all prior Payment Dates, together with
interest thereon at the applicable Series 1995-1, Class A Note Rate in
effect for each Eurodollar Period during which such shortfall was
outstanding;

(ii) to holders of the Series 1995-1, Class B Notes, the sum of (a)
interest accrued on the Series 1995-1, Class B Notes during the immediately
preceding Eurodollar Period and (b) the aggregate amount of shortfalls in
distributions of interest to holders of the Series 1995-1, Class B Notes as
provided in clause (ii)(a) for all prior Payment Dates, together with
interest thereon at the applicable Series 1995-1, Class B Note Rate in
effect for each Eurodollar Period during which such shortfall was
outstanding;

(iii) to holders of the Series 1995-1, Class A Notes, in reduction of
the outstanding principal balance of the Series 1995-1 Class A Notes, (a)
on the Expected Final Payment Date, in an amount equal to the lesser of (x)
the funds on deposit in the Principal Funding Account allocable to the
Series 1995-1 Notes or (y) the outstanding principal balance of the Series
1995-1, Class A Notes at such time and (b) on each Payment Date occurring
after commencement of the Liquidation Period or a Pay-Out Period
(commencing with the first Payment Date after the Calculation Period in
which the Liquidation Period or the Pay-Out Period, as the case may be,
commences) with respect to the Series 1995-1 Notes, in an amount equal to
the lesser of (x) the Principal Payment Amount for such Payment Date and
(y) the Outstanding Principal Balance of the Series 1995-1, Class A Notes
at such time, until the entire Outstanding Principal Balance of all of the
Series 1995-1, Class A Notes shall have been repaid in full;

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(iv) to holders of the Series 1995-1, Class B Notes, in reduction of
the outstanding principal balance of the Series 1995-1, Class B Notes, (a)
on the Expected Final Payment Date, in an amount equal to the lesser of (x)
the funds on deposit in the Principal Funding Account allocable to the
Series 1995-1 Notes, if any, after application of such funds in accordance
with clause (iii) above and (y) the outstanding principal balance of the
Series 1995-1, Class B Notes at such time, and (b) on each Payment Date
occurring after commencement of the Liquidation Period or a Pay-Out Period
(commencing with the first Payment Date after the Calculation Period in
which the Liquidation Period or the Pay-Out Period, as the case may be,
commences) with respect to the Series 1995-1 Notes, in an amount equal to
the lesser of (x) the Principal Payment Amount for such Payment Date LESS
the amount thereof, if any, applied in accordance with clause (iii) above
and (y) the Outstanding Principal Balance of the Series 1995-1, Class B
Notes at such time, until the entire Outstanding Principal Balance of all
of the Series 1995-1, Class B Notes shall have been repaid in full; and

(v) on each Payment Date occurring after the commencement of the
Liquidation Period, (a) to the holders of the Series 1995-1, Class A Notes,
in reduction of the amount of any accrued and unpaid Prepayment Premiums,
if any, then due and owing thereto, in an amount equal to the lesser of (x)
the Principal Payment Amount for such Payment Date and (y) the aggregate
amount of such accrued and unpaid Prepayment Premiums so owing to such
holders, until the aggregate amount thereof shall have been paid in full,
and (b) to the holders of the Series 1995-1, Class B Notes, in reduction of
the amount of any accrued and unpaid Prepayment Premiums, if any, then due
and owing thereto, in an amount equal to the lesser of (x) the Principal
Payment Amount for such Payment Date and (y) the aggregate amount of such
accrued and unpaid Prepayment Premiums so owing to such holders LESS the
amount thereof, if any, applied in accordance with the immediately
preceding subclause (a), until the aggregate amount thereof shall have been
paid in full.

ARTICLE V

PAY-OUT EVENTS

SECTION 5.01 PAY-OUT EVENTS. Any of the following shall be "Pay-Out
Events" with respect to the Series 1995-1 Notes:

(a) (i) (x) the failure on the part of the Sellers to duly observe or
perform Section 5.01(k), 5.03(a) or 5.03(d) of the Purchase Agreement or
the Issuer to duly observe or perform Section 7.02(e), 7.02(g) or 7.02(h)
or clause (i) or

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(ii) of Section 7.02(f) of the Indenture, which failure has a Material
Adverse Effect and continues unremedied for a period of five Business Days
after the date on which written notice of such failure, requiring same to
be remedied, shall have been given to the Issuer by the Trustee or the
Administrative Agent or to the Issuer, the Trustee and the Administrative
Agent by any holder of the Series 1995-1 Notes, or (y) the failure on the
part of the Issuer or the Servicer to duly observe or perform any other
covenant or agreement of the Issuer or the Servicer (other than as
described in Section 9.01(e) of the Indenture or subclause (x) of this
clause (a)) set forth in any Transaction Document, which failure has a
Material Adverse Effect and continues unremedied for a period of 30 days
after the date on which written notice of such failure, requiring the same
to be remedied, shall have been given to the Issuer or the Servicer by the
Trustee or the Administrative Agent or to the Issuer or the Servicer, as
applicable, the Trustee and the Administrative Agent by any holder of the
Series 1995-1 Notes and (ii) the occurrence of a Pay-Out Event has been
declared by the holders of Series 1995-1 Notes evidencing at least 50% of
the Series 1995-1 Outstanding Principal Balance at such time, by notice to
the Administrative Agent, the Trustee, the Issuer and the Servicer after
the expiration of the applicable grace periods set forth above;

(b) (i) any representation or warranty made by a Seller in Section
4.01(e) of the Purchase Agreement or by the Issuer in Section 2.03(a)(i),
(a)(ii)(A), (a)(ii)(B) or (a)(ii)(C) of the Indenture shall prove to have
been incorrect in any material respect when made, and continues to be
incorrect in any material respect for a period of five Business Days after
the date on which written notice of such breach, requiring the same to be
remedied, shall have been given to the Issuer by the Trustee or the
Administrative Agent or to the Issuer, the Trustee and the Administrative
Agent by any holder of the Series 1995-1 Notes, or any other representation
or warranty made by a Seller in the Purchase Agreement or by the Issuer in
the Indenture shall prove to have been incorrect in any material respect
when made, and continues to be incorrect in any material respect for a
period of 30 days after the date on which written notice of such breach,
requiring the same to be remedied, shall have been given to the Issuer by
the Trustee or the Administrative Agent or to the Issuer, the Trustee and
the Administrative Agent by any holder of the Series 1995-1 Notes;
PROVIDED, HOWEVER, that a mistake in representation of a Receivable as an
Eligible Receivable shall not constitute a Pay-Out Event unless and until a
Seller has failed to make any cash payments owed under the Purchase
Agreement in respect of the Noncomplying Receivables and Dilution
Adjustment arising from such misrepresentation and (ii) the occurrence of a
Pay-Out Event has been declared by the holders of Series 1995-1 Notes
evidencing at least 50%

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of the Series 1995-1 Outstanding Principal Balance at such time, by notice
to the Administrative Agent, the Trustee, the Issuer and the Servicer after
the expiration of the applicable grace periods set forth above;

(c) The Majority Noteholders do not declare a Liquidation
Commencement Date with respect to a Liquidation Event described in clause
(e)(A) of Section 9.01 of the Indenture, in which case a Pay-Out Event
shall be deemed to have occurred automatically unless the occurrence of the
Pay-Out Commencement Date is waived by the holders of the Series 1995-1,
Class A Notes evidencing more than 66 2/3% of the Outstanding Principal
Balance of such Class and by the holders of the Series 1995-1, Class B
Notes evidencing 100% of the Outstanding Principal Balance of such Class,
in each case, by notice to the Administrative Agent, the Trustee, the
Issuer and the Servicer, given within the applicable grace period.

(d) The Majority Noteholders do not declare a Liquidation
Commencement Date with respect to a Liquidation Event described in clause
(d) or (e)(B) of Section 9.01 of the Indenture, and the holders of Series
1995-1 Notes evidencing at least 50% of the Series 1995-1 Outstanding
Principal Balance declare that a Pay-Out Event has occurred by notice to
the Administrative Agent, the Trustee, the Issuer and the Servicer.

(e) After deposits to the Principal Funding Account on the Expected
Final Payment Date, the outstanding principal and interest of the Series
1995-1 Notes shall not have been repaid in full.

Notwithstanding the foregoing, a delay in or failure in performance
referred to in SUBSECTION (a) or (b) above for a period of 30 Business Days
after the applicable grace period shall not (unless such delay or failure
continues after such 30 Business Day period) constitute a Pay-Out Event if such
delay or failure could not have been prevented by the exercise of reasonable
diligence by the Issuer, the affected Seller or the Servicer, as applicable, and
such delay or failure was caused by an act of God or the public enemy, riots,
acts of war, acts of terrorism, epidemics, flood, embargoes, weather,
landslides, fire, earthquakes or similar causes. The preceding sentence shall
not relieve the Issuer, the affected Seller or the Servicer, as applicable, from
using its best efforts to perform its obligations in a timely manner in
accordance with the terms hereof and of the other Transaction Documents, and the
Issuer or the Servicer, as applicable, shall promptly give the Trustee and the
Administrative Agent an Officer's Certificate notifying them of such failure or
delay by it or by any affected Seller.

The Administrative Agent will promptly send a copy of each notice,
waiver and/or certificate which it sends or receives

-25-

<PAGE>

pursuant to this SECTION 5.01 to each of the Applicable Rating Agencies.
Notwithstanding anything contained herein or in the Indenture to the contrary,
neither the Trustee nor the Administrative Agent shall be deemed to have
knowledge of the occurrence or existence of any Pay-Out Event or Unmatured Pay-
Out Event until a Responsible Officer of such Person receives written notice
thereof.

ARTICLE VI

MISCELLANEOUS

SECTION 6.01 GOVERNING LAW. THIS SUPPLEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO THE CONFLICT
OF LAWS PRINCIPLES EXCEPT AS CONTEMPLATED IN SECTION 5-1401 OF THE GENERAL
OBLIGATION LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.

SECTION 6.02 EXECUTION IN COUNTERPARTS. This Supplement may be
executed in any number of counterparts and by the different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original, and all of which taken together shall constitute one and the same
agreement.

SECTION 6.03 EFFECT OF UNENFORCEABLE PROVISIONS. If any provision
hereof shall be invalid, illegal or unenforceable in any jurisdiction, the
remaining provisions shall continue to be valid and enforceable and such
provision shall continue to be valid and enforceable in any other jurisdiction.

SECTION 6.04 AMENDMENT, WAIVER, ETC.

(a) This Supplement may be amended from time to time by the Servicer,
the Issuer, the Trustee and the Administrative Agent by a written instrument
signed by each of them, without the consent of any of the holders of any Series
1995-1 Notes, to the extent permitted by Section 14.01 of the Indenture.

(b) The provisions of this Supplement may also be amended, modified
or waived from time to time by the Servicer, the Issuer, the Trustee and the
Administrative Agent with the consent of the Required Series Holders of Series
1995-1 Notes to the extent permitted by Sections 14.02 and 14.03 of the
Indenture, and otherwise with the consent of all holders of the Series 1995-1
Notes, and, in each case, the terms of Sections 14.03 and 14.04 shall apply to
any such amendment, modification or waiver.

-26-

<PAGE>

waiver of this Supplement shall become effective unless a copy thereof shall
have sent to each of the Applicable Rating Agencies and the Rating Agency
Condition shall have been satisfied with respect thereto.

SECTION 6.05 THE TRUSTEE AND THE ADMINISTRATIVE AGENT. Neither the
Trustee nor the Administrative Agent shall responsible in any manner whatsoever
for or in respect of the validity or sufficiency of this Supplement or for or in
respect of the recitals contained herein, all of which recitals are made solely
by the Issuer and the Servicer.

SECTION 6.06 INSTRUCTIONS IN WRITING. All instructions given by the
Issuer or the Servicer, as applicable, to the Trustee and/or the Administrative
Agent pursuant to this Supplement shall in writing, and may be included in a
Daily Report or Settlement Statement.

-27-

<PAGE>

IN WITNESS WHEREOF, the Issuer, the initial Servicer, the Trustee, and
the Administrative Agent have caused this Supplement to be duly executed by
their respective officers thereunto duly authorized as of the day and year first
above written.

STONE RECEIVABLES CORPORATION,
as the Issuer

By
---------------------------------
Name: Leslie T. Lederer
Title: Vice President and Secretary

Address: 150 North Michigan Avenue,
17th Floor,
Chicago, Illinois 60601-7568

Attention: Assistant Treasurer
Telephone: (312) 553-1123
Facsimile: (312) 553-0238

STONE CONTAINER CORPORATION
as initial Servicer

By
---------------------------------
Name: Michael B. Wheeler
Title: Vice President and Treasurer

Address: 150 North Michigan Avenue
Chicago, Illinois 60601-7568

Attention: Legal Department
Telephone: (312) 346-6600
Facsimile: (312) 580-2299

-28-

<PAGE>

MARINE MIDLAND BANK,
as the Trustee

By
---------------------------------
Name: BarbaraJean McCauley
Title: Assistant Vice President

Address: 140 Broadway, 12th Floor
New York, New York 10005-1180
Attention: Corporate Trust Services
Telephone: (212) 658-6084
Facsimile: (212) 658-6425

BANKERS TRUST COMPANY,
as the Administrative Agent

By
---------------------------------
Name: Melissa J. Kaye
Title: Vice President

-29-

<PAGE>

STATE OF ILLINOIS )
) SS
COUNTY OF COOK )

Given under my hand and notarial seal, this __th day of March, 1995.

-----------------------------
Notary Public

Name:
-----------------
Commission expires:
<PAGE>

STATE OF ILLINOIS )
) SS
COUNTY OF COOK )

Given under my hand and notarial seal, this __th day of March, 1995.

-----------------------------
Notary Public

Name:
-----------------
Commission expires:
<PAGE>

STATE OF ILLINOIS )
) SS
COUNTY OF COOK )

Given under my hand and notarial seal, this __th day of March, 1995.

-----------------------------
Notary Public

Name:
-----------------
Commission expires:

<PAGE>

STATE OF ILLINOIS )
) SS
COUNTY OF COOK )

Given under my hand and notarial seal, this __th day of March, 1995.

-----------------------------
Notary Public

Name:
-----------------
Commission expires:

<PAGE>
EXHIBIT 11

STONE CONTAINER CORPORATION
COMPUTATION OF PRIMARY AND FULLY DILUTED
NET INCOME (LOSS) PER SHARE
(in millions, except per share)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
PRIMARY EARNINGS PER SHARE 1995 1994 1993
- ------------------------------------------------------------------------------------------------ --------- --------- ---------
<S> <C> <C> <C>
Shares of Common Stock:
Weighted average number of common shares outstanding.......................................... 94.1 88.2 71.2
--------- --------- ---------
Primary Weighted Average Shares Outstanding..................................................... 94.1 88.2 71.2
--------- --------- ---------
--------- --------- ---------
Net Income (Loss)............................................................................... $ 255.5 $ (204.6) $ (358.7)
Less: Series E Cumulative Convertible Exchangeable Preferred Stock dividend..................... (8.1) (8.1) (8.1)
Redemption premium on redeemable preferred stock of a
consolidated affiliate.................................................................. -- (4.0) --
--------- --------- ---------
Net income (loss) used in computing primary net income (loss) per common share.................. $ 247.4 $ (216.7) $ (366.8)
--------- --------- ---------
--------- --------- ---------
Primary Earnings Per Share...................................................................... $ 2.63 $ (2.46) (5.15)
--------- --------- ---------
--------- --------- ---------

YEAR ENDED DECEMBER 31,
-------------------------------
FULLY DILUTED EARNINGS PER SHARE 1995 1994 1993
- ------------------------------------------------------------------------------------------------ --------- --------- ---------
<S> <C> <C> <C>
Shares of Common Stock:
Weighted average number of common shares outstanding.......................................... 94.1 88.2 71.2
Dilutive effect of options and warrants....................................................... -- .1 --
Addition from assumed conversion of 8.875% convertible senior subordinated notes.............. 15.2 21.6 10.4
Addition from assumed conversion of 6.75% convertible subordinated debentures................. 2.0 3.4 3.4
Addition from assumed conversion of Series E Cumulative Convertible Exchangeable Preferred
Stock........................................................................................ 3.4 3.4 3.4
--------- --------- ---------
Fully Diluted Weighted Average Shares Outstanding............................................... 114.7 116.7 88.4
--------- --------- ---------
--------- --------- ---------
Net Income (Loss)............................................................................... $ 255.5 $ (204.6) $ (358.7)
Less: Series E Cumulative Convertible Exchangeable Preferred Stock dividend..................... (8.1) (8.1) (8.1)
Income adjustment associated with assumed conversion of Stone-
Consolidated Corporation 8% convertible subordinated debentures......................... (10.6) -- --
Redemption premium on redeemable preferred stock of a consolidated affiliate............... -- (4.0) --
Add back: Interest on 8.875% convertible senior subordinated notes.............................. 9.5 13.5 6.8
Interest on 6.75% convertible subordinated debentures................................. 2.8 4.7 4.7
Income adjustment associated with assumed conversion of Stone-
Consolidated 8% convertible subordinated debentures................................ -- 6.9 .6
Series E Cumulative Convertible Exchangeable Preferred Stock dividend................. 8.1 8.1 8.1
--------- --------- ---------
Net income (loss) used in computing fully diluted net income (loss) per common share............ $ 257.2 $ (183.5) $ (346.6)
--------- --------- ---------
--------- --------- ---------
Fully Diluted Earnings Per Share (A)............................................................ $ 2.24 $ (1.57) $ (3.92)
--------- --------- ---------
--------- --------- ---------
</TABLE>

- ---------

(A) Fully diluted earnings per share for 1994 and 1993 are not disclosed in the
consolidated financial statements because the amounts are anti-dilutive.

<PAGE>
EXHIBIT 12

STONE CONTAINER CORPORATION
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
(IN MILLIONS) 1991 1992 1993 1994 1995
- ------------------------------------------------------------------------ --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Income (loss) before extraordinary charges and cumulative effects of
accounting changes..................................................... $ (49.1) $ (169.9) $ (319.2) $ (128.8) $ 444.5
Income tax provision (credit)........................................... 31.1 (59.4) (147.7) (35.5) 320.9
Minority interest in consolidated subsidiaries.......................... 5.8 5.3 3.6 1.2 29.3
Preferred stock dividend requirements of majority owned subsidiary...... (5.9) (4.7) (5.7) (9.4) --
Undistributed (earnings) loss of non-consolidated subsidiaries.......... 5.4 6.0 13.3 9.1 (9.0)
Capitalized interest.................................................... (81.9) (47.4) (10.8) (4.7) (13.2)
--------- --------- --------- --------- ----------
(94.6) (270.1) (466.5) (168.1) 772.5
--------- --------- --------- --------- ----------
--------- --------- --------- --------- ----------
Fixed charges:
Interest charges (expensed and capitalized), amortization of debt
discount and debt fees on all indebtedness........................... 479.7 433.5 437.5 460.7 473.5
Interest cost portion of rental expenses (33 1/3%).................... 26.8 27.8 27.4 29.1 35.4
Preferred stock dividend requirements of majority owned subsidiary.... 5.9 4.7 5.7 9.4 --
--------- --------- --------- --------- ----------
Total fixed charges................................................. 512.4 466.0 470.6 499.2 508.9
--------- --------- --------- --------- ----------
--------- --------- --------- --------- ----------
Earnings before income taxes, undistributed (earnings) loss of
non-consolidated subsidiaries, minority interest and fixed charges
(excluding capitalized interest)....................................... $ 417.8 $ 195.9 $ 4.1 $ 331.1 $ 1,281.4
--------- --------- --------- --------- ----------
Ratio of earnings to fixed charges...................................... (D) (C) (B) (A) 2.52
--------- --------- --------- --------- ----------
--------- --------- --------- --------- ----------
</TABLE>

- ---------

(A) The Company's earnings for the year ended December 31, 1994 were
insufficient to cover fixed charges by $168.1 million. Earnings for 1994
included a non-recurring pretax gain of $22.0 million relating to an
involuntary conversion at the Company's Panama City, Florida pulp and
paperboard mill. If such a nonrecurring event had not occurred, earnings
would have been insufficient to cover the fixed charges by $190.1 million.

(B) The Company's earnings for the year ended December 31, 1993 were
insufficient to cover fixed charges by $466.5 million. Earnings for 1993
included a non-recurring pretax gain of $35.4 million from the sale of the
Company's 49 percent equity interest in Empaques de Carton Titan, S.A. If
such a non-recurring event had not occurred, earnings would have been
insufficient to cover fixed charges by $501.9 million.

(C) The Company's earnings for the year ended December 31, 1992 were
insufficient to cover fixed charges by $270.1 million.

(D) The Company's earnings for the year ended December 31, 1991 were
insufficient to cover fixed charges by $94.6 million. Earnings for 1991
included a non-recurring pretax gain of $41.8 million associated with the
settlement and termination of a Canadian supply contract and a non-recurring
pretax gain of $17.5 million relating to an involuntary conversion at the
Company's Missoula, Montana mill. If such nonrecurring events had not
occurred, earnings would have been insufficient to cover the fixed charges
by $153.9 million.

<PAGE>
EXHIBIT 21

SUBSIDIARIES OF THE REGISTRANT

<TABLE>
<CAPTION>
ORGANIZED
UNDER THE PERCENTAGE
CONSOLIDATED SUBSIDIARIES: LAWS OF OWNERSHIP
- ---------------------------------------------------------------- ------------------- ------------
<S> <C> <C>
AB Specialty Packaging, Inc................................. Delaware 90.3%
A.H. Julius Rohde GmbH...................................... Germany 100%
Apache Railway Corporation.................................. Arizona 100%
Atlanta & Saint Andrews Bay Railroad Company................ Florida 100%
Baie Holdings Limited (NPL)................................. Canada 100%
Cameo Container Corporation................................. Illinois 100%
Cartomills, S.A............................................. Belgium 100%
Cartomills France S.A.R.L................................... France 100%
Cartonnages Robert Delubac S.A.R.L.......................... France 95.7%
Cousins Leasing Corporation................................. New York 100%
DST Design Service Team GmbH................................ Germany 100%
Europa Carton AG............................................ Germany 100%
Eurotrend Gesellschaft Gmbh................................. Germany 100%
Gamache Exploration & Mining Co. Ltd (NPL).................. Canada 100%
Grundstrucks-Verwaltungsgesellschaft Altona mbh............. Germany 95%
IFP Packungsgestaltung GmbH................................. Germany 100%
IDENTITY Institute fur Corporate Design GmbH................ Germany 100%
Leasing-Kontor Fur Investitionsguter GmbH................... Germany 100%
Orangeburg Trucking, Inc.................................... South Carolina 100%
SFI Forest Industries, Inc.................................. Delaware 100%
Societe Emballages des Cevennes, S.A........................ France 98.8%
Societe Europeenne de Carton S.A.R.L........................ France 100%
Southwest Forest Insurance Company, Ltd..................... Bermuda 100%
Speditions-Gesellschaft Visurgis mbh........................ Germany 100%
SSJ Corporation............................................. Delaware 100%
Ston Forestal, S.A.......................................... Costa Rica 100%
Stone Communications Corporation............................ Delaware 100%
Stone Connecticut Paperboard Properties, Inc................ Delaware 100%
Stone Container Australia Pty., Ltd......................... Australia 100%
Stone Container (Canada), Inc............................... Canada 100%
Stone Container (China) Corporation......................... U.S. Virgin Islands 100%
Stone Container de Mexico S.A. de C.V....................... Mexico 100%
Stone Container Holdings GmbH............................... Germany 100%
British Virgin
Stone Container International Corporation................... Islands 100%
Stone Papers, Inc........................................... Delaware 100%
Stone Receivables Corporation............................... Delaware 100%
Stone/River House Australian Investments, Inc............... Delaware 100%
Stone Venepal (Celgar) Pulp, Inc............................ Canada 90.0%
Stone-Ven Investments, Inc.................................. Delaware 100%
Strong-Robinette Bag Company, Inc........................... Virginia 100%
Wellpappenwerk Waren GmbH................................... Germany 100%
2736551 Canada Inc.......................................... Canada 100%
</TABLE>

74
<PAGE>
<TABLE>
<CAPTION>
ORGANIZED
UNDER THE PERCENTAGE
NON-CONSOLIDATED ENTITIES: LAWS OF OWNERSHIP
- ---------------------------------------------------------------- ------------------- ------------
<S> <C> <C>
Aspamill, Inc............................................... Canada 45%
Associated Paper Mills (Ontario) Limited.................... Canada 45%
Bridgewater Paper Company Limited........................... England 46.6%
Bridgewater Newsprint Limited............................... England 46.6%
Cartonnages MGC S.A......................................... France 50%
C.A. Venezolana de Pulpa y Papel S.A.C.A.................... Venezuela 20.7%
Cheshire Recycling Limited.................................. England 46.6%
Compagnie d'Estacades de La Cascapedia, Inc................. Canada 50%
Compagnie de Flottage due St. Maurice Limitee............... Canada 36.3%
Estrella de Osa S.A......................................... Costa Rica 49%
Financiere Carton Papier.................................... France 50%
GfA-Gesellschaft fur Altpapier und Rohstoffe mbh............ Germany 33.3%
ICO Inc..................................................... Canada 42%
Indupa Vertriebgesellschaft mbh & Co. KG.................... Germany 50%
Indupa Grundstucksgesellschaft mbh.......................... Germany 50%
Interstate Packaging Corporation............................ New York 50%
Laimbeer Packaging Company LLC.............................. Delaware 50%
L & M Corrugated Container Corporation...................... Illinois 50%
MacMillan Bathurst.......................................... Canada 50%
MacMillan Bathurst, Inc..................................... Canada 50%
Mannkraft Corporation....................................... Pennsylvania 49%
Maritime Containers Limited................................. Canada 35%
ORPACK-Stone Corporation.................................... Delaware 49%
Paper Recycling International, L.P.......................... Delaware 50%
Paroco Rohstoffverwertung GmbH.............................. Germany 49%
Produits Forestiers Petit Paris, Inc........................ Canada 23.3%
Rohstoffhandel Kiel GmbH.................................... Germany 37.5%
Rosenbloom Group, Inc....................................... Canada 45%
Scieries Saugenay Limitee................................... Canada 23.3%
Shanghai Stone Millennium Packaging and Paper Co. Ltd....... China 50%
Stirling Fibre (Holdings) Limited........................... England 46.6%
Stirling Fibre Limited...................................... England 46.6%
Stirling Recycling Limited.................................. England 46.6%
Stone-Billerud S.A.......................................... Switzerland 50%
Stone-Consolidated Corporation.............................. Canada 46.6%
Stone-Consolidated (Europe) S.A............................. Belgium 46.6%
Stone-Consolidated (US) Corporation......................... Delaware 46.6%
Stone Container (Hong Kong) Limited......................... Hong Kong 50%
Stone Container Japan Co., Ltd.............................. Japan 50%
Tradepak Internacional S.A. de C.V.......................... Mexico 35.9%
Trans-Seal Corporation...................................... Japan 50%
Venepal-Stone Forestal, S.A................................. Venezuela 49%
Vertriebsgesellschaft Rohstoffhandel Kiel GmbH.............. Germany 37.5%
</TABLE>

<PAGE>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from Stone
Container Corporation and Subsidiaries' December 31, 1995 Consolidated Balance
Sheet and Consolidated Statement of Operations and Retained Earnings and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 40
<SECURITIES> 0
<RECEIVABLES> 765
<ALLOWANCES> 22
<INVENTORY> 733
<CURRENT-ASSETS> 1683
<PP&E> 4750
<DEPRECIATION> 2114
<TOTAL-ASSETS> 6399
<CURRENT-LIABILITIES> 702
<BONDS> 3885
0
115
<COMMON> 953
<OTHER-SE> (63)
<TOTAL-LIABILITY-AND-EQUITY> 6399
<SALES> 7351
<TOTAL-REVENUES> 7351
<CGS> 5169
<TOTAL-COSTS> 6149
<OTHER-EXPENSES> (53)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 460
<INCOME-PRETAX> 795
<INCOME-TAX> 321
<INCOME-CONTINUING> 445
<DISCONTINUED> 0
<EXTRAORDINARY> (189)
<CHANGES> 0
<NET-INCOME> 256
<EPS-PRIMARY> 2.63
<EPS-DILUTED> 2.24

</TABLE>