SEPARATION AGREEMENT


         This is a Separation Agreement dated as of October 8, 1999 between Fort
James Operating Company,  its parent,  affiliates,  subsidiaries,  predecessors,
successors and assigns  (collectively "Fort James" or the "Company") and William
A. Paterson ("Paterson").
         A.  Paterson has been  employed by Fort James as Senior Vice  President
and  Controller  under his  employment  agreement  dated as of May 27, 1997 (the
"Employment  Agreement") and wishes to resign that  employment and retire.  Fort
James and Paterson  have agreed on the terms under which he will  terminate  his
employment  with the Company.  The parties desire to resolve  matters  involving
Paterson's  employment,  the Employment Agreement and Paterson's separation from
employment with Fort James.
         B.  Paterson  and Fort  James  further  desire to settle,  resolve  and
release any and all existing or potential  claims,  controversies,  differences,
disputes or  disagreements,  known or unknown,  that Paterson may have with Fort
James  in  exchange  for Fort  James'  agreement  to  provide  Paterson  certain
compensation and benefits to which he otherwise may not be entitled.
         C.  Fort  James  also  desires  to  provide  Paterson  with  additional
compensation over the next two (2) years in return for Paterson agreeing (i) not
to compete against Fort James,  (ii) not to hire former Fort James employees who
worked  with  Paterson in the  Controller's  function at Fort James and (iii) to
cooperate with Fort James.
         THEREFORE,  in  consideration  of the  above  premises  and the  mutual
covenants  and  promises  contained  herein,  Paterson  and Fort James  agree as
follows:

1.   Termination of  Employment.  Paterson  agrees to voluntarily  terminate his
     employment effective at the close of business on October 8, 1999 (his "Date
     of  Termination").  He will be paid  all of his  regular  compensation  and
     benefits through that date. His last day of work and responsibilities shall
     be October 8, 1999.

2.   Severance Payments. Fort James shall pay Paterson in a lump sum, the amount
     of $1,727,553  representing three (3) times the sum of (i) his current base
     salary  and (ii) his  1997  Management  Incentive  Bonus,  less  authorized
     deductions and deductions for required taxes.

3.   1999  MIP  Bonus  Payment.   Fort  James  shall  pay  Paterson  $212,367.48
     representing his bonus under the 1999 Management Incentive Plan.

4.  Pension  and  Other Benefits.
     (a) The Company will provide no medical,  prescription  or dental  coverage
and no accidental  death and  dismemberment  benefits to Paterson and members of
his family following his Date of Termination and Paterson expressly acknowledges
that these will not be provided.  Instead,  the Company agrees to pay Paterson a
lump sum or $20,000.
     (b)  Paterson  is the  beneficiary  of 5,466  restricted  shares and 39,800
performance  shares  issued  pursuant  to the 1996  Stock  Incentive  Plan  (the
"Plan").  Paterson  agrees  to  relinquish  all  right  to  the  restricted  and
performance  shares as of October 8, 1999. In return,  the Company agrees to pay
Paterson on or before  October 31, 1999,  an amount  equivalent  to the value on
October 8, 1999 of 45,266  shares of Common  Stock of the Company  (the  "Common
Stock")  determined  by  calculating  the average of the high and low price (the
"Average  Price")  of  the  Common  Stock  plus  an  amount  equal  to  $77,610,
representing the accrued dividends on such shares.
     (c) The Company will  reimburse  Paterson for his  initiation  to Knollwood
County Club and will gross up the payment for taxes.
     (d) Nothing herein shall forfeit or otherwise  affect  Paterson's  right to
vested  benefits in the Fort James 401(k) Plan and related SERP,  which benefits
shall be paid to Paterson according to such plan.
     (e)  Paterson  shall not be entitled to any other bonus  payments or profit
sharing awards including any payments under the Management Incentive Plan.
     (f) All  payments  referred  to herein are gross  payments  from which Fort
James  may  withhold  legal  and  authorized   amounts  for  payment  to  taxing
authorities as required by law.
     (g)  The  Company  shall  pay  Paterson  $21,000  for  tax  advice  and tax
preparation expenses for calendar years 2000 through 2002.
     (h) The Company  will pay  Paterson  $45,466.82  representing  the mortgage
buydown  for three  (3) years  commencing  1/1/00 on his Lake  Forest,  Illinois
residence.
     (i) The Company will pay the cost of the $1,500,000  life insurance  policy
provided to Paterson under the split-dollar insurance program for the balance of
the  fifteen  (15) years from the date of issue.  Thereafter,  Paterson  will be
responsible for the payments  should he elect to continue the policy.  For three
(3) years  following  his date of  termination,  the Company  will  maintain for
Paterson  his  long-term  disability  coverage  and  his  group  universal  life
insurance as currently provided.
     (j) The Company will reimburse  Paterson for  reasonable  legal expenses in
connection  with the  negotiation of this  Separation  Agreement,  not to exceed
$5,000.  The Company agrees to pay as incurred,  to the full extent permitted by
law, all legal fees and expenses which Paterson may reasonably incur as a result
of any contest  (regardless of the outcome thereof) by the Company,  Paterson or
others of the validity or  enforceability  of, or liability under, any provision
of the  Employment  Agreement or this  Separation  Agreement or any guarantee of
performance  thereof (including as a result of any contest by Paterson about the
amount of any payment pursuant to this Agreement), plus in each case interest on
any delayed payment at the applicable  Federal rate provided for in Section 7872
(f) (2) (A) of the Internal Revenue Code of 1986, as amended (the "Code").
     (k) The Company  acknowledges that upon his retirement,  Paterson's options
for 25,000  shares  granted  on  January 6, 1999 shall be vested and  subject to
exercise for three (3) years from the Date of Termination.
     (l)  Paterson's  existing  1996 and 1998  stock  options  shall be  amended
effective October 8, 1999 as set forth in Exhibit A hereto.

5.   Method of Payment.  All cash payments  required by this Agreement  shall be
     made by wire  transfer to  Paterson's  account or  accounts  which he shall
     designate  in writing  to the  Company's  Senior  Vice  President,  General
     Counsel.  Such transfers  shall be authorized and released in advance so as
     to arrive in Paterson's account(s) by applicable due dates.

6.   Company  Car.  Fort James  agrees to  transfer  to  Paterson  no later than
     October 31, 1999, the  certificate  of title to the  automobile  previously
     provided him for his personal and business use. Paterson  acknowledges that
     after transfer of the title to the car to him, Fort James will no longer be
     responsible  for providing  insurance or maintenance for the vehicle in any
     manner  and he shall  be  responsible  for all  costs  associated  with the
     vehicle from that date forward.

7.   General Release.
     (a) In  consideration  of all  payments  due him  hereunder  or  under  the
Employment  Agreement,  Paterson  hereby agrees,  for himself,  his  successors,
heirs,  representatives,  executors,  agents and assigns, to release and forever
discharge  Fort  James,   including  its  affiliates,   subsidiaries,   parents,
predecessors,  successors and assigns and their respective directors,  officers,
employees and agents  thereof from any and all claims,  debts,  responsibilities
and  liabilities  of every  kind and  character  whatsoever,  known or  unknown,
suspected or unsuspected,  which he has ever had or may have against Fort James,
including  but not  limited  to, any and all claims  arising  out of  Paterson's
employment or termination of employment with Fort James.  Paterson  acknowledges
that this Release  includes  any and all claims  whether in contract or in tort,
claims that may be brought on his behalf by others,  claims  brought  before any
court or administrative agency, or claims under any national,  federal, state or
local  statute or  ordinance,  including any claims under Title VII of the Civil
Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with
Disabilities  Act or any other  law.
     It  is  acknowledged  that  this  Separation  Agreement  does  not  release
Paterson's  right to any  vested  benefits  in the Fort  James  Corporation
StockPlus  Plan  (the  "StockPlus  Plan")  and  related  SERP.   Paterson's
eligibility  for benefits in the  StockPlus  Plan will be controlled by the
terms of the plan.
     (b) Fort James, including its affiliates, subsidiaries, parents,
predecessors,  successors and assigns and their respective directors,  officers,
employees and agents thereof hereby release and forever discharge Paterson,  his
successors, heirs,  representatives,  executors, agents and assigns from any and
all  claims,  which it has ever had or may have  against  Paterson or any of the
foregoing  persons,  arising out of (x) Paterson's  employment or termination of
employment  with Fort James or (y) any event,  condition  or  circumstance  that
existed or arose on or prior to the Date of Termination.  The foregoing  release
will not apply to Paterson's  obligations under this Separation Agreement.  Fort
James  acknowledges that this Release includes all claims whether in contract or
in tort,  claims  that may be brought on its  behalf by others,  claims  brought
before  any  court or  administrative  agency,  or claims  under  any  national,
federal, state or local statute or ordinance.

8.   Special Release Notification.  This Separation Agreement includes a release
     of all claims under the Age  Discrimination  in Employment  Act,  ("ADEA"),
     and,  therefore,  pursuant  to  the  requirements  of  the  ADEA,  Paterson
     acknowledges that he has been advised (1) that this release includes but is
     not  limited  to,  all  rights or claims  arising  under the ADEA up to and
     including the date of execution of this release,  but does not waive rights
     or claims that may arise after the date of  execution;  (2) to consult with
     an  attorney or other  advisor of his  choosing  concerning  his rights and
     obligations  under this release;  (3) to fully consider this release before
     executing it, and that he has been offered at least twenty-one (21) days to
     do so; (4) that this release shall become  effective and enforceable  seven
     (7) days following  execution of this  Separation  Agreement,  during which
     seven (7) day period Paterson understands that he may revoke his acceptance
     of this  Separation  Agreement by delivering  written notice to Clifford A.
     Cutchins,  IV,  Senior  Vice  President  and  General  Counsel,  Fort James
     Corporation, 1650 Lake Cook Road, Deerfield, Illinois 60015.

9.   Post Employment Restrictions, Obligations
     (a)  Paterson  agrees  to  comply  with the  terms  of his  Confidentiality
Agreement  executed  between  himself and Fort James and not to otherwise use or
disclose  Fort James  confidential  information  in the  future.  A copy of this
Agreement is attached as Exhibit B.
     (b) In return for the extension of the option exercise period,  the vesting
and payment for the restricted shares and the performance shares as set forth in
Paragraph 4(b),  Paterson  agrees,  in order to protect the Company's  goodwill,
trade secrets and confidential information and thereby help ensure the long-term
success and development of the business, not to engage in competitive activities
on behalf of a competitive  business for a period of two (2) years following the
Date of  Termination  with  the  Company  for  whatever  reason,  without  first
obtaining  written  permission from either the Senior Vice President and General
Counsel  or the Senior  Vice  President,  Human  Resources,  which  shall not be
unnecessarily  withheld or delayed.  "Engage in  competitive  activities"  means
rendering services or being involved directly or indirectly in any way or in any
capacity whether as an officer, director, employee, agent, owner, shareholder or
consultant  (excluding  ownership  of less  than 5% of the  stock of a  publicly
traded  company),  in the  manufacture,  development,  promotion  or sale of any
towel,  tissue  or  foodservice  cup,  plate  or  cutlery  product  of the  type
manufactured by Fort James (the "Covered  Products").  A "competitive  business"
means any person or entity engaged in the  manufacture or non-retail sale of the
Covered  Products.  Paterson  acknowledges that products of the Company are sold
throughout  North America and Western Europe.  Accordingly,  the geographic area
covered by this  restraint  shall include any county,  city,  town,  province or
comparable unit of local government where the Covered Products are manufactured,
marketed  or sold by the  Company.  The  parties  agree  that  this  non-compete
provision supersedes all prior agreements between them on this subject.
     (c) Paterson  agrees for a period of two (2) years not to solicit  directly
or indirectly for  employment  any employee or former  employee of Fort James or
its affiliates, as of October 8, 1999, without the written consent of the Senior
Vice President, Human Resources for the Company, which shall not be unreasonably
withheld  or  delayed.  Further,  Paterson  agrees  that if any such Fort  James
employee  approaches him for  employment,  he will refer them to the appropriate
hiring  official  of his  employer  and will have no  involvement  either in the
hiring of the employee or in working with the employee should such employee work
for the same company for which Paterson works.
     (d)  Paterson  agrees  that as Senior Vice  President  and  Controller,  he
possesses  intimate  knowledge  about all  aspects  of the  Company's  business,
business plans and other confidential or propriety  information.  He also agrees
that these  restrictions  are  reasonable and necessary to protect the Company's
business  and  in  consideration  of  the  substantial   benefits  provided  him
hereunder.  If Paterson  violates any of his obligations under this paragraph 9,
the Company shall have no further  obligation to him under this  Agreement as on
the date of breach.  Paterson agrees that the Company will be irreparably harmed
and will be entitled to immediate  injunctive relief in the event of such breach
in addition to any other monetary remedies.
     (e) If any aspect of the above post employment restrictions are deemed void
or unenforceable by any court of competent jurisdiction,  the parties agree that
the court should modify these  restrictions to a point they would be enforceable
and enforce the restrictions to that extent

10.  Indemnity.  Fort James  agrees to continue to indemnify  and save  Paterson
     harmless  from all  claims,  actions  and  liabilities  which  may arise in
     connection  with his reasonable  performance of his duties for the Company.
     Such indemnification  shall be to the same extent as its indemnification of
     active executives of equal rank but shall relate only to Paterson's alleged
     actions or failure to act during the period in which he was employed by the
     Company.

11.  Future  Cooperation.  Paterson agrees to cooperate in providing  transition
     assistance related to his departure as may be reasonably required of him by
     Fort James, including presences as a witness in legal proceedings as may be
     necessary,  both before and after his Date of Termination.  Fort James will
     reimburse Paterson $2,500 per day plus any reasonable  expenses incurred in
     this  regard  subject  to  written   authorization  from  the  Senior  Vice
     President, Human Resources.

12.  Resignation.  By his signature hereto, Paterson hereby resigns his position
     as Senior Vice  President and  Controller  and any and all other  positions
     with the Company, its subsidiaries, its parent and its affiliates.

13.  Confidentiality.  Paterson  agrees that he will not divulge the contents of
     this  Separation  Agreement  which are agreed to be  confidential in nature
     except (a)  Paterson  may  divulge the  contents  to his spouse,  attorney,
     financial advisor and income tax preparer; or (b) except as may be required
     to comply with legal  process.  It is further agreed by Paterson that if it
     is necessary that this  Agreement or a significant  portion be disclosed to
     those listed above,  Paterson  agrees to instruct and request each of them,
     or use such other efforts as may be reasonable,  to keep any information so
     disclosed confidential. If Paterson materially breaches this provision, the
     Company will have no further obligation to him under this Agreement.

14.  Entire  Agreement.  Paterson  understands and agrees that all terms of this
     Separation  Agreement  are  contractual  and  are not a mere  recital.  The
     parties  represent  and warrant  that in  negotiating  and  executing  this
     Separation  Agreement,  each have had an  opportunity to consult with legal
     counsel  or other  representatives  of their own  choosing  concerning  the
     meaning and effect of each term or provision hereof,  and that there are no
     representations,  promises  or  agreements  other than  those  specifically
     referred  to or set forth in writing  herein.

     The parties  represent and warrant that they have read this Separation
     Agreement in its entirety,  fully understand and agree to its term and
     provisions,  and intend and agree that it is a final and legal binding
     settlement and release of all claims Paterson may have.

15.  Severability.  If any  portions of this  Separation  Agreement  are void or
     deemed  unenforceable for any reason,  the unenforceable  portions shall be
     deemed severed from the remaining  portions of this  Agreement  which shall
     otherwise remain in full force and effect.

16.  No Waiver. The decision of either party not to assert a claim for breach of
     the Separation  Agreement shall not be construed as a waiver of that or any
     subsequent breach which might occur.

17.  Corporate  Authority.  The officer  executing this Separation  Agreement on
     behalf of Fort James represents that he has full corporate  authority to do
     so  and  to  bind  the  Company,  its  parents,  affiliates,  subsidiaries,
     predecessors, successors and assigns.

18.  Governing Law. This Agreement shall be governed and construed  according to
     the laws of the Commonwealth of Virginia.



IN WITNESS WHEREOF, the parties have affixed their signatures:





                                       By:/s/William A. Paterson
                                             William A. Paterson





                                       FORT JAMES OPERATING COMPANY



                                       By:/s/Daniel J. Girvan
                                             Daniel J. Girvan
                                             Senior Vice President



<PAGE>


                             FORT JAMES CORPORATION

                                     EXHIBIT A
                           AMENDMENT TO STOCK OPTIONS


         FORT JAMES  CORPORATION  (the  "Company")  and William A. Paterson (the
"Participant")  hereby agree to this Amendment to Stock Options as of October 8,
1999.

         WHEREAS,  the  Participant  has been granted certain options to acquire
shares of common stock of the Company ("Company Stock") which are listed below.

         WHEREAS, in connection with the Participant's termination of employment
without cause,  the Company and the Participant  wish to modify certain terms of
such options.

         WHEREAS,  the  terms of this  Amendment  to  Stock  Options  have  been
approved  by  the  Compensation   Committee  of  Fort  James   Corporation  (the
"Committee").

         THEREFORE,  in  consideration of the foregoing and the mutual covenants
hereinafter, the Company and the Participant agree as follows:

1.   From the options  granted to the Participant on January 6, 1998 to purchase
     60,000 shares,  all 60,000 shares (the "1998  Options") shall be vested and
     exercisable as of October 8, 1999.

2.   The 1998 Options and the options for 20,000 shares  granted to  Participant
     on January 25, 1996 and 25,000 shares July 1, 1996 (the "1996 Options") may
     be  exercised at any time on or before  October 8, 2001.  To the extent not
     previously  exercised,  the 1998 and 1996 Options shall expire and cease to
     be exercisable on October 9, 2001.

3.   Any  provisions  of the  options  relating  to the time for  vesting or the
     period  to  exercise  the 1996  and 1998  Options  are  superseded  by this
     Amendment to Stock Options,  including  provisions requiring the continuing
     employment of the Participant or measuring  periods to exercise the options
     based on termination of employment by the Participant.

4.   To the extent not specifically  amended by the provisions of this Amendment
     to Stock Options, the terms and conditions of the options shall continue to
     apply.

5.   Any  controversy  concerning  this  Amendment  to  Stock  Options  shall be
     resolved by the Committee as it deems  proper,  and any  interpretation  of
     this Amendment to Stock Options or other decision of the Committee shall be
     final and conclusive.

6.   If  the  Participant  dies  before  an  option  expires  as set  forth  and
     established  in Section 3 hereof,  all of the  options  that he held at the
     time of his death may be exercised by the  personal  representative  of his
     estate.  The options may be exercised at any time until the expiration date
     of the options.

7.   As a  further  condition  of  this  Amendment  to  Stock  Options,  and  in
     consideration of receipt of these rights,  the Participant agrees to comply
     with all provisions of the Separation Agreement between the Participant and
     Fort  James  Operating  Company.  If  the  Committee  determines  that  the
     Participant  has violated the provisions of the Separation  Agreement,  the
     options shall  terminate as of the date when a violation of the  Separation
     Agreement  first  occurred as determined by the Committee  (the  "Violation
     Date") and the options shall no longer be  exercisable  as of the Violation
     Date.

8.   Any notice to be given under the terms of this  Amendment to Stock  Options
     shall be addressed to Fort James Corporation, Corporate Secretary, P.O. Box
     89,  Deerfield,  Illinois  60015,  and  any  notice  to  be  given  to  the
     Participant or to his personal  representative shall be addressed to him at
     the last address on the records of the Company or at such other  address as
     either party may hereafter designate in writing to the other. Notices shall
     be deemed to have been duly given if mailed, postage prepaid,  addressed as
     aforesaid.
<PAGE>
         IN WITNESS  WHEREOF,  the Company and the Participant  have caused this
Amendment to Stock Options to be signed, as of the dates below.

                                         FORT JAMES CORPORATION



Date: September 29, 1999           By:/s/Miles L. Marsh
                                         Miles L. Marsh
                                         Chairman of the Board and CEO



                                         WILLIAM A. PATERSON



Date: September 29, 1999           By:/s/William A. Paterson
                                         William A. Paterson

<PAGE>




                                    EXHIBIT B
                      CONFIDENTIALITY AND PATENT AGREEMENT


         The word  "Employer" as used herein shall mean James River  Corporation
and all its present and future divisions,  subsidiaries and affiliates,  and the
obligations  assumed by me herein shall be for the benefit of all  regardless of
by which division,  subsidiary or affiliate I may now, heretofore,  or hereafter
be employed.

         In  consideration  of my employment by Employer,  I hereby agree to the
terms and conditions of this Agreement as follows:

1.   CONFIDENTIALITY.  I recognize that by virtue of my employment and training,
     I will have  access to  information  relating  to the  business of Employer
     which I acknowledge  must remain  confidential.  I recognize and agree that
     this  information  is a valuable,  special and unique  asset of  Employer's
     business,  and if it were to be known  and  used by  myself  or any  entity
     engaged in a similar  business,  it would be harmful and detrimental to the
     interests of Employer.

         Accordingly, unless specifically authorized in writing, I shall not use
or disclose,  either during or after my employment,  any secret or  confidential
information,  data or trade secrets  relating to the business of Employer.  Such
information,  data or trade secrets shall  include,  but are not limited to, any
information  concerning Employer's products,  processes,  services,  inventions,
manufacturing   methods,   purchasing,   accounting,   engineering,   marketing,
merchandising  and  selling  or  any  other  information  concerning  Employer's
business  or its  manner  of  operation  and  which  is not  generally  known in
Employer's  industry.  I will disclose such  information,  data or trade secrets
only to other employees of Employer as required by my duties.

         I understand  why the foregoing  information  should not be divulged to
others,  and that I also may learn  certain  things which may or may not require
confidential  treatment.  I recognize  that it may often be difficult to draw an
exact  line of  distinction  as to what  does or does not  require  confidential
treatment,  although,  as a general  rule,  it may be said that any  unpublished
information  is secret and  confidential.  In those cases where doubt arises,  I
will obtain  written  permission  from  Employer  before using or divulging  the
information in question.

         Upon separation from my employment with the Company,  regardless of the
reason, I shall promptly deliver to Employer all memoranda,  notebooks,  letters
and  copies  thereof,  and all  materials  of a secret  or  confidential  nature
relating to Employer's business,  or its clients, and which are in my possession
or under my control.

         This Confidentiality provision shall be construed as independent of any
other provision of this Agreement. The existence of any claim or cause of action
against Employer by me, whether predicated on the Agreement or otherwise,  shall
constitute  a defense to the  enforcement  of the  Confidentiality  provision by
Employer.

2.   PATENT.  I shall  disclose  promptly to Employer or its nominee any and all
     inventions,  discoveries  and  improvements  related  to  the  business  or
     activities of Employer,  whether patentable or not, conceived or made by me
     during the period of my employment or within one year  thereafter.  I shall
     assign and agree to assign to  Employer  or its  nominee all my interest in
     such inventions, discoveries and improvements.  Whenever requested to do so
     by Employer, I shall execute any and all applications, assignments or other
     instruments  which  Employer  shall deem  necessary to apply for and obtain
     letters patent of the United States or any foreign  country or to otherwise
     protect the Company's interest therein.  These obligations shall be binding
     upon my assigns, executors, administrators and other legal representatives.

3.   REMEDIES.  I agree that if I breach or threaten to breach any  provision of
     this Agreement,  the Company's  remedies at law may be inadequate,  and the
     Company shall be entitled to an injunction  restraining me from such breach
     or  threatened  breach.  Nothing  contained  herein  shall be  construed as
     prohibiting  the Company from pursuing any other  remedies  available to it
     for such  breach or  threatened  breach,  including  the  recovery or money
     damages, costs and attorney fees.

4.   SEVERABILITY AND  ENFORCEMENT.  If any provision of this Agreement is void,
     or so declared, such provision shall be deemed, and hereby is, severed from
     this Agreement, which shall otherwise remain in full force and effect.

5.   GOVERNING LAW. This Agreement shall be governed by the law of Connecticut.


         IN WITNESS  WHEREOF,  parties  hereto have executed this Agreement this
30th day of January, 1996.





Date:February 8, 1996                     By:/s/William A. Paterson
                                                William A. Paterson
                                                Employee



By:/s/Charles S. Reed                           James River Corporation
      Charles S. Reed                           Employer
      Witness