ANNEX I





                             FORT JAMES CORPORATION

                                 $2,500,000,000

                                CREDIT AGREEMENT











                                   dated as of

                                 August 13, 1997






                           amended and restated as of


                                October 31, 1997

                                      

                              CHASE SECURITIES INC.
                            BT SECURITIES CORPORATION
                          BANCAMERICA SECURITIES, INC.
                        NATIONSBANC CAPITAL MARKETS, INC.

                                  AS ARRANGERS


                            THE CHASE MANHATTAN BANK

                             AS ADMINISTRATIVE AGENT

                                      E-8
<PAGE>



                                TABLE OF CONTENTS


                                                                           Page


                                    ARTICLE I

                                   Definitions

SECTION 1.01    Defined Terms ...........................................    1
SECTION 1.02    Classification of Loans and Borrowings...................   17
SECTION 1.03    Terms Generally .........................................   17
SECTION 1.04    Accounting Terms; GAAP ..................................   17
SECTION 1.05    Exchange Rates ..........................................   18
SECTION 1.06    Several Obligations .....................................   18


                                   ARTICLE II

                                   The Credits

SECTION 2.01  Commitments................................................   18
                                                                               
SECTION 2.02. Loans and Borrowings ......................................   19
                                                                              
SECTION 2.03. Requests for Revolving Borrowings .........................   19
                                                                             
SECTION 2.04. Competitive Bid Procedure .................................   20
                                                                           
SECTION 2.05. Funding of Borrowings .....................................   22
                                                                             
SECTION 2.06. Interest Elections ........................................   23
                                                                            
SECTION 2.07. Termination and Reduction of Commitments ..................   24
                                                                           
SECTION 2.08. Repayment of Loans; Evidence of Debt ......................   25
                                                                             
SECTION 2.09. Prepayment of Loans .......................................   25
                                                                            
SECTION 2.10. Fees ......................................................   26
                                                                            
SECTION 2.11. Interest ..................................................   27
                                                                            
SECTION 2.12. Alternate Rate of Interest ................................   28
                                                                            
SECTION 2.13. Increased Costs; Illegality ...............................   28
                                                                            
SECTION 2.14. Break Funding Payments ....................................   30
                                                                            
SECTION 2.15. Taxes .....................................................   31
                                                                            
SECTION 2.16. Payments Generally; Pro Rata Treatment; Sharing of Set-offs   32
                                                                            
SECTION 2.17. Mitigation Obligations; Replacement of Lenders ............   34
                                                                            
SECTION 2.18 Borrowing Subsidiaries .....................................   34
                                                                            
SECTION 2.19. Letters of Credit .........................................   35

                                   ARTICLE III

                         Representations and Warranties

SECTION 3.01    Organization; Powers .....................................   38
SECTION 3.02    Authorization; Enforceability ............................   38
SECTION 3.03    Governmental Approvals; No Conflicts .....................   38
SECTION 3.04    Financial Condition; No Material Adverse Change...........   39
SECTION 3.05    Properties ...............................................   39
SECTION 3.06    Litigation and Environmental Matters .....................   40
SECTION 3.07    Compliance with Laws and Agreements ......................   40
SECTION 3.08    Investment and Holding Company Status ....................   40
SECTION 3.09    Taxes ....................................................   40
SECTION 3.10    ERISA ....................................................   40
SECTION 3.11    Disclosure ...............................................   40
SECTION 3.12    Federal Reserve Regulations ..............................   41
SECTION 3.13    Designated Senior Indebtedness ...........................   41

<PAGE>

                                   ARTICLE IV

                                   Conditions

SECTION 4.01    Effective Date ...........................................   41
SECTION 4.02    Each Credit Event ........................................   42
SECTION 4.03    Each Borrowing Subsidiary Credit Event....................   43


                                    ARTICLE V

                              Affirmative Covenants

SECTION 5.01    Financial Statements and Other Information...............    43
SECTION 5.02    Notices of Material Events...............................    44
SECTION 5.03    Existence; Conduct of Business...........................    45
SECTION 5.04    Payment of Obligations...................................    45
SECTION 5.05    Maintenance of Properties; Insurance.....................    45
SECTION 5.06    Books and Records; Inspection Rights.....................    45
SECTION 5.07    Compliance with Laws.....................................    45
SECTION 5.08    Use of Proceeds and Letters of Credit....................    45
                                   ARTICLE VI

                               Negative Covenants

SECTION 6.01    Indebtedness and Preferred Stock of Subsidiaries..........   46
SECTION 6.02    Liens ....................................................   46
SECTION 6.03    Fundamental Changes ......................................   47
SECTION 6.04    Transactions with Affiliates .............................   48
SECTION 6.05    Sale and Lease-Back Transactions .........................   48
SECTION 6.06    Restrictive Agreements ...................................   48
SECTION 6.07    Borrowing Subsidiaries ...................................   48
SECTION 6.08    Leverage Ratio ...........................................   48


                                   ARTICLE VII

 Events of Default.....................................................      49


                                  ARTICLE VIII

 The Administrative Agent..............................................      51


                                   ARTICLE IX

 Guarantee.............................................................      52

<PAGE>

                                    ARTICLE X

Miscellaneous

SECTION 10.01    Notices...................................................  54
SECTION 10.02    Waivers; Amendments.......................................  54
SECTION 10.03    Expenses; Indemnity; Damage Waiver........................  55
SECTION 10.04    Successors and Assigns....................................  56
SECTION 10.05    Survival..................................................  58
SECTION 10.06    Counterparts; Integration; Effectiveness..................  58
SECTION 10.07    Severability..............................................  59
SECTION 10.08    Right of Setoff...........................................  59
SECTION 10.09    Governing Law; Jurisdiction; Consent to Service of Process  59
SECTION 10.10    WAIVER OF JURY TRIAL......................................  59
SECTION 10.11    Headings..................................................  60
SECTION 10.12    Confidentiality...........................................  60
SECTION 10.13    Interest Rate Limitation..................................  60
SECTION 10.14    Conversion of Currencies..................................  60


SCHEDULES:

Schedule 1.01(a)    --   Alternate Procedures
Schedule 1.01(b)    --   Existing Credit Agreements
Schedule 1.01(c)    --   Existing Receivables Program Documents
Schedule 2.01       --   U.S. Lenders, U.S. Commitments, Multicurrency
                          Lenders and Multicurrency Commitments
Schedule 3.06       --   Disclosed Matters
Schedule 6.01(a)    --   Existing Indebtedness and Preferred Stock
Schedule 6.02       --   Existing Liens
Schedule 6.06       --   Restrictive Agreements


EXHIBITS:

Exhibit A           --   Form of Assignment and Acceptance
Exhibit B-1         --   Form of Opinion of McGuire Woods Battle & Boothe LLP
Exhibit B-2         --   Form of Opinion of Wachtell, Lipton, Rosen & Katz
Exhibit B-3         --   Form of Opinion of Robert A. Imig, Jr.
Exhibit B-4         --   Form of Opinion of Shearman & Sterling
Exhibit B-5         --   Form of Opinion of McGuire Woods Battle & Boothe LLP
Exhibit B-6         --   Form of Opinion of De Brauw Blackstone Westbroek
Exhibit C           --   Form of Opinion of Borrowing Subsidiary's
                         Counsel
Exhibit D           --   Form of Borrowing Subsidiary Agreement
Exhibit E           --   Form of Borrowing Subsidiary Termination


<PAGE>







                                    CREDIT  AGREEMENT  dated  as of  August  13,
                           1997, as amended and restated as of October 31, 1997,
                           among   FORT   JAMES   CORPORATION,   the   BORROWING
                           SUBSIDIARIES  party hereto, the LENDERS party hereto,
                           and  THE  CHASE  MANHATTAN  BANK,  as  Administrative
                           Agent.


         The parties hereto agree as follows:


                                    ARTICLE I

                                   Definitions

         SECTION 1.01. Defined Terms. As used  in  this Agreement, the following
terms have the meanings specified below

         "ABR", when used in reference to any Loan or Borrowing, means that such
Loan, or the Loans  comprising  such Borrowing,  are bearing  interest at a rate
determined by reference to the Alternate Base Rate.

         "Administrative  Agent" means The Chase Manhattan Bank, in its capacity
as administrative agent for the Lenders hereunder.

         "Administrative Questionnaire" means an Administrative Questionnaire in
a form supplied by the Administrative  Agent, a copy of which shall be delivered
to the Company.

         "Affiliate"  means, with respect to a specified Person,  another Person
that directly, or indirectly through one or more intermediaries,  Controls or is
Controlled by or is under common Control with the Person specified.

         "Agreement Currency" has the meaning assigned to  such  term in Section
10.14.

         "Alternate Base Rate" means, for any day, a rate per annum equal to the
greatest  of (a) the Prime  Rate in effect on such day,  (b) the Base CD Rate in
effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on
such day plus 1/2 of 1%. Any change in the  Alternate  Base Rate due to a change
in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate shall be
effective  from and  including  the  effective  date of such change in the Prime
Rate, the Base CD Rate or the Federal Funds Effective Rate, respectively.

         "Alternate  Procedures" means, with respect to the Multicurrency  Loans
in a specified  Committed  Currency,  any alternate  notice,  funding or payment
procedures approved by the Administrative Agent, the applicable Borrower and the
Multicurrency  Lenders  and set  forth  in  Schedule  1.01(a)  or in one or more
supplements thereto.



<PAGE>

         "Applicable  Percentage"  of any  Lender  means  (a) in the case of any
determination  in respect of the U.S.  Commitments  or any  extension  of credit
thereunder,  the  percentage of the total U.S.  Commitments  represented by such
Lender's U.S. Commitment, (b) in the case of any determination in respect of the
Multicurrency Commitments or any extension of credit thereunder,  the percentage
of  the  total   Multicurrency   Commitments   represented   by  such   Lender's
Multicurrency  Commitment,  and (c) in all other cases,  the  percentage  of the
total Commitments  represented by such Lender's  Commitment.  If the Commitments
have terminated or expired, the Applicable Percentages shall be determined based
upon the Commitments most recently in effect, giving effect to any assignments.

         "Applicable  Rate" means, for any day, with respect to any Eurocurrency
Revolving  Loan or with respect to the facility fees payable  hereunder,  as the
case may be, the  applicable  rate per annum set forth  below  under the caption
"Eurocurrency Spread" or "Facility Fee Rate", as the case may be, based upon the
ratings by S&P and Moody's,  respectively,  applicable on such date to the Index
Debt:

<TABLE>

---------------------------------------------------- -------------------------- ===========================

         <S>                                              <C>                         <C>    
                Index Debt Ratings:                        Eurocurrency                Facility Fee
                                                              Spread                       Rate

---------------------------------------------------- -------------------------- ===========================
---------------------------------------------------- -------------------------- ===========================

                    Category 1
                A-or higher by S&P                             .140%                       .06%
              A3 or higher by Moody's
---------------------------------------------------- -------------------------- ===========================
---------------------------------------------------- -------------------------- ===========================

                    Category 2
                    BBB+ by S&P                                .170%                       .08%
                  Baa1 by Moody's
---------------------------------------------------- -------------------------- ===========================
---------------------------------------------------- -------------------------- ===========================

                    Category 3
                    BBB by S&P                                 .185%                       .09%
                  Baa2 by Moody's
---------------------------------------------------- -------------------------- ===========================
---------------------------------------------------- -------------------------- ===========================

                    Category 4
                    BBB- by S&P                                .225%                       .10%
                  Baa3 by Moody's
---------------------------------------------------- -------------------------- ===========================
---------------------------------------------------- -------------------------- ===========================

                    Category 5
                    BB+ by S&P                                 .350%                       .15%
                  Ba1 by Moody's
---------------------------------------------------- -------------------------- ===========================
---------------------------------------------------- -------------------------- ===========================

                    Category 6
                BB or lower by S&P                             .500%                       .25%
              Ba2 or lower by Moody's
---------------------------------------------------- -------------------------- ===========================
</TABLE>
<PAGE>



         For purposes of the  foregoing,  (i) if either Moody's or S&P shall not
have in  effect a  rating  for the  Index  Debt  (other  than by  reason  of the
circumstances referred to in the penultimate sentence of this definition),  then
such rating  agency shall be deemed to have  established a rating in Category 6;
(ii) if the ratings  established  or deemed to have been  established by Moody's
and S&P for the Index Debt shall fall within different  Categories,  then (x) if
such ratings shall differ by only one  Category,  the  Applicable  Rate shall be
based on the higher of the two ratings and (y) if such  ratings  shall differ by
two or more Categories,  the Applicable Rate shall be determined by reference to
the Category  next above that of the lower of the two ratings (with one Category
being above  another if the ratings it contains  are  superior to the ratings in
such other  Category);  and (iii) if the ratings  established  or deemed to have
been  established  by Moody's and S&P for the Index Debt shall be changed (other
than as a result  of a change in the  rating  system of  Moody's  or S&P),  such
change shall be  effective as of the date on which it is first  announced by the
applicable rating agency.  Each change in the Applicable Rate shall apply during
the period  commencing  on the  effective  date of such change and ending on the
date  immediately  preceding the effective date of the next such change.  If the
rating  system of Moody's or S&P shall  change,  or if either such rating agency
shall cease to be in the business of rating  corporate debt obligations or shall
terminate its rating for reasons outside the control of the Company, the Company
and the  Lenders  shall  negotiate  in good  faith to amend this  definition  to
reflect  such changed  rating  system or the absence of ratings from such rating
agency and, pending the effectiveness of any such amendment, the Applicable Rate
shall be  determined by reference to the rating most recently in effect prior to
such  change  or  cessation.  Notwithstanding  the  foregoing,  until  the first
anniversary  of the  Effective  Date,  the  ratings  for the Index Debt shall be
deemed not to be higher  than BBB- by S&P and Baa3 by Moody's  (with A-/A3 being
the highest such rating and BB/Ba2 being the lowest).

         "Assessment  Rate" means,  for any day, the annual  assessment  rate in
effect  on such  day that is  payable  by a member  of the Bank  Insurance  Fund
classified  as  "well-capitalized"  and within  supervisory  subgroup  "B" (or a
comparable successor risk  classification)  within the meaning of 12 C.F.R. Part
327 (or any successor  provision) to the Federal Deposit  Insurance  Corporation
for  insurance  by such  Corporation  of time  deposits  made in  dollars at the
offices of such member in the United  States;  provided  that if, as a result of
any change in any law, rule or regulation, it is no longer possible to determine
the Assessment Rate as aforesaid,  then the Assessment Rate shall be such annual
rate as shall be  determined  in good  faith by the  Administrative  Agent to be
representative of the cost of such insurance to the Lenders.

         "Assignment and Acceptance" means an assignment and acceptance  entered
into by a Lender and an assignee (with the consent of any party whose consent is
required  by  Section  10.04),  and  accepted  by  the   Administrative   Agent,
substantially  in the  form of  Exhibit  A or any  other  form  approved  by the
Administrative Agent and the Company.

         "Availability Period" means the period from and including the Effective
Date  to but  excluding  the  earlier  of the  Maturity  Date  and  the  date of
termination of all of the Commitments.

         "Base CD Rate" means the sum of (a) the  Three-Month  Secondary CD Rate
multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate.

         "Board"  means the Board of  Governors  of the Federal  Reserve  System
 of the United States of America.

         "Borrower" means the Company or any Borrowing Subsidiary.

         "Borrowing"  means  (a)  Revolving  Loans of the same  Type,  Class and
currency,  made,  converted  or  continued  on the  same  date to or by the same
Borrower and, in the case of  Eurocurrency  Loans, as to which a single Interest
Period is in effect,  or (b) a Competitive Loan or group of Competitive Loans of
the same Type made on the same date and as to which a single  Interest Period is
in effect.

         "Borrowing  Date" means any Business Day specified in a notice pursuant
to  Section  2.03 or 2.04 as a date on which the  applicable  Borrower  requests
Loans to be made hereunder.



<PAGE>



         "Borrowing  Request" means  a  request  for  a Revolving  Borrowing  in
accordance with Section 2.03.

         "Borrowing Subsidiary" means, at any time, each of (a) Jamont and James
River  Services and (b) if designated  as a Borrowing  Subsidiary by the Company
pursuant to Section 2.18,  any other Wholly Owned  Subsidiary  that is a Foreign
Subsidiary,  in each  case  until  such  Person  has  ceased  to be a  Borrowing
Subsidiary pursuant to Section 2.18.

         "Borrowing Subsidiary Agreement" means a Borrowing Subsidiary Agreement
substantially in the form of Exhibit D.

         "Borrowing   Subsidiary   Termination"  means  a  Borrowing  Subsidiary
Termination substantially in the form of Exhibit E.

         "Business  Day" means any day that is not a  Saturday,  Sunday or other
day on which commercial banks in New York City are authorized or required by law
to remain closed;  provided that (i) when used in connection with a Eurocurrency
Loan,  the term "Business Day" shall also exclude any day on which banks are not
open for dealings in deposits in the applicable currency in the London interbank
market and (ii) when used in  connection  with a  Multicurrency  Loan,  the term
"Business  Day" shall also  exclude any day on which  banks in the  jurisdiction
where such Loans are being made and where  payments  thereof are  required to be
made are required by law to remain closed.

         "Calculation  Date" means (a) the last  Business  Day of each  calendar
month  and (b) at any time  when  the sum of the  Multicurrency  Loan  Exposures
exceeds 75% of the total  Multicurrency  Commitments,  the last  Business Day of
each calendar week.

         "Capital Lease Obligations" of any Person means the obligations of such
Person to pay rent or other  amounts  under  any lease of (or other  arrangement
conveying the right to use) real or personal property, or a combination thereof,
which  obligations  are required to be  classified  and accounted for as capital
leases on a balance  sheet of such  Person  under  GAAP,  and the amount of such
obligations  shall be the  capitalized  amount thereof  determined in accordance
with GAAP.

         "Change in Control" means (a) the acquisition of ownership, directly or
indirectly,  beneficially  or of  record,  by any  Person or group  (within  the
meaning of the  Securities  Exchange Act of 1934 and the rules of the Securities
and Exchange  Commission  thereunder as in effect on the date hereof), of shares
representing more than 35% of the aggregate ordinary voting power represented by
the issued and outstanding  capital stock of the Company; or (b) occupation of a
majority of the seats (other than vacant seats) on the board of directors of the
Company by Persons who were  neither (i)  nominated by the board of directors of
the Company nor (ii) appointed by directors so nominated;  or (c) the occurrence
of a "change in control" (or similar event,  howsoever denominated) under and as
defined in any indenture or other agreement in respect of Material  Indebtedness
to which any Borrower is a party.



<PAGE>



         "Change in Law" means (a) the adoption of any law,  rule or  regulation
after the date of this Agreement,  (b) any change in any law, rule or regulation
or in the  interpretation or application  thereof by any Governmental  Authority
after the date of this  Agreement or (c) compliance by any Lender or the Issuing
Bank (or, for purposes of Section 2.13(c),  by any lending office of such Lender
or by such  Lender's or the Issuing  Bank's  holding  company,  if any) with any
request,  guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement.

          "Class", when used in reference  to any Loan  or Borrowing, refers  to
whether such Loan, or the Loans  comprising such Borrowing,  are U.S.  Revolving
Loans,  Multicurrency  Loans or  Competitive  Loans.  "Code"  means the Internal
Revenue Code of 1986, as amended from time to time.

          "Commitment"  means,  with respect to each Lender,  such Lender's U.S.
Commitment  and  Multicurrency  Commitment.  The  initial  amount  of the  total
Commitments is $2,500,000,000.  "Committed Currency" means (a) dollars,  British
Pounds Sterling,  Deutsche Marks,  French Francs,  Italian Lire, Belgian Francs,
Dutch  Guilders and Spanish  Pesetas and (b) any other  Eligible  Currency  that
shall be designated by the Company in a notice  delivered to the  Administrative
Agent and approved by the Administrative Agent and all the Multicurrency Lenders
as a Committed Currency.

          "Company"  means  Fort  James  Corporation,   a  Virginia  corporation
formerly named James River Corporation of Virginia.

          "Competitive  Bid" means  an  offer by a  Lender to make a Competitive
Loan in accordance with Section 2.04.

         "Competitive Bid Rate" means,  with respect to any Competitive Bid, the
Margin or the Fixed  Rate,  as  applicable,  offered by the Lender  making  such
Competitive Bid.

         "Competitive  Bid  Request"  means a request  for  Competitive  Bids in
accordance with Section 2.04.

         "Competitive Borrowing"means a Borrowing comprised of Competitive Loans

         "Competitive Loan"means a Loan in dollars made pursuant to Section 2.04

         "Consolidated Net Income" for any period means the amount of net income
(or net loss) of the Company and its consolidated Subsidiaries (giving pro forma
effect,  for any period ending prior to the  consummation of the Merger,  to the
Merger as if it had  occurred on the first day of such period,  consistent  with
the method applied in the pro forma financial  statements referred to in Section
3.04(b)), excluding the portion thereof allocable to minority interests, if any,
held by Persons  other than the Company or any Wholly Owned  Subsidiary  in such
consolidated  Subsidiaries for such period determined on a consolidated basis in
accordance with GAAP.

         "Consolidated  Net  Tangible  Assets"  means  the  total  assets of the
Company and its consolidated  Subsidiaries,  less (a) all current liabilities of
the Company and its consolidated Subsidiaries (other than the current maturities
of  long-term  debt)  and  (b)  all  unamortized   debt  discount  and  expense,
unamortized  deferred charges,  goodwill,  patents,  trademarks,  service marks,
trade names, copyrights and other intangible assets.



<PAGE>



         "Control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through  the  ability to  exercise  voting  power,  by  contract  or  otherwise.
"Controlling" and "Controlled" have meanings correlative thereto.

         "Default"  means any event or condition  which  constitutes an Event of
Default or which  upon  notice,  lapse of time or both  would,  unless  cured or
waived, become an Event of Default.

         "Disclosed  Matters" means the actions,  suits and  proceedings and the
environmental matters disclosed in Schedule 3.06.

         "Dollar  Equivalent" means, on any date of determination,  with respect
to any  amount in any  Committed  Currency,  the  equivalent  in dollars of such
amount, determined by the Administrative Agent pursuant to Section 1.05(a) using
the Exchange Rate with respect to such Committed Currency then in effect.

         "dollars"or "$" refers to lawful money of the United States of America.

         "EBITDA"  means,  for any  period,  Consolidated  Net  Income  for such
period,  plus, to the extent deducted in computing  Consolidated  Net Income for
such  period,  the sum  (without  duplication)  of (a) income tax  expense,  (b)
Interest Expense,  (c) depreciation and amortization  expense, (d) extraordinary
losses,  (e) restructuring  charges related to the Merger taken in the third and
fourth quarters of 1997 and (f) any other non-cash  charges or expenses,  minus,
to the extent added in computing  Consolidated  Net Income for such period,  (i)
consolidated  interest  income,  (ii)  extraordinary  gains  and (iii) any other
non-cash income.

         "Effective  Date" means the date on which the  conditions  specified in
Section 4.01 are satisfied (or waived in accordance with Section 10.02).

         "Eligible Currency" means at any time any currency (other than dollars)
that is freely tradeable and exchangeable  into dollars in the London market and
for which an Exchange  Rate can be  determined by reference to the Reuters World
Currency Page or another  publicly  available  service for  displaying  exchange
rates.

         "Environmental  Laws"  means  all  laws,  rules,  regulations,   codes,
ordinances,  orders,  decrees,  judgments,   injunctions,   notices  or  binding
agreements  issued,  promulgated or entered into by any Governmental  Authority,
relating in any way to the  environment,  preservation or reclamation of natural
resources,  the  management,  release or  threatened  release  of any  Hazardous
Material or to health and safety matters.

         "Environmental Liability" means any liability,  contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties  or  indemnities),  of the  Company  or  any  Subsidiary  directly  or
indirectly  resulting from or based upon (a) violation of any Environmental Law,
(b)  the  generation,  use,  handling,  transportation,  storage,  treatment  or
disposal of any Hazardous  Materials,  (c) exposure to any Hazardous  Materials,
(d) the  release or  threatened  release  of any  Hazardous  Materials  into the
environment  or (e) any  contract,  agreement  or other  consensual  arrangement
pursuant to which  liability  is assumed or imposed  with  respect to any of the
foregoing.

         "ERISA" means the Employee  Retirement  Income Security Act of 1974, as
amended from time to time.


<PAGE>



         "ERISA   Affiliate"  means  any  trade  or  business  (whether  or  not
incorporated)  that,  together with the Company, is treated as a single employer
under  Section  414(b) or (c) of the Code or, solely for purposes of Section 302
of ERISA and  Section  412 of the Code,  is treated as a single  employer  under
Section 414 of the Code.

         "ERISA Event" means (a) any "reportable  event",  as defined in Section
4043 of ERISA or the regulations issued thereunder with respect to a Plan (other
than a  reportable  event for which the notice to the PBGC is  waived);  (b) the
existence with respect to any Plan of an  "accumulated  funding  deficiency" (as
defined in  Section  412 of the Code or  Section  302 of ERISA),  whether or not
waived;  (c) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an  application  for a waiver of the minimum  funding  standard with
respect  to any Plan;  (d) the  incurrence  by the  Company  or any of its ERISA
Affiliates  of any  liability  under  Title  IV of  ERISA  with  respect  to the
termination of any Plan;  (e) the receipt by the Company or any ERISA  Affiliate
from the PBGC or a plan  administrator of any notice relating to an intention to
terminate any Plan or Plans or to appoint a trustee to administer  any Plan; (f)
the  incurrence  by the Company or any of its ERISA  Affiliates of any liability
with  respect  to  the  withdrawal  or  partial  withdrawal  from  any  Plan  or
Multiemployer  Plan; or (g) the receipt by the Company or any ERISA Affiliate of
any  notice,  or the receipt by any  Multiemployer  Plan from the Company or any
ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability
or a determination that a Multiemployer Plan is, or is expected to be, insolvent
or in reorganization, within the meaning of Title IV of ERISA.

         "Eurocurrency",  when used in reference to any Loan or Borrowing, means
that such Loan, or the Loans comprising such Borrowing,  are bearing interest at
a rate determined by reference to the LIBO Rate.

         "Eurocurrency Reserve Percentage" means, with respect to any Lender for
any day that percentage  (expressed as a decimal) that is in effect on such day,
as prescribed by any Governmental Authority for determining the reserve,  liquid
asset or similar  requirement with respect to Eurocurrency Loans for such Lender
that is subject to the rules and regulations of such Governmental Authority.

         "Even of Default" has the meaning assigned to such term in Article VII.

         "Exchange  Rate"  means,  on any day,  with  respect  to any  Committed
Currency other than dollars,  the rate at which such  Committed  Currency may be
exchanged into dollars (and,  for purposes of the  definition of  "Multicurrency
Equivalent"  and  Section  2.06(e),  2.12(i) or  2.13(g)(ii),  the rate at which
dollars  may be  exchanged  into  such  Committed  Currency),  as set  forth  at
approximately  11:00  a.m.,  London  time,  on such  date on the  Reuters  World
Currency  Page  for  such  Committed  Currency  or as  otherwise  determined  in
accordance with the Alternate  Procedures.  In the event that such rate does not
appear on any Reuters World Currency Page, the Exchange Rate shall be determined
by reference to such other publicly  available  service for displaying  exchange
rates as may be agreed upon by the Administrative  Agent and the Company, or, in
the  absence  of  such  agreement,  such  Exchange  Rate  shall  instead  be the
arithmetic average of the spot rates of exchange of the Administrative  Agent in
the market where its foreign  currency  exchange  operations  in respect of such
Committed Currency are then being conducted, at or about 10:00 a.m., local time,
on such date for the  purchase of dollars (or such  Committed  Currency,  as the
case may be) for delivery two Business Days later;  provided that if at the time
of any such  determination,  for any reason,  no such spot rate is being quoted,
the  Administrative  Agent may use any reasonable method it deems appropriate to
determine such rate,  and such  determination  shall be presumed  correct absent
manifest error.



<PAGE>



         "Excluded Taxes" means, with respect to the  Administrative  Agent, any
Lender,  the Issuing Bank or any other recipient of any payment to be made by or
on account of any obligation of any Borrower hereunder,  (a) income or franchise
taxes imposed on (or measured by) such recipient's net income  (including branch
profits or similar taxes) imposed as a result of a present or former  connection
between such recipient and the Governmental  Authority  imposing such tax (other
than any such  connection  arising solely from such recipient  having  executed,
delivered or performed its obligations or received a payment under, or enforced,
this  Agreement) and (b) in the case of a Foreign Lender (other than an assignee
pursuant to a request by the Company under Section 2.17(b)), any withholding tax
(other than withholding taxes imposed by a Governmental  Authority of Belgium or
any political  subdivision  thereof) that is imposed on amounts  payable to such
Foreign  Lender (i) to the extent it is in effect and would apply as of the date
such Foreign  Lender  becomes a party to this Agreement or (ii) to the extent it
relates to payments  received by a new lending office designated by such Foreign
Lender  and is in effect  and would  apply at the time  such  lending  office is
designated,  except to the extent that such Foreign Lender (or its assignor,  if
any) was  entitled,  at the time of  designation  of a new  lending  office  (or
assignment),  to receive  additional  amounts from the applicable  Borrower with
respect to such  withholding  tax  pursuant to Section  2.15(a)  (other than any
withholding  tax imposed on payments  (A) by any  Borrowing  Subsidiary  that is
designated  after  such  Foreign  Lender  becomes a party to this  Agreement  or
designates a new lending  office or (B) by any Borrower from a Payment  Location
other than one specifically  identified in this Agreement or any schedule hereto
as of the  date  such  Foreign  Lender  becomes  a party  to this  Agreement  or
designates a new lending office),  or (iii) that is attributable to such Foreign
Lender's failure to comply with Section 2.15(e).

         "Existing Credit  Agreements"  means the agreements  listed on Schedule
1.01(b) and all related guarantees and security documents, if any.

         "Existing   Receivables   Program"   means  that  certain   receivables
securitization  program conducted pursuant to the Existing  Receivables  Program
Documents.

         "Existing Receivables Program Documents" means the documents listed  on
Schedule 1.01(c).

         "Federal Funds Effective Rate" means, for any day, the weighted average
(rounded  upwards,  if  necessary,  to the  next  1/100  of 1%) of the  rates on
overnight Federal funds  transactions with members of the Federal Reserve System
arranged by Federal funds brokers,  as published on the next succeeding Business
Day by the  Federal  Reserve  Bank  of New  York,  or,  if  such  rate is not so
published for any day that is a Business Day, the average (rounded  upwards,  if
necessary,  to the  next  1/100 of 1%) of the  quotations  for such day for such
transactions  received  by the  Administrative  Agent from three  Federal  funds
brokers of recognized standing selected by it.

         "Financial  Officer" of any Person means the chief  financial  officer,
principal accounting officer, treasurer or controller of such Person.

         "Fixed Rate" means,  with respect to any Competitive Loan (other than a
Eurocurrency  Competitive  Loan), the fixed rate of interest per annum specified
by the Lender making such Competitive Loan in its related Competitive Bid.

         "Fixed Rate Loan" means a Competitive  Loan bearing interest at a Fixed
Rate.

         "Foreign  Lender"  means,  with respect to any Loan,  any Lender making
such Loan that is  organized  under the laws of a  jurisdiction  other  than the
Relevant Jurisdiction.


<PAGE>



         "Foreign  Subsidiary"  means any Subsidiary that is not organized under
the laws of any jurisdiction in the United States.

         "Fort Howard" means Fort Howard Corporation, a Delaware corporation.

         "Fort  Howard  Bonds" means Fort  Howard's (i) 9-1/4%  Senior Notes due
2001,  in an  aggregate  principal  amount  outstanding  on the date  hereof  of
$450,000,000,  (ii) 8-1/4%  Senior  Notes due 2002,  in an  aggregate  principal
amount  outstanding  on  the  date  hereof  of  $100,000,000,  (iii)  9%  Senior
Subordinated Notes due 2006, in an aggregate principal amount outstanding on the
date hereof of  $618,097,000,  and (iv) 10%  Subordinated  Notes due 2003, in an
aggregate principal amount outstanding on the date hereof of $298,500,000.

         "Fort Howard  Subordinated Note Indenture" means the Indenture dated as
of March 15, 1993,  between Fort Howard and United  States Trust  Company of New
York pursuant to which Fort Howard issued its 10% Subordinated Notes due 2003.

         "GAAP" means  generally  accepted accounting  principles in the  United
States of America.

         "Governmental  Authority"  means the government of the United States of
America, any other nation or any political subdivision thereof, whether state or
local,  and any agency,  authority,  instrumentality,  regulatory  body,  court,
central  bank or  other  entity  exercising  executive,  legislative,  judicial,
taxing,  regulatory  or  administrative  powers or functions of or pertaining to
government.

         "Guarantee" of or by any Person (the "guarantor") means any obligation,
contingent or otherwise,  of the guarantor  guaranteeing  or having the economic
effect of  guaranteeing  any  Indebtedness  or other monetary  obligation of any
other  Person  (the  "primary  obligor")  in any  manner,  whether  directly  or
indirectly,  and including any obligation of the guarantor,  direct or indirect,
(a) to purchase or pay (or advance or supply  funds for the  purchase or payment
of) such  Indebtedness  or other  obligation  or to  purchase  (or to advance or
supply funds for the purchase of) any security for the payment  thereof,  (b) to
purchase or lease  property,  securities or services for the purpose of assuring
the owner of such  Indebtedness or other obligation of the payment thereof,  (c)
to maintain  working  capital,  equity capital or any other financial  statement
condition  or  liquidity  of the  primary  obligor so as to enable  the  primary
obligor to pay such  Indebtedness or other obligation or (d) as an account party
in respect of any letter of credit or letter of guaranty  issued to support such
Indebtedness or obligation;  provided, that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business.

         "Hazardous Materials" means all explosive or radioactive  substances or
wastes  and all  hazardous  or toxic  substances,  wastes  or other  pollutants,
including  petroleum or petroleum  distillates,  asbestos or asbestos containing
materials,  polychlorinated  biphenyls,  radon gas, infectious or medical wastes
and all other  substances  or wastes of any  nature  regulated  pursuant  to any
Environmental Law.

         "Hedging  Agreement"  means any  interest  rate  protection  agreement,
foreign currency  exchange  agreement,  commodity price protection  agreement or
other interest or currency exchange rate or commodity price hedging arrangement.

         "Hedging  Obligations"  means  all  obligations  of  the Company or any
Subsidiary in respect of any Hedging Agreement.



<PAGE>



         "Indebtedness"  of any  Person  means,  without  duplication,  (a)  all
obligations  of such Person for  borrowed  money,  (b) all  obligations  of such
Person evidenced by bonds,  debentures,  notes or similar  instruments,  (c) all
obligations  of such Person  under  conditional  sale or other  title  retention
agreements  relating to property acquired by such Person, (d) all obligations of
such Person in respect of the  deferred  purchase  price of property or services
(excluding   current  accounts  payable  incurred  in  the  ordinary  course  of
business),  (e) all  Indebtedness  of others of the type  described in the other
clauses  of  this  definition  secured  by (or  for  which  the  holder  of such
Indebtedness has an existing right,  contingent or otherwise,  to be secured by)
any Lien on  property  owned or  acquired  by such  Person,  whether  or not the
Indebtedness  secured thereby has been assumed;  provided that the amount of any
Indebtedness  of others that  constitutes  Indebtedness of such Person solely by
reason of this clause (e) shall not for  purposes of this  Agreement  exceed the
greater of the book value or the fair market  value of the  property  subject to
such Lien, (f) all Guarantees by such Person of Indebtedness of others,  (g) all
Capital Lease  Obligations of such Person,  (h) all  obligations,  contingent or
otherwise,  of such  Person as an account  party in respect of letters of credit
and letters of guaranty and (i) all  obligations,  contingent or  otherwise,  of
such Person in respect of bankers'  acceptances.  The Indebtedness of any Person
shall include the Indebtedness of any other entity (including any partnership in
which such Person is a general  partner)  to the extent such Person  would under
applicable law or any agreement or instrument be liable  therefor as a result of
such  Person's  ownership  interest in or other  relationship  with such entity,
except to the extent the terms of such  Indebtedness  provide  that such  Person
shall not be liable therefor.

         "Indemnified Taxes" means Taxes other than Excluded Taxes.

         "Index  Debt"  means  senior,  unsecured,  long-term  indebtedness  for
borrowed  money of the Company  that is not  guaranteed  by any other  Person or
subject to any other credit enhancement.

         "Information  Memorandum" means the Confidential Information Memorandum
of the Company dated July 1997.

         "Interest Election Request" means a request by the applicable  Borrower
to convert or continue a Revolving Borrowing in accordance with Section 2.06.

         "Interest  Expense" means, for any period,  the interest expense of the
Company  and its  consolidated  Subsidiaries  for such  period  determined  on a
consolidated  basis in accordance  with GAAP (giving pro forma  effect,  for any
period ending prior to the  consummation  of the Merger,  to the Merger as if it
had occurred on the first day of such period, consistent with the method applied
in the pro forma financial statements referred to in Section 3.04(b)), including
(i) the  amortization  of debt  discounts  to the extent  included  in  interest
expense in accordance  with GAAP,  (ii) the  amortization of all fees (including
fees  with  respect  to  Hedging  Agreements)  payable  in  connection  with the
incurrence  of  Indebtedness  to the  extent  included  in  interest  expense in
accordance  with GAAP and (iii) the portion of any rents  payable  under capital
leases allocable to interest expense in accordance with GAAP.



<PAGE>



         "Interest  Payment  Date" means (a) with  respect to any ABR Loan,  the
last day of each March,  June,  September and December,  (b) with respect to any
Eurocurrency  Loan,  the  last  day of the  Interest  Period  applicable  to the
Borrowing  of which  such  Loan is a part  and,  in the  case of a  Eurocurrency
Borrowing with an Interest Period of more than three months' duration,  each day
prior to the last day of such Interest  Period that occurs at intervals of three
months'  duration  after  the first day of such  Interest  Period,  and (c) with
respect to any Fixed Rate Loan, the last day of the Interest  Period  applicable
to the  Borrowing  of which such Loan is a part and, in the case of a Fixed Rate
Borrowing  with an  Interest  Period  of more  than 90  days'  duration  (unless
otherwise specified in the applicable  Competitive Bid Request),  each day prior
to the last day of such  Interest  Period that occurs at  intervals  of 90 days'
duration after the first day of such Interest  Period,  and any other dates that
are  specified in the  applicable  Competitive  Bid Request as Interest  Payment
Dates with respect to such Borrowing.

         "Interest Period" means (a) with respect to any Eurocurrency Borrowing,
the  period  commencing  on  the  date  of  such  Borrowing  and  ending  on the
numerically  corresponding  day in the calendar month that is one, two, three or
six months thereafter, as the applicable Borrower may elect and (b) with respect
to any Fixed Rate Borrowing, the period (which shall not be less than one day or
more than 360 days)  commencing on the date of such  Borrowing and ending on the
date specified in the applicable Competitive Bid Request;  provided, that (i) if
any Interest  Period would end on a day other than a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless, in the case
of a Eurocurrency  Borrowing only, such next succeeding  Business Day would fall
in the next calendar  month, in which case such Interest Period shall end on the
next  preceding  Business  Day and  (ii) any  Interest  Period  pertaining  to a
Eurocurrency  Borrowing  that  commences on the last  Business Day of a calendar
month (or on a day for which there is no  numerically  corresponding  day in the
last calendar month of such Interest  Period) shall end on the last Business Day
of the last calendar month of such Interest  Period.  For purposes  hereof,  the
date of a Borrowing  initially shall be the date on which such Borrowing is made
and, in the case of a Revolving  Borrowing,  thereafter  shall be the  effective
date of the most recent conversion or continuation of such Borrowing.

         "Issuing Bank" means The Chase  Manhattan  Bank, in its capacity as the
issuer of Letters of Credit  hereunder,  and its  successors in such capacity as
provided in Section  2.19(i).  The Issuing Bank may, in its discretion,  arrange
for one or more  Letters  of Credit to be issued by  Affiliates  of the  Issuing
Bank,  in which case the term "Issuing  Bank" shall  include any such  Affiliate
with respect to Letters of Credit issued by such Affiliate.

         "James River  Services"  means James River Services  S.N.C.,  a general
partnership  organized and existing  under the laws of the Kingdom of Belgium (a
"Vennootsehap onder Firmal Societe en Nom Collectif").

         "Jamont" means Jamont N.V., a company incorporated under the law of The
Netherlands.

         "Judgment Currency" has  the meaning  assigned  to such term in Section
10.14.

         "LC Disbursement"  means a payment made by the Issuing Bank pursuant to
a Letter of Credit.

         "LC Exposure" means, at any time, the sum of (a) the aggregate  undrawn
amount of all outstanding  Letters of Credit at such time plus (b) the aggregate
amount of all LC Disbursements that have not yet been reimbursed by or on behalf
of the  Company at such time.  The LC  Exposure  of any U.S.  Lender at any time
shall be its Applicable Percentage of the total LC Exposure at such time.

         "Lenders" means the U.S. Lenders and the Multicurrency Lenders.

         "Letter of Credit" means any letter of  credit issued  pursuant to this
Agreement.



<PAGE>



         "Leverage Ratio" means, as of the last day of any fiscal quarter of the
Company,  the ratio of (a) Total  Debt at such date to (b) EBITDA for the period
of four consecutive fiscal quarters of the Company ended on such date.

         "LIBO Rate" means,  with respect to any Eurocurrency  Borrowing for any
Interest  Period,  the  rate  appearing  on  Page  3750  (or,  in the  case of a
Multicurrency  Borrowing,  the rate  appearing  on the  Page for the  applicable
Committed  Currency) of the Dow Jones Service (or on any successor or substitute
page of such  Service,  or any  successor  to or  substitute  for such  Service,
providing rate quotations comparable to those currently provided on such page of
such Service,  as determined by the  Administrative  Agent from time to time for
purposes of providing quotations of interest rates applicable to dollar deposits
(or,  in the  case of a  Multicurrency  Borrowing,  deposits  in the  applicable
Committed Currency) in the London interbank market) at approximately 11:00 a.m.,
London  time,  two  Business  Days prior to the  commencement  of such  Interest
Period, as the rate for dollar deposits (or the applicable  Committed  Currency)
with a maturity  comparable to such Interest Period. In the event that such rate
is not available at such time for any reason,  then the "LIBO Rate" with respect
to such  Eurocurrency  Borrowing  (or  such  Multicurrency  Borrowing)  for such
Interest Period shall be the rate at which the  Administrative  Agent is offered
dollar  deposits of $5,000,000  (or, in the case of a  Multicurrency  Borrowing,
deposits in the applicable Committed Currency in an amount the Dollar Equivalent
of which is approximately  equal to $5,000,000) and for a maturity comparable to
such Interest  Period in  immediately  available  funds in the London  interbank
market at approximately  11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period.

         "Lien"  means,  with respect to any asset,  (a) any  mortgage,  deed of
trust, lien, pledge, hypothecation, encumbrance, charge or security interest in,
on or of such  asset,  (b) the  interest  of a  vendor  or a  lessor  under  any
conditional sale agreement,  capital lease or title retention  agreement (or any
financing  lease having  substantially  the same  economic  effect as any of the
foregoing)  relating  to such  asset  and (c) in the  case  of  securities,  any
purchase  option,  call or similar  right of a third party with  respect to such
securities.

         "Loans" means the U.S. Revolving Loans, the Multicurrency Loans and the
Competitive Loans.

         "Margin" means,  with respect to any Competitive  Loan bearing interest
at a rate based on the LIBO Rate,  the marginal rate of interest,  if any, to be
added to or  subtracted  from the LIBO Rate to  determine  the rate of  interest
applicable  to such Loan,  as  specified  by the Lender  making such Loan in its
related Competitive Bid.

         "Margin Stock" has the meaning assigned to such term in Regulation U.

         "Material  Adverse  Effect" means a material  adverse effect on (a) the
business,  assets,  operations  or  condition,  financial or  otherwise,  of the
Company  and its  Subsidiaries,  taken as a  whole,  or (b) the  ability  of any
Borrower to perform,  or the enforceability  against any Borrower of, any of its
obligations under this Agreement or any Borrowing  Subsidiary Agreement to which
it is a party.



<PAGE>



         "Material  Indebtedness"  means Indebtedness  (other than the Loans and
the  Letters of  Credit),  or  obligations  in  respect  of one or more  Hedging
Agreements,  of the Company and its  Subsidiaries  in an  aggregate  outstanding
principal amount  exceeding  $25,000,000.  For purposes of determining  Material
Indebtedness,  the "principal  amount" of the  obligations of the Company or any
Subsidiary in respect of any Hedging  Agreement at any time shall be the maximum
aggregate  amount (giving effect to any netting  agreements) that the Company or
such  Subsidiary  would  be  required  to pay if  such  Hedging  Agreement  were
terminated at such time.

         "Maturity Date" means August 13, 2002.

         "Merger" means the merger of James River Delaware,  Inc., with and into
Fort Howard, with Fort Howard surviving such merger as a Wholly Owned Subsidiary
of the Company.

         "Merger  Agreement"  means the Agreement and Plan of Merger dated as of
May 4, 1997, among the Company, James River Delaware, Inc., and Fort Howard.

         "Moody's" means Moody's Investors Service, Inc.

         "Multicurrency Borrowing" means a Borrowing comprised of  Multicurrency
Loans.

         "Multicurrency  Commitment"  means, with respect to each  Multicurrency
Lender,   the  commitment  of  such  Lender   (expressed  in  dollars)  to  make
Multicurrency  Loans,  expressed as an amount representing the maximum aggregate
Dollar  Equivalent  of  the  principal  amount  of  such  Lender's   outstanding
Multicurrency  Loans,  as such  commitment  may be (a) reduced from time to time
pursuant to Section 2.07 and (b) reduced or increased from time to time pursuant
to  assignments  by or to such  Lender  pursuant to Section  10.04.  The initial
amount of each Multicurrency Lender's  Multicurrency  Commitment is set forth on
Schedule 2.01 or in the Assignment and Acceptance  pursuant to which such Lender
shall have assumed its  Multicurrency  Commitment,  as  applicable.  The initial
amount of the total Multicurrency Commitments is $300,000,000.

         "Multicurrency  Equivalent"  means, on any date of determination,  with
respect to any amount in  dollars,  the  equivalent  in the  relevant  Committed
Currency  of such  amount,  determined  by the  Administrative  Agent  using the
Exchange  Rate  with  respect  to such  Committed  Currency  then in  effect  as
determined pursuant to Section 1.05(a).

         "Multicurrency  Lenders"  means  the  Lenders  designated  as  such  on
Schedule  2.01 and any other  Person that shall  become a  Multicurrency  Lender
pursuant to an Assignment and Acceptance, other than any such Person that ceases
to be a Multicurrency Lender pursuant to an Assignment and Acceptance.

         "Multicurrency  Loan" means a Revolving Loan denominated in a Committed
Currency and made pursuant to Section 2.01(b).

         "Multicurrency  Loan Exposure" means, with respect to any Multicurrency
Lender at any time, such Lender's Applicable Percentage of the Dollar Equivalent
of the aggregate principal amount of the outstanding Multicurrency Loans.

         "Multiemployer Plan" means  a  multiemployer plan as defined in Section
4001(a)(3) of ERISA.

         "New  Receivables  Financing" has the meaning  assigned to such term in
the definition of "Permitted Receivables Financing".



<PAGE>



         "Obligations"   means  the   obligations   of  each  of  the  Borrowing
Subsidiaries under this Agreement and the Borrowing  Subsidiary  Agreements with
respect to the payment of (i) the principal of and interest on the Loans to each
such Borrowing Subsidiary when and as due, whether at maturity, by acceleration,
upon one or more  dates  set for  prepayment  or  otherwise  and (ii) all  other
monetary  obligations  of  each  of the  Borrowing  Subsidiaries  hereunder  and
thereunder.

         "Other Taxes" means any and all present or future stamp or  documentary
taxes or any other excise or property  taxes,  charges or similar levies arising
from any payment made hereunder or from the  execution,  delivery or enforcement
of, or otherwise with respect to, this Agreement.

         "Participant"has the meaning assigned to such term in Section 10.04(e).

         "Payment Location" means an office, branch  or other  place of business
of any Borrower.

         "PBGC" means the Pension Benefit Guaranty  Corporation  referred to and
defined in ERISA and any successor entity performing similar functions.

         "Permitted Encumbrances" means:

                  (a) Liens  imposed  by law for  taxes  that are not yet due or
         are  being  contested  in compliance with Section 5.04;

                  (b)  carriers',  warehousemen's,   mechanics',  materialmen's,
         repairmen's  and  other  like  Liens  imposed  by law,  arising  in the
         ordinary course of business and securing  obligations  that (i) are not
         overdue by more than 30 days,  (ii) do not in the aggregate  materially
         detract  from  the  value  of the  property  subject  to  such  Lien or
         materially  impair the use thereof in the  operation of the business of
         the  Company  or  any  Subsidiary  or  (iii)  are  being  contested  in
         compliance with Section 5.04;

                  (c)  pledges  and  deposits  made in the  ordinary  course  of
         business  in  compliance  with  workers'   compensation,   unemployment
         insurance and other social security laws or regulations;

                  (d)  deposits  to  secure  the  performance  of  bids,   trade
         contracts,  leases,  statutory  obligations,  surety and appeal  bonds,
         performance  bonds and other obligations of a like nature, in each case
         in the ordinary course of business,  and deposits securing  liabilities
         to insurance carriers under insurance or self-insurance arrangements;

                  (e)  judgment  liens  in  respect  of  judgments  that  do not
         constitute an Event of Default under clause (k) of Article VII; and

                  (f) easements, zoning restrictions,  rights-of-way and similar
         encumbrances on real property imposed by law or arising in the ordinary
         course of business that do not secure any monetary  obligations  and do
         not  materially  detract  from the value of the  affected  property  or
         interfere  with the ordinary  conduct of business of the Company or any
         Subsidiary;

provided  that the term  "Permitted  Encumbrances"  shall not  include  any Lien
securing Indebtedness.



<PAGE>



         "Permitted  Receivables  Financing" means (a) the Existing  Receivables
Program  and  (b)  any  extension,   renewal  or  refinancing  of  the  Existing
Receivables  Program,  or any other financing  secured by trade receivables (and
related assets)  originated by the Company or any Subsidiary (a "New Receivables
Financing"),  provided that (i) the  Indebtedness  associated  with the Existing
Receivables  Program and any New  Receivables  Financing  does not exceed in the
aggregate  $500,000,000 at any time, (ii) sales of receivables by the Company or
any Subsidiary are made at fair market value, (iii) the interest rate applicable
to any  receivables  financing shall be a market interest rate (as determined in
good  faith by the  board  of  directors  of the  Company)  as of the time  such
financing is entered into,  (iv) such financing is  non-recourse  to the Company
and its  Subsidiaries  except to a limited extent  customary for such financings
and  (v)  the  covenants,  events  of  default  and  other  provisions  thereof,
collectively, shall be market terms (as determined in good faith by the board of
directors of the Company).

         "Person"  means any  natural  person,  corporation,  limited  liability
company, trust, joint venture, association,  company, partnership,  Governmental
Authority or other entity.

         "Plan"  means  any  employee   pension   benefit  plan  (other  than  a
Multiemployer  Plan)  (i)  subject  to the  provisions  of  Title IV of ERISA or
Section 412 of the Code or Section 302 of ERISA and (ii) in respect of which the
Company or any ERISA Affiliate is (or, if such plan were terminated, would under
Section 4069 of ERISA be deemed to be) an  "employer" as defined in Section 3(5)
of ERISA.

         "Preferred  Stock" of any Person  means any class of  capital  stock or
other  equity  interest of such Person  that is  preferred  as to the payment of
dividends  or  distributions,  or as to the  distribution  of  assets  upon  any
voluntary or involuntary  liquidation  or  dissolution of such Person,  over any
other class of capital stock or other equity interest of such Person.

         "Prime  Rate" means the rate of interest per annum  publicly  announced
from time to time by The Chase Manhattan Bank as its prime rate in effect at its
principal  office in New York  City;  each  change in the  Prime  Rate  shall be
effective from and including the date such change is publicly announced as being
effective.

         "Register" has the meaning set forth in Section 10.04(c).

         "Regulation G" means  Regulation G of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.

         "Regulation T" means  Regulation T of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.

         "Regulation U" means  Regulation U of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.

         "Regulation X" means  Regulation X of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.

         "Related  Parties" means,  with respect to any specified  Person,  such
Person's Affiliates and the respective directors,  officers,  employees,  agents
and advisors of such Person and such Person's Affiliates.

         "Relevant  Jurisdiction"  means  (a) in the  case  of any  Loan  to the
Company or Fort Howard, the United States of America, and (b) in the case of any
Loan to any other Borrowing Subsidiary, the jurisdiction imposing (or having the
power to impose) withholding tax on payments by such Borrowing  Subsidiary under
this Agreement.



<PAGE>



         "Required  Lenders" means, at any time, Lenders having Revolving Credit
Exposures and unused  Commitments  representing  more than 50% of the sum of the
total Revolving Credit Exposures and unused  Commitments at such time;  provided
that,  for  purposes of  declaring  the Loans to be due and payable  pursuant to
Article  VII,  and for all  purposes  after the  Loans  become  due and  payable
pursuant to Article VII or the Commitments expire or terminate,  the outstanding
Competitive Loans of the Lenders shall be included in their respective Revolving
Credit Exposures in determining the Required Lenders.

         "Reset Date" has the meaning set forth in Section 1.05(a).

         "Revolving Borrowing" means a Borrowing comprised of Revolving Loans.

         "Revolving  Credit Exposure"  means,  with respect to any Lender at any
time,such Lender's U.S.Revolving Credit Exposure and such Lender's Multicurrency
Loan Exposure.

         "Revolving Loan" means a U.S. Revolving Loan or a Multicurrency Loan.

         "S&P" means Standard & Poor's.

         "Statutory Reserve Rate" means a fraction (expressed as a decimal), the
numerator of which is the number one and the  denominator of which is the number
one  minus  the  aggregate  of the  maximum  reserve,  liquid  asset or  similar
percentages  (including  any  marginal,   special,   emergency  or  supplemental
reserves)  expressed as a decimal  established  by the Board for new  negotiable
nonpersonal   time  deposits  in  dollars  of  over  $100,000  with   maturities
approximately  equal  to three  months.  The  Statutory  Reserve  Rate  shall be
adjusted  automatically  on and as of the  effective  date of any  change in any
reserve percentage.

         "subsidiary"  means,  with respect to any Person (the  "parent") at any
date, any corporation,  limited liability company,  partnership,  association or
other  entity the  accounts  of which  would be  consolidated  with those of the
parent in the  parent's  consolidated  financial  statements  if such  financial
statements were prepared in accordance with GAAP as of such date, as well as any
other corporation, limited liability company, partnership,  association or other
entity of which securities or other ownership  interests  representing more than
50% of the equity or more than 50% of the ordinary  voting power or, in the case
of a partnership,  more than 50% of the general partnership interests are, as of
such date, owned, controlled or held directly or indirectly by the parent.

         "Subsidiary" means any subsidiary of the Company.

         "Taxes"  means any and all present or future  taxes,  levies,  imposts,
duties,  deductions,   charges  or  withholdings  imposed  by  any  Governmental
Authority.



<PAGE>



         "Three-Month  Secondary  CD Rate"  means,  for any day,  the  secondary
market rate for three-month  certificates of deposit reported as being in effect
on such day (or, if such day is not a Business Day, the next preceding  Business
Day) by the Board through the public  information  telephone line of the Federal
Reserve  Bank of New York (which rate will,  under the current  practices of the
Board, be published in Federal Reserve  Statistical Release H.15(519) during the
week following such day) or, if such rate is not so reported on such day or such
next preceding  Business Day, the average of the secondary market quotations for
three-month certificates of deposit of major money center banks in New York City
received at  approximately  10:00 a.m.,  New York City time, on such day (or, if
such day is not a  Business  Day,  on the next  preceding  Business  Day) by the
Administrative  Agent from three  negotiable  certificate of deposit  dealers of
recognized standing selected by it.

         "Total Debt" means,  at any date, all  Indebtedness  of the Company and
its consolidated  Subsidiaries at such date (other than Indebtedness of the type
described  in clause (h) or (i) of the  definition  of the term  "Indebtedness",
except to the extent of any unreimbursed drawings thereunder).

         "Transactions"  means (i) the Merger and (ii) the  execution,  delivery
and performance by the Borrowers of this Agreement and any Borrowing  Subsidiary
Agreements,  the borrowing of Loans and the use of the proceeds  thereof and the
issuance of Letters of Credit hereunder.

         "Type",  when used in  reference  to any Loan or  Borrowing,  refers to
whether  the rate of  interest  on such Loan,  or on the Loans  comprising  such
Borrowing,  is determined by reference to the LIBO Rate, the Alternate Base Rate
or a Fixed Rate.

         "U.S.  Commitment"  means,  with  respect  to  each  U.S.  Lender,  the
commitment  of  such  Lender  to  make  U.S.  Revolving  Loans  and  to  acquire
participations  in  Letters  of  Credit   hereunder,   expressed  as  an  amount
representing the maximum aggregate amount of such Lender's U.S. Revolving Credit
Exposure  hereunder,  as such  commitment  may be (a) reduced  from time to time
pursuant to Section 2.07 and (b) reduced or increased from time to time pursuant
to  assignments  by or to such  Lender  pursuant to Section  10.04.  The initial
amount of each U.S. Lender's U.S. Commitment is set forth on Schedule 2.01 or in
the Assignment  and Acceptance  pursuant to which such Lender shall have assumed
its U.S.  Commitment,  as  applicable.  The  initial  amount of the  total  U.S.
Commitments is $2,200,000,000.

         "U.S.  Lenders"  means the Lenders  designated as such on Schedule 2.01
and any other Person that shall become a U.S.  Lender  pursuant to an Assignment
and  Acceptance,  other than any such  Person  that  ceases to be a U.S.  Lender
pursuant to an Assignment and Acceptance.

         "U.S.Revolving Borrowing" means a Borrowing comprised of U.S. Revolving
Loans.

         "U.S.  Revolving Credit Exposure" means,  with respect to any Lender at
any time,  the sum of the  outstanding  principal  amount of such  Lender's U.S.
Revolving Loans and its LC Exposure at such time.

         "U.S.  Revolving  Loan" means a Revolving  Loan  denominated in dollars
and made  pursuant to Section 2.01(a).

         "Wholly Owned  Subsidiary" means a Subsidiary all the capital stock (or
other ownership interests) of which (other than directors' qualifying shares) is
owned by the Company or another Wholly Owned Subsidiary.

         "Withdrawal  Liability"  means liability to a  Multiemployer  Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.



<PAGE>



         SECTION 1.02.  Classification of Loans and Borrowings.  For purposes of
this  Agreement,  Loans may be  classified  and  referred to by Class  (e.g.,  a
"Revolving Loan") or by Type (e.g., a "Eurocurrency  Loan") or by Class and Type
(e.g., a "Eurocurrency  Revolving Loan").  Borrowings also may be classified and
referred  to by Class  (e.g.,  a  "Revolving  Borrowing")  or by Type  (e.g.,  a
"Eurocurrency  Borrowing") or by Class and Type (e.g., a "Eurocurrency Revolving
Borrowing").

         SECTION 1.03.  Terms  Generally.  The definitions of terms herein shall
apply  equally to the singular and plural forms of the terms  defined.  Whenever
the context may require, any pronoun shall include the corresponding  masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed  by the phrase  "without  limitation".  The word "will"
shall be  construed  to have the same  meaning  and effect as the word  "shall".
Unless the context requires  otherwise (a) any definition of or reference to any
agreement,  instrument or other document  herein shall be construed as referring
to such  agreement,  instrument or other  document as from time to time amended,
supplemented  or  otherwise  modified  (subject  to  any  restrictions  on  such
amendments,  supplements or modifications  set forth herein),  (b) any reference
herein to any Person shall be construed to include such Person's  successors and
assigns, (c) the words "herein", "hereof" and "hereunder",  and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any  particular  provision  hereof,  (d)  all  references  herein  to  Articles,
Sections,  Exhibits  and  Schedules  shall be construed to refer to Articles and
Sections of, and Exhibits and  Schedules  to, this  Agreement  and (e) the words
"asset" and  "property"  shall be  construed to have the same meaning and effect
and to refer to any and all  tangible  and  intangible  assets  and  properties,
including cash, securities, accounts and contract rights.

         SECTION 1.04.  Accounting Terms;  GAAP.  Except as otherwise  expressly
provided  herein,  all  terms of an  accounting  or  financial  nature  shall be
construed  in  accordance  with GAAP,  as in effect from time to time;  provided
that, if the Company notifies the Administrative Agent that the Company requests
an  amendment  to any  provision  hereof to  eliminate  the effect of any change
occurring  after the date  hereof in GAAP or in the  application  thereof on the
operation of such provision (or if the Administrative Agent notifies the Company
that the Required  Lenders request an amendment to any provision hereof for such
purpose),  regardless  of whether any such notice is given  before or after such
change  in GAAP or in the  application  thereof,  then such  provision  shall be
interpreted  on the basis of GAAP as in effect and  applied  immediately  before
such  change  shall have  become  effective  until such  notice  shall have been
withdrawn or such provision amended in accordance herewith.

         SECTION 1.05.  Exchange  Rates.  (a) Not later than 1:00 p.m., New York
City  time,  on each  Calculation  Date,  the  Administrative  Agent  shall  (i)
determine  the Exchange  Rate as of such  Calculation  Date with respect to each
Committed  Currency  (other than  dollars)  and (ii) give notice  thereof to the
Lenders and the Company. The Exchange Rates so determined shall become effective
on the first Business Day immediately following the relevant Calculation Date (a
"Reset Date"),  shall remain effective until the next succeeding Reset Date, and
shall for all purposes of this Agreement  (other than Section  2.06(e),  Section
2.12(i),  Section  2.13(g)(ii),  Section 10.14 or any other provision  expressly
requiring the use of a current  Exchange Rate) be the Exchange Rates employed in
converting any amounts between dollars and Committed Currencies.

         (b) Not later  than 5:00 p.m.,  New York City time,  on each Reset Date
and each Borrowing Date with respect to Multicurrency  Loans, the Administrative
Agent shall (i)  determine  the Dollar  Equivalent  of the  aggregate  principal
amount of the Multicurrency  Loans then outstanding  (after giving effect to any
Multicurrency Loans made or repaid on such date) and (ii) notify the Lenders and
the Company of the results of such determination.

         SECTION 1.06. Several Obligations.  The obligations of the Borrowers to
pay the principal of and interest on each Loan are several and not joint, and no
Borrowing  Subsidiary shall be liable for the payment obligations of the Company
or any other Borrowing Subsidiary hereunder.


<PAGE>




                                   ARTICLE II

                                   The Credits

          SECTION 2.01. Commitments. (a) Subject to the terms and conditions set
forth  herein,  each U.S.  Lender  agrees to make  U.S.  Revolving  Loans to the
Company  from  time to time  during  the  Availability  Period  in an  aggregate
principal amount that will not result in (i) such Lender's U.S. Revolving Credit
Exposure  exceeding  such Lender's U.S.  Commitment or (ii) the sum of the total
U.S.  Revolving  Credit  Exposures  plus the aggregate  principal  amount of the
outstanding Competitive Loans exceeding the total U.S. Commitments.

         (b)  Subject  to the  terms  and  conditions  set  forth  herein,  each
Multicurrency  Lender  agrees to make  Multicurrency  Loans to any Borrower from
time to time during the  Availability  Period in an aggregate  principal  amount
that will not result in (i) the Multicurrency Loan Exposure of any Multicurrency
Lender exceeding such Lender's  Multicurrency  Commitment or (ii) the sum of the
Multicurrency  Loan  Exposures  exceeding the total  Multicurrency  Commitments,
provided that the aggregate  amount of all  Multicurrency  Loans  denominated in
each of Italian Lire and Spanish Pesetas shall not exceed $25,000,000.

         (c) Within the foregoing limits and subject to the terms and conditions
set forth herein, the Borrowers may borrow, prepay and reborrow Revolving Loans.

         SECTION 2.02. Loans and Borrowings.  (a) Each U.S. Revolving Loan shall
be made as part of a Borrowing  consisting of U.S.  Revolving  Loans made by the
U.S.   Lenders  ratably  in  accordance  with  their  U.S.   Commitments.   Each
Multicurrency  Loan  shall  be  made  as  part  of  a  Borrowing  consisting  of
Multicurrency  Loans denominated in the same Committed  Currency and made by the
Multicurrency   Lenders   ratably  in   accordance   with  their   Multicurrency
Commitments.  Each  Competitive  Loan  shall  be made  in  accordance  with  the
procedures set forth in Section 2.04. The failure of any Lender to make any Loan
required to be made by it shall not relieve any other Lender of its  obligations
hereunder;  provided  that the  Commitments  of the  Lenders  are several and no
Lender  shall be  responsible  for any other  Lender's  failure to make Loans as
required.

         (b)  Subject  to  Section  2.12 and  Section  2.13(g),  (i)  each  U.S.
Revolving  Borrowing shall be comprised  entirely of  Eurocurrency  Loans or ABR
Loans as the Company may request in accordance herewith, (ii) each Multicurrency
Borrowing shall be comprised of Eurocurrency Loans or, if denominated in dollars
and at the option of the  applicable  Borrower as specified  pursuant to Section
2.03 or 2.06, ABR Loans, and (iii) each Competitive Borrowing shall be comprised
entirely of  Eurocurrency  Competitive  Loans or Fixed Rate Loans as the Company
may  request  in  accordance  herewith.  Each  Lender at its option may make any
Eurocurrency Loan by causing any domestic or foreign branch or Affiliate of such
Lender to make such Loan;  provided  that any  exercise of such option shall not
affect the obligation of any Borrower to repay such Loan in accordance  with the
terms of this Agreement.



<PAGE>



         (c) At the  commencement of each Interest  Period for any  Eurocurrency
Revolving  Borrowing,  such Borrowing shall be in an aggregate amount that is at
least $5,000,000 (or the Multicurrency Equivalent thereof) and, in the case of a
Borrowing  denominated in dollars,  an integral  multiple of $1,000,000.  At the
time that each ABR Revolving  Borrowing is made,  such Borrowing  shall be in an
aggregate  amount  that is at  least  $5,000,000  and an  integral  multiple  of
$1,000,000;  provided  that an ABR  Revolving  Borrowing  may be in an aggregate
amount that is equal to the entire unused balance of the total U.S.  Commitments
or total Multicurrency  Commitments,  as the case may be, or that is required to
finance the  reimbursement  of an LC  Disbursement  as  contemplated  by Section
2.19(e).  Each Competitive  Borrowing shall be in an aggregate amount that is at
least $5,000,000 and an integral multiple of $1,000,000. Borrowings of more than
one Type and Class may be  outstanding  at the same  time;  provided  that there
shall  not at any  time  be  more  than a  total  of 25  Eurocurrency  Revolving
Borrowings outstanding.

         (d) Notwithstanding any other provision of this Agreement,  no Borrower
shall be entitled to request, or to elect to convert or continue,  any Borrowing
if the  Interest  Period  requested  with  respect  thereto  would end after the
Maturity Date.

         SECTION 2.03. Requests for Revolving Borrowings. To request a Revolving
Borrowing,  a Borrower shall notify the Administrative  Agent of such request by
telephone  (a)  in  the  case  of  a  Eurocurrency   Borrowing   (other  than  a
Multicurrency  Borrowing),  not later than 11:00 a.m., New York City time, three
Business  Days before the date of the proposed  Borrowing,  (b) in the case of a
Multicurrency  Borrowing, not later than 10:00 a.m., London time, three Business
Days before the date of the proposed  Borrowing  (or at such other time as shall
be  specified  in  the  Alternate  Procedures)  or (c)  in  the  case  of an ABR
Borrowing,  not later than 12:00  (noon),  New York City time, on the day of the
proposed Borrowing.  Each such telephonic Borrowing Request shall be irrevocable
and  shall  be  confirmed   promptly  by  hand   delivery  or  telecopy  to  the
Administrative  Agent of a written  Borrowing  Request in a form approved by the
Administrative Agent and signed by the applicable Borrower. Each such telephonic
and written  Borrowing  Request  shall  specify  the  following  information  in
compliance with Section 2.02:

          (i) the aggregate amount of the requested Borrowing;

          (ii) the date of such Borrowing, which shall be a Business Day;

          (iii) whether such Borrowing is to be a  U.S.Revolving  Borrowing or a
     Multicurrency Borrowing;

          (iv)  if  such  Borrowing  is to  be a  Multicurrency  Borrowing,  the
     currency thereof, which shall be a Committed Currency;

          (v) if such Borrowing is to be  denominated in dollars,  whether it is
     to be an ABR Borrowing or a Eurocurrency Borrowing;

          (vi) in the case of a  Eurocurrency  Borrowing,  the initial  Interest
     Period to be applicable  thereto,  which shall be a period  contemplated by
     the definition of the term "Interest Period"; and

          (vii) the location and number of the applicable  Borrower's account to
     which funds are to be disbursed,  which shall comply with the  requirements
     of Section 2.05.



<PAGE>



If no Class is specified with respect to any dollar denominated  Borrowing,  the
applicable Borrower shall be deemed to have selected a U.S. Revolving Borrowing.
If no  Class  is  specified  with  respect  to any  Borrowing  denominated  in a
Committed Currency (other than dollars), the applicable Borrower shall be deemed
to have selected a Multicurrency Borrowing. If no Type is specified with respect
to any U.S.  Revolving  Borrowing selected or deemed selected or a Multicurrency
Borrowing  denominated in dollars,  then the applicable Borrower shall be deemed
to have selected an ABR  Borrowing.  If no currency is specified with respect to
any requested  Eurocurrency  Revolving  Borrowing,  then the applicable Borrower
shall be deemed to have  selected  dollars.  If no Interest  Period is specified
with  respect  to any  requested  Eurocurrency  Revolving  Borrowing,  then  the
applicable  Borrower shall be deemed to have selected an Interest  Period of one
month's  duration.   Promptly  following  receipt  of  a  Borrowing  Request  in
accordance with this Section,  the Administrative Agent shall advise each Lender
of the  details  thereof and of the amount of such  Lender's  Loan to be made as
part of the requested Borrowing.

         SECTION 2.04.  Competitive Bid Procedure.  (a) Subject to the terms and
conditions set forth herein,  from time to time during the  Availability  Period
the Company may request  Competitive Bids for Competitive  Loans  denominated in
dollars and may (but shall not have any obligation to) accept  Competitive  Bids
and borrow Competitive Loans;  provided that the sum of the total U.S. Revolving
Credit Exposures plus the aggregate principal amount of outstanding  Competitive
Loans at any time  shall not  exceed  the total  U.S.  Commitments.  To  request
Competitive  Bids,  the Company  shall notify the  Administrative  Agent of such
request by telephone,  in the case of a Eurocurrency  Borrowing,  not later than
11:00  a.m.,  New York City  time,  four  Business  Days  before the date of the
proposed  Borrowing and, in the case of a Fixed Rate  Borrowing,  not later than
10:00 a.m., New York City time, one Business Day before the date of the proposed
Borrowing;  provided  that the  Company  may submit  jointly up to (but not more
than) three  Competitive  Bid  Requests on the same day, but a  Competitive  Bid
Request  shall  not be made  within  five  Business  Days  after the date of any
previous  Competitive Bid Request,  unless any and all such previous Competitive
Bid Requests  shall have been  withdrawn  or all  Competitive  Bids  received in
response thereto rejected. Each such telephonic Competitive Bid Request shall be
confirmed promptly by hand delivery or telecopy to the Administrative Agent of a
written  Competitive Bid Request in a form approved by the Administrative  Agent
and signed by the Company.  Each such  telephonic  and written  Competitive  Bid
Request shall specify the following information in compliance with Section 2.02:

          (i) the aggregate amount of the requested Borrowing;  

          (ii) the date of such Borrowing, which shall be a Business Day; 

          (iii) whether such  Borrowing is to be a  Eurocurrency  Borrowing or a
     Fixed Rate Borrowing;

          (iv) the Interest  Period to be  applicable to such  Borrowing,  which
     shall be a period  contemplated  by the  definition  of the term  "Interest
     Period"; and

          (v) the  location and number of the  Company's  account to which funds
     are to be disbursed,  which shall comply with the  requirements  of Section
     2.05.

Promptly  following receipt of a Competitive Bid Request in accordance with this
Section,  the  Administrative  Agent  shall  notify the  Lenders of the  details
thereof by telecopy, inviting the Lenders to submit Competitive Bids.



<PAGE>



         (b) Each U.S.  Lender may (but shall not have any  obligation  to) make
one or more  Competitive  Bids to the Company in response to a  Competitive  Bid
Request. Each Competitive Bid by a U.S. Lender must be in a form approved by the
Administrative  Agent  and  must be  received  by the  Administrative  Agent  by
telecopy, in the case of a Eurocurrency  Competitive  Borrowing,  not later than
9:30 a.m.,  New York City time,  three Business Days before the proposed date of
such Competitive Borrowing, and in the case of a Fixed Rate Borrowing, not later
than 9:30 a.m.,  New York City time,  on the proposed  date of such  Competitive
Borrowing.  Competitive  Bids  that do not  conform  substantially  to the  form
approved  by the  Administrative  Agent may be  rejected  by the  Administrative
Agent,  and the  Administrative  Agent  shall  notify the  applicable  Lender as
promptly as  practicable.  Each  Competitive  Bid shall be irrevocable and shall
specify (i) the principal  amount (which shall be a minimum of $5,000,000 and an
integral  multiple of $1,000,000 and which may equal up to the entire  principal
amount of the Competitive Borrowing requested by the Company) of the Competitive
Loan or Loans that the Lender is willing to make,  (ii) the Competitive Bid Rate
or Rates at which the Lender is prepared to make such  Competitive Loan or Loans
(expressed  as a  percentage  rate per annum in the form of a decimal to no more
than four decimal places) and (iii) the Interest Period  applicable to each such
Loan and the last day thereof.

         (c) The  Administrative  Agent  shall  promptly  notify the  Company by
telecopy of the  Competitive  Bid Rate or Rates and the principal  amount of the
Competitive  Loan or Loans specified in each Competitive Bid and the identity of
the Lender that shall have made such Competitive Bid.

         (d) Subject only to the provisions of this  paragraph,  the Company may
accept  or  reject  any   Competitive   Bid.   The  Company   shall  notify  the
Administrative  Agent by telephone,  confirmed by telecopy in a form approved by
the Administrative Agent, whether and to what extent it has decided to accept or
reject  each  Competitive  Bid,  in  the  case  of  a  Eurocurrency  Competitive
Borrowing,  not later than 10:30 a.m.,  New York City time,  three Business Days
before  the date of the  proposed  Competitive  Borrowing,  and in the case of a
Fixed Rate  Borrowing,  not later than 10:30  a.m.,  New York City time,  on the
proposed date of the Competitive Borrowing; provided that (i) the failure of the
Company  to  give  such  notice  shall  be  deemed  to be a  rejection  of  each
Competitive  Bid, (ii) the Company shall not accept a Competitive  Bid made at a
particular Competitive Bid Rate if the Company rejects a Competitive Bid made at
a lower Competitive Bid Rate, (iii) the aggregate amount of the Competitive Bids
accepted by the Company shall not exceed the  aggregate  amount of the requested
Competitive  Borrowing specified in the related Competitive Bid Request, (iv) to
the extent  necessary to comply with clause (iii) above,  the Company may accept
Competitive Bids at the same Competitive Bid Rate in part, which acceptance,  in
the case of multiple  Competitive  Bids at such  Competitive Bid Rate,  shall be
made pro rata in  accordance  with the  amount of each such  Competitive  Bid as
allocated by the  Administrative  Agent,  and (v) except pursuant to clause (iv)
above, no Competitive  Bid shall be accepted for a Competitive  Loan unless such
Competitive Loan is in a minimum  principal amount of $5,000,000 and an integral
multiple of $1,000,000;  provided  further that if a Competitive Loan must be in
an amount less than  $5,000,000  because of the provisions of clause (iv) above,
such  Competitive  Loan  may be for a  minimum  of  $1,000,000  or any  integral
multiple  thereof,  and in calculating the pro rata allocation of acceptances of
portions of  multiple  Competitive  Bids at a  particular  Competitive  Bid Rate
pursuant to clause (iv) the amounts  shall be rounded to integral  multiples  of
$1,000,000 in a manner determined by the Company.  A notice given by the Company
pursuant to this paragraph shall be irrevocable.

         (e) The Administrative  Agent shall promptly notify each bidding Lender
by telecopy  whether or not its  Competitive  Bid has been accepted (and, if so,
the amount and  Competitive  Bid Rate so  accepted),  and,  upon receipt of such
notice, each successful bidder will thereupon become bound, subject to the terms
and  conditions  hereof,  to make the  Competitive  Loan in respect of which its
Competitive Bid has been accepted.

         (f) If the Administrative Agent shall elect to submit a Competitive Bid
in its capacity as a Lender,  it shall submit such  Competitive  Bid directly to
the Company at least one quarter of an hour  earlier  than the time by which the
other   Lenders  are   required  to  submit  their   Competitive   Bids  to  the
Administrative Agent pursuant to paragraph (b) of this Section.


<PAGE>



         SECTION 2.05.  Funding of Borrowings.  (a) Each U.S.  Lender shall make
each  Loan to be made by it  hereunder  on the  proposed  date  thereof  by wire
transfer of  immediately  available  funds by 12:00 noon, New York City time, to
the account of the Administrative  Agent most recently designated by it for such
purpose by notice to the Lenders.  The Administrative Agent will make such Loans
available  to the  applicable  Borrower  by  promptly  crediting  the amounts so
received,  in like  funds,  to an account  of the  Company  maintained  with the
Administrative  Agent in New York  City and  designated  by the  Company  in the
applicable Borrowing Request or Competitive Bid Request or to such other account
as may be  specified  by the  applicable  Borrower in the  applicable  Borrowing
Request or Competitive Bid Request;  provided that ABR U.S. Revolving Loans made
to finance  the  reimbursement  of an LC  Disbursement  as  provided  in Section
2.19(e) shall be remitted by the Administrative  Agent to the Issuing Bank. Each
Multicurrency  Lender  shall  make  each  Multicurrency  Loan  to be  made by it
hereunder on the  proposed  date  thereof by wire  transfer of such  immediately
available  funds as may then be customary for the  settlement  of  international
transactions in the applicable  Committed Currency,  by 11:00 a.m., London time,
to the account of the  Administrative  Agent most recently  designated by it for
such purpose by notice to the  Multicurrency  Lenders (or by such other time and
to such other  account as shall be specified in the Alternate  Procedures).  The
Administrative  Agent  will  make  such  Multicurrency  Loans  available  to the
applicable  Borrower by promptly  crediting  the  amounts so  received,  in like
funds,  to an account of such  Borrower  maintained  in London (or in such other
city as shall be designated in the Alternate  Procedures) and designated by such
Borrower in the applicable Borrowing Request.

         (b) Unless the  Administrative  Agent shall have received notice from a
Lender prior to the  proposed  date of any  Borrowing  that such Lender will not
make  available  to  the  Administrative  Agent  such  Lender's  share  of  such
Borrowing,  the  Administrative  Agent may assume that such Lender has made such
share  available on such date in accordance  with  paragraph (a) of this Section
and may, in reliance  upon such  assumption,  make  available to the  applicable
Borrower a corresponding amount. In such event, if a Lender has not in fact made
its share of the applicable  Borrowing  available to the  Administrative  Agent,
then the applicable Lender and the applicable Borrower severally agree to pay to
the  Administrative  Agent  forthwith on demand such  corresponding  amount with
interest  thereon,  for each day from and including the date such amount is made
available to the applicable Borrower to but excluding the date of payment to the
Administrative  Agent, at (i) in the case of such Lender,  (x) the Federal Funds
Effective  Rate  (in the  case  of a  Borrowing  in  dollars)  and (y) the  rate
reasonably  determined  by the  Administrative  Agent  to be the  cost  to it of
funding such amount (in the case of a Borrowing in a Committed Currency) or (ii)
in the case of such Borrower,  the interest rate applicable to the subject Loan.
If such Lender pays such amount to the  Administrative  Agent,  then such amount
shall constitute such Lender's Loan included in such Borrowing.

         SECTION  2.06.  Interest   Elections.   (a)  Each  Revolving  Borrowing
initially  shall be of the Type  specified in the applicable  Borrowing  Request
and, in the case of a Eurocurrency  Revolving  Borrowing,  shall have an initial
Interest  Period as specified in such Borrowing  Request (or, in either case, as
deemed specified). Thereafter, the applicable Borrower may elect to convert such
Borrowing to a different  Type or to continue such Borrowing and, in the case of
a Eurocurrency Revolving Borrowing,  may elect Interest Periods therefor, all as
provided in this Section. A Borrower may elect different options with respect to
different  portions of the affected  Borrowing,  in which case each such portion
shall be allocated  ratably among the Lenders holding the Loans  comprising such
Borrowing,  and the Loans  comprising  each such portion  shall be  considered a
separate  Borrowing.  This Section  shall not apply to  Competitive  Borrowings,
which may not be converted or continued.  Notwithstanding any contrary provision
herein, this Section shall not be construed to permit any Borrower to change the
currency or Class of any Borrowing.



<PAGE>



         (b) To make an election  pursuant  to this  Section,  a Borrower  shall
notify the Administrative Agent of such election by telephone by the time that a
Borrowing  Request  would be required  under  Section 2.03 if such Borrower were
requesting a Revolving  Borrowing of the Type resulting from such election to be
made on the  effective  date of such  election.  Each such  telephonic  Interest
Election  Request shall be irrevocable  and shall be confirmed  promptly by hand
delivery or telecopy to the Administrative  Agent of a written Interest Election
Request  in a form  approved  by the  Administrative  Agent  and  signed  by the
applicable Borrower.

         (c) Each telephonic and written Interest Election Request shall specify
the following information in compliance with Section 2.02:

                  (i) the  Borrowing  to which such  Interest  Election  Request
         applies  and, if  different  options are being  elected with respect to
         different  portions  thereof,  the portions  thereof to be allocated to
         each resulting Borrowing (in which case the information to be specified
         pursuant to clauses  (iii) and (iv) below shall be  specified  for each
         resulting Borrowing);

                  (ii) the effective  date of the election made pursuant to such
         Interest Election Request, which shall be a Business Day;

                  (iii) if the Borrowing to which such Interest Election Request
         applies is denominated in dollars,  whether the resulting  Borrowing is
         to be an ABR Borrowing or a Eurocurrency Borrowing; and

                  (iv) if the resulting  Borrowing is a Eurocurrency  Borrowing,
         the Interest  Period to be  applicable  thereto  after giving effect to
         such election,  which shall be a period  contemplated by the definition
         of the term "Interest Period".

If no Interest  Period is specified  with respect to any requested  Eurocurrency
Borrowing,  then the  applicable  Borrower  shall be deemed to have  selected an
Interest Period of one month's duration.

         (d) Promptly  following receipt of an Interest  Election  Request,  the
Administrative Agent shall advise each Lender of the details thereof and of such
Lender's portion of each resulting Borrowing.

         (e) If the  applicable  Borrower  fails to  deliver  a timely  Interest
Election Request with respect to a Eurocurrency Revolving Borrowing prior to the
end of the Interest Period  applicable  thereto,  then, unless such Borrowing is
repaid as provided  herein,  at the end of such Interest  Period such  Borrowing
shall be converted to an ABR Borrowing  (unless such Borrowing is denominated in
a Committed  Currency  other than dollars,  in which case such  Borrowing  shall
become due and payable on the last day of such Interest Period). Notwithstanding
any  contrary  provision  hereof,  if an Event of Default  has  occurred  and is
continuing and the Administrative Agent, at the request of the Required Lenders,
so notifies the applicable  Borrower and the Company,  then, so long as an Event
of Default is continuing (i) no outstanding Revolving Borrowing may be converted
to or  continued  as a  Eurocurrency  Borrowing  and (ii)  unless  repaid,  each
Eurocurrency  Revolving  Borrowing shall be converted to an ABR Borrowing at the
end  of  the  Interest  Period  applicable  thereto  (and,  in  the  case  of  a
Multicurrency  Borrowing denominated in a Committed Currency other than dollars,
such Borrowing,  shall be converted into dollars at the Exchange Rate determined
by the  Administrative  Agent on the last day of the Interest Period  applicable
thereto).

         SECTION  2.07.  Termination  and Reduction of  Commitments. (a)  Unless
previously  terminated, the Commitments shall terminate on the Maturity Date.


<PAGE>



         (b) The Company may at any time terminate, or from time to time reduce,
the U.S.  Commitments or the Multicurrency  Commitments;  provided that (i) each
reduction of the U.S.  Commitments or the Multicurrency  Commitments shall be in
an  amount  that  is an  integral  multiple  of  $1,000,000  and not  less  than
$10,000,000  and (ii) the  Company  shall not  terminate  or reduce (x) the U.S.
Commitments if, after giving effect to any concurrent prepayment of the Loans in
accordance  with Section 2.09, the sum of the U.S.  Revolving  Credit  Exposures
plus the aggregate  principal amount of the outstanding  Competitive Loans would
exceed the total U.S. Commitments or (y) the Multicurrency Commitments if, after
giving  effect  to any  concurrent  prepayment  of the  Multicurrency  Loans  in
accordance with Section 2.09, the sum of the Multicurrency  Loan Exposures would
exceed the total Multicurrency Commitments.

         (c)  Within  three  Business  Days  of the  establishment  of  any  New
Receivables Financing, the Company shall permanently reduce the U.S. Commitments
in an amount equal to the maximum  amount of  Indebtedness  that may be incurred
under such New Receivables Financing.

         (d) The Company shall notify the  Administrative  Agent of any election
to terminate or reduce the U.S.  Commitments  or the  Multicurrency  Commitments
under  paragraph  (b) of this Section at least three  Business Days prior to the
effective date of such  termination or reduction,  specifying  such election and
the effective date thereof.  Promptly  following receipt of any such notice, the
Administrative  Agent shall  advise the Lenders of the  contents  thereof.  Each
notice  delivered by the Company  pursuant to this Section shall be irrevocable;
provided  that a notice  of  termination  of the  Commitments  delivered  by the
Company  may state that such notice is  conditioned  upon the  effectiveness  of
other credit facilities, in which case such notice may be revoked by the Company
(by notice to the  Administrative  Agent on or prior to the specified  effective
date) if such  condition is not satisfied.  Any  termination or reduction of the
U.S.  Commitments  or the  Multicurrency  Commitments  shall be permanent.  Each
reduction of the U.S. Commitments or the Multicurrency Commitments shall be made
ratably among the U.S. Lenders or the Multicurrency Lenders, as the case may be,
in  accordance  with  their   respective  U.S.   Commitments  or   Multicurrency
Commitments.

         SECTION 2.08.  Repayment of Loans;  Evidence of Debt. (a) Each Borrower
hereby   unconditionally   promises  to  pay  on  the   Maturity   Date  to  the
Administrative  Agent for the account of each  Lender the then unpaid  principal
amount of each Revolving Loan made by such Lender to such Borrower.  The Company
hereby  unconditionally  promises  to pay to the  Administrative  Agent  for the
account of each Lender the then unpaid principal amount of each Competitive Loan
made by such Lender on the last day of the Interest  Period  applicable  to such
Loan.

         (b) Each Lender shall maintain in accordance with its usual practice an
account or accounts  evidencing the indebtedness of each Borrower to such Lender
resulting from each Loan made by such Lender, including the amounts of principal
and interest payable and paid to such Lender from time to time hereunder.

         (c) The Administrative  Agent shall maintain accounts in which it shall
record (i) the amount of each Loan made  hereunder,  the Class and Type (and, in
the case of a Multicurrency  Loan, the currency) thereof and the Interest Period
applicable thereto, (ii) the amount of any principal or interest due and payable
or to become due and payable  from each  Borrower to each Lender  hereunder  and
(iii) the amount of any sum received by the  Administrative  Agent hereunder for
the account of the Lenders and each Lender's share thereof.



<PAGE>



         (d) The entries made in the accounts  maintained  pursuant to paragraph
(b) or (c) of this Section  shall be prima facie  evidence of the  existence and
amounts of the obligations  recorded  therein;  provided that the failure of any
Lender  or the  Administrative  Agent to  maintain  such  accounts  or any error
therein shall not in any manner  affect the  obligation of any Borrower to repay
the Loans in accordance with the terms of this Agreement.

         (e) Any Lender may  request  that  Loans made by it be  evidenced  by a
promissory  note.  In such event,  the  Administrative  Agent shall  prepare and
deliver to each  Borrower,  and each Borrower  shall execute and deliver to such
Lender,  a promissory note payable to the order of such Lender (or, if requested
by  such  Lender,  to such  Lender  and its  registered  assigns)  and in a form
approved by the  Administrative  Agent and the  Company.  Thereafter,  the Loans
evidenced by each such promissory  note and interest  thereon shall at all times
(including after assignment  pursuant to Section 10.04) be represented by one or
more  promissory  notes in such form  payable  to the  order of the payee  named
therein (or, if such promissory note is a registered note, to such payee and its
registered assigns).

         SECTION  2.09.  Prepayment of Loans.  (a) Subject to Section 2.14,  any
Borrower  shall  have the right at any time and from time to time to prepay  any
Borrowing  of such  Borrower  in whole or in part,  subject  to prior  notice in
accordance  with paragraph (c) of this Section;  provided that no Borrower shall
have the right to prepay any  Competitive  Loan without the prior consent of the
Lender thereof.

         (b) If, on the last day of any  Interest  Period  with  respect  to any
Multicurrency  Loan, the Dollar Equivalent of the aggregate  principal amount of
the outstanding Multicurrency Loans exceeds the total Multicurrency Commitments,
the  Company,  on such day,  shall  cause the  Borrowers  to prepay  one or more
Multicurrency Borrowings in an amount sufficient to eliminate such excess.

         (c) The applicable  Borrower shall notify the  Administrative  Agent by
telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of
prepayment of a Eurocurrency  Revolving  Borrowing  (other than a  Multicurrency
Borrowing),  not later than 11:00 a.m., New York City time,  three Business Days
before the date of prepayment, (ii) in the case of prepayment of a Multicurrency
Borrowing, not later than 2:00 p.m., London time, three Business Days before the
date of prepayment (or such other  applicable  time as shall be set forth in the
Alternate  Procedures),  or (iii) in the case of  prepayment of an ABR Revolving
Borrowing,  not later than  12:00  (noon),  New York City  time,  on the date of
prepayment.  Each  such  notice  shall be  irrevocable  and  shall  specify  the
prepayment date and the principal amount of each Borrowing or portion thereof to
be prepaid; provided that, if a notice of prepayment is given in connection with
a conditional  notice of  termination  of the  Commitments  as  contemplated  by
Section 2.07,  then such notice of  prepayment  may be revoked if such notice of
termination  is revoked in  accordance  with Section  2.07.  Promptly  following
receipt of any such notice relating to a Revolving Borrowing, the Administrative
Agent shall advise the Lenders of the contents thereof.  Each partial prepayment
of any Revolving  Borrowing shall be in an amount that would be permitted in the
case of an advance of a  Revolving  Borrowing  of the same Type as  provided  in
Section 2.02. Each prepayment of a Revolving  Borrowing shall be applied ratably
to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied
by accrued interest to the extent required by Section 2.11.



<PAGE>



         SECTION 2.10. Fees. (a) The Company agrees to pay to the Administrative
Agent for the account of each Lender a facility  fee,  which shall accrue at the
Applicable  Rate on the daily amount of the  Commitments of such Lender (whether
used or unused)  during the period  from and  including  the date  hereof to but
excluding the date on which such Commitments  terminate;  provided that, if such
Lender  continues to have any Revolving  Credit  Exposure after its  Commitments
terminate,  then such facility fee shall  continue to accrue on the daily amount
of such Lender's  Revolving Credit Exposure from and including the date on which
its Commitments  terminate to but excluding the date on which such Lender ceases
to have any Revolving Credit Exposure. Accrued facility fees shall be payable in
arrears on the last Business Day of March, June,  September and December of each
year and on the date on which the Commitments terminate, commencing on the first
such date to occur  after  the date  hereof;  provided  that any  facility  fees
accruing after the date on which the  Commitments  terminate shall be payable on
demand.  The facility fees payable hereunder shall be computed on the basis of a
year of 360 days and shall be  payable  for the  actual  number of days  elapsed
(including the first day but excluding the last day).

         (b) The Company agrees to pay (i) to the  Administrative  Agent for the
account  of  each  U.S.  Lender  a   participation   fee  with  respect  to  its
participations  in Letters of Credit,  which shall accrue at the same Applicable
Rate as interest on Eurodollar U.S.  Revolving Loans on the average daily amount
of such U.S. Lender's LC Exposure (excluding any portion thereof attributable to
unreimbursed  LC  Disbursements)  during  the  period  from  and  including  the
Effective  Date to but  excluding  the  later  of the date on  which  such  U.S.
Lender's U.S. Commitment terminates and the date on which such U.S Lender ceases
to have any LC  Exposure,  and (ii) to the Issuing  Bank a fronting  fee,  which
shall accrue at the rate or rates per annum  separately  agreed upon between the
Company and the  Issuing  Bank on the  average  daily  amount of the LC Exposure
(excluding any portion thereof  attributable  to unreimbursed LC  Disbursements)
during the period from and  including  the  Effective  Date to but excluding the
later of the date of termination of the U.S.  Commitments  and the date on which
there ceases to be any LC Exposure,  as well as the Issuing Bank's standard fees
with respect to the issuance,  amendment,  renewal or extension of any Letter of
Credit or processing  of drawings  thereunder.  Participation  fees and fronting
fees accrued  through and including the last day of March,  June,  September and
December of each year shall be payable on the third  Business Day following such
last day,  commencing on the first such date to occur after the Effective  Date;
provided  that all such  fees  shall be  payable  on the date on which  the U.S.
Commitments  terminate  and any such fees  accruing  after the date on which the
U.S. Commitments terminate shall be payable on demand. Any other fees payable to
the Issuing  Bank  pursuant to this  paragraph  shall be payable  within 10 days
after demand.  All participation fees and fronting fees shall be computed on the
basis of a year of 360 days and shall be payable  for the actual  number of days
elapsed (including the first day but excluding the last day).

         (c) The Company agrees to pay to the Administrative  Agent, for its own
account,  fees in the amounts and  payable at the times  separately  agreed upon
between the Company and the Administrative Agent.

         (d) All fees payable under  paragraphs  (a), (b) and (c) above shall be
paid on the dates due, in immediately  available  funds,  to the  Administrative
Agent  (or to  the  Issuing  Bank,  in the  case  of  fees  payable  to it)  for
distribution,  in the case of facility fees, to the Lenders. Fees paid shall not
be refundable under any circumstances.

         SECTION 2.11.  Interest.  (a)  The Loans comprising each  ABR Borrowing
shall bear interest at a rate per annum equal to the Alternate Base Rate.

         (b) Except as otherwise  specified  in the  Alternate  Procedures  with
respect to Multicurrency Loans, the Loans comprising each Eurocurrency Borrowing
shall bear interest at a rate per annum equal to (i) in the case of Eurocurrency
Revolving  Loans,  the LIBO Rate for the  Interest  Period  in  effect  for such
Borrowing  plus  the  Applicable  Rate  or  (ii)  in the  case  of  Eurocurrency
Competitive  Loans,  the LIBO Rate for the  Interest  Period in effect  for such
Borrowing plus the Margin applicable to such Loan.



<PAGE>



         (c) Each Fixed Rate Loan shall bear  interest at a rate per annum equal
to the Fixed Rate applicable to such Loan.

         (d) Notwithstanding  the foregoing,  if any principal of or interest on
any Loan or any fee or other  amount  payable by any  Borrower  hereunder is not
paid when due, whether at stated maturity, upon acceleration or otherwise,  such
overdue  amount shall bear  interest,  after as well as before  judgment (and in
lieu of pre- or post-judgment  interest that would otherwise accrue),  at a rate
per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the
rate otherwise applicable (or most recently applicable) to such Loan as provided
above or (ii) in the case of any other  amount,  2% plus the rate  applicable to
ABR Loans as provided above.

         (e)  Accrued  interest on each Loan shall be payable in arrears on each
Interest Payment Date for such Loan; provided that (i) interest accrued pursuant
to paragraph (d) of this Section  shall be payable on demand,  (ii) in the event
of any  repayment or  prepayment  of any Loan (other than a prepayment of an ABR
Revolving Loan prior to the end of the Availability Period), accrued interest on
the  principal  amount  repaid or  prepaid  shall be payable on the date of such
repayment  or  prepayment,   (iii)  in  the  event  of  any  conversion  of  any
Eurocurrency  Revolving  Loan prior to the end of the  current  Interest  Period
therefor,  accrued  interest on such Loan shall be payable on the effective date
of such  conversion  and  (iv)  all  accrued  interest  shall  be  payable  upon
termination of the Commitments.

         (f) All interest  hereunder shall be computed on the basis of a year of
360 days,  except that interest computed by reference to the Alternate Base Rate
at times  when the  Alternate  Base  Rate is based on the  Prime  Rate  shall be
computed on the basis of a year of 365 days (or 366 days in a leap year), and in
each case shall be payable for the actual number of days elapsed  (including the
first day but excluding the last day).  The  applicable  Alternate  Base Rate or
LIBO  Rate  shall  be  determined  by  the   Administrative   Agent,   and  such
determination shall be conclusive absent manifest error.

         SECTION 2.12.  Alternate Rate of Interest. If prior to the commencement
of any Interest Period for a Eurocurrency Borrowing:

                  (a) the Administrative  Agent determines (which  determination
         shall be conclusive absent manifest error) that adequate and reasonable
         means do not exist  for  ascertaining  the LIBO Rate for such  Interest
         Period; or

                  (b)  the  Administrative  Agent  is  advised  by the  Required
         Lenders (or, in the case of a Eurocurrency Competitive Loan, the Lender
         that is  required  to make  such  Loan)  that  the  LIBO  Rate for such
         Interest Period will not adequately and fairly reflect the cost to such
         Lenders (or Lender) of making or maintaining  their Loans (or its Loan)
         included in such Borrowing for such Interest Period; or

                  (c)  in  the   case   of  a   Multicurrency   Borrowing,   the
         Administrative   Agent  determines   (which   determination   shall  be
         conclusive  absent  manifest  error) that  deposits  in the  applicable
         Committed Currency are not generally  available,  or cannot be obtained
         by the Multicurrency Lenders, in the London interbank market;



<PAGE>



then the  Administrative  Agent shall give notice thereof to the Company and the
applicable  Borrower  and the  Lenders by  telephone  or telecopy as promptly as
practicable  thereafter and, until the Administrative Agent notifies the Company
and the applicable  Borrower and the Lenders that the circumstances  giving rise
to such notice no longer exist, (i) any Interest  Election Request that requests
the conversion of any Revolving  Borrowing to, or  continuation of any Revolving
Borrowing  as,  a  Eurocurrency   Borrowing  shall  be   ineffective,   and  any
Eurocurrency  Borrowing so requested to be continued shall, at the option of the
Company  or the  applicable  Borrower,  be  repaid  on the  last day of the then
current  Interest  Period with  respect  thereto or shall be converted to an ABR
Borrowing  denominated  in  dollars  at  the  Exchange  Rate  determined  by the
Administrative  Agent in accordance  with this  Agreement on the last day of the
then current Interest Period with respect thereto, (ii) if any Borrowing Request
requests a Eurocurrency Revolving Borrowing,  such Borrowing shall be made as an
ABR  Borrowing  and  (iii)  any  request  by  any  Borrower  for a  Eurocurrency
Competitive  Borrowing or a  Multicurrency  Borrowing in the affected  Committed
Currency shall be ineffective; provided that if the circumstances giving rise to
such  notice do not affect  all the  Lenders,  then  requests  for  Eurocurrency
Competitive Borrowings may be made to Lenders that are not affected thereby and,
if the  circumstances  giving rise to such  notice do not affect all  applicable
currencies,  then  requests  for  Eurocurrency  Borrowings  may be  made  in the
currencies that are not affected thereby.

         SECTION  2.13.  Increased  Costs;  Illegality.  (a) If any Lender shall
determine at any time that it shall be required,  by any Governmental  Authority
of any jurisdiction of any currency in which any Eurocurrency Loan shall be made
or in which  banks are subject  for any  category  of  deposits  or  liabilities
customarily used to fund Eurocurrency  Loans in such currency or by reference to
which  interest  rates  applicable  to  Eurocurrency  Loans in such currency are
determined,  to maintain reserves in respect of Eurocurrency  Loans with respect
to any period when it has a Eurocurrency Loan outstanding  hereunder,  then such
Lender  may   require   the   Company  or  the   applicable   Borrower  to  pay,
contemporaneously  with each  payment of  interest  on the  Eurocurrency  Loans,
additional  interest  for such period on the related  Eurocurrency  Loan of such
Lender at a rate per annum  equal to the  excess of (i)(A) the  applicable  LIBO
Rate (or such other rate determined  pursuant to Section 2.11(d)) divided by (B)
one minus the  Eurocurrency  Reserve  Percentage over (ii) the rate specified in
clause (i)(A) above.

          (b)  If any Change in Law shall:

                  (i) impose,  modify or deem  applicable  any reserve,  special
         deposit or similar  requirement against assets of, deposits with or for
         the  account  of, or credit  extended  by, any Lender  (except any such
         reserve requirement referred to in Section 2.13(a)); or

                  (ii) impose on any Lender or the London  interbank  market (or
         any other market in which the funding  operations  of such Lender shall
         be  conducted  with  respect  to  any  Committed  Currency)  any  other
         condition  affecting this Agreement or the Eurocurrency  Loans or Fixed
         Rate Loans made by such  Lender  (except any such  reserve  requirement
         referred to in Section 2.13(a));

and the result thereof shall be to increase the cost to such Lender of making or
maintaining  any  Eurocurrency  Loan or Fixed Rate Loan (or of  maintaining  its
obligation  to make any such Loan),  or to reduce the amount of any sum received
or  receivable  by such  Lender in respect  thereof by an amount  deemed by such
Lender  to be  material,  then the  Company  will pay or  cause  the  applicable
Borrower  to pay to such  Lender  such  additional  amount  or  amounts  as will
compensate such Lender for such additional costs incurred or reduction suffered.



<PAGE>



         (c) If any Lender or the Issuing Bank determines that any Change in Law
regarding capital requirements has or would have the effect of reducing the rate
of return on such  Lender's or the Issuing  Bank's  capital or on the capital of
such Lender's or the Issuing Bank's holding company, if any, as a consequence of
this Agreement or the Loans made by, or participations in Letters of Credit held
by such Lender,  or the Letters of Credit issued by the Issuing Bank, to a level
below that which such Lender or the Issuing Bank or such Lender's or the Issuing
Bank's  holding  company  could have achieved but for such Change in Law (taking
into consideration such Lender's or the Issuing Bank's policies and the policies
of such Lender's or the Issuing Bank's  holding  company with respect to capital
adequacy) by an amount  deemed by such Lender or the Issuing  Bank,  as the case
may be, to be material, then from time to time the Company will pay or cause the
applicable  Borrower to pay to such Lender or the Issuing  Bank such  additional
amount or amounts as will  compensate  such Lender or the  Issuing  Bank or such
Lender's or the Issuing Bank's holding company for any such reduction suffered.

         (d) A  certificate  of a Lender or the Issuing Bank  setting  forth the
amount or amounts  necessary  to  compensate  such Lender or the Issuing Bank or
such  Lender's or the Issuing  Bank's  holding  company,  as the case may be, as
specified in paragraph  (a), (b) or (c) of this  Section,  and setting  forth in
reasonable  detail the manner in which  such  amount or amounts  shall have been
determined,  shall be  delivered to the Company and shall be  conclusive  absent
manifest  error.  The Company shall pay or cause the applicable  Borrower to pay
such Lender or the Issuing Bank the amount shown as due on any such  certificate
within 10 Business Days after receipt thereof.

         (e) Failure or delay on the part of any Lender or the  Issuing  Bank to
demand  compensation  pursuant to this Section shall not  constitute a waiver of
such Lender's or the Issuing Bank's right to demand such compensation;  provided
that the Company  shall not be required  to  compensate  a Lender or the Issuing
Bank  pursuant to this Section for any increased  costs or  reductions  incurred
more  than 270 days  prior to the date  that such  Lender  or the  Issuing  Bank
notifies the Company of the Change in Law giving rise to such increased costs or
reductions  and of such  Lender's  or the  Issuing  Bank's  intention  to  claim
compensation  therefor;  provided further that, if the Change in Law giving rise
to such increased  costs or reductions is  retroactive,  then the 270-day period
referred to above shall be extended to include the period of retroactive  effect
thereof.

         (f) Notwithstanding the foregoing  provisions of this Section, a Lender
shall not be entitled to compensation pursuant to this Section in respect of any
Competitive  Loan if the Change in Law that would  otherwise  entitle it to such
compensation  shall have been  publicly  announced or be  otherwise  known to it
prior to submission of the Competitive Bid pursuant to which such Loan was made.

         (g)  Notwithstanding  any other provision of this Agreement,  if, after
the  date  hereof,  (i)  any  Change  in Law  shall  make  it  unlawful  for any
Multicurrency  Lender  to make or  maintain  any  Multicurrency  Loan or to give
effect  to  its  obligations  as   contemplated   hereby  with  respect  to  any
Multicurrency  Loan, or (ii) there shall have occurred any change in national or
international  financial,   political  or  economic  conditions  (including  the
imposition  of or any change in exchange  controls) or currency  exchange  rates
which  would  make it  impracticable  for the  Multicurrency  Lenders  holding a
majority in interest of the outstanding  Multicurrency  Loans denominated in the
affected Committed Currency to make or maintain  Multicurrency Loans denominated
in such  Committed  Currency to, or for the account of, any  Borrower,  then, by
written  notice  to  the  Company  and  the  applicable   Borrower  and  to  the
Administrative Agent:



<PAGE>



                  (i) such Lender may declare that  Multicurrency  Loans (in the
         affected  currency or currencies) will not thereafter (for the duration
         of such unlawfulness) be made by such Lender hereunder (or be continued
         for  additional   Interest  Periods),   whereupon  any  request  for  a
         Multicurrency Borrowing (in the affected currency or currencies) (or to
         continue  a  Multicurrency  Borrowing  (in  the  affected  currency  or
         currencies) for an additional Interest Period) shall, as to such Lender
         only,  be deemed a  request  for a  Eurocurrency  Loan  denominated  in
         dollars  (or  a  request  to  convert  a  Multicurrency   Loan  into  a
         Eurocurrency  Loan  denominated  in dollars on the last day of the then
         current Interest Period with respect thereto),  unless such declaration
         shall be subsequently withdrawn; and

                  (ii)   such   Lender   may   require   that  all   outstanding
         Multicurrency Loans (in the affected currency or currencies) made by it
         be converted to Loans  denominated in dollars,  in which event all such
         Multicurrency  Loans (in the affected  currency or currencies) shall be
         converted to Loans  denominated  in dollars as of the effective date of
         such notice as provided in paragraph (h) below and at the Exchange Rate
         on the date of such conversion.

In the event any Lender shall  exercise its rights under (i) or (ii) above,  all
payments and  prepayments of principal that would otherwise have been applied to
repay the  Multicurrency  Loans that would have been made by such  Lender or the
converted  Multicurrency  Loans of such Lender shall instead be applied to repay
the Eurocurrency Loans denominated in dollars,  as the case may be, made by such
Lender in lieu of, or  resulting  from the  conversion  of,  such  Multicurrency
Loans.

         (h) For  purposes  of this  Section,  a notice to the  Company  and the
applicable  Borrower by any Lender shall be  effective as to each  Multicurrency
Loan made by such  Lender,  if lawful,  on the last day of the  Interest  Period
currently  applicable to such Eurocurrency  Loan; in all other cases such notice
shall be  effective  on the  date of  receipt  thereof  by the  Company  and the
applicable Borrower.

         SECTION 2.14. Break Funding  Payments.  In the event of (a) the payment
of any principal of any  Eurocurrency  Loan or Fixed Rate Loan other than on the
last day of an Interest Period applicable  thereto  (including as a result of an
Event of Default but excluding any prepayment pursuant to Section 2.05(b)),  (b)
the  conversion  of any  Eurocurrency  Loan  other  than on the  last day of the
Interest Period applicable thereto, (c) the conversion of any Multicurrency Loan
to a dollar denominated Loan pursuant to Section 2.12(i) or Section 2.13(g)(ii),
(d) the failure to borrow, convert,  continue or prepay any Eurocurrency Loan on
the date  specified  in any notice  delivered  pursuant  hereto  (regardless  of
whether such notice is permitted to be revocable  under  Section  2.09(c) and is
revoked in accordance herewith),  (e) the failure to borrow any Competitive Loan
after  accepting the Competitive Bid to make such Loan, or (f) the assignment of
any  Eurocurrency  Loan or Fixed  Rate  Loan  other  than on the last day of the
Interest  Period  applicable  thereto  as a result of a request  by the  Company
pursuant to Section 2.17,  then, in any such event, the Company shall compensate
each Lender for the loss,  cost and expense  attributable  to such event. In the
case of a Eurocurrency  Loan,  such loss, cost or expense to any Lender shall be
an amount  determined by such Lender to be the excess, if any, of (i) the amount
of interest  that would have  accrued on the  principal  amount of such Loan had
such event not  occurred,  at the LIBO Rate that would have been  applicable  to
such  Loan,  for the  period  from the date of such event to the last day of the
then current  Interest  Period therefor (or, in the case of a failure to borrow,
convert or continue, for the period that would have been the Interest Period for
such Loan), over (ii) the amount of interest that would accrue on such principal
amount for such period at the interest  rate which such Lender would bid were it
to bid, at the commencement of such period, for a deposit equal to the principal
amount of such Loan (and in the same currency as such Loan) for such period from
other banks in the  eurodollar  market at the  commencement  of such  period.  A
certificate  of any Lender  setting forth any amount or amounts that such Lender
is  entitled to receive  pursuant  to this  Section  shall be  delivered  to the
Company and the  applicable  Borrower and shall be  conclusive  absent  manifest
error.  The Company shall pay or shall cause the  applicable  Borrower to pay to
such Lender the amount shown as due on any such  certificate  within 10 Business
Days after receipt thereof.



<PAGE>



         SECTION 2.15.  Taxes.  (a) Any and all payments by or on account of any
obligation of any Borrower hereunder shall be made free and clear of and without
deduction  for any  Indemnified  Taxes  or  Other  Taxes;  provided  that if any
Borrower shall be required to deduct any  Indemnified  Taxes or Other Taxes from
such payments,  then (i) the sum payable shall be increased as necessary so that
after  making  all  required  deductions  (including  deductions  applicable  to
additional sums payable under this Section 2.15 (a)) the  Administrative  Agent,
Lender or the Issuing  Bank (as the case may be) receives an amount equal to the
sum it would have received had no such  deductions been made, (ii) such Borrower
shall make such  deductions  and (iii) such  Borrower  shall pay the full amount
deducted to the relevant  Governmental  Authority in accordance  with applicable
law.

         (b) In  addition,  the  Borrowers  shall  pay any  Other  Taxes  to the
relevant Governmental Authority in accordance with applicable law.

         (c) Without  duplication  of any amounts  payable by any Borrower under
Section 2.15(a) or Section 2.15(b),  the applicable Borrower shall indemnify the
Administrative  Agent, each Lender and the Issuing Bank, within 10 Business Days
after written demand therefor,  for the full amount of any Indemnified  Taxes or
Other Taxes paid by the  Administrative  Agent, such Lender or the Issuing Bank,
as the case may be, on or with  respect  to any  payment by or on account of any
obligation  of such Borrower  hereunder  (including  Indemnified  Taxes or Other
Taxes  imposed or  asserted on or  attributable  to amounts  payable  under this
Section 2.15(c)),  and any penalties,  interest and reasonable  expenses arising
therefrom  or with respect  thereto,  whether or not such  Indemnified  Taxes or
Other  Taxes were  correctly  or legally  imposed or  asserted  by the  relevant
Governmental  Authority.  A  certificate  as to the  amount of such  payment  or
liability prepared in good faith and delivered to the Company by a Lender or the
Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of a
Lender or the Issuing Bank, shall be conclusive absent manifest error.

         (d) As soon as practicable  after any payment of  Indemnified  Taxes or
Other Taxes by any Borrower to a  Governmental  Authority,  such Borrower  shall
deliver  to the  Administrative  Agent the  original  or a  certified  copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy of
the return  reporting such payment or other evidence of such payment  reasonably
satisfactory to the Administrative Agent.

         (e)  Any  Foreign  Lender  that is  entitled  to an  exemption  from or
reduction  of  withholding  tax with  respect to payments  under this  Agreement
pursuant to the law of the Relevant  Jurisdiction  or any treaty  (including any
protocol  thereto  or  official  exchange  of notes by  applicable  governmental
authorities with respect thereto) to which the Relevant  Jurisdiction is a party
shall  deliver to the Company and the  applicable  Borrower  (with a copy to the
Administrative  Agent),  at the time or times prescribed by applicable law, such
properly  completed and executed  documentation  prescribed by applicable law or
reasonably  requested  by the Company as will  permit  such  payments to be made
without withholding or with a reduced rate of withholding.



<PAGE>



         (f) If a Lender, the Issuing Bank or the Administrative  Agent receives
a refund from a taxing  authority in respect of any  Indemnified  Taxes or Other
Taxes for which it has been indemnified by a Borrower,  or with respect to which
any Borrower has paid additional amounts pursuant to this Section 2.15, it shall
within 30 days from the date of such  receipt pay over the amount of such refund
to the applicable  Borrower (but only to the extent of indemnity  payments made,
or additional  amounts paid, by the applicable  Borrower under this Section 2.15
with  respect  to the  Indemnified  Taxes or  Other  Taxes  giving  rise to such
refund),  net of all  reasonable  out-of-pocket  expenses  of such  Lender,  the
Issuing  Bank or the  Administrative  Agent and  without  interest  (other  than
interest  paid by the relevant  taxing  authority  with respect to such refund);
provided,  however,  that each  Borrower  upon the request of such  Lender,  the
Issuing Bank or the Administrative Agent agrees to repay the amount paid over to
such Borrower (plus  penalties,  interest or other charges) to such Lender,  the
Issuing Bank or the  Administrative  Agent in the event such Lender, the Issuing
Bank or the Administrative Agent is required to repay such refund to such taxing
authority.

         (g) Nothing  contained in this  Section 2.15 shall  require any Lender,
the Issuing Bank or  Administrative  Agent to make  available its tax returns or
any other  information  relating to Taxes or Other Taxes that such  Lender,  the
Issuing  Bank  or  Administrative  Agent  deems  to be  confidential;  provided,
however,  that any Taxes or Other Taxes shall, to the extent  resulting from the
Lender's,  the  Issuing  Bank's or the  Administrative  Agent's  failure to make
available any such tax returns, be deemed to be Excluded Taxes.

         SECTION  2.16.  Payments  Generally;  Pro Rata  Treatment;  Sharing  of
Set-offs.  (a) Each Borrower  shall make each payment  required to be made by it
hereunder (whether of principal, interest or fees or under Section 2.13, 2.14 or
2.15 or  otherwise)  from a Payment  Location in the United States or the United
Kingdom  prior to 1:00 p.m.,  New York City time (or 1:00 p.m.,  London time, in
respect of principal of or interest on any Multicurrency  Loan) (or, in the case
of any  Multicurrency  Loan,  from such other Payment  Location or by such other
time as shall be specified in the Alternate  Procedures),  on the date when due,
in immediately  available  funds,  without setoff or  counterclaim.  Any amounts
received   after  such  time  on  any  date  may,  in  the   discretion  of  the
Administrative  Agent,  be deemed to have been  received on the next  succeeding
Business Day for purposes of  calculating  interest  thereon.  All such payments
shall be made in dollars to the Administrative Agent at its offices at One Chase
Manhattan Plaza, New York, New York (or, in the applicable Committed Currency to
the Administrative Agent at its offices at Trinity Tower, 9 Thomas Moore Street,
London,  or at such  other  offices  as  shall  be  specified  in the  Alternate
Procedures),  except  payments  to be  made  directly  to the  Issuing  Bank  as
expressly  provided  herein and except that payments  pursuant to Sections 2.13,
2.14, 2.15 and 10.03 shall be made directly to the Persons entitled thereto. The
Administrative  Agent shall distribute any such payments  received by it for the
account of any other  Person to the  appropriate  recipient  promptly  following
receipt  thereof.  If any payment  hereunder shall be due on a day that is not a
Business  Day,  the date for payment  shall be  extended to the next  succeeding
Business  Day,  and,  in the case of any  payment  accruing  interest,  interest
thereon shall be payable for the period of such  extension at the same rate then
in effect with respect thereto.  All U.S.  Revolving Loans and Competitive Loans
hereunder shall be denominated  and made, and all payments  hereunder in respect
thereof  (whether of principal,  interest,  fees or otherwise) shall be made, in
dollars.  All  Multicurrency  Loans hereunder shall be denominated and made, and
all payments of principal and interest (but not fees,  which shall be payable in
dollars) hereunder in respect thereof shall be made, in the applicable Committed
Currencies, except as otherwise expressly provided herein.

         (b) If at any time insufficient  funds are received by and available to
the Administrative Agent to pay fully all amounts of principal,  unreimbursed LC
Disbursements, interest and fees then due hereunder, such funds shall be applied
(i)  first,  to pay  interest  and fees then due  hereunder,  ratably  among the
parties  entitled  thereto in  accordance  with the amounts of interest and fees
then due to such parties,  and (ii) second, to pay principal and unreimbursed LC
Disbursements then due hereunder,  ratably among the parties entitled thereto in
accordance with the amounts of principal and unreimbursed LC Disbursements  then
due to such parties.



<PAGE>



         (c) If  any  Lender  shall,  by  exercising  any  right  of  setoff  or
counterclaim  or  otherwise,  obtain  payment in respect of any  principal of or
interest on any of its Revolving  Loans or  participations  in LC  Disbursements
resulting in such Lender obtaining a  proportionately  greater  reduction of its
Revolving Credit Exposure than the reduction obtained by any other Lender,  then
the Lender  obtaining  such greater  reduction  shall purchase (for cash at face
value)   participations  in  the  Revolving  Loans  and   participations  in  LC
Disbursments of other Lenders to the extent necessary so that the benefit of all
such payments  shall be shared by the Lenders  ratably in accordance  with their
Revolving Credit  Exposures;  provided that (i) if any such  participations  are
purchased  and  all or any  portion  of  the  payment  giving  rise  thereto  is
recovered,  such  participations  shall  be  rescinded  and the  purchase  price
restored  to the  extent  of such  recovery,  without  interest,  and  (ii)  the
provisions of this paragraph shall not be construed to apply to any payment made
by any Borrower  pursuant to and in  accordance  with the express  terms of this
Agreement  or  any  payment  obtained  by a  Lender  as  consideration  for  the
assignment of or sale of a participation  in any of its Loans or  participations
in LC Disbursements  to any assignee or participant,  other than to any Borrower
or any  Subsidiary  or  Affiliate  thereof (as to which the  provisions  of this
paragraph shall apply).  Each Borrower  consents to the foregoing and agrees, to
the  extent it may  effectively  do so under  applicable  law,  that any  Lender
acquiring a participation  pursuant to the foregoing  arrangements  may exercise
against such  Borrower  rights of setoff and  counterclaim  with respect to such
participation as fully as if such Lender were a direct creditor of such Borrower
in the amount of such participation.

         (d) Unless the Administrative Agent shall have received notice from the
Company or the applicable Borrower prior to the date on which any payment is due
to the  Administrative  Agent for the account of the Lenders or the Issuing Bank
hereunder  that such  Borrower will not make such  payment,  the  Administrative
Agent may  assume  that such  Borrower  has made  such  payment  on such date in
accordance herewith and may, in reliance upon such assumption, distribute to the
Lenders or the Issuing Bank the amount due. In such event,  if such Borrower has
not in fact made such payment,  then each of the Lenders or the Issuing Bank, as
the case may be, severally agrees to repay to the Administrative Agent forthwith
on demand the amount so  distributed  to such  Lender or the  Issuing  Bank with
interest  thereon,  for each day from and  including  the date  such  amount  is
distributed  to it to but  excluding  the date of payment to the  Administrative
Agent, (i) in the case of a Borrowing in dollars or an LC  Disbursement,  at the
Federal Funds  Effective Rate and (ii) in the case of a Borrowing in a Committed
Currency,  at the rate reasonably  determined by the Administrative  Agent to be
the cost to it of funding such amount.

         (e) If any Lender or the  Issuing  Bank shall fail to make any  payment
required  to be made by it  pursuant  to Section  2.05(b) or  2.16(d),  then the
Administrative  Agent  may,  in its  discretion  (notwithstanding  any  contrary
provision hereof),  apply any amounts thereafter  received by the Administrative
Agent for the account of such Lender or the Issuing Bank, as the case may be, to
satisfy such  Lender's or the Issuing  Bank's  obligations  under such  Sections
until all such unsatisfied obligations are fully paid.

         SECTION 2.17.  Mitigation  Obligations;  Replacement of Lenders. (a) If
any Lender demands compensation or delivers a certificate under Section 2.13, or
if any  Borrower is required to pay any  additional  amount to any Lender or any
Governmental  Authority for the account of any Lender  pursuant to Section 2.15,
then such Lender shall use reasonable  efforts to designate a different  lending
office for  funding or booking its Loans  hereunder  or to assign its rights and
obligations hereunder to another of its offices, branches or affiliates,  if, in
the judgment of such Lender,  such designation or assignment (i) would eliminate
or reduce amounts payable  pursuant to Section 2.13 or 2.15, as the case may be,
in the future and (ii) would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be  disadvantageous  to such Lender. The Company
hereby agrees to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.



<PAGE>



         (b) If any Lender demands  compensation or delivers a certificate under
Section 2.13, or if any Borrower is required to pay any additional amount to any
Lender or any  Governmental  Authority for the account of any Lender pursuant to
Section  2.15,  or if any  Lender  defaults  in its  obligation  to  fund  Loans
hereunder,  or if any  Multicurrency  Lender does not approve any  currency as a
Committed  Currency,  then the Company may, at its sole expense and effort, upon
notice to such  Lender and the  Administrative  Agent,  require  such  Lender to
assign and delegate,  without  recourse (in  accordance  with and subject to the
restrictions  contained  in  Section  10.04),  all  its  interests,  rights  and
obligations  under this Agreement (other than any outstanding  Competitive Loans
held by it) to an assignee that shall assume such  obligations  (which  assignee
may be another Lender, if a Lender accepts such  assignment);  provided that (i)
if the  assignee is not a Lender,  the  Company  shall have  received  the prior
written consent of the Administrative  Agent (and, if a U.S. Commitment is being
assigned,  the Issuing Bank),  which consent shall not unreasonably be withheld,
(ii)  such  Lender  shall  have  received  payment  of an  amount  equal  to the
outstanding   principal  of  its  Loans  (other  than  Competitive   Loans)  and
participations in LC Disbursements,  accrued interest thereon,  accrued fees and
all other amounts  payable to it hereunder,  from the assignee (to the extent of
such outstanding principal and accrued interest and fees) or the Company (in the
case  of all  other  amounts)  and  (iii)  in the  case of any  such  assignment
resulting from a claim for compensation  under Section 2.13 or payments required
to be made pursuant to Section 2.15,  such assignment will result in a reduction
in such  compensation  or  payments.  A Lender shall not be required to make any
such  assignment and  delegation  if, prior thereto,  as a result of a waiver by
such  Lender or  otherwise,  the  circumstances  entitling  the  Company or such
Borrower to require such assignment and delegation cease to apply.

         SECTION 2.18. Borrowing  Subsidiaries.  On or after the Effective Date,
the Company may  designate  any Wholly Owned  Foreign  Subsidiary as a Borrowing
Subsidiary  by delivery to the  Administrative  Agent of a Borrowing  Subsidiary
Agreement  executed by such  Subsidiary and the Company,  and upon such delivery
such  Subsidiary  shall  for all  purposes  of  this  Agreement  be a  Borrowing
Subsidiary  and a party to this  Agreement.  The Company may cause any Borrowing
Subsidiary to cease to be a party to this  Agreement by executing and delivering
to the Administrative Agent a Borrowing  Subsidiary  Termination with respect to
such  Subsidiary,  whereupon  such  Subsidiary  shall  cease  to be a  Borrowing
Subsidiary and a party to this  Agreement.  Notwithstanding  the  foregoing,  no
Borrowing  Subsidiary  Termination  will become  effective  as to any  Borrowing
Subsidiary at a time when any principal of or interest on any Loan made directly
to such Borrowing Subsidiary shall be outstanding hereunder;  provided that such
Borrowing Subsidiary  Termination shall be effective to terminate such Borrowing
Subsidiary's right to make further  Borrowings under this Agreement.  As soon as
practicable upon receipt of a Borrowing Subsidiary Agreement, the Administrative
Agent shall send a copy thereof to each Lender.

         SECTION 2.19. Letters of Credit. (a) General.  Subject to the terms and
conditions set forth herein,  the Company may request the issuance of Letters of
Credit  denominated  in  dollars  for  its  own  account,  in a form  reasonably
acceptable  to the  Administrative  Agent and the Issuing  Bank, at any time and
from  time  to  time  during  the  Availability  Period.  In  the  event  of any
inconsistency  between the terms and  conditions of this Agreement and the terms
and conditions of any form of Letter of Credit  application  or other  agreement
submitted  by the Company to, or entered into by the Company  with,  the Issuing
Bank  relating  to any  Letter  of  Credit,  the terms  and  conditions  of this
Agreement shall control.



<PAGE>



         (b)  Notice  of  Issuance,   Amendment,   Renewal,  Extension;  Certain
Conditions.  To request the  issuance  of a Letter of Credit (or the  amendment,
renewal or extension of an outstanding  Letter of Credit) the Company shall hand
deliver or telecopy (or transmit by electronic  communication,  if  arrangements
for doing so have been approved by the Issuing Bank) to the Issuing Bank and the
Administrative  Agent  (reasonably in advance of the requested date of issuance,
amendment, renewal or extension) a notice requesting the issuance of a Letter of
Credit, or identifying the Letter of Credit to be amended,  renewed or extended,
and  specifying  the date of issuance,  amendment,  renewal or extension  (which
shall be a Business  Day),  the date on which such Letter of Credit is to expire
(which  shall comply with  paragraph  (c) of this  Section),  the amount of such
Letter of Credit, the name and address of the beneficiary thereof and such other
information as shall be necessary to prepare, amend, renew or extend such Letter
of Credit.  If  requested by the Issuing  Bank,  the Company also shall submit a
Letter of Credit  application on the Issuing Bank's  standard form in connection
with any  request  for a Letter of Credit.  A Letter of Credit  shall be issued,
amended, renewed or extended only if (and upon issuance,  amendment,  renewal or
extension of each Letter of Credit the Company  shall be deemed to represent and
warrant  that),  after giving  effect to such  issuance,  amendment,  renewal or
extension (i) the LC Exposure shall not exceed  $100,000,000 and (ii) the sum of
the total U.S. Revolving Credit Exposures plus the aggregate principal amount of
outstanding Competitive Loans shall not exceed the total U.S. Commitments.

         (c) Expiration  Date. Each Letter of Credit shall expire at or prior to
the close of  business on the earlier of (i) the date one year after the date of
the  issuance  of such  Letter  of Credit  (or,  in the case of any  renewal  or
extension  thereof,  one year after such renewal or extension) and (ii) the date
that is five Business Days prior to the Maturity Date.

         (d)  Participations.  By the  issuance  of a Letter  of  Credit  (or an
amendment to a Letter of Credit  increasing the amount  thereof) and without any
further action on the part of the Issuing Bank or the U.S. Lenders,  the Issuing
Bank hereby grants to each U.S.  Lender,  and each U.S.  Lender hereby  acquires
from the Issuing  Bank, a  participation  in such Letter of Credit equal to such
U.S.  Lender's  Applicable  Percentage of the aggregate  amount  available to be
drawn under such Letter of Credit.  In  consideration  and in furtherance of the
foregoing,  each U.S. Lender hereby absolutely and unconditionally agrees to pay
to the  Administrative  Agent,  for the account of the Issuing  Bank,  such U.S.
Lender's Applicable  Percentage of each LC Disbursement made by the Issuing Bank
and not  reimbursed  by the Company on the date due as provided in paragraph (e)
of this Section, or of any reimbursement  payment required to be refunded to the
Company  for any  reason.  Each U.S.  Lender  acknowledges  and agrees  that its
obligation to acquire  participations  pursuant to this  paragraph in respect of
Letters of Credit is absolute and unconditional and shall not be affected by any
circumstance  whatsoever,  including any amendment,  renewal or extension of any
Letter of Credit or the occurrence and  continuance of a Default or reduction or
termination of the Commitments, and that each such payment shall be made without
any offset, abatement, withholding or reduction whatsoever.



<PAGE>



         (e)  Reimbursement.  If the Issuing Bank shall make any LC Disbursement
in  respect  of a  Letter  of  Credit,  the  Company  shall  reimburse  such  LC
Disbursement  by paying to the  Administrative  Agent an amount equal to such LC
Disbursement  not later than 12:00  noon,  New York City time,  on the date that
such LC  Disbursement is made, if the Company shall have received notice of such
LC  Disbursement  prior to 10:00 a.m.,  New York City time, on such date, or, if
such  notice has not been  received  by the  Company  prior to such time on such
date,  then not later than 12:00 noon,  New York City time,  on (i) the Business
Day that the Company  receives such notice,  if such notice is received prior to
10:00 a.m., New York City time, on the day of receipt,  or (ii) the Business Day
immediately  following the day that the Company  receives  such notice,  if such
notice is not received  prior to such time on the day of receipt;  provided that
the Company  may,  subject to the  conditions  to  borrowing  set forth  herein,
request in  accordance  with Section 2.03 that such payment be financed  with an
ABR U.S.  Revolving  Borrowing  in an  equivalent  amount  and, to the extent so
financed,  the Company's obligation to make such payment shall be discharged and
replaced by the resulting ABR U.S. Revolving Borrowing.  If the Company fails to
make such  payment  when due,  the  Administrative  Agent shall notify each U.S.
Lender of the applicable LC Disbursement,  the payment then due from the Company
in  respect  thereof  and such  U.S.  Lender's  Applicable  Percentage  thereof.
Promptly  following  receipt of such notice,  each U.S.  Lender shall pay to the
Administrative Agent its Applicable  Percentage of the payment then due from the
Company,  in the same manner as provided in Section  2.05 with  respect to Loans
made by such U.S. Lender (and Section 2.05 shall apply, mutatis mutandis, to the
payment  obligations of the U.S. Lenders),  and the  Administrative  Agent shall
promptly  pay to the  Issuing  Bank the  amounts so received by it from the U.S.
Lenders.  Promptly following receipt by the Administrative  Agent of any payment
from the Company  pursuant to this  paragraph,  the  Administrative  Agent shall
distribute such payment to the Issuing Bank or, to the extent that U.S.  Lenders
have made  payments  pursuant to this  paragraph to reimburse  the Issuing Bank,
then to such U.S.  Lenders and the Issuing Bank as their  interests  may appear.
Any payment made by a U.S.  Lender  pursuant to this  paragraph to reimburse the
Issuing  Bank  for any LC  Disbursement  (other  than  the  funding  of ABR U.S.
Revolving Loans as contemplated above) shall not constitute a Loan and shall not
relieve the Company of its obligation to reimburse such LC Disbursement.

         (f)  Obligations  Absolute.  The  Company's  obligation to reimburse LC
Disbursements  as provided in paragraph  (e) of this Section  shall be absolute,
unconditional  and  irrevocable,  and shall be performed  strictly in accordance
with the terms of this Agreement under any and all circumstances  whatsoever and
irrespective  of (i) any lack of  validity  or  enforceability  of any Letter of
Credit or this Agreement,  or any term or provision  therein,  (ii) any draft or
other  document  presented  under a  Letter  of  Credit  proving  to be  forged,
fraudulent  or invalid in any respect or any  statement  therein being untrue or
inaccurate  in any respect,  (iii) payment by the Issuing Bank under a Letter of
Credit  against  presentation  of a draft or other document that does not comply
with the terms of such Letter of Credit, or (iv) any other event or circumstance
whatsoever,  whether or not similar to any of the foregoing, that might, but for
the provisions of this Section, constitute a legal or equitable discharge of, or
provide a right of setoff against, the Company's obligations hereunder.  Neither
the  Administrative  Agent,  the Lenders nor the Issuing Bank,  nor any of their
Related Parties,  shall have any liability or  responsibility by reason of or in
connection  with the issuance or transfer of any Letter of Credit or any payment
or  failure  to  make  any  payment  thereunder  (irrespective  of  any  of  the
circumstances  referred to in the preceding sentence),  or any error,  omission,
interruption,  loss or delay in transmission or delivery of any draft, notice or
other  communication  under or relating to any Letter of Credit  (including  any
document required to make a drawing thereunder),  any error in interpretation of
technical terms or any consequence arising from causes beyond the control of the
Issuing Bank;  provided that the foregoing  shall not be construed to excuse the
Issuing Bank from  liability to the Company to the extent of any direct  damages
(as  opposed  to  consequential  damages,  claims in respect of which are hereby
waived by the Company to the extent permitted by applicable law) suffered by the
Company  that are caused by the Issuing  Bank's  failure to  exercise  care when
determining  whether  drafts  and other  documents  presented  under a Letter of
Credit comply with the terms thereof.  The parties hereto  expressly agree that,
in the  absence  of gross  negligence  or wilful  misconduct  on the part of the
Issuing Bank (as finally determined by a court of competent  jurisdiction),  the
Issuing Bank shall be deemed to have exercised care in each such  determination.
In furtherance of the foregoing and without limiting the generality thereof, the
parties agree that,  with respect to documents  presented  which appear on their
face to be in substantial  compliance with the terms of a Letter of Credit,  the
Issuing Bank may, in its sole  discretion,  either  accept and make payment upon
such documents without responsibility for further  investigation,  regardless of
any notice or information to the contrary,  or refuse to accept and make payment
upon such  documents if such  documents  are not in strict  compliance  with the
terms of such Letter of Credit.



<PAGE>



         (g) Disbursement Procedures. The Issuing Bank shall, promptly following
its receipt thereof,  examine all documents purporting to represent a demand for
payment  under a Letter of Credit.  The Issuing Bank shall  promptly  notify the
Administrative  Agent and the Company by  telephone  (confirmed  by telecopy) of
such demand for payment and whether the Issuing Bank has made or will make an LC
Disbursement  thereunder;  provided  that any failure to give or delay in giving
such notice shall not relieve the Company of its  obligation  to  reimburse  the
Issuing Bank and the U.S. Lenders with respect to any such LC Disbursement.

         (h)  Interim   Interest.   If  the  Issuing  Bank  shall  make  any  LC
Disbursement,  then,  unless the Company shall reimburse such LC Disbursement in
full on the date such LC  Disbursement  is made, the unpaid amount thereof shall
bear interest,  for each day from and including the date such LC Disbursement is
made to but excluding the date that the Company reimburses such LC Disbursement,
at the rate per annum then  applicable  to ABR U.S.  Revolving  Loans;  provided
that, if the Company fails to reimburse such LC  Disbursement  when due pursuant
to paragraph (e) of this  Section,  then Section  2.11(d) shall apply.  Interest
accrued pursuant to this paragraph shall be for the account of the Issuing Bank,
except that interest accrued on and after the date of payment by any U.S. Lender
pursuant to paragraph (e) of this Section to reimburse the Issuing Bank shall be
for the account of such U.S. Lender to the extent of such payment.

         (i)  Replacement  of the Issuing Bank. The Issuing Bank may be replaced
at any time by written agreement among the Company,  the  Administrative  Agent,
the replaced  Issuing Bank and the successor  Issuing Bank.  The  Administrative
Agent shall notify the U.S. Lenders of any such replacement of the Issuing Bank.
At the time any such replacement shall become  effective,  the Company shall pay
all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to
Section 2.10(b). From and after the effective date of any such replacement,  (i)
the  successor  Issuing  Bank shall have all the rights and  obligations  of the
Issuing Bank under this Agreement with respect to Letters of Credit to be issued
thereafter and (ii) references herein to the term "Issuing Bank" shall be deemed
to refer to such successor or to any previous Issuing Bank, or to such successor
and all  previous  Issuing  Banks,  as the  context  shall  require.  After  the
replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain
a party hereto and shall  continue to have all the rights and  obligations of an
Issuing Bank under this Agreement with respect to Letters of Credit issued by it
prior to such replacement, but shall not be required to issue additional Letters
of Credit.



<PAGE>



         (j) Cash Collateralization.  If any Event of Default shall occur and be
continuing,  on the  Business  Day that the  Company  receives  notice  from the
Administrative  Agent or the Required  Lenders (or, if the maturity of the Loans
has been accelerated,  Lenders with LC Exposure representing greater than 50% of
the total LC Exposure) demanding the deposit of cash collateral pursuant to this
paragraph,  the  Company  shall  deposit in an account  with the  Administrative
Agent,  in the  name of the  Administrative  Agent  and for the  benefit  of the
Lenders,  an amount in cash  equal to the LC  Exposure  as of such date plus any
accrued and unpaid  interest  thereon;  provided that the  obligation to deposit
such cash collateral shall become effective immediately,  and such deposit shall
become immediately due and payable,  without demand or other notice of any kind,
upon the  occurrence  of any  Event  of  Default  with  respect  to the  Company
described in clause (h) or (i) of Article VII. Such deposit shall be held by the
Administrative  Agent as  collateral  for the  payment  and  performance  of the
obligations of the Company under this Agreement.  The Administrative 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,  which  investments  shall  be made at the  option  and  sole
discretion of the  Administrative  Agent and at the Company's  risk and expense,
such  deposits  shall not bear  interest.  Interest or profits,  if any, on such
investments  shall  accumulate in such account.  Moneys in such account shall be
applied  by the  Administrative  Agent  to  reimburse  the  Issuing  Bank for LC
Disbursements  for which it has not been  reimbursed  and,  to the extent not so
applied, shall be held for the satisfaction of the reimbursement  obligations of
the Company  for the LC  Exposure at such time or, if the  maturity of the Loans
has been  accelerated  (but  subject to the consent of Lenders  with LC Exposure
representing  greater than 50% of the total LC Exposure),  be applied to satisfy
other  obligations  of the  Company  under  this  Agreement.  If the  Company is
required to provide an amount of cash  collateral  hereunder  as a result of the
occurrence  of an Event of  Default,  such  amount (to the extent not applied as
aforesaid) shall be returned to the Company within three Business Days after all
Events of Default have been cured or waived.



                                   ARTICLE III

                         Representations and Warranties

         Each Borrower represents and warrants to the Lenders that:

         SECTION  3.01.  Organization;  Powers.  Each  of the  Borrower  and the
Subsidiaries  is duly  organized,  validly  existing  and in good  standing,  if
applicable,  under the laws of the  jurisdiction  of its  organization,  has all
requisite  power and authority to carry on its business as conducted on the date
hereof and is  qualified  to do business  in, and is in good  standing in, every
jurisdiction where such qualification is required, except in each case where the
failure to do so,  individually  or in the  aggregate,  could not  reasonably be
expected to result in a Material Adverse Effect.

         SECTION  3.02.  Authorization;  Enforceability.  The  Transactions  are
within the Company's (and, as applicable, each Borrowing Subsidiary's) corporate
or partnership  powers and have been duly authorized by all necessary  corporate
or partnership and, if required,  stockholder or partner action.  This Agreement
has  been  duly  executed  and  delivered  by the  Company  and  each  Borrowing
Subsidiary  (other than any Borrowing  Subsidiary that has become a party hereto
by executing and delivering a Borrowing Subsidiary  Agreement) and constitutes a
legal,  valid and binding  obligation  of the  Company  and each such  Borrowing
Subsidiary,  and each  Borrowing  Subsidiary  Agreement (as to which a Borrowing
Subsidiary  Termination  has not become  effective)  has been duly  executed and
delivered  by the  Company  and  the  Borrowing  Subsidiary  party  thereto  and
constitutes a legal,  valid and binding  obligation of the Borrowing  Subsidiary
thereunder, in each case enforceable in accordance with its terms.

         SECTION 3.03. Governmental  Approvals;  No Conflicts.  The Transactions
(a) do not require any consent or approval of,  registration  or filing with, or
any other  action  by,  any  Governmental  Authority,  except  such as have been
obtained or made and are in full force and effect,  except  where the failure to
obtain such  consent or approval or make such  registration  or filing could not
reasonably  be expected  to result in a Material  Adverse  Effect,  (b) will not
violate  any  applicable  law or  regulation  or the  charter,  by-laws or other
organizational  documents  of any  Borrower  or any  order  of any  Governmental
Authority,  (c) will not  violate  or result in a default  under any  indenture,
agreement or other instrument  binding upon any Borrower or its assets,  or give
rise to a right  thereunder  to require any payment to be made by any  Borrower,
except that the repayment of Indebtedness under the Existing Credit Agreement of
Fort  Howard may  constitute  or result in a Purchase  Termination  Event and an
Early  Amortization  Event under the  Receivable  Sales  Agreement,  dated as of
September 28, 1995, among Fort Howard,  as seller and servicer,  and FHC Funding
Corporation  and  the  related  pooling  and  servicing   agreements  and  trust
certificates  (the "FHC Facility")  (which means that receivables will no longer
be sold under the FHC Facility and, upon collection of receivables already sold,
the FHC  Facility  will  terminate)  and (d) will not result in the  creation or
imposition of any Lien on any asset of the Company or any of its Subsidiaries.


<PAGE>



         SECTION 3.04. Financial Condition; No Material Adverse Change. (a) Each
of the  Company  and Fort  Howard has  heretofore  furnished  to the Lenders its
consolidated  balance sheet and statements of income,  stockholders'  equity and
cash  flows  (i) as of and for the  fiscal  years  ended  (A) in the case of the
Company,  December 25, 1994,  December 31, 1995, and December 29, 1996, reported
on by Coopers & Lybrand L.L.P.,  independent public accountants,  and (B) in the
case of Fort Howard,  December 31,  1994,  1995 and 1996,  reported on by Arthur
Andersen LLP, independent public accountants,  and (ii) as of and for the fiscal
quarter and the portion of the fiscal year ended (A) in the case of the Company,
March 30,  1997,  and (B) in the case of Fort Howard,  March 31,  1997,  in each
case, certified by the appropriate  Financial Officer. Such financial statements
present fairly, in all material respects,  the financial position and results of
operations and cash flows of the Company and its  consolidated  Subsidiaries and
Fort Howard and its  consolidated  subsidiaries,  as the case may be, as of such
dates and for such periods in accordance  with GAAP,  subject to year-end  audit
adjustments and the absence of footnotes in the case of the statements  referred
to in clause (ii) above.

         (b) The Company has  heretofore  furnished to the Lenders its unaudited
pro forma consolidated  balance sheet and statements of income as of and for the
fiscal  quarter  ended March 30, 1997.  Such balance  sheet was prepared  giving
effect to the Merger as if it had occurred on such date and such other financial
statements  were  prepared  giving effect to the Merger as if it had occurred on
January 1, 1997. Such pro forma financial  statements have been prepared in good
faith by the  Company,  based  on  assumptions  believed  by the  Company  to be
reasonable on the date hereof and at the time made,  and present fairly on a pro
forma basis (subject to normal  year-end  adjustments)  the estimated  financial
position and operations of the Company and its  Subsidiaries as of the dates set
forth above,  assuming  that the Merger had  actually  occurred on the dates set
forth above.

         (c) Since December 29, 1996,  there has been no material adverse change
in the business,  assets,  results of  operations or financial  condition of the
Company and its Subsidiaries (including Fort Howard and its subsidiaries), taken
as a whole.

         SECTION 3.05.  Properties.  (a) Each Borrower and its  subsidiaries has
good  title to,  or valid  leasehold  interests  in,  all its real and  personal
property  material  to its  business,  except  for  defects in title that do not
interfere with its ability to conduct its business as currently  conducted or to
utilize  such  properties  for their  intended  purposes  and except for defects
which,  individually  or in the  aggregate,  could not reasonably be expected to
result in a Material Adverse Effect.

         (b) Each Borrower and its subsidiaries owns, or is licensed to use, all
trademarks,  tradenames,  copyrights,  patents and other  intellectual  property
material  to  its  business,  and  the  use  thereof  by  the  Company  and  its
Subsidiaries  does not infringe upon the rights of any other Person,  except for
any  such  infringements  that,  individually  or in the  aggregate,  could  not
reasonably be expected to result in a Material Adverse Effect.

         SECTION 3.06. Litigation and Environmental  Matters. (a) Except for the
Disclosed Matters,  there are no actions,  suits or proceedings by or before any
arbitrator or Governmental Authority pending against or, to the knowledge of any
Borrower,   threatened   against  or  affecting  any  Borrower  or  any  of  its
subsidiaries  (i) as to which there is a  reasonable  possibility  of an adverse
determination and that, if adversely  determined,  could reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect or (ii)
that  involve  this  Agreement,   any  Borrowing  Subsidiary  Agreement  or  the
Transactions.



<PAGE>



         (b) Except for the  Disclosed  Matters and except  with  respect to any
other matters that,  individually  or in the aggregate,  could not reasonably be
expected to result in a Material Adverse Effect, neither any Borrower nor any of
its  subsidiaries  (i) has  failed to comply  with any  Environmental  Law or to
obtain,  maintain or comply with any permit,  license or other approval required
under any  Environmental  Law,  (ii) has  become  subject  to any  Environmental
Liability  or (iii)  has  received  notice  of any  claim  with  respect  to any
Environmental Liability.

         SECTION 3.07.  Compliance with Laws and  Agreements.  Each Borrower and
its  subsidiaries is in compliance with all laws,  regulations and orders of any
Governmental  Authority  applicable  to it or its property  and all  indentures,
agreements and other instruments  binding upon it or its property,  except where
the failure to do so, individually or in the aggregate,  could not reasonably be
expected to result in a Material Adverse Effect.  No Default has occurred and is
continuing.

         SECTION  3.08.  Investment  and  Holding  Company  Status.  Neither any
Borrower nor any of its  subsidiaries is (a) an "investment  company" as defined
in, or subject to regulation under, the Investment  Company Act of 1940 or (b) a
"holding  company" as defined  in, or subject to  regulation  under,  the Public
Utility Holding Company Act of 1935.

         SECTION  3.09.  Taxes.  Each Borrower and its  subsidiaries  has timely
filed or caused to be filed all Tax returns  and  reports  required to have been
filed and has paid or caused to be paid all Taxes  required to have been paid by
it,  except (a) Taxes that are being  contested  as to the fact or the amount of
liability,  the validity of the tax or  otherwise  in good faith by  appropriate
proceedings and for which such Borrower or such Subsidiary,  as applicable,  has
set aside on its books  reserves  or other  appropriate  provisions,  if any, as
shall be required in conformity  with GAAP or (b) to the extent that the failure
to do so could not  reasonably  be  expected  to result  in a  Material  Adverse
Effect.

         SECTION  3.10.  ERISA.  No ERISA Event has  occurred  or is  reasonably
expected to occur that, when taken together with all other such ERISA Events for
which liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect. As of the date of the most recent financial
statements  reflecting  the following  amounts,  the amount by which the present
value of all accumulated  benefit obligations of all underfunded Plans (based on
the assumptions used for purposes of Statement of Financial Accounting Standards
No. 87)  exceeds  the fair  market  value of the assets of all such Plans  (such
excess being referred to as the "Shortfall") would not reasonably be expected to
result  in a  Material  Adverse  Effect if the  Company  or any  Subsidiary  was
immediately required to fully fund such Shortfall.

         SECTION 3.11. Disclosure. Neither the Information Memorandum nor any of
the  other  reports,   financial  statements,   certificates  or  other  written
information  furnished  by or on behalf of any  Borrower  to the  Administrative
Agent or any Lender in connection  with the negotiation of this Agreement or any
Borrowing  Subsidiary  Agreement or delivered hereunder or thereunder,  contains
any material  misstatement of fact or omits to state any material fact necessary
to make the statements  therein,  in the light of the circumstances  under which
they were made,  not  misleading;  provided  that,  with  respect  to  projected
financial  information,  the Borrowers  represent only that such information was
prepared in good faith based upon  assumptions  believed to be reasonable at the
time.

         SECTION 3.12. Federal  Reserve  Regulations. (a)  Neither  the  Company
nor  any  of  the Subsidiaries  is engaged  principally,  or  as one of its more
important  activities,  in the  business of extending credit for the purposes of
buying or carrying Margin Stock.



<PAGE>



         (b) No part of the proceeds of any Loan will be used,  whether directly
or indirectly,  and whether  immediately,  incidentally  or ultimately,  for any
purpose  that  entails  a  violation  of,  or that  is  inconsistent  with,  the
provisions of the Regulations of the Board, including Regulation G, T, U or X.

         SECTION 3.13. Designated Senior Indebtedness.The Obligations constitute
"Designated  Senior Indebtedness"  under  and  as  defined  in  the  Fort Howard
Subordinated Note Indenture.


                                   ARTICLE IV

                                   Conditions

         SECTION 4.01.  Effective  Date. The  obligations of the Lenders to make
Loans hereunder  shall not become  effective until the date on which each of the
following conditions is satisfied (or waived in accordance with Section 10.02):

                  (a) The  Administrative  Agent  (or its  counsel)  shall  have
         received  from each  party  hereto  either  (i) a  counterpart  of this
         Agreement  signed  on  behalf of such  party or (ii)  written  evidence
         satisfactory to the  Administrative  Agent (which may include  telecopy
         transmission  of a signed  signature page of this  Agreement) that such
         party has signed a counterpart of this Agreement.

                  (b) The  Administrative  Agent shall have  received  favorable
         written opinions (addressed to the Administrative Agent and the Lenders
         and dated the Effective  Date) of McGuire Woods Battle & Boothe LLP and
         Wachtell,  Lipton,  Rosen & Katz,  counsel for the  Company,  Robert A.
         Imig,  Jr.,  Managing  Counsel  for Fort  Howard,  Shearman & Sterling,
         counsel for Fort Howard, McGuire Woods Battle & Boothe LLP, counsel for
         James River Services,  and De Brauw Blackstone  Westbroek,  counsel for
         Jamont,  substantially  in the form of Exhibits B-1, B-2, B-3, B-4, B-5
         and B-6, respectively,  and covering such other matters relating to the
         Borrowers,  this Agreement or the  Transactions as the Required Lenders
         shall reasonably request.  The Borrowers hereby request such counsel to
         deliver such opinions.

                  (c)  The   Administrative   Agent  shall  have  received  such
         documents and certificates as the  Administrative  Agent or its counsel
         may reasonably request relating to the organization, existence and good
         standing of the Borrowers,  the  authorization  of the Transactions and
         any other legal matters  relating to the  Borrowers,  this Agreement or
         the Transactions,  all in form and substance reasonably satisfactory to
         the Administrative Agent and its counsel.

                  (d) The Merger shall have been  consummated in accordance with
         the Merger  Agreement and  applicable  law, all requisite  Governmental
         Authorities  and third  parties shall have approved or consented to the
         Transactions,  except  where the  failure to obtain  such  approval  or
         consent  could not  reasonably  be  expected  to  result in a  Material
         Adverse Effect,  and there shall be no governmental or judicial action,
         actual or threatened, that has or could have a reasonable likelihood of
         restraining,  preventing  or  imposing  burdensome  conditions  on  the
         Transactions.



<PAGE>



                  (e) Concurrently with the first Borrowing, the Borrowers shall
         have repaid, or made adequate provision to repay, in full the principal
         of all loans  outstanding,  interest  thereon and other amounts due and
         payable under the Existing  Credit  Agreements  and the  Administrative
         Agent shall have received duly executed documentation either evidencing
         or necessary for (i) the termination of each Existing Credit Agreement,
         (ii) the  cancelation  of all  commitments  thereunder  and  (iii)  the
         release of all Liens granted by any Borrower or any subsidiary  thereof
         in connection therewith.

                  (f)  The   Administrative   Agent   shall   have   received  a
         certificate,  dated the Effective Date and signed by the Chairman,  the
         President,  a Vice  President  or a Financial  Officer of the  Company,
         confirming  compliance  with the conditions set forth in paragraphs (a)
         and (b) of Section 4.02.

                  (g) The Administrative  Agent shall have received all fees and
         other  amounts due and payable  hereunder on or prior to the  Effective
         Date,  including,  to the extent invoiced,  reimbursement or payment of
         all  out-of-pocket  expenses  required to be  reimbursed or paid by the
         Company hereunder.

The  Administrative  Agent  shall  notify  the  Company  and the  Lenders of the
Effective Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing,  the obligations of the Lenders to make Loans hereunder shall not
become effective unless each of the foregoing conditions is satisfied (or waived
pursuant  to  Section  10.02) at or prior to 3:00 p.m.,  New York City time,  on
February  28, 1998 (and,  in the event such  conditions  are not so satisfied or
waived, the Commitments shall terminate at such time).

         SECTION 4.02. Each Credit Event.  The obligation of each Lender to make
a Loan on the  occasion  of any  Borrowing,  and of the  Issuing  Bank to issue,
amend,  renew or extend any Letter of Credit,  is subject to the satisfaction of
the following conditions:

                  (a) The  representations  and  warranties of the Borrowers set
         forth in this Agreement shall be true and correct on and as of the date
         of such  Borrowing  or the  date of  issuance,  amendment,  renewal  or
         extension  of  such  Letter  of  Credit,  except  to  the  extent  such
         representations  and warranties  expressly relate to an earlier date in
         which  case  such  representations  and  warranties  shall  be true and
         correct on and as of such earlier date.

                  (b) At the time of and immediately after giving effect to such
         Borrowing  or the  issuance,  amendment,  renewal or  extension of such
         Letter of Credit, no Default shall have occurred and be continuing.

Each Borrowing and each issuance, amendment, renewal or extension of a Letter of
Credit  shall be deemed to  constitute  a  representation  and  warranty  by the
Company  and the  applicable  Borrower  on the date  thereof  as to the  matters
specified in paragraphs (a) and (b) of this Section.

         SECTION 4.03. Each Borrowing Subsidiary Credit Event. The obligation of
each Lender to make Loans  hereunder to any Borrowing  Subsidiary that becomes a
party  hereto after the  Effective  Date is subject to the  satisfaction  of the
following conditions:

                  (a) The  Administrative  Agent  (or its  counsel)  shall  have
         received  from each  party  thereto  either (i) a  counterpart  of such
         Borrowing  Subsidiary's  Borrowing Subsidiary Agreement or (ii) written
         evidence  satisfactory to the  Administrative  Agent (which may include
         telecopy  transmission  of a signed  signature  page thereof) that such
         party has signed a counterpart of such Borrowing Subsidiary Agreement.



<PAGE>



                  (b) The  Administrative  Agent shall have received a favorable
         written opinion of counsel for such Borrowing Subsidiary (which counsel
         shall  be   reasonably   acceptable  to  the   Administrative   Agent),
         substantially in the form of Exhibit C, and covering such other matters
         relating  to such  Borrowing  Subsidiary  or its  Borrowing  Subsidiary
         Agreement as the Required Lenders shall reasonably request.

                  (c)  The   Administrative   Agent  shall  have  received  such
         documents and certificates as the  Administrative  Agent or its counsel
         may reasonably request relating to the organization, existence and good
         standing  of  such  Borrowing  Subsidiary,  the  authorization  of  the
         Transactions  relating to such Borrowing Subsidiary and any other legal
         matters relating to such Borrowing Subsidiary, its Borrowing Subsidiary
         Agreement or such Transactions,  all in form and substance satisfactory
         to the Administrative Agent and its counsel.


                                    ARTICLE V

                              Affirmative Covenants

         Until the Commitments have expired or been terminated and the principal
of and interest on each Loan and all fees payable hereunder shall have been paid
in full and all Letters of Credit  shall have expired or  terminated  and all LC
Disbursements  shall have been  reimbursed,  each Borrower  covenants and agrees
with the Lenders that:

         SECTION  5.01. Financial Statements and Other Information.  The Company
will furnish to the Administrative Agent and each Lender:

                  (a) within 105 days after the end of each  fiscal  year of the
         Company,  its audited consolidated balance sheet and related statements
         of operations, stockholders' equity and cash flows as of the end of and
         for such  year,  setting  forth in each  case in  comparative  form the
         figures for the  previous  fiscal  year,  all  reported on by Coopers &
         Lybrand L.L.P., or other independent  public  accountants of recognized
         national standing  (without a "going concern" or like  qualification or
         exception and without any qualification or exception as to the scope of
         such audit) to the effect that such consolidated  financial  statements
         present  fairly in all material  respects the  financial  condition and
         results of operations of the Company and its consolidated  Subsidiaries
         on a consolidated basis in accordance with GAAP consistently applied;

                  (b)  within 60 days  after the end of each of the first  three
         fiscal  quarters of each fiscal year of the Company,  its  consolidated
         balance  sheet and  related  statements  of  operations,  stockholders'
         equity and cash flows as of the end of and for such fiscal  quarter and
         the then elapsed portion of the fiscal year, setting forth in each case
         in comparative form the figures for the corresponding period or periods
         of  (or,  in the  case  of the  balance  sheet,  as of the  end of) the
         previous fiscal year, all certified by one of its Financial Officers as
         presenting fairly in all material respects the financial  condition and
         results of operations of the Company and its consolidated  Subsidiaries
         on a consolidated  basis in accordance with GAAP consistently  applied,
         subject  to  normal  year-end  audit  adjustments  and the  absence  of
         footnotes;



<PAGE>



                  (c)  concurrently  with any delivery of  financial  statements
         under clause (a) or (b) above, a certificate of a Financial  Officer of
         the Company (i) certifying as to whether a Default has occurred and, if
         a Default has occurred,  specifying the details  thereof and any action
         taken or proposed to be taken with respect thereto,  (ii) setting forth
         reasonably detailed calculations demonstrating compliance with Sections
         6.01,  6.02 and 6.08 and (iii) stating  whether any material  change in
         GAAP or in the  application  thereof has occurred since the date of the
         audited financial  statements  referred to in Section 3.04(a) affecting
         the Company and, if any such change has occurred, specifying the effect
         of  such  change  on  the  financial   statements   accompanying   such
         certificate;

                  (d)  concurrently  with any delivery of  financial  statements
         under  clause (a) above,  a  certificate  of the  accounting  firm that
         reported on such  financial  statements  stating  whether they obtained
         knowledge  during the  course of their  examination  of such  financial
         statements  of any  Default  (which  certificate  may be limited to the
         extent required by accounting rules or guidelines);

                  (e) promptly after the same become publicly available,  copies
         of all periodic and other reports,  proxy  statements and  registration
         statements  (other  than  the  exhibits  thereto  and any  registration
         statement  or Form S-8 or its  equivalent)  filed by the Company or any
         Subsidiary  with  the  Securities  and  Exchange  Commission,   or  any
         Governmental  Authority  succeeding  to any or all of the  functions of
         said  Commission,   or  with  any  national  securities  exchange,   or
         distributed by the Company to its stockholders  generally,  as the case
         may be; and

                  (f)  promptly  following  any  request  therefor,  such  other
         information  regarding the operations,  business  affairs and financial
         condition  of the Company or any  Subsidiary,  or  compliance  with the
         terms of this  Agreement,  as the  Administrative  Agent, or any Lender
         through the Administrative Agent, may reasonably request.

         SECTION 5.02.  Notices of Material Events.  Promptly upon any Financial
Officer or other executive officer obtaining  knowledge  thereof,  each Borrower
will furnish to the  Administrative  Agent and each Lender written notice of the
following:

                  (a) the occurrence of any Default;

                  (b)  the  filing  or  commencement  of  any  action,  suit  or
         proceeding  by or  before  any  arbitrator  or  Governmental  Authority
         against or affecting  such  Borrower or any  subsidiary  thereof  where
         there is a reasonable possibility of an adverse determination and that,
         if adversely  determined,  could  reasonably be expected to result in a
         Material Adverse Effect;

                  (c) the occurrence of any ERISA Event that,  alone or together
         with any other ERISA Events that have  occurred,  could  reasonably  be
         expected to result in liability of the Company and its  Subsidiaries in
         an aggregate amount exceeding $25,000,000; and

                  (d) any other development that results in, or could reasonably
         be expected to result in, a Material Adverse Effect.

Each notice  delivered under this Section shall be accompanied by a statement of
a Financial  Officer or other executive officer of the Company setting forth the
details of the event or  development  requiring such notice and any action taken
or proposed to be taken with respect thereto.



<PAGE>



         SECTION 5.03. Existence;  Conduct of Business.  Each Borrower will, and
will  cause  each of its  subsidiaries  to,  do or cause  to be done all  things
necessary  to  preserve,  renew  and keep in full  force  and  effect  its legal
existence and the rights, licenses,  permits, privileges and franchises material
to the conduct of its business  except,  in the case of any such subsidiary that
is not a Borrowing  Subsidiary,  where the failure to do so could not reasonably
be expected to result in a Material Adverse Effect;  provided that the foregoing
shall  not  prohibit  any  merger,  consolidation,  liquidation  or  dissolution
permitted under Section 6.03.

         SECTION 5.04.  Payment of  Obligations.  Each Borrower  will,  and will
cause each of its subsidiaries to, pay its obligations,  including Taxes, before
the same shall become delinquent or in default,  except where (a) the failure to
pay such amount could not reasonably be expected to result in a Material Adverse
Effect or (b) the validity or amount thereof is being contested in good faith by
appropriate  proceedings  and (i) such Borrower or such subsidiary has set aside
on its books  reserves  or other  appropriate  provisions,  if any,  as shall be
required in  conformity  with GAAP and (ii) the failure to make payment  pending
such contest could not  reasonably  be expected to result in a Material  Adverse
Effect.

         SECTION 5.05. Maintenance of Properties; Insurance. Each Borrower will,
and will cause each of its  subsidiaries  to, (a) keep and maintain all property
material to the conduct of its  business in good  working  order and  condition,
ordinary wear and tear excepted,  and (b) maintain,  with financially  sound and
reputable  insurance companies (or through a system or systems of self-insurance
in accordance  with  customary  practices for companies in similar  businesses),
insurance in such amounts and against such risks as are  customarily  maintained
by companies engaged in the same or similar businesses  operating in the same or
similar locations.

         SECTION 5.06. Books and Records; Inspection Rights. Each Borrower will,
and will cause each of its  subsidiaries  to,  keep  proper  books of record and
account  in  accordance  with  GAAP (or,  in the case of a  Foreign  Subsidiary,
generally accepted accounting  principles in the jurisdiction of organization of
such  Foreign  Subsidiary).  Each  Borrower  will,  and will  cause  each of its
subsidiaries  to, permit any  representatives  designated by the  Administrative
Agent or any Lender,  upon  reasonable  prior  notice,  to visit and inspect its
properties,  to examine and make  extracts  from its books and  records,  and to
discuss its affairs,  finances and condition  with its officers and  independent
accountants, all at such reasonable times and as often as reasonably requested.

         SECTION 5.07.  Compliance with Laws. Each Borrower will, and will cause
each of its subsidiaries to, comply with all laws, rules, regulations and orders
of any Governmental Authority applicable to it or its property, except where the
failure to do so,  individually  or in the  aggregate,  could not  reasonably be
expected to result in a Material Adverse Effect.

         SECTION  5.08.  Use of Proceeds and Letters of Credit.  The proceeds of
the  Loans  will be used only for  general  corporate  purposes.  No part of the
proceeds  of any Loan will be used,  whether  directly  or  indirectly,  for any
purpose  that  entails  a  violation  of any of the  Regulations  of the  Board,
including  Regulations  G, U and X.  Letters  of Credit  will be issued  only to
support obligations of the Company incurred in the ordinary course of business.




<PAGE>



                                   ARTICLE VI

                               Negative Covenants

         Until the  Commitments  have expired or terminated and the principal of
and interest on each Loan and all fees payable  hereunder have been paid in full
and all Letters of Credit have expired or  terminated  and all LC  Disbursements
shall have been reimbursed,  each Borrower covenants and agrees with the Lenders
that:

         SECTION 6.01.  Indebtedness  and Preferred  Stock of  Subsidiaries.  No
Borrowing  Subsidiary  will,  and the Company will not permit any Subsidiary to,
create,  incur,  assume or permit to exist any  Indebtedness or Preferred Stock,
except:

                 (a)  Indebtedness  (other  than  the  Fort  Howard  Bonds)  and
         Preferred  Stock  outstanding  on the  date  hereof  and set  forth  on
         Schedule 6.01(a), and any extensions,  renewals and replacements of any
         such   Indebtedness  or  Preferred  Stock  that  do  not  increase  the
         outstanding  principal  amount  (or,  in the case of  Preferred  Stock,
         liquidation value) thereof;

                 (b) Indebtedness created hereunder;

                 (c) [Intentionally Omitted];

                 (d) Indebtedness issued to the Company or any other Subsidiary;

                 (e) Guarantees of Indebtedness of any other Subsidiary;

                 (f)  Indebtedness   (including    Capital  Lease   Obligations)
         incurred  by any  Subsidiary  after the  Effective  Date to finance the
         acquisition,  construction  or  improvement  of any  real  property  or
         equipment, and any extension,  renewal or replacement thereof that does
         not  increase  the  aggregate  outstanding  principal  amount  thereof,
         provided that (i) the Indebtedness incurred shall not exceed the lesser
         of the cost and the fair market value of the asset financed thereby and
         (ii)  such   Indebtedness   is  incurred  within  180  days  after  the
         acquisition, construction or improvement of the asset financed thereby;

                  (g)   Indebtedness   incurred   pursuant   to  any   Permitted
Receivables Financing; and

                  (h) other  Indebtedness  (including the Fort Howard Bonds) and
         Preferred  Stock in an aggregate  principal  amount (or, in the case of
         Preferred Stock,  liquidation  value),  when added to the amount of (i)
         all Indebtedness secured by Liens permitted by Section 6.02(i) and (ii)
         the  aggregate  amount of cash and cash  equivalents  securing  Hedging
         Obligations   pursuant  to  Section  6.02(c),   not  exceeding  10%  of
         Consolidated   Net  Tangible   Assets  as  shown  on  the  most  recent
         consolidated balance sheet of the Company delivered pursuant to Section
         3.04(b), 5.01(a) or 5.01(b), as the case may be.



<PAGE>



         SECTION  6.02.  Liens.  The Company  will not,  and will not permit any
Subsidiary to, create, incur, assume or permit to exist any Lien on any property
or asset now owned or hereafter  acquired by it (including  any capital stock or
Indebtedness  of a  Subsidiary),  or  assign  or sell  any  income  or  revenues
(including accounts receivable) or rights in respect of any thereof, except:

                  (a) Permitted Encumbrances;

                  (b) any Lien on any  property  or asset of the  Company or any
         Subsidiary  existing on the date hereof and set forth in Schedule 6.02;
         provided  that (i) such Lien shall not apply to any other  property  or
         asset of the Company or any  Subsidiary and (ii) such Lien shall secure
         only  those  obligations  which  it  secures  on the  date  hereof  and
         extensions, renewals, refinancings and replacements thereof that do not
         increase the outstanding principal amount thereof;

                  (c)  Liens  on cash  and  cash  equivalents  securing  Hedging
         Obligations;  provided  that  the  aggregate  amount  of cash  and cash
         equivalents subject to such Liens may at no time exceed $100,000,000;

                  (d) Liens to secure obligations owing by a  Subsidiary  to the
         Company or to another Subsidiary;

                  (e)  Liens in favor of the  United  States of  America  or any
         state thereof,  or any department,  agency or political  subdivision of
         the United State of America or any state  thereof,  to secure  partial,
         progress,  advance  or  other  payments  pursuant  to any  contract  or
         statute;

                  (f)  Liens in favor of any  customer  arising  in  respect  of
         partial,  progress,  advance or other  payments made by or on behalf of
         such  customer  for goods  produced  for or  services  rendered to such
         customer in the ordinary course of business not exceeding the amount of
         such payments;

                  (g) Liens to secure Indebtedness permitted by Section 6.01(f),
         provided  that (i) such Liens are  incurred  within 180 days after such
         acquisition  (or  construction)  or are  incurred  to extend,  renew or
         refinance  Liens  incurred  within such 180-day  period,  and (ii) such
         Liens do not apply to any other  property  or assets of the  Company or
         any Subsidiary;

                  (h) Liens on accounts  receivable  financed in connection with
         any Permitted Receivables Financing; and

                  (i) other Liens to secure  Indebtedness  if the sum of (i) the
         aggregate amount of all Indebtedness secured by Liens that would not be
         permitted but for this clause (i),  plus (ii) the  aggregate  amount of
         cash and cash  equivalents  securing  Hedging  Obligations  pursuant to
         clause  (c),  plus  (iii)  the  aggregate  amount of  Indebtedness  and
         Preferred Stock  outstanding  under Section 6.01(h) does not exceed 10%
         of  Consolidated  Net  Tangible  Assets  as shown  on the  most  recent
         consolidated balance sheet of the Company delivered pursuant to Section
         3.04(b), 5.01(a) or 5.01(b), as the case may be.



<PAGE>



         SECTION 6.03.  Fundamental  Changes. (a) The Company will not, and will
not permit any of its  Subsidiaries to, merge into or consolidate with any other
Person,  or permit  any other  Person to merge into or  consolidate  with it, or
sell, transfer, lease or otherwise dispose of (in one transaction or in a series
of transactions)  all or  substantially  all of its assets (whether now owned or
hereafter  acquired),  or  liquidate or  dissolve,  except that,  if at the time
thereof  and  immediately  after  giving  effect  thereto no Default  shall have
occurred  and be  continuing,  (i) any Person  may merge  into the  Company in a
transaction in which the Company is the surviving  corporation,  (ii) any Person
may merge into any Subsidiary in a transaction in which the surviving  entity is
a Wholly Owned  Subsidiary,  (iii) any Subsidiary may sell,  transfer,  lease or
otherwise  dispose of its assets to the Company or to a Wholly Owned  Subsidiary
and (iv) any Subsidiary may merge into or consolidate  with another  Person,  or
may  liquidate or dissolve,  if the Company  determines  in good faith that such
merger,  consolidation,  liquidation  or dissolution is in the best interests of
the Company and is not materially  disadvantageous to the Lenders; provided that
a Borrowing Subsidiary may not merge, consolidate, liquidate or dissolve unless,
in addition to the foregoing  conditions,  the surviving  entity,  or the entity
into which such Borrowing  Subsidiary  liquidates or dissolves,  is or becomes a
Borrower and assumes all the obligations of such Borrowing  Subsidiary hereunder
and under its Borrowing Subsidiary Agreement (if any).

         (b) The Company will not,  and will not permit any of its  Subsidiaries
to, engage to any material  extent in any business other than  businesses of the
type  conducted  by the  Company  and its  Subsidiaries  on the date  hereof and
businesses reasonably related thereto.

         SECTION 6.04.  Transactions with Affiliates.  The Company will not, and
will not permit any of its Subsidiaries  to, sell,  lease or otherwise  transfer
any property or assets to, or purchase,  lease or otherwise acquire any property
or assets from, or otherwise engage in any other  transactions  with, any of its
Affiliates, except (a) in the ordinary course of business at prices and on terms
and conditions not less favorable to the Company or such  Subsidiary  than could
be  obtained  on an  arm's-length  basis from  unrelated  third  parties and (b)
transactions  between or among the Company and its Wholly Owned Subsidiaries not
involving any other Affiliate.

         SECTION 6.05. Sale and Lease-Back  Transactions.  The Company will not,
and will not permit any of its  Subsidiaries  to, directly or indirectly,  enter
into any  arrangement  with any Person  (other than the Company or a Subsidiary)
whereby it shall sell or transfer any property used in its business, whether now
owned or hereafter acquired, and thereafter rent or lease such property or other
property which it intends to use for  substantially the same purpose or purposes
as the property being sold or transferred,  unless the Lien attributable to such
transaction would be permitted by Section 6.02.

         SECTION 6.06.  Restrictive  Agreements.  The Company will not, and will
not permit any of its Subsidiaries to, directly or indirectly, enter into, incur
or permit to exist any agreement or other arrangement that prohibits,  restricts
or imposes any condition  upon the ability of any Subsidiary to pay dividends or
other  distributions  with  respect to any shares of its capital  stock or other
equity  interests  or to make or repay  loans or  advances to the Company or any
other  Subsidiary  or to  Guarantee  Indebtedness  of the  Company  or any other
Subsidiary;  provided that the  foregoing  shall not apply to  restrictions  and
conditions  (a) imposed by law or by this  Agreement,  (b)  existing on the date
hereof and  identified  on Schedule  6.06 (but shall apply to any  extension  or
renewal of, or any  amendment or  modification  expanding the scope of, any such
restriction or condition) or (c) contained in agreements relating to the sale of
a Subsidiary pending such sale,  provided such restrictions and conditions apply
only to the Subsidiary that is to be sold and such sale is permitted hereunder.

         SECTION  6.07.  Borrowing  Subsidiaries.  The Company will not cease to
own, directly or indirectly,  and Control 100% (other than directors' qualifying
shares) of the ordinary voting power of any Borrowing Subsidiary.



<PAGE>



         SECTION 6.08.  Leverage  Ratio.  The Leverage  Ratio as of the last day
of any fiscal quarter of the Company will not exceed 3.75 to 1.00.


                                   ARTICLE VII

                                Events of Default

         If any of the following events ("Events of Default") shall occur and be
continuing:

                  (a) any Borrower  shall fail to pay any  principal of any Loan
         of such  Borrower,  or the Company shall fail to pay any  reimbursement
         obligation in respect of any LC Disbursement,  in each case when and as
         the same shall become due and payable,  whether at the due date thereof
         or at a date fixed for prepayment thereof or otherwise;

                  (b) any Borrower shall fail to pay any interest on any Loan of
         such  Borrower  or any fee or any other  amount  (other  than an amount
         referred  to in clause (a) of this  Article)  payable by such  Borrower
         under  this  Agreement,  when  and as the  same  shall  become  due and
         payable,  and such failure shall  continue  unremedied  for a period of
         five Business Days;

                  (c) any  representation  or warranty made or deemed made by or
         on behalf of the Company or any  Subsidiary  in or in  connection  with
         this Agreement,  any Borrowing Subsidiary Agreement or any amendment or
         modification  hereof  or  thereof,  or  in  any  report,   certificate,
         financial  statement  or other  document  furnished  pursuant  to or in
         connection with this Agreement,  any Borrowing  Subsidiary Agreement or
         any amendment or  modification  hereof or thereof,  shall prove to have
         been incorrect in any material respect when made or deemed made;

                  (d) the Company shall fail to observe or perform any covenant,
         condition or agreement contained in Section 5.02(a), 5.03 (with respect
         to the Company's existence) or 5.08 or in Article VI;

                  (e)  any  Borrower  shall  fail  to  observe  or  perform  any
         covenant,  condition  or agreement  contained in this  Agreement or any
         Borrowing  Subsidiary  Agreement  (other than those specified in clause
         (a),  (b),  (c), (d) or (m) of this  Article),  and such failure  shall
         continue  unremedied  for a period of 30 days after notice thereof from
         the  Administrative  Agent  (given at the request of any Lender) to the
         Company;

                  (f) the  Company  or any  Subsidiary  shall  fail to make  any
         payment  (whether of principal or interest and regardless of amount) in
         respect of any Material Indebtedness, when and as the same shall become
         due and payable;



<PAGE>



                  (g) any event or  condition  shall  occur that  results in any
         Material  Indebtedness  becoming due prior to its scheduled maturity or
         that  enables or permits  (with or  without  the giving of notice,  the
         lapse  of  time  or  both)  the  holder  or  holders  of  any  Material
         Indebtedness  or any  trustee or agent on its or their  behalf to cause
         any Material  Indebtedness to become due, or to require the prepayment,
         repurchase,  redemption or defeasance  thereof,  prior to its scheduled
         maturity;  provided that this clause (g) shall not apply to (i) secured
         Indebtedness  that becomes due solely as a result of the voluntary sale
         or transfer of the property or assets  securing  such  Indebtedness  or
         solely as a result of the election of the Company or any  Subsidiary to
         redeem such Material  Indebtedness in accordance with its terms or (ii)
         any early termination event under any Hedging Agreement;

                  (h)  an  involuntary  proceeding  shall  be  commenced  or  an
         involuntary   petition   shall  be  filed   seeking  (i)   liquidation,
         reorganization  or  other  relief  in  respect  of the  Company  or any
         Subsidiary or its debts, or of a substantial part of its assets,  under
         any Federal, state or foreign bankruptcy,  insolvency,  receivership or
         similar law now or  hereafter  in effect or (ii) the  appointment  of a
         receiver,  trustee,  custodian,  sequestrator,  conservator  or similar
         official for the Company or any Subsidiary or for a substantial part of
         its assets,  and, in any such case,  such  proceeding or petition shall
         continue  undismissed  for 60 days or an order or decree  approving  or
         ordering any of the foregoing shall be entered;

                  (i)  the  Company  or any  Subsidiary  shall  (i)  voluntarily
         commence  any  proceeding  or file any  petition  seeking  liquidation,
         reorganization  or other  relief  under any  Federal,  state or foreign
         bankruptcy, insolvency, receivership or similar law now or hereafter in
         effect,  (ii)  consent to the  institution  of, or fail to contest in a
         timely and appropriate  manner, any proceeding or petition described in
         clause  (h)  of  this  Article,  (iii)  apply  for  or  consent  to the
         appointment   of  a   receiver,   trustee,   custodian,   sequestrator,
         conservator  or similar  official for the Company or any  Subsidiary or
         for a substantial part of its assets, (iv) file an answer admitting the
         material  allegations  of a  petition  filed  against  it in  any  such
         proceeding,  (v) make a general assignment for the benefit of creditors
         or (vi)  take  any  action  for the  purpose  of  effecting  any of the
         foregoing;

                  (j) the Company or any Subsidiary  shall become unable,  admit
         in writing its  inability  or fail  generally  to pay its debts as they
         become due;

                  (k) one or more  judgments  for the  payment  of  money  in an
         aggregate amount in excess of $25,000,000 shall be rendered against the
         Company,  any Subsidiary or any combination  thereof and the same shall
         remain  unpaid  or  undischarged  for a period of 30  consecutive  days
         during which execution shall not be effectively  stayed,  or any action
         shall be legally  taken by a judgment  creditor  to attach or levy upon
         any  assets  of the  Company  or any  Subsidiary  to  enforce  any such
         judgment;

                  (l) an ERISA Event shall have occurred that, in the opinion of
         the Required  Lenders,  when taken together with all other ERISA Events
         that have occurred, could reasonably be expected to result in liability
         of the Company and its  Subsidiaries in an aggregate  amount that could
         reasonably be expected to result in a Material Adverse Effect;

                  (m) the Company shall fail to observe or perform any covenant,
         condition or agreement contained in Article IX, or the guarantee of the
         Company  hereunder  shall not be (or shall be claimed by any Person not
         to be) valid or in full force and effect; or

                  (n) a Change in Control shall occur;



<PAGE>



then,  and in every such event (other than an event with respect to any Borrower
described  in clause  (h) or (i) of this  Article),  and at any time  thereafter
during the continuance of such event, the  Administrative  Agent may, and at the
request of the Required Lenders shall, by notice to the Company,  take either or
both of the following actions, at the same or different times: (i) terminate the
Commitments, and thereupon the Commitments shall terminate immediately, and (ii)
declare the Loans then  outstanding  to be due and payable in whole (or in part,
in which case any principal not so declared to be due and payable may thereafter
be declared to be due and payable),  and thereupon the principal of the Loans so
declared to be due and payable,  together with accrued  interest thereon and all
fees and other obligations of the Borrowers accrued hereunder,  shall become due
and payable immediately, without presentment, demand, protest or other notice of
any kind,  all of which are hereby waived by each  Borrower;  and in case of any
event  with  respect  to any  Borrower  described  in clause  (h) or (i) of this
Article, the Commitments shall automatically  terminate and the principal of the
Loans then outstanding,  together with accrued interest thereon and all fees and
other obligations of the Borrowers accrued hereunder, shall automatically become
due and payable,  without  presentment,  demand,  protest or other notice of any
kind, all of which are hereby waived by each Borrower.


                                  ARTICLE VIII

                            The Administrative Agent

         Each of the Lenders and the Issuing  Bank hereby  irrevocably  appoints
the Administrative Agent as its agent and authorizes the Administrative Agent to
take such actions on its behalf and to exercise  such powers as are delegated to
the  Administrative  Agent by the terms  hereof,  together with such actions and
powers as are reasonably incidental thereto.

         The bank serving as the  Administrative  Agent hereunder shall have the
same rights and powers in its  capacity as a Lender as any other  Lender and may
exercise the same as though it were not the Administrative  Agent, and such bank
and its Affiliates may accept deposits from, lend money to and generally  engage
in any kind of business with the Company or any  Subsidiary  or other  Affiliate
thereof as if it were not the Administrative Agent hereunder.

         The  Administrative  Agent  shall not have any  duties  or  obligations
except those expressly set forth herein.  Without limiting the generality of the
foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or
other  implied  duties,  regardless  of whether a Default  has  occurred  and is
continuing,  (b) the  Administrative  Agent  shall not have any duty to take any
discretionary action or exercise any discretionary  powers, except discretionary
rights and powers expressly contemplated hereby that the Administrative Agent is
required to exercise in writing by the Required Lenders (or all the Lenders when
required by Section 10.02(b)), and (c) except as expressly set forth herein, the
Administrative  Agent  shall  not have any duty to  disclose,  and  shall not be
liable for the failure to disclose,  any information  relating to the Company or
any of its Subsidiaries  that is communicated to or obtained by the bank serving
as  Administrative  Agent  or  any  of  its  Affiliates  in  any  capacity.  The
Administrative Agent shall not be liable for any action taken or not taken by it
with the consent or at the request of the  Required  Lenders (or all the Lenders
when required by Section 10.02(b)) or in the absence of its own gross negligence
or wilful  misconduct.  The  Administrative  Agent  shall be deemed  not to have
knowledge of any Default unless and until written notice thereof is given to the
Administrative  Agent by a Borrower or a Lender,  and the  Administrative  Agent
shall not be  responsible  for or have any duty to ascertain or inquire into (i)
any statement,  warranty or  representation  made in or in connection  with this
Agreement  or any  Borrowing  Subsidiary  Agreement,  (ii) the  contents  of any
certificate,  report or other document  delivered  hereunder or thereunder or in
connection herewith or therewith,  (iii) the performance or observance of any of
the covenants,  agreements or other terms or conditions  set forth herein,  (iv)
the validity, enforceability,  effectiveness or genuineness of this Agreement or
any  Borrowing  Subsidiary  Agreement  or any  other  agreement,  instrument  or
document,  or (v) the  satisfaction  of any condition set forth in Article IV or
elsewhere herein,  other than to confirm receipt of items expressly  required to
be delivered to the Administrative Agent.


<PAGE>



         The Administrative  Agent shall be entitled to rely upon, and shall not
incur any liability for relying upon, any notice, request, certificate, consent,
statement,  instrument,  document or other writing  believed by it to be genuine
and to have been signed or sent by the proper Person. The  Administrative  Agent
also  may  rely  upon  any  statement  made to it  orally  or by  telephone  and
reasonably  believed by it to be made by the proper Person,  and shall not incur
any liability for relying  thereon.  The  Administrative  Agent may consult with
legal counsel (who may be counsel for any Borrower), independent accountants and
other experts selected by it, and shall not be liable for any reasonable  action
taken or not taken by it in  accordance  with the  advice  of any such  counsel,
accountants or experts.

         The  Administrative  Agent may  perform  any and all of its  duties and
exercise  its  rights  and  powers  by or  through  any one or  more  sub-agents
appointed by the  Administrative  Agent. The  Administrative  Agent and any such
sub-agent  may  perform  any and all of its duties and  exercise  its rights and
powers through their respective Related Parties.  The exculpatory  provisions of
the preceding  paragraphs  shall apply to any such  sub-agent and to the Related
Parties of the Administrative  Agent and any such sub-agent,  and shall apply to
their  respective  activities in connection  with the  syndication of the credit
facilities provided for herein as well as activities as Administrative Agent.

         Subject to the appointment and acceptance of a successor Administrative
Agent as provided in this paragraph,  the Administrative Agent may resign at any
time by notifying the Lenders,  the Issuing Bank and the Company.  Upon any such
resignation, the Required Lenders shall have the right, in consultation with the
Company, to appoint a successor. If no successor shall have been so appointed by
the Required  Lenders and shall have  accepted such  appointment  within 30 days
after the resigning  Administrative Agent gives notice of its resignation,  then
the resigning Administrative Agent may, on behalf of the Lenders and the Issuing
Bank,  appoint a  successor  Administrative  Agent which shall be a bank with an
office in New  York,  New  York,  or an  Affiliate  of any such  bank.  Upon the
acceptance of its appointment as Administrative  Agent hereunder by a successor,
such successor  shall succeed to and become vested with all the rights,  powers,
privileges and duties of the resigning  Administrative  Agent, and the resigning
Administrative  Agent  shall be  discharged  from  its  duties  and  obligations
hereunder.  The fees payable by the Company to a successor  Administrative Agent
shall be the same as those payable to its predecessor  unless  otherwise  agreed
between  the  Company  and such  successor.  After  the  Administrative  Agent's
resignation  hereunder,  the  provisions of this Article and Section 10.03 shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as Administrative Agent.

         Each  Lender  acknowledges  that  it  has,  independently  and  without
reliance  upon the  Administrative  Agent or any other  Lender and based on such
documents  and  information  as it has deemed  appropriate,  made its own credit
analysis  and  decision  to  enter  into  this   Agreement.   Each  Lender  also
acknowledges  that  it  will,   independently  and  without  reliance  upon  the
Administrative  Agent  or any  other  Lender  and  based on such  documents  and
information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not taking action under or based upon this Agreement,
any related agreement or any document furnished hereunder or thereunder.




<PAGE>



                                   ARTICLE IX

                                    Guarantee

         In order to induce the Lenders to extend credit hereunder,  the Company
hereby irrevocably and unconditionally  guarantees, as a primary obligor and not
merely as a surety, the Obligations. The Company further agrees that the due and
punctual  payment of the Obligations may be extended or renewed,  in whole or in
part, without notice to or further assent from it, and that it will remain bound
upon its Guarantee  hereunder  notwithstanding  any such extension or renewal of
any Obligation.

         The Company waives  presentment  to, demand of payment from and protest
to any Borrowing Subsidiary of any of the Obligations, and also waives notice of
acceptance  of its  obligations  and  notice  of  protest  for  nonpayment.  The
obligations of the Company hereunder shall not be affected by (a) the failure of
any  Lender  or the  Administrative  Agent to  assert  any claim or demand or to
enforce or exercise any right or remedy against any Borrowing  Subsidiary  under
the  provisions of this  Agreement or otherwise or (b) any  rescission,  waiver,
amendment or  modification  of any of the terms or provisions of this Agreement,
any Borrowing Subsidiary Agreement or any other agreement.

         The Company  further  agrees that its  agreement  under this Article IX
constitutes  a promise of payment  when due  (whether or not any  bankruptcy  or
similar  proceeding  shall have stayed the accrual or  collection  of any of the
Obligations  or operated as a discharge  thereof) and not merely of  collection,
and  waives  any right to  require  that any  resort be had by any Lender to any
balance of any deposit  account or credit on the books of any Lender in favor of
any Borrower or any other Person.

         The  obligations  of the  Company  under  this  Article IX shall not be
subject to any reduction, limitation,  impairment or termination for any reason,
and shall not be subject to any defense or setoff,  counterclaim,  recoupment or
termination   whatsoever,   by  reason   of  the   invalidity,   illegality   or
unenforceability of the Obligations, any impossibility in the performance of the
Obligations or otherwise.  Without limiting the generality of the foregoing, the
obligations  of the Company  under this  Article IX shall not be  discharged  or
impaired or otherwise affected by the failure of the Administrative Agent or any
Lender  to  assert  any claim or demand or to  enforce  any  remedy  under  this
Agreement or any other  agreement,  by any waiver or  modification in respect of
any  thereof,  by any default,  failure or delay,  wilful or  otherwise,  in the
performance  of the  Obligations,  or by any other act or omission  which may or
might in any manner or to any extent vary the risk of the  Company or  otherwise
operate as a discharge  of the Company or any other  Borrower as a matter of law
or equity.

         The Company further agrees that its  obligations  under this Article IX
shall continue to be effective or be  reinstated,  as the case may be, if at any
time  payment,  or any part  thereof,  of any  Obligation  is  rescinded or must
otherwise  be  restored  by the  Administrative  Agent  or any  Lender  upon the
bankruptcy or reorganization of any Borrower or otherwise.



<PAGE>



         In  furtherance  of the  foregoing  and not in  limitation of any other
right which the Administrative  Agent or any Lender may have at law or in equity
against  the  Company  by virtue of this  Article  IX,  upon the  failure of any
Borrowing  Subsidiary  to pay any  Obligation  when and as the same shall become
due,  whether at  maturity,  by  acceleration,  after  notice of  prepayment  or
otherwise,  the Company  hereby  promises to and will,  upon  receipt of written
demand by the Administrative Agent,  forthwith pay, or cause to be paid, in cash
the amount of such unpaid Obligation. The Company further agrees that if payment
in  respect of any  Obligation  shall be due in a  currency  other than  dollars
and/or at a place of payment other than New York and if, by reason of any Change
in Law,  disruption  of  currency  or  foreign  exchange  markets,  war or civil
disturbance or similar event,  payment of such Obligation in such currency or at
such place of payment shall be impossible or, in the reasonable  judgment of any
applicable  Lender,  not  consistent  with  the  protection  of  its  rights  or
interests,  then, at the election of any  applicable  Lender,  the Company shall
make payment of such  Obligation in dollars (based upon the applicable  Exchange
Rate in effect on the date of payment)  and/or in New York, and shall  indemnify
such Lender  against any losses or expenses that it shall sustain as a result of
such alternative payment.

         Upon payment by the Company of any sums as provided  above,  all rights
of Company against any Borrowing  Subsidiary  arising as a result thereof by way
of right of subrogation or otherwise shall in all respects be  subordinated  and
junior in right of payment to the prior indefeasible  payment in full of all the
Obligations owed by such Borrowing Subsidiary to the Lenders.


                                    ARTICLE X

                                  Miscellaneous

         SECTION  10.01.  Notices.  Except  in the  case of  notices  and  other
communications  expressly  permitted to be given by  telephone,  all notices and
other  communications  provided  for  herein  shall be in  writing  and shall be
delivered  by  hand  or  overnight  courier  service,  mailed  by  certified  or
registered mail or sent by telecopy, as follows:

                  (a) if to any  Borrower,  to it in care of the Company at Fort
         James Corporation, 120 Tredegar Street Richmond, VA 23219, Attention of
         R. Michael  Lempke  c/o  Clifford  A. Cutchins, IV (Telecopy No.
         (414)435-3703);

                  (b) if to the  Administrative  Agent,  to The Chase  Manhattan
         Bank,  Agent Bank Services Group, One Chase Manhattan Plaza, 8th Floor,
         New York, New York 10081, Attention of Janet Belden (Telecopy No. (212)
         552-5658),  with  a copy  to  Jonathan  Twichell  (Telecopy  No.  (312)
         807-4550),  and  to  any  other  applicable  address  specified  in the
         Alternate Procedures;

                  (c) if to the  Issuing  Bank,  to The  Chase  Manhattan  Bank,
         Corporate Banking Department, 1201 Market Street, Wilmington,  Delaware
         19801, Attention of Michael Handigo (Telecopy No. (302) 428-3390), with
         a copy to Janet Belden (Telecopy No. (212) 552-5658); and

                  (d)  if to  any  Lender,  to it at its  address  (or  telecopy
         number) set forth in its Administrative Questionnaire.

Any party hereto may change its address or telecopy number for notices and other
communications  hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.

         SECTION  10.02.  Waivers;  Amendments.  (a) No  failure or delay by the
Administrative  Agent, the Issuing Bank or any Lender in exercising any right or
power  hereunder  shall  operate  as a waiver  thereof,  nor shall any single or
partial   exercise  of  any  such  right  or  power,   or  any   abandonment  or
discontinuance of steps to enforce such a right or power,  preclude any other or
further exercise thereof or the exercise of any other right or power. The rights
and  remedies of the  Administrative  Agent,  the  Issuing  Bank and the Lenders
hereunder  are  cumulative  and are not exclusive of any rights or remedies that
they would  otherwise  have.  No waiver of any  provision  of this  Agreement or
consent  to any  departure  by any  Borrower  therefrom  shall  in any  event be
effective  unless the same shall be permitted by paragraph  (b) of this Section,
and then such waiver or consent shall be effective only in the specific instance
and for the purpose for which  given.  Without  limiting the  generality  of the
foregoing,  the making of a Loan or the issuance of a Letter of Credit shall not
be  construed  as  a  waiver  of  any   Default,   regardless   of  whether  the
Administrative  Agent,  the  Issuing  Bank or any  Lender may have had notice or
knowledge of such Default at the time.



<PAGE>



         (b) Neither  this  Agreement  nor any  provision  hereof may be waived,
amended or modified  except  pursuant to an agreement or  agreements  in writing
entered into by the Company,  the  Borrowing  Subsidiaries  party hereto and the
Required Lenders or by the Company, the Borrowing  Subsidiaries party hereto and
the Administrative Agent with the consent of the Required Lenders; provided that
no such  agreement  shall (i) increase the  Commitment of any Lender without the
written consent of such Lender,  (ii) reduce the principal amount of any Loan or
LC  Disbursement  or reduce  the rate of  interest  thereon,  or reduce any fees
payable hereunder,  without the written consent of each Lender affected thereby,
(iii) postpone the scheduled date of payment of the principal amount of any Loan
or LC Disbursement,  or any interest thereon, or any fees payable hereunder,  or
reduce  the  amount  of,  waive or excuse  any such  payment,  or  postpone  the
scheduled date of expiration of any  Commitment,  without the written consent of
each Lender  affected  thereby,  (iv) change Section  2.16(b) or (c) in a manner
that would alter the pro rata sharing of payments required thereby,  without the
written consent of each Lender, (v) change any of the provisions of this Section
or the definition of "Required Lenders" or any other provision hereof specifying
the number or  percentage  of  Lenders  required  to waive,  amend or modify any
rights  hereunder  or make any  determination  or grant any  consent  hereunder,
without the written  consent of each Lender,  (vi) modify or amend Section 2.15,
(vii) waive  Section  4.01(d),  or (viii)  release the Company from, or limit or
condition, its obligations under Article IX, without the written consent of each
Lender; provided further that no such agreement shall amend, modify or otherwise
affect  the rights or duties of the  Administrative  Agent or the  Issuing  Bank
hereunder without the prior written consent of the  Administrative  Agent or the
Issuing Bank, as the case may be.

         (c) Notwithstanding  Section 10.02(b) (other than the proviso thereto),
the Alternate Procedures may be amended by an agreement or agreements in writing
entered  into by the  Administrative  Agent,  the  applicable  Borrower  and the
Multicurrency  Lenders.  Without  limiting  the  foregoing,  the  Borrower,  the
Administrative  Agent and each  Multicurrency  Lender agree to negotiate in good
faith any requested amendment to the Alternate  Procedures that may be necessary
or desirable to comply with local laws or  regulations or otherwise to implement
the making and repaying of Multicurrency Loans as contemplated hereby.

         SECTION 10.03.  Expenses;  Indemnity;  Damage  Waiver.  (a) The Company
shall  pay  (i)  all   reasonable   out-of-pocket   expenses   incurred  by  the
Administrative Agent and its Affiliates,  including the reasonable fees, charges
and  disbursements of counsel for the  Administrative  Agent, in connection with
the syndication of the credit  facilities  provided for herein,  the preparation
and administration of this Agreement or any Borrowing  Subsidiary  Agreement and
any  amendments,  modifications  or waivers of the provisions  hereof or thereof
(whether  or not the  transactions  contemplated  hereby  or  thereby  shall  be
consummated), (ii) all reasonable out-of-pocket expenses incurred by the Issuing
Bank in  connection  with the issuance,  amendment,  renewal or extension of any
Letter of Credit or any demand for payment  thereunder  and (iii) all reasonable
out-of-pocket expenses incurred by the Administrative Agent, the Issuing Bank or
any Lender, including the fees, charges and disbursements of any counsel for the
Administrative  Agent,  the Issuing Bank or any Lender,  in connection  with the
enforcement or protection of its rights in connection with this Agreement or any
Borrowing Subsidiary  Agreement,  including its rights under this Section, or in
connection with the Loans made or Letters of Credit issued hereunder,  including
in  connection  with any  workout,  restructuring  or  negotiations  in  respect
thereof.



<PAGE>



         (b) The Company shall indemnify the  Administrative  Agent, the Issuing
Bank and each Lender,  and each Related  Party of any of the  foregoing  Persons
(each  such  Person  being  called  an  "Indemnitee")  against,  and  hold  each
Indemnitee harmless from, any and all losses, claims,  damages,  liabilities and
related  expenses,  including the reasonable fees,  charges and disbursements of
any counsel for any Indemnitee,  incurred by or asserted  against any Indemnitee
arising  out of, in  connection  with,  or as a result of (i) the  execution  or
delivery  of  this  Agreement  or  any  Borrowing  Subsidiary  Agreement  or any
agreement or instrument  contemplated hereby or thereby,  the performance by the
parties  hereto  or  thereto  of  their  respective   obligations  hereunder  or
thereunder or the  consummation of the  Transactions  or any other  transactions
contemplated  hereby,  (ii)  any  Loan or  Letter  of  Credit  or the use of the
proceeds therefrom  (including any refusal by the Issuing Bank to honor a demand
for payment  under a Letter of Credit if the  documents  presented in connection
with  such  demand  do not  strictly  comply  with the  terms of such  Letter of
Credit),  (iii) any actual or alleged presence or release of Hazardous Materials
on or  from  any  property  owned  or  operated  by  the  Company  or any of its
Subsidiaries,  or any Environmental  Liability related in any way to the Company
or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation,
investigation or proceeding  relating to any of the foregoing,  whether based on
contract, tort or any other theory and regardless of whether any Indemnitee is a
party thereto;  provided that such indemnity shall not, as to any Indemnitee, be
available  to the extent  that such  losses,  claims,  damages,  liabilities  or
related  expenses are determined by a court of competent  jurisdiction  by final
and nonappealable  judgment to have resulted from the gross negligence or wilful
misconduct of such Indemnitee.

         (c) To the extent that the Company fails to pay any amount  required to
be paid by it to the  Administrative  Agent under  paragraph  (a) or (b) of this
Section,  each Lender severally agrees to pay to the  Administrative  Agent such
Lender's  Applicable  Percentage  (determined as of the time that the applicable
unreimbursed  expense or  indemnity  payment is sought) of such  unpaid  amount;
provided that (i) if the  Commitments  shall have terminated or expired prior to
the repayment in full of all the Loans,  then the payment by the Lenders of such
amounts shall be based upon the then  outstanding  principal amount of the Loans
of each Lender and (ii) the  unreimbursed  expense or indemnified  loss,  claim,
damage,  liability  or related  expense,  as the case may be, was incurred by or
asserted against the Administrative Agent in its capacity as such.

         (d) To the extent  permitted  by  applicable  law,  no  Borrower  shall
assert,  and each Borrower hereby waives,  any claim against any Indemnitee,  on
any theory of  liability,  for  special,  indirect,  consequential  or  punitive
damages (as opposed to direct or actual  damages)  arising out of, in connection
with, or as a result of, this Agreement or any Borrowing Subsidiary Agreement or
any agreement or instrument  contemplated  hereby or thereby,  the Transactions,
any Loan or Letter of Credit or the use of the proceeds thereof.

         (e) All amounts due under this Section shall be payable  promptly after
written demand therefor.

         SECTION  10.04.  Successors  and Assigns.  (a) The  provisions  of this
Agreement  shall be binding upon and inure to the benefit of the parties  hereto
(including  the  parties  to  any  Borrowing  Subsidiary  Agreement)  and  their
respective  successors and assigns  permitted hereby (including any Affiliate of
the Issuing Bank that issues any Letter of Credit),  except that no Borrower may
assign or otherwise transfer any of its rights or obligations hereunder or under
any Borrowing  Subsidiary  Agreement  without the prior written  consent of each
Lender (and any attempted  assignment  or transfer by any Borrower  without such
consent  shall  be null and  void).  Nothing  in this  Agreement,  expressed  or
implied,  shall be construed  to confer upon any Person  (other than the parties
hereto, their respective  successors and assigns permitted hereby (including any
Affiliate  of the  Issuing  Bank that  issues any Letter of Credit)  and, to the
extent  expressly  contemplated  hereby,  the  Related  Parties  of  each of the
Administrative  Agent and the Lenders) any legal or equitable  right,  remedy or
claim under or by reason of this Agreement.



<PAGE>



         (b) Any Lender may assign to one or more  assignees all or a portion of
its rights and obligations  under this Agreement  (including all or a portion of
its Commitment and the Loans at the time owing to it);  provided that (i) except
in the case of an  assignment  to a Lender or an Affiliate of a Lender,  each of
the Company and the  Administrative  Agent (and, in the case of an assignment of
all or a  portion  of a U.S.  Commitment  or any U.S.  Lender's  obligations  in
respect of its LC  Exposure,  the Issuing  Bank) must give their  prior  written
consent to such assignment  (which consent shall not be unreasonably  withheld),
(ii) except in the case of an assignment to a Lender or an Affiliate of a Lender
or an  assignment  of the  entire  remaining  amount of the  assigning  Lender's
Commitment, the amount of the Commitment of the assigning Lender subject to each
such  assignment  (determined as of the date the Assignment and Acceptance  with
respect to such assignment is delivered to the  Administrative  Agent) shall not
be less than $15,000,000 unless each of the Company and the Administrative Agent
otherwise  consent,  (iii) the  parties to each  assignment  shall  execute  and
deliver to the Administrative Agent an Assignment and Acceptance,  together with
a processing and recordation fee of $2,000,  and (iv) the assignee,  if it shall
not be a Lender,  shall deliver to the  Administrative  Agent an  Administrative
Questionnaire;  provided  further  that any  consent  of the  Company  otherwise
required under this  paragraph  shall not be required if (i) an Event of Default
under  clause (h) or (i) of Article  VII has  occurred  and is  continuing  with
respect to the Company or (ii) any other Event of Default  has  occurred  and is
continuing  with respect to the Company for a period of 30 days. Upon acceptance
and  recording  pursuant to paragraph  (d) of this  Section,  from and after the
effective  date  specified  in each  Assignment  and  Acceptance,  the  assignee
thereunder  shall be a party hereto and, to the extent of the interest  assigned
by such Assignment and  Acceptance,  have the rights and obligations of a Lender
under this Agreement,  and the assigning Lender  thereunder shall, to the extent
of the interest assigned by such Assignment and Acceptance, be released from its
obligations  under  this  Agreement  (and,  in the  case  of an  Assignment  and
Acceptance  covering all of the assigning  Lender's rights and obligations under
this Agreement,  such Lender shall cease to be a party hereto but shall continue
to be entitled to the  benefits of Sections  2.13,  2.14,  2.15 and 10.03).  Any
assignment or transfer by a Lender of rights or obligations under this Agreement
that does not comply with this  paragraph  shall be treated for purposes of this
Agreement  as a sale by such  Lender  of a  participation  in  such  rights  and
obligations in accordance with paragraph (e) of this Section.

         (c) The  Administrative  Agent,  acting for this purpose as an agent of
the  Borrowers,  shall  maintain at one of its offices in The City of New York a
copy of each  Assignment and  Acceptance  delivered to it and a register for the
recordation  of the names and addresses of the Lenders,  and the  Commitment of,
and  principal  amount of the Loans owing to, each Lender  pursuant to the terms
hereof from time to time (the "Register").  The entries in the Register shall be
conclusive absent manifest error, and the Borrowers,  the Administrative  Agent,
the Issuing Bank and the Lenders may treat each Person whose name is recorded in
the Register pursuant to the terms hereof as a Lender hereunder for all purposes
of this Agreement, notwithstanding notice to the contrary. The Register shall be
available for inspection by the Company, the Issuing Bank and any Lender, at any
reasonable time and from time to time upon reasonable prior notice.

         (d) Upon its  receipt of a duly  completed  Assignment  and  Acceptance
executed  by an  assigning  Lender and an  assignee,  the  assignee's  completed
Administrative  Questionnaire  (unless the  assignee  shall  already be a Lender
hereunder),  the processing and  recordation fee referred to in paragraph (b) of
this Section and any written  consent to such  assignment  required by paragraph
(b) of this Section,  the Administrative  Agent shall accept such Assignment and
Acceptance  and record the  information  contained  therein in the Register.  No
assignment  shall be effective for purposes of this Agreement unless it has been
recorded in the Register as provided in this paragraph.



<PAGE>



         (e)  Any  Lender  may,  without  the  consent  of  any  Borrower,   the
Administrative  Agent or the Issuing Bank,  sell  participations  to one or more
banks or other entities (a  "Participant")  in all or a portion of such Lender's
rights and obligations  under this Agreement  (including all or a portion of its
Commitment  and the  Loans  owing  to  it);  provided  that  (i)  such  Lender's
obligations under this Agreement shall remain unchanged,  (ii) such Lender shall
remain solely  responsible  to the other parties  hereto for the  performance of
such obligations and (iii) the Borrowers,  the Administrative Agent, the Issuing
Bank and the other Lenders shall  continue to deal solely and directly with such
Lender in  connection  with such  Lender's  rights  and  obligations  under this
Agreement.  Any agreement or instrument  pursuant to which a Lender sells such a
participation  shall  provide  that such Lender  shall  retain the sole right to
enforce this Agreement and to approve any amendment,  modification  or waiver of
any provision of this Agreement;  provided that such agreement or instrument may
provide that such Lender will not, without the consent of the Participant, agree
to any  amendment,  modification  or waiver  described  in the first  proviso to
Section 10.02(b) that affects such Participant. Subject to paragraph (f) of this
Section,  each Borrower  agrees that each  Participant  shall be entitled to the
benefits  of  Sections  2.13,  2.14 and 2.15 to the same  extent as if it were a
Lender and had acquired its interest by assignment  pursuant to paragraph (b) of
this Section.  To the extent  permitted by law, each  Participant  also shall be
entitled to the benefits of Section  10.08 as though it were a Lender,  provided
such  Participant  agrees to be subject  to Section  2.16(c) as though it were a
Lender.

         (f) A Participant  shall not be entitled to receive any greater payment
under Section 2.14 or 2.15 than the  applicable  Lender would have been entitled
to receive with respect to the participation  sold to such  Participant,  unless
the sale of the  participation  to such  Participant  is made with the Company's
prior  written  consent.  Subject  to  the  immediately  preceding  sentence,  a
Participant  that  would be a Foreign  Lender  if it were a Lender  shall not be
entitled to the  benefits of Section  2.15 unless the Company is notified of the
participation  sold to such  Participant and such  Participant  agrees,  for the
benefit of the  Borrowers,  to comply with  Section  2.15(e) as though it were a
Lender.

         (g) Any Lender may at any time  pledge or assign all or any  portion of
its rights under this  Agreement to any Federal  Reserve Bank,  and this Section
shall  not  apply to any such  pledge  or  assignment  of a  security  interest;
provided that no such pledge or assignment of a security  interest shall release
a Lender from any of its  obligations  hereunder or substitute any such assignee
for such Lender as a party hereto.

         SECTION 10.05. Survival. All covenants, agreements, representations and
warranties  made  by  the  Borrowers  herein  and in  the  Borrowing  Subsidiary
Agreements and the  certificates  or other  instruments  delivered in connection
with or pursuant to this Agreement  shall be considered to have been relied upon
by the other parties hereto and shall survive the execution and delivery of this
Agreement and the making of any Loans,  regardless of any investigation  made by
any  such  other   party  or  on  its  behalf  and   notwithstanding   that  the
Administrative  Agent,  the  Issuing  Bank or any  Lender may have had notice or
knowledge of any Default or incorrect representation or warranty at the time any
credit is  extended  hereunder,  and shall  continue in full force and effect as
long as the  principal of or any accrued  interest on any Loan or any fee or any
other  amount  payable  under this  Agreement is  outstanding  and unpaid or any
Letter of Credit is outstanding and so long as the Commitments  have not expired
or terminated. The provisions of Sections 2.13, 2.14, 2.15 and 10.03 and Article
VIII  shall  survive  and  remain in full  force and  effect  regardless  of the
consummation  of the  transactions  contemplated  hereby,  the  repayment of the
Loans,  the expiration or termination of the  Commitments or the  termination of
this Agreement or any provision hereof.



<PAGE>



         SECTION 10.06. Counterparts; Integration; Effectiveness. This Agreement
may be executed in  counterparts  (and by different  parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken  together  shall  constitute a single  contract.  This  Agreement  and any
separate letter  agreements  with respect to fees payable to the  Administrative
Agent  constitute the entire contract among the parties  relating to the subject
matter hereof and supersede any and all previous  agreements and understandings,
oral  or  written,  relating  to  the  subject  matter  hereof.  Subject  to the
provisions of Section 4.01, this Agreement shall become  effective when it shall
have been executed by the Administrative Agent and when the Administrative Agent
shall have received  counterparts  hereof which,  when taken together,  bear the
signatures of each of the other parties hereto,  and thereafter shall be binding
upon and  inure to the  benefit  of the  parties  hereto  and  their  respective
successors and assigns.  Delivery of an executed counterpart of a signature page
of this  Agreement  by  telecopy  shall be  effective  as delivery of a manually
executed counterpart of this Agreement.

         SECTION 10.07. Severability. Any provision of this Agreement held to be
invalid,  illegal  or  unenforceable  in  any  jurisdiction  shall,  as to  such
jurisdiction,  be  ineffective to the extent of such  invalidity,  illegality or
unenforceability without affecting the validity,  legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a  particular  jurisdiction  shall not  invalidate  such  provision in any other
jurisdiction.

         SECTION  10.08.  Right of  Setoff.  If an Event of  Default  shall have
occurred and be  continuing,  each Lender and each of its  Affiliates  is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all  deposits  (general  or  special,  time or
demand,  provisional  or final) at any time held and other  indebtedness  at any
time owing by such  Lender or  Affiliate  to or for the credit or the account of
any  Borrower  against  any of and all the  obligations  of the  Company or such
Borrower now or hereafter  existing  under this  Agreement  held by such Lender,
irrespective of whether or not such Lender shall have made any demand under this
Agreement and although  such  obligations  may be unmatured.  The rights of each
Lender  under  this  Section  are in  addition  to  other  rights  and  remedies
(including other rights of setoff) which such Lender may have.

         SECTION  10.09.  Governing  Law; Jurisdiction;  Consent  to  Service of
Process.  (a) This Agreement  shall be construed in accordance with and governed
by the internal law of the State of New York.

         (b) Each Borrower hereby irrevocably and unconditionally  submits,  for
itself and its property,  to the nonexclusive  jurisdiction of the Supreme Court
of the State of New York  sitting in New York  County  and of the United  States
District  Court of the Southern  District of New York,  and any appellate  court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement,  or for  recognition or enforcement of any judgment,  and each of the
parties hereto hereby irrevocably and unconditionally  agrees that all claims in
respect of any such action or proceeding may be heard and determined in such New
York State or, to the extent  permitted by law, in such Federal  court.  Each of
the parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive  and may be enforced in other  jurisdictions  by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement shall
affect any right that the  Administrative  Agent, the Issuing Bank or any Lender
may otherwise have to bring any action or proceeding  relating to this Agreement
against any Borrower or its properties in the courts of any jurisdiction.

         (c) Each Borrower hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and  effectively do so, any objection which it may
now or hereafter  have to the laying of venue of any suit,  action or proceeding
arising  out of or  relating  to this  Agreement  in any  court  referred  to in
paragraph (b) of this  Section.  Each of the parties  hereto hereby  irrevocably
waives,  to the fullest extent  permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.

         (d) Each party to this Agreement (including any Borrowing Subsidiaries)
irrevocably consents to service of process in the manner provided for notices in
Section  10.01.  Nothing in this Agreement will affect the right of any party to
this Agreement to serve process in any other manner permitted by law.



<PAGE>



         SECTION 10.10.  WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY WAIVES,
TO THE FULLEST  EXTENT  PERMITTED BY APPLICABLE  LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING  DIRECTLY OR INDIRECTLY  ARISING OUT OF OR
RELATING TO THIS  AGREEMENT OR THE  TRANSACTIONS  CONTEMPLATED  HEREBY  (WHETHER
BASED ON CONTRACT,  TORT OR ANY OTHER  THEORY).  EACH PARTY HERETO (A) CERTIFIES
THAT NO  REPRESENTATIVE,  AGENT OR ATTORNEY OF ANY OTHER PARTY HAS  REPRESENTED,
EXPRESSLY  OR  OTHERWISE,  THAT SUCH  OTHER  PARTY  WOULD  NOT,  IN THE EVENT OF
LITIGATION,  SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)  ACKNOWLEDGES  THAT IT
AND THE OTHER PARTIES  HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

         SECTION 10.11. Headings.  Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement  and  shall  not  affect  the   construction  of,  or  be  taken  into
consideration in interpreting, this Agreement.

         SECTION 10.12.  Confidentiality.  Each of the Administrative Agent, the
Issuing  Bank and the Lenders  agrees to  maintain  the  confidentiality  of the
Information (as defined below),  except that Information may be disclosed (a) to
its   Affiliates'   directors,   officers,   employees  and  agents,   including
accountants,  legal  counsel and other  advisors (it being  understood  that the
Persons to whom such  disclosure  is made will be informed  of the  confidential
nature  of  such   Information   and   instructed   to  keep  such   Information
confidential),  (b) to the extent requested by any regulatory authority,  (c) to
the extent  required by  applicable  laws or  regulations  or by any subpoena or
similar  legal  process,  (d) to any  other  party  to  this  Agreement,  (e) in
connection  with the exercise of any remedies  hereunder or any suit,  action or
proceeding  relating to this Agreement or the  enforcement of rights  hereunder,
(f) subject to an  agreement  containing  provisions  substantially  the same as
those of this Section,  to any assignee of or Participant in, or any prospective
assignee  of or  Participant  in,  any of its rights or  obligations  under this
Agreement,  (g)  with the  consent  of the  Company  or (h) to the  extent  such
Information (i) becomes publicly available other than as a result of a breach of
this Section or (ii) becomes available to the Administrative  Agent, the Issuing
Bank or any  Lender  on a  nonconfidential  basis  from a  source  other  than a
Borrower. For the purposes of this Section,  "Information" means all information
received from a Borrower relating to a Borrower or its business,  other than any
such information that is available to the Administrative Agent, the Issuing Bank
or any Lender on a  nonconfidential  basis  prior to  disclosure  by a Borrower;
provided  that, in the case of  information  received from a Borrower  after the
date  hereof,  such  information  is  identified  at the  time  of  delivery  as
confidential. Any Person required to maintain the confidentiality of Information
as  provided in this  Section  shall be  considered  to have  complied  with its
obligation  to do so if such  Person has  exercised  the same  degree of care to
maintain the  confidentiality of such Information as such Person would accord to
its own confidential information.

         SECTION  10.13.  Interest  Rate  Limitation.  Notwithstanding  anything
herein to the contrary, if at any time the interest rate applicable to any Loan,
together with all fees,  charges and other amounts which are treated as interest
on such Loan under applicable law (collectively the "Charges"), shall exceed the
maximum lawful rate (the "Maximum Rate") which may be contracted  for,  charged,
taken,  received or reserved by the Lender holding such Loan in accordance  with
applicable law, the rate of interest  payable in respect of such Loan hereunder,
together with all Charges  payable in respect  thereof,  shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would have
been  payable in  respect  of such Loan but were not  payable as a result of the
operation  of this  Section  shall be  cumulated  and the  interest  and Charges
payable to such Lender in respect of other Loans or periods  shall be  increased
(but not above the Maximum Rate therefor) until such cumulated amount,  together
with  interest  thereon  at the  Federal  Funds  Effective  Rate to the  date of
repayment, shall have been received by such Lender.


<PAGE>



         SECTION  10.14.  Conversion of  Currencies.  (a) If, for the purpose of
obtaining  judgment  in any  court,  it is  necessary  to  convert  a sum  owing
hereunder in one currency into another  currency,  each party hereto  (including
any Borrowing  Subsidiary) agrees, to the fullest extent that it may effectively
do so, that the rate of exchange used shall be that at which in accordance  with
normal banking procedures in the relevant  jurisdiction the first currency could
be purchased with such other currency on the Business Day immediately  preceding
the day on which final judgment is given.

         (b) The  obligations  of each Borrower in respect of any sum due to any
party hereto or any holder of the obligations  owing hereunder (the  "Applicable
Creditor")  shall,  notwithstanding  any judgment in a currency  (the  "Judgment
Currency")  other  than the  currency  in which  such  sum is  stated  to be due
hereunder (the "Agreement Currency"),  be discharged only to the extent that, on
the  Business  Day  following  receipt  by the  Applicable  Creditor  of any sum
adjudged to be so due in the Judgment Currency,  the Applicable  Creditor may in
accordance with normal banking procedures in the relevant  jurisdiction purchase
the  Agreement  Currency  with  the  Judgment  Currency;  if the  amount  of the
Agreement  Currency  so  purchased  is less than the sum  originally  due to the
Applicable  Creditor in the  Agreement  Currency,  such  Borrower  agrees,  as a
separate  obligation and  notwithstanding  any such  judgment,  to indemnify the
Applicable  Creditor  against  such  loss.  The  obligations  of  the  Borrowers
contained in this Section 10.14 shall survive the  termination of this Agreement
and the payment of all other amounts owing hereunder.