ASSET PURCHASE AGREEMENT
                                      AMONG
                             FORT JAMES CORPORATION,
                             ACX TECHNOLOGIES, INC.
                                       AND
                          GRAPHIC PACKAGING CORPORATION




                           Dated as of April 25, 1999


                                     <PAGE>




                                      -iv-
                                TABLE OF CONTENTS


                                    ARTICLE I
                                   DEFINITIONS

   1.1        Definitions..................................................   1


                                   ARTICLE II
                           PURCHASE AND SALE OF ASSETS

   2.1        Purchase and Sale.............................................   7
   2.2        Excluded Assets...............................................   8
   2.3        Assumed Liabilities; Excluded Liabilities.....................   8


                                   ARTICLE III
                   PURCHASE PRICE, WORKING CAPITAL ADJUSTMENT

   3.1        Purchase Price................................................  10
   3.2        Working Capital Adjustment....................................  10
   3.3        Additional Payments...........................................  11


                                   ARTICLE IV
                               RELATED AGREEMENTS

   4.1        Related Agreements............................................  12


                                    ARTICLE V
                  REPRESENTATIONS AND WARRANTIES OF FORT JAMES

   5.1        Organization; Qualification...................................  13
   5.2        Authority Relative to this Agreement and the Related Agreements 13
   5.3        Consents and Approvals......................................... 13
   5.4        Non-Contravention.............................................  13
   5.5        Compliance with Laws..........................................  14
   5.6        Environmental Matters.........................................  14
   5.7        Licenses and Permits..........................................  14
   5.8        Financial Statements..........................................  15
   5.9        Litigation....................................................  15
   5.10       Title to Properties............................................ 15
   5.11       Leases......................................................... 15
   5.12       Intellectual Property.......................................... 16
   5.13       Listed Contracts..............................................  17
   5.14       Labor Matters.................................................  17
   5.15       Employee Benefit Plans......................................... 18
   5.16       Conduct of Business and Management of Assets................... 19
   5.17       Finders.......................................................  20
   5.18       Sufficiency of Assets.........................................  20
   5.19       Customers.....................................................  20


                                   ARTICLE VI
                     REPRESENTATIONS AND WARRANTIES OF BUYER

   6.1        Organization; Qualification...................................  21
   6.2        Authority Relative to this Agreement and the Related Agreements.21
   6.3        Non-Contravention...............................................21
   6.4        Consents and Approvals..........................................21
   6.5        Litigation......................................................21
   6.6        Availability of Funds...........................................22
   6.7        Finders.........................................................22


                                   ARTICLE VII
                              ADDITIONAL AGREEMENTS

   7.1        Conduct of Business and Management of Assets....................22
   7.2        Forbearances by Fort James......................................22
   7.3        Mail Received After Closing.....................................23
   7.4        Retention of Books and Records..................................23
   7.5        Expenses........................................................24
   7.6        Confidentiality.................................................24
   7.7        Public Announcements............................................25
   7.8        Efforts to Consummate...........................................25
   7.9        Further Assurances..............................................25
   7.10       Use of Fort James Name..........................................25
   7.11       No Solicitation of Employees....................................26
   7.12       Antitrust Filings...............................................26
   7.13       Title Matters...................................................27
   7.14       Tax Matters.....................................................28
   7.15       Access to Assets and Business Employees.........................28
   7.16       Substitute Letters of Credit; Guarantees........................28
   7.17       Consents and Approvals..........................................28
   7.18       Negotiations....................................................29
   7.19       Audited Financial Statements....................................29
   7.20       Year 2000 Compliance Program....................................29


                                  ARTICLE VIII
                 BUSINESS EMPLOYEE AND EMPLOYEE BENEFIT MATTERS

   8.1        Business Employees..............................................29
   8.2        Employment......................................................30
   8.3        Employee Benefits...............................................30
   8.4        Assumption of Liabilities.......................................32
   8.5        Collective Bargaining Agreements................................32
   8.6        Pension Plan for Salaried Business Employees....................33
   8.7        401(k) Plan.....................................................33
   8.8        Pension Plan For Hourly Buiness Employees.......................34
   8.9        Worker's Compensation...........................................37
   8.10       Vacation Pay....................................................37
   8.11       Welfare Plans...................................................37
   8.12       Plant Closing Laws..............................................37


                                   ARTICLE IX
                       CONDITIONS TO OBLIGATIONS OF BUYER

   9.1        Representations and Warranties..................................38
   9.2        Performance of this Agreement...................................38
   9.3        Proceedings.....................................................38
   9.4        Consents and Approvals..........................................38
   9.5        Injunction, Litigation, etc.....................................38
   9.6        Legislation.....................................................38
   9.7        Related Agreements..............................................38
   9.8        Material Adverse Change.........................................38
   9.9        Opinion of Counsel for Fort James...............................39
   9.10       Officer's Certificate...........................................39
   9.11       Audited Financial Statements....................................39


                                    ARTICLE X
                     CONDITIONS TO OBLIGATIONS OF FORT JAMES

   10.1       Representations and Warranties..................................39
   10.2       Performance of this Agreement...................................39
   10.3       Proceedings.....................................................39
   10.4       Consents and Approvals..........................................39
   10.5       Injunction, Litigation, etc.....................................39
   10.6       Legislation.....................................................40
   10.7       Related Agreements..............................................40
   10.8       Officer's Certificate...........................................40


                                   ARTICLE XI
                  DELIVERIES, ETC., IN CONNECTION WITH CLOSING

   11.1       Time and Place of Closing.......................................40
   11.2       Deliveries by Fort James........................................40
   11.3       Deliveries by Buyer.............................................41
   11.4       Deliveries of Related Agreements................................41


                                   ARTICLE XII
                                 INDEMNIFICATION

   12.1       Indemnification by Fort James...................................41
   12.2       Indemnification by Buyer........................................43
   12.3       Article  VIII Rights and Obligations Excluded...................43
   12.4       Survival Date...................................................43
   12.5       Definition of Loss..............................................44
   12.6       Third Party Claims..............................................44
   12.7       Subrogation Rights; No Duplication..............................45


                                  ARTICLE XIII
                        TERMINATION, AMENDMENT AND WAIVER

   13.1       Termination.....................................................45
   13.2       Effect of Termination...........................................46
   13.3       Amendment.......................................................46
   13.4       Extension; Waiver...............................................46


                                   ARTICLE XIV
                               GENERAL PROVISIONS

   14.1       Notices.........................................................46
   14.2       Interpretation..................................................47
   14.3       Counterparts....................................................47
   14.4       Miscellaneous...................................................47
   14.5       Third Party Beneficiaries.......................................48




<PAGE>



                            ASSET PURCHASE AGREEMENT

         This ASSET PURCHASE AGREEMENT (the "Agreement"),  dated as of April 25,
1999,  is made among  FORT JAMES  CORPORATION,  a  Virginia  corporation  ("Fort
James"),  ACX  TECHNOLOGIES,  INC., a Colorado  corporation  ("ACX") and GRAPHIC
PACKAGING  CORPORATION,  a Delaware  corporation  ("GPC," and together with ACX,
"Buyer").

                                    RECITALS

         WHEREAS, Fort James desires to sell, or cause its Subsidiaries to sell,
the assets described  herein and Buyer desires to purchase such assets,  for the
consideration  hereinafter  set  forth,  including  the  assumption  of  certain
liabilities.

         NOW   THEREFORE,   in   consideration   of  the   foregoing   and   the
representations, warranties, and agreements herein contained, the parties hereto
agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

1.1  Definitions.  As used  herein,  the  following  terms  have  the  following
meanings:

         "accumulated funding deficiency" has the meaning  set forth in  Section
          5.15(d).

         "Affiliate," with respect to any party, means a party, person or entity
          that,  directly,  or  indirectly  through one or more  intermediaries,
          controls,  is controlled  by, or is under common  control  with,  such
          party, whether through the ownership of voting securities, by contract
          or otherwise;  provided,  that with respect to Buyer,  Affiliate shall
          not include  Coors  Brewing  Company,  Adolph Coors  Company and their
          respective   affiliates   except  ACX  and  its  direct  and  indirect
          subsidiaries.

          "Agreement"  has the meaning set forth in the  introductory  paragraph
          hereof.

         "Allocation Schedule" has the meaning set forth in Section 7.14(b).

         "Antitrust  Laws" means the Sherman Act, the Clayton Act, the Antitrust
          Improvements  Act,  the Federal  Trade  Commission  Act, and all other
          federal  and state  statutes,  rules,  regulations,  orders,  decrees,
          administrative  and  judicial  doctrines,  and  other  laws  that  are
          designed or intended to prohibit,  restrict or regulate actions having
          the purpose or effect of monopolization or restraint of trade.

         "Applicable Percentage" has the meaning set forth in Section 12.1(c).

         "Assets" has the meaning set forth in Section 2.1.

         "Asset Transfer Date" has the meaning set forth in Section 8.8(g).

         "Assumed  Collective  Bargaining  Agreements"  has the meaning set
          forth in Section 8.5(a).

         "Assumed Liabilities" has the meaning set forth in Section 2.3(a).

         "Authority" means any national,  federal,  state or local governmental,
          judicial  or  regulatory  agency or  authority  within or outside  the
          United States.

         "Basket" has the meaning set forth in Section 12.1(b).

         "Business"  means the business  customarily  operated by the  packaging
          business of Fort James with  respect to the products  manufactured  at
          the Transferred Sites. For purposes of clarity,  it is understood that
          the "Business"  excludes (i) the business  operated in the St. Mary's,
          Georgia  and  Naheola,  Alabama  facilities  and  (ii)  the  land  and
          buildings   located   in   Redmond,   Washington   and   Chambersburg,
          Pennsylvania.

         "Business Employees" has the meaning set forth in Section 8.1.

         "Business Intellectual Property" has the meaning  set forth in  Section
          2.1(d).

         "Buyer" has the meaning set forth in the introductory paragraph hereof.

         "Buyer's DC Plan" has the meaning set forth in Section 8.7(a).

         "Buyer FSA Plan" has the meaning set forth in Section 8.3(e).

         "Buyer's Pension Plan" has the meaning set forth in Section 8.8(a).

         "Buyer's Pension Trust" has the meaning set forth in Section 8.8(d).

         "Cap" has the meaning set forth in Section 12.1(b).

         "CERCLA" means the Comprehensive Environmental  Response  Compensation
          and Liability Act codified at 42 U.S.C.  ss. 9601 et seq.  (including
          the amendments made by the Superfund Amendments and Reauthorization
          Act of 1986).

         "Closing" has the meaning set forth in Section 11.1.

         "Closing Balance Sheet" has the meaning set forth in Section 3.2(a).

         "Closing Date" has the meaning set forth in Section 11.1.

         "Closing Working Capital" has the meaning set forth in Section 3.2(a).

         "Code" means the Internal Revenue Code of 1986, as amended.

         "Confidential Information" has the meaning set forth in Section 7.6.

         "Disputed Items" has the meaning set forth in Section 3.2(b).

         "Employee Plans" has the meaning set forth in Section 5.15(a).

         "Environmental Accrual Date" has the meaning set forth in Section
          12.1(c).

         "Environmental   Condition"   means  any  condition   existing  at  any
          Transferred Site that relates to(i)the emission, discharge,  disposal,
          release or  threatened  release of any  Hazardous  Substance  into the
          environment,  (ii) the treatment, storage, recycling or other handling
          of and  Hazardous  Substance,  or (iii) the presence of any  Hazardous
          Substance,  including,  but not limited to, asbestos, in any building,
          structure or workplace or on any of the Transferred Sites.

         "Environmental  Laws" means  Environmental  Statutes and any common law
          governing   the   contamination,   pollution  or   protection  of  the
          environment or allocating liabilities in respect thereof.

         "Environmental  Statutes"  means federal,  state and local statutes and
          regulations  promulgated thereunder intended to provide protection for
          public health and the environment,  including, without limitation, the
          Clean Air Act, the Clean Water Act,  CERCLA,  the Solid Waste Disposal
          Act (including the Resource  Conservation and Recovery Act), the Toxic
          Substances   Control  Act,   their  state   statutory  and  regulatory
          counterparts  and other  substantially  similar  foreign  statutes and
          regulations.

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

         "ERISA   Affiliate"   means  any  member  of  a  controlled   group  of
          corporations,  any  member of a group of trades  or  businesses  under
          common control, or any member of an affiliated service group with Fort
          James within the meaning of Section  414(b),  (c),  (m), or (o) of the
          Code, or Section 4001(a)(14) of ERISA.

         "Excluded Assets" has the meaning set forth in Section 2.2.

         "Excluded Liabilities" has the meaning set forth in Section 2.3(b).

         "Filed Business  Intellectual  Property" means trade names,  trademarks
          and service  marks,  together with the  associated  goodwill,  letters
          patent, copyrights,  design registrations and inventor certificates as
          well as applications,  registrations,  and certificates for any of the
          foregoing or any other intellectual property which is used exclusively
          in, or applicable  exclusively to, the Business and embodied in a form
          which is filed or registered with any Authority.

         "Final Closing Working Capital" has the meaning set forth in Sections
          3.2(b) and 3.2(d).

         "FJ 401(k) Plan" has the meaning set forth in Section 8.7(a).

         "FJ FSA Plan" has the meaning set forth in Section 8.3(e).

         "FJ Group" means Fort James and all of its Subsidiaries.

         "FJ Pension Plan" has the meaning set forth in Section 8.8(a).

         "FJ's Pension Trust" has the meaning set forth in Section 8.8(d).

         "Fort James" has the meaning set forth in the introductory paragraph
          hereof.

         "Fort James Corporate Designations" has the meaning set forth in
          Section 7.10(a).

         "Fort James Material Adverse Effect" means a material adverse effect on
          the  consolidated  financial  position or results of operations of the
          Business,  taken as a whole,  other than as a result of (i) changes in
          general economic  conditions or general  developments in the packaging
          industry  or (ii)  changes  which  result  from  the  announcement  or
          performance of this Agreement and the transactions contemplated hereby
          and compliance with the covenants set forth herein.

         "GAAP" means United States generally accepted accounting principles.

         "Hazardous  Substance"  means (i) any  hazardous  substance,  extremely
          hazardous substance,  hazardous material,  hazardous waste,  regulated
          substance  or toxic  substance  (as  those  terms are  defined  by any
          applicable  Environmental  Laws) and (ii) any  chemicals,  pollutants,
          contaminants, or petroleum, crude oil or any fraction thereof

         "Hourly Business Employees" has the meaning set forth in Section
          8.2(b).

         "Indemnitee" has the meaning set forth in Section 12.4(a).

         "Indemnitor" has the meaning set forth in Section 12.4(a).

         "Inventory" has the meaning set forth in Section 2.1(c).

         "Knowledge of Fort James" means the actual  knowledge of those officers
          and employees of Fort James listed on Schedule 1.1-A.

         "Large Brokers" has the meaning set forth in Section 5.19.

         "Large Customers" has the meaning set forth in Section 5.19.

         "Leased  Assets" means any real  property,  improvements,  equipment or
          other assets leased to a Person within the FJ Group and used solely in
          connection with the Business.

         "Leased  Premises" means that real property leased by Fort James or any
          of its Subsidiaries, as lessee, and listed on Schedule 1.1-B.

         "Legal Action" has the meaning set forth in Section 12.5.

         "Lessee  Lease" and "Lessee  Leases" have the  respective  meanings set
          forth in Section 5.11.

         "Lessor  Lease" and "Lessor  Leases" have the  respective  meanings set
          forth in Section 5.11.

         "Liability" means any liability or obligation (whether known or unknown
          whether  asserted  or  unasserted,  whether  absolute  or  contingent,
          whether accrued or unaccrued, whether liquidated or unliquidated,  and
          whether due or to become due).

         "Listed Contract" has the meaning set forth in Section 5.13.

         "Losses" has the meaning set forth in Section 12.5.

         "Major Leases" has the meaning set forth in Section 5.11(b).

         "Major Leases Title Commitment" has the meaning set forth in Section
          7.13(a).

         "Major Leases Title Package" has the meaning set forth in Section
          7.13(b).

         "March  Balance  Sheet"  means  the  unaudited  balance  sheet  for the
          Business as of March 28, 1999,  reflecting the Business as proposed to
          be transferred hereunder,  previously delivered by Fort James to Buyer
          and included as Schedule 3.2(a) hereto.

         "Non-Filed Business Intellectual Property" means unpatented technology,
          inventions,  trade secrets, processes,  know-how, designs and formulae
          and unfiled trade names,  trademarks and service marks,  together with
          the associated goodwill,  unregistered copyrights and other industrial
          or intellectual  property which is used  exclusively in, or applicable
          exclusively  to,  the  Business  and not filed or  registered  with an
          Authority.

         "Opening Working Capital" has the meaning set forth in Section 3.2(e).

         "P&L" has the meaning set forth in Section 5.8(b).

         "PBGC" means the Pension Benefit Guaranty Corporation.

         "Permitted  Exceptions"  means (i) statutory liens for current taxes or
          assessments  not yet due and payable or being contested in good faith;
          (ii) terms and  conditions  of any Lessor  Leases;  (iii) the  current
          zoning and  subdivision  laws and  regulations  applicable to any Real
          Property;  and (iv)  such  liens,  imperfections  in  title,  charges,
          easements, restrictions,  encumbrances (including any of the foregoing
          shown by the surveys  referred to in Section 7.13) as would not have a
          Fort James Material Adverse Effect.

         "Person"  means  an  individual,   partnership  (general  or  limited),
          corporation,  association  or  other  form  of  business  organization
          (whether or not  regarded as a legal  entity  under  applicable  law),
          trust, estate or any other entity.

         "Pre-Closing Environmental Loss" has the meaning set forth in Section
          12.1(c).

         "Purchase Price" has the meaning set forth in Section 3.1.

         "Rate of Return" has the meaning set forth in Section 8.8(g).

         "Real Property" has the meaning set forth in Section 2.1(a).

         "Real Property Title Commitment" has the meaning set forth in Section
          7.13(a).

         "Real Property Title Package" has the meaning set forth in Section
          7.13(a).

         "Related Agreements" has the meaning set forth in Section 4.1.

         "Release"  means any spilling,  leaking,  pumping,  pouring,  emitting,
          emptying,  discharging,  injecting,  escaping,  leaching,  dumping  or
          disposing into the environment.

         "Remedial Actions" means actions required under  Environmental  Laws to
          clean up or to  contain  or  otherwise  to  ameliorate  or remedy  any
          Environmental  Condition,  including  but not limited to  preventing a
          Release or threatened Release and performing  studies,  investigations
          and monitoring.

         "Representative" has the meaning set forth in Section 7.6.

         "Salaried Business Employees" has the meaning set forth in Section
          8.2(b).

         "section 411(d)(6) protected benefits" has the meaning set forth in
          Section 8.7(a).

         "Subsidiary,"  when  used  with  respect  to  any  Person,   means  any
          corporation or other business entity, whether or not incorporated,  of
          which such Person holds, directly or indirectly,  more than 50% of the
          securities or interests having, by their terms,  ordinary voting power
          to  elect  members  of  the  Board  of  Directors,  or  other  persons
          performing similar functions with respect to such entity.

         "Title Commitment" has the meaning set forth in Section 7.13(a).

         "Title Defect" has the meaning set forth in Section 7.13(a).

         "Transfer Amount" has the meaning set forth in Section 8.8(e).

         "Transfer Fees" has the meaning set forth in Section 7.5(b).

         "Transferred Employees" has the meaning set forth in Section 8.2(a).

         "Transferred Hourly Employees" has the meaning set forth in Section
          8.3(a).

         "Transferred Pension Participants" has the meaning setforth in Section
          8.8(a).

         "Transferred Salaried Employees" has the meaning set forth in Section
          8.3(a).

         "Transferred Sites" means the Real Property and the Leased Premises.

         "Transition Services Agreement" has the meaning set forth in Section
          4.1(b).

         "Window Period" has the meaning set forth in Section 8.3(a).


                                   ARTICLE II
                           PURCHASE AND SALE OF ASSETS

2.1 Purchase and Sale.  Fort James agrees to sell and to cause its  Subsidiaries
to sell,  to Buyer  and  Buyer  agrees  to  purchase  from  Fort  James  and its
designated  Subsidiaries at Closing all of the right, title and interest of Fort
James  or any  Person  within  the FJ  Group  in  and to the  following  assets,
properties  and  rights  other  than  the  Excluded  Assets  (collectively,  the
"Assets"):

(a) the real property  listed in Schedule  2.1(a)  together with the  buildings,
fixtures and other  improvements  located thereon and the appurtenances  thereto
(the "Real Property");

(b) the machinery,  equipment,  furniture,  vehicles,  tools, supplies and other
tangible  personal  property which (i) is ordinarily  located on the Transferred
Sites or (ii) is listed on the attached Schedule 2.1(b);

(c) the raw materials,  work-in-process,  finished goods,  stores,  supplies and
spare parts which are located at the Transferred Sites or are in transit thereto
or  which  are  located  elsewhere  and  relate  solely  to  the  Business  (the
"Inventory");

(d)  except to the  extent  specified  in  Schedule  5.12,  the  Filed  Business
Intellectual   Property   listed  in  Schedule  5.12,  the  Non-Filed   Business
Intellectual  Property  listed in Schedule  5.12, and licenses to Filed Business
Intellectual  Property and Non-Filed  Business  Intellectual  Property listed in
Schedule  5.12  (such  Filed  Business  Intellectual  Property,  such  Non-Filed
Business Intellectual  Property,  and such licenses thereto,  collectively,  the
"Business Intellectual Property");

(e) all of the rights of every  Person  within the FJ Group under (i) the Listed
Contracts,  (ii) the Lessee Leases and (iii) all other contracts and commitments
to the extent the same relate exclusively to the Business;

(f) to the extent assignable, all federal, state, local and foreign governmental
licenses, permits, approvals and authorizations held by any Person within the FJ
Group to the extent the same relate solely to the Business;

(g) all accounts  receivable  and notes  receivable  arising from the  Business,
including receivables from Transferred Employees;

(h) all property records,  production records,  engineering records,  purchasing
and sales  records,  personnel and payroll  records for  Transferred  Employees,
accounting  records,  customer  and  vendor  lists and other  records  and files
(including,  but not limited to, any such records  maintained in connection with
any computer  system,  but subject to the provisions of any  applicable  Related
Agreement) used exclusively in the Business;  a co-ownership  interest in any of
the foregoing  assets which are used only in part in the  Business,  but only to
the extent of such use; and copies of the  information  relating to the Business
contained in the computer files referred to in Section  2.2(d),  but only to the
extent such information  relates to the Business;  provided,  however,  that the
transfer of the assets and properties referred to in this Section 2.1(h) that do
not constitute  indicia of title,  may, at the option of Fort James,  consist of
transfer of true, correct and complete copies thereof;

(i) subject to the  provisions  of Section  7.10,  all purchase  orders,  forms,
labels,  stationery,  shipping  materials,  catalogues,   brochures,  art  work,
photographs  and  advertising  materials  which relate solely to the Business or
which are located at any Transferred Site;

(j) those  categories of prepaid  expenses and deferred  charges  created in the
ordinary course of the Business which are listed on Schedule 2.1(j);

(k) all  rights,  choses in action  and  claims,  known or  unknown,  matured or
unmatured,  accrued or contingent,  against third parties  arising solely out of
the Business or the ownership or operation of the Assets; and

(l) Fort  James'  one-third  interest in the  Kalamazoo  Valley  Group  Landfill
Partnership.

2.2 Excluded Assets.  The following assets (the "Excluded Assets") to the extent
that, but for this sentence, they would constitute Assets, shall not be included
in the Assets:

(a) all cash and cash  equivalents,  including cash on hand or in bank accounts,
certificates  of deposit,  commercial  paper and  securities,  except petty cash
funds located at the Transferred Sites;

(b) all  prepaid  expenses  and  deferred  charges  other than  those  listed in
Schedule 2.1(j);

(c) the real property, improvements, equipment and all other assets to be leased
from a member of the FJ Group pursuant to any Related Agreement,  and any Leased
Assets (other than the leasehold interest therein);

(d) all  computer  files  which  contain  any  records or lists  relating to any
business of the FJ Group other than the Business;

(e)      the excluded technology listed in Schedule 2.2(e);

(f)      all assets listed in Schedule 2.2(f); and

(g)      all prepaid insurance premiums.

2.3  Assumed  Liabilities;  Excluded  Liabilities.  (a) Except to the extent set
forth in Section 2.3(b), Buyer shall assume, at the Closing, all Liabilities and
obligations of any Person within the FJ Group to the extent such Liabilities and
obligations relate  exclusively to the Business or to the Assets  (collectively,
the "Assumed Liabilities"), including, without limitation, the following:

(i)      the  current  liabilities  related  to  the  Business  or  the  Assets,
         including,  but not limited to, all  accounts and trade  payables,  all
         Liabilities  and all  obligations  accruable as a current  liability on
         Fort  James'  financial  statements  at  Closing  to  the  extent  such
         payables,  liabilities and  obligations are related  exclusively to the
         Business or the Assets;

(ii)     all  Liabilities and obligations of any Person within the FJ Group with
         respect to goods or services  delivered or to be delivered to customers
         of the Business  arising from orders  placed prior to or following  the
         Closing;

(iii)    all Liabilities and obligations of any Person within the FJ Group under
         the  Listed  Contracts,  the  Lessee  Leases  and any  other  contract,
         commitment, license, permit, approval, authorization or other agreement
         or arrangement constituting part of the Assets under Section 2.1(e);

(iv)     all  Liabilities  and  obligations  of any  Person  within the FJ Group
         existing at Closing and  relating to Business  Employees  and  employee
         benefits for Business Employees,  except to the extent such liabilities
         and obligations are  specifically  retained by the FJ Group pursuant to
         Article VIII;

(v)       subject to Section  12.1(c)  hereof,  all  Liabilities and obligations
          under Environmental Laws of any Person within the FJ Group (including,
          without  limitation,  any  obligation  to  conduct  or to pay  for any
          Remedial Action for any  Environmental  Condition or any obligation to
          correct or to pay a penalty for  failure to comply with  Environmental
          Statutes),  in connection with facts, events,  conditions,  actions or
          omissions  existing or  occurring  prior to or after  Closing,  to the
          extent  that such  liability,  obligation,  condition  or failure  (A)
          exists on any Real  Property,  or real  property  constituting  Leased
          Premises at the Transferred  Sites or (B) is a Liability arising under
          Environmental Laws with respect to hazardous substances, contaminants,
          pollutants or petroleum products leaching or physically migrating from
          Transferred  Sites to adjacent or nearby  properties,  and  including,
          without limitation, those liabilities listed on Schedule 2.3(a)(v);

(vi)     all  Liabilities  or  obligations  of any  member  of the FJ  Group  in
         connection  with the Port of Portland  Industrial  Development  Revenue
         Bonds; and

(vii) all other Liabilities described on Schedule 2.3(a)(vii).

(b) The following Liabilities and obligations (the "Excluded Liabilities") shall
be excluded from the Assumed Liabilities:

(i)      Liabilities for federal, state and local income and franchise taxes and
         any other  taxes  incurred  by any  Persons  within the FJ Group in the
         conduct of the Business or with respect to the Assets  before  Closing,
         except as is otherwise provided in this Agreement;

(ii)     all   Liabilities  or  obligations  to  the  extent   relating  to  the
         acquisition, ownership or use of any of the Excluded Assets;

(iii)    all  Liabilities or  obligations  arising under  Environmental  Laws in
         connection  with  facts,  events,  conditions,   actions  or  omissions
         existing on or occurring  prior to Closing at locations  other than the
         Transferred Sites; and

(iv) any Liabilities listed on Schedule 2.3(b)(iv).

                                   ARTICLE III
                         PURCHASE PRICE, WORKING CAPITAL
                                   ADJUSTMENT


3.1 Purchase Price.  The  consideration to be paid for the Assets (the "Purchase
Price")  shall be $830  million,  in cash,  subject to adjustment as provided in
Section 3.2.

3.2 Working Capital  Adjustment.  (a) Immediately after the Closing,  Fort James
and Buyer shall jointly cause  PricewaterhouseCoopers  LLP to prepare an audited
balance  sheet of the  Business as of the  Closing  Date (the  "Closing  Balance
Sheet") and schedules setting forth the Closing Working Capital as of the end of
the last  shift  on the day next  preceding  the date of the  Closing.  "Closing
Working Capital" shall equal the current assets less the current  liabilities as
reflected  in the Closing  Balance  Sheet.  The Closing  Balance  Sheet shall be
prepared on a basis  consistent  with the preparation of the March Balance Sheet
and taking into account the assets transferred and liabilities  assumed pursuant
to this  Agreement.  The Closing  Balance  Sheet  (together  with the  schedules
setting forth Closing Working Capital),  shall be completed and delivered to the
parties no later than 60 days after Closing.  All items in the schedules setting
forth the Closing  Working  Capital the amounts of which are not  objected to or
questioned by Fort James or Buyer during the 15-day period following  completion
and  delivery of the Closing  Balance  Sheet shall be deemed  agreed upon by the
parties and shall be deemed  conclusive  for purposes of  determining  the Final
Closing Working Capital, as defined herein.

(b)As promptly as  practicable,  but no later than 15 days after  completion and
delivery of the Closing Balance Sheet,  the parties shall attempt to resolve any
items  comprising  Closing  Working  Capital as to which the parties differ (the
"Disputed Items").  If during such 15-day period the parties are able to resolve
all  Disputed  Items,  the Closing  Working  Capital so agreed upon shall be the
"Final Closing Working Capital."

(c) If during such 15-day  period any such  Disputed  Items  cannot be resolved,
those  items to the extent of the amounts  agreed  upon by the parties  shall be
deemed  agreed  upon,  shall no longer  constitute  Disputed  Items and shall be
conclusive for purposes of  determining  the Final Closing  Working  Capital and
each of Fort James and Buyer shall promptly thereafter but in no event more than
10 days  thereafter  cause  an  accounting  firm of  internationally  recognized
standing  reasonably  satisfactory to them promptly to review this Agreement and
the remaining  Disputed  Items for purposes of resolving the remaining  Disputed
Items and  calculating  the  Final  Closing  Working  Capital.  In  making  such
calculation,  such accounting  firm shall make a determination  only of Disputed
Items not  resolved  by the parties and in the case of all other items shall use
the amounts  which are agreed upon by the parties.  Such  accounting  firm shall
deliver to Fort James and to Buyer, as promptly as practicable, a report setting
forth its  resolution of the remaining  Disputed  Items and its  calculation  of
Closing Working Capital. Such report shall be final and binding upon the parties
hereto.  The cost of such review and report shall be borne by the party  against
whom the  disagreement  is in large part resolved or, if the resolution does not
substantially  favor  either  party,  such costs shall be borne  equally by Fort
James  and  Buyer.  In all  events,  such  accounting  firm will  determine  the
assessment of such costs.

(d) The Closing Working Capital agreed to by the parties or as calculated by the
accounting  firm as set forth in Section 3.2(c) above, as the case may be, shall
be the "Final  Closing  Working  Capital,"  which  shall be  conclusive  for all
purposes of this Agreement.

(e) If the Final  Closing  Working  Capital is  greater  than  $72,294,000  (the
"Opening Working Capital"), Buyer shall promptly pay to (or as directed by) Fort
James, in the manner and with interest as provided in Section 3.2(f), the amount
of the  difference.  If the Final Closing  Working  Capital is less than Opening
Working Capital,  Fort James shall promptly pay to (or as directed by) Buyer, in
the manner and with  interest as provided in Section  3.2(f),  the amount of the
difference.  Any such payment pursuant to this Section 3.2(e) shall be made at a
mutually  convenient  time and place (i) within 5 business  days after Buyer and
Fort James  agree upon the Final  Closing  Working  Capital  pursuant to Section
3.2(b)  or  (ii)  if  Disputed  Items  are  referred  to a firm  of  independent
accountants  pursuant to Section 3.2(c),  then within 10 business days after the
delivery of the report of such firm referred to in Section 3.2(c).

(f) Any payments  pursuant to this Section  3.2(f) shall be made by causing such
payments to be credited in immediately  available  funds to the account of Buyer
or of  Fort  James,  as the  case  may be,  as may be  designated  by the  party
receiving payment. The amount of any payment to be made pursuant to this Section
3.2(f)  shall  bear  interest  from and  including  the date of  Closing  to but
excluding  the date of  payment  at a rate per annum  equal to the Prime Rate as
published by The Chase  Manhattan  Bank.  Such interest  shall be payable at the
same time as the  payment to which it relates and shall be  calculated  daily on
the basis of a year of 365 days and the actual number of days for which interest
is due.

3.3  Additional  Payments.  (a) If any Asset or the  Business  shall  suffer any
damage,  destruction  or loss  after the date  hereof,  but  before  the date of
Closing,  and such Asset or the Business and the related casualty are covered by
any insurance  policy  maintained by any Person within the FJ Group:  Fort James
shall pay to Buyer, as soon as practicable after receipt by Fort James, in cash,
the amount by which the  proceeds  from such  policy in respect of such  damage,
destruction  or loss  exceeds the sum of (i) any amount  recorded on the Closing
Balance  Sheet as a current  liability  with respect to repair,  restoration  or
replacement related to such damage,  destruction or loss; (ii) the amount if any
by which the current  assets  included in the Closing  Balance  Sheet shall have
been reduced from the current  assets shown on the March Balance Sheet by reason
of such  damage,  destruction  or loss,  and (iii) any amount paid by any Person
within the FJ Group after the date hereof in cash for the repair, restoration or
replacement of the damaged or destroyed asset.

     (b) All proceeds of insurance  which are  applicable  to insured  claims of
third parties included in the Assumed Liabilities and are received by any Person
within the FJ Group after Closing shall (i) be used to discharge, in whole or in
part, the applicable Assumed  Liabilities,  (ii) be paid to Buyer if, and to the
extent that, such Assumed Liabilities have been discharged by Buyer or Buyer has
made a reimbursement to Fort James in respect of such claim or (iii) be retained
by Fort James if, and to the extent  that,  such Assumed  Liabilities  have been
discharged  by  any  Person  within  the FJ  Group  and  Buyer  has  not  made a
reimbursement to Fort James in respect of such claim.

                                   ARTICLE IV
                               RELATED AGREEMENTS

4.1 Related Agreements.  In connection with the consummation of the transactions
contemplated  hereby, Fort James (or the Subsidiary of Fort James named therein)
and Buyer shall enter into each of the following agreements  (collectively,  the
"Related Agreements") at or prior to the Closing:

(a) each of the supply agreements  listed in Exhibit A hereto,  substantially in
the form of Exhibit A hereto, and upon the terms and conditions set forth in the
separate term sheets for each such agreement included in Exhibit A hereto;

(b) each of the broker agreements listed in Exhibit B hereto, upon the terms and
conditions set forth in such Exhibit B; and

(c) a transition services agreement (the "Transition  Services  Agreement")
providing  for the  provision  by Fort  James to  Buyer of such of the  services
listed in Exhibit C hereto as Buyer elects in writing, no later than 20 business
days prior to Closing, upon terms and conditions customary for such arrangements
and at a price to Buyer equal to Fort James' fully-loaded cost of providing such
service (which shall be comparable to amounts  reflected in the P&L) in addition
to any one-time  costs in connection  with the  provision of such  service.  The
Transition Services Agreement will address (i) the operation of the Chambersburg
facility  until such  facility is shut down (which shut down is  anticipated  to
occur in July  1999)  and (ii) the  removal  of the  Chambersburg  equipment  at
Buyer's sole cost and expense following such shut down; provided that Fort James
shall be responsible for the disposal of such Chambersburg  equipment that Buyer
chooses not to remove.  In addition,  the  Transition  Services  Agreement  will
provide  that (i) Fort  James will  grant to Buyer a  royalty-free  nonexclusive
license relating to Pressed High  Performance  plate and related tooling patents
and  technology  for use in  manufacturing  food  packaging for sale in channels
where  food is sold in the  packaging  at  wholesale,  and (ii) Fort  James will
retain in the technology being transferred to Buyer, a royalty-free nonexclusive
license  relating  to  Microwave  packaging  patents and  technology  for use in
manufacturing  food packaging for sale in channels where food is not sold in the
packaging at wholesale.

                                    ARTICLE V
                  REPRESENTATIONS AND WARRANTIES OF FORT JAMES

         Fort James hereby represents and warrants to Buyer that:

5.1  Organization;  Qualification.  Fort James is a corporation  duly organized,
validly  existing and in good  standing  under the laws of the  Commonwealth  of
Virginia and has corporate  power and authority to own all of its properties and
assets and to carry on its business as it is now being conducted. Fort James and
each member of the FJ Group  engaged in the Business are duly  qualified  and in
good standing to do business in each  jurisdiction  in which the property owned,
leased or operated  by it or the nature of the  business  conducted  by it makes
such qualification  necessary except in those jurisdictions where the failure to
be duly  qualified  and in good  standing  would not have a Fort James  Material
Adverse Effect.

5.2 Authority Relative to this Agreement and the Related Agreements. Each Person
within the FJ Group has the corporate power and authority to execute and deliver
each  agreement or other  document to be executed by it in  connection  with the
transactions  contemplated by this Agreement and to consummate the  transactions
contemplated  on its part  thereby.  The  execution  and delivery by each Person
within the FJ Group of each  agreement or other document to be executed by it in
connection  with  the  transactions  contemplated  by  this  Agreement,  and the
consummation  by it of any  transactions  contemplated  on its part  hereby  and
thereby,  have been duly  authorized by such Person's  Board of Directors and no
other  corporate  proceedings  on the part of such  Person  are  necessary  with
respect thereto. Assuming the due authorization, execution and delivery by Buyer
of this  Agreement,  this  Agreement  constitutes,  and each  agreement or other
document to be executed by a Person within the FJ Group in  connection  with the
transactions contemplated by this Agreement (when executed and delivered by Fort
James or that other  Person  within  the FJ Group)  will  constitute,  valid and
binding  obligations of Fort James and/or such other Person within the FJ Group,
as the case may be, enforceable in accordance with their terms.

5.3 Consents and  Approvals.  Except as set forth in Schedule  5.3,  there is no
requirement  applicable  to any  Person  within  the FJ Group to make any filing
with,  or to obtain any permit,  authorization,  consent or approval  from,  any
third party  (including any Authority) as a condition to the consummation of the
transactions contemplated by this Agreement,  other than such requirements,  the
failure of which to satisfy would not have a Fort James Material Adverse Effect.

5.4  Non-Contravention.  The  execution  and  delivery  by  Fort  James  of this
Agreement  and by each Person  within the FJ Group of the other  agreements  and
documents to be executed in connection  with the  transactions  contemplated  by
this Agreement and the  consummation of the  transactions  contemplated  thereby
will not (a) violate or result in a breach of any  provision  of the Articles of
Incorporation  or Bylaws of Fort James or such other Person within the FJ Group,
as the case may be,  (b)  result  in a  default  (or give  rise to any  right of
termination,  cancellation  or  acceleration)  under the  terms,  conditions  or
provisions of any note, bond, mortgage,  indenture, license, agreement, lease or
other  instrument  or obligation to which Fort James or such other Person within
the FJ  Group,  as the case may be,  is a party or by which  Fort  James or such
other  member of the FJ Group,  as the case may be, or any of the  Assets may be
bound,  except for such  defaults  (or rights of  termination,  cancellation  or
acceleration)  as to which  requisite  waivers or consents have been or shall be
obtained  by Fort James  before the Closing or which would not have a Fort James
Material Adverse Effect,  or (c) violate any order,  writ,  injunction,  decree,
statute,  rule or regulation applicable to any Person within the FJ Group or any
of the Assets or the Business  (other than any  applicable  "bulk sales"  laws),
excluding from the foregoing  clause (c) such  violations  that would not have a
Fort James Material Adverse Effect.

5.5 Compliance  with Laws.  Except as set forth in Schedules 5.5, 5.6 and 5.7 or
as would not have a Fort James Material  Adverse Effect,  all Persons within the
FJ Group have  operated the Business in compliance  with all laws,  regulations,
policies,  guidelines,  orders, judgments or decrees of any Authority applicable
to, or having  jurisdiction over, Persons within the FJ Group, the Assets or the
Business.  Except as set forth in Schedule 5.6, with respect to the Business, to
the Knowledge of Fort James: (a) no Person within the FJ Group has received from
any Authority  any notice of any failure to so comply,  and (b) no Person within
the FJ Group is currently subject to any sanction for such noncompliance.

5.6 Environmental  Matters.  Except as described on Schedule 5.6, Persons within
the FJ Group have obtained all federal,  state and local  permits,  licenses and
other  authorizations  and have submitted all notices,  which are required under
applicable  Environmental  Laws in  connection  with the  Business,  other  than
licenses,  permits,  and other  authorizations,  the  failure of which to obtain
would not have a Fort James  Material  Adverse  Effect.  Except as  described on
Schedule 5.6, and except for such  noncompliance  as would not have a Fort James
Material Adverse Effect,  the Assets and the Business are in compliance with all
terms and conditions of such permits, licenses and authorizations,  and are also
in compliance with all other limitations,  restrictions,  conditions, standards,
prohibitions,   requirements,  obligations,  schedules  and  timetables  of  any
Environmental  Law or order,  decree,  judgment notice or demand letter entered,
promulgated or approved thereunder, and no action is pending to revoke or modify
any such permit, license or authorization.  Except as described on Schedule 5.6,
neither  Fort James nor any of its  Subsidiaries  has  received  notice from any
Authority or Person of any failure of the Assets or the Business to comply with,
or of any  liability  or any  potential  liability of the Assets or the Business
under, any Environmental  Law, except for any such Environmental Law the failure
to comply with which would not have a Fort James Material Adverse Effect. Except
as set forth in Schedule  5.6, or for any  Excluded  Liability,  or as would not
have a Fort James Material  Adverse Effect:  (i) none of the Transferred  Sites,
the Assets or the Business has released or disposed of any Hazardous Substances,
and no  Person  in the FJ Group  knows of any  prior  releases  or  disposal  of
Hazardous  Substances on the  Transferred  Sites or related to the Assets or the
Business, and (ii) there are no physical or environmental  conditions located at
the  Transferred  Sites or related to the Assets or the Business that would give
rise to remedial obligations.

5.7  Licenses  and  Permits.  Except as set forth on Schedule  5.7, all material
federal,  state and local  permits and  licenses  that any Person  within the FJ
Group is required to obtain that are related to the Business or the ownership or
operation of the Assets have been  obtained and are  currently in full force and
effect other than such permits and licenses the failure of which to obtain would
not have a Fort James Material  Adverse Effect.  Except as set forth in Schedule
5.7 or as would not have a Fort James Material Adverse Effect,  no Person within
the FJ Group has violated the terms or conditions of any such license or permit,
no notice of a violation of any such license or permit has been  received by any
Person  within the FJ Group or  recorded  or  published,  and no  proceeding  is
pending, to revoke, prevent the renewal of, or limit any such license or permit.

   (b) 5.8 Financial  Statements.  (a) Fort James has previously furnished Buyer
with the March Balance Sheet.  Such unaudited balance sheet has been prepared in
conformity with GAAP (except as otherwise set forth in the comments accompanying
such balance sheet) applied on a basis  consistent  with Fort James'  historical
accounting  policies and  procedures  with  respect to the Business  used in the
preparation of Fort James' audited financial statements.

Fort James has  previously  furnished  Buyer with an  unaudited  profit and loss
statement  for the Business for the fiscal year ended  December 27, 1998, a copy
of which is attached as Schedule 5.8(b) (the "P&L"). Such unaudited P&L has been
prepared in conformity  with GAAP (except as otherwise set forth in the comments
accompanying such P&L) applied on a basis consistent with Fort James' historical
accounting  policies and  procedures  with  respect to the Business  used in the
preparation of Fort James' audited financial statements.

5.9  Litigation.  Except as set forth in  Schedule  5.9,  there are no  actions,
suits,   claims,   investigations  or  proceedings  (legal,   administrative  or
arbitrative) pending or, to the Knowledge of Fort James,  threatened against any
Person within the FJ Group which relate to the Assets or the  Business,  whether
at law or in equity and whether civil or criminal in nature, before any federal,
state,  municipal,  foreign country's or other court,  arbitrator,  governmental
department, commission, agency or instrumentality,  nor are there any judgments,
decrees  or  orders  of any such  court,  arbitrator,  governmental  department,
commission,  agency or instrumentality outstanding against any Person within the
FJ Group which relate to the Assets or the  Business and which,  in either case,
have, or, if adversely determined,  could be reasonably expected to have, a Fort
James Material Adverse Effect.

5.10 Title to  Properties.  (a) Except as set forth in Schedule  5.10 and except
for Permitted Exceptions,  Fort James or another Person of the FJ Group has good
and  valid  fee  simple  title  to the  Real  Property;  and no  portion  of any
Transferred  Site is  subject  to any  proceeding  for its  sale,  condemnation,
expropriation  or taking (by eminent  domain or otherwise) by any Authority nor,
to the Knowledge of Fort James, has any such sale,  condemnation,  expropriation
or taking been proposed or threatened.

5.11 Leases.  (a) Schedule 5.11 lists all leases,  agreements and commitments to
lease, under which any Person within the FJ Group is the lessee (each, a "Lessee
Lease" and, collectively,  the "Lessee Leases"), and all leases,  agreements and
commitments  to lease,  under which any Person within the FJ Group is the lessor
(each a "Lessor Lease" and,  collectively,  the "Lessor Leases") that relate, in
each case,  exclusively to the Business and to either real or personal property,
other than leases of personal  property which may be canceled  without  material
penalty upon not more than 60 days'  notice or which  require the payment of not
more than $10,000 per month. Except as set forth in Schedule 5.11, there is not,
with  respect to any of the Lessee  Leases or the Lessor  Leases,  any  existing
material  default or event of  default  on the part of any Person  within the FJ
Group or, to the Knowledge of Fort James, any existing material default or event
of  default on the part of any other  party to the  Lessee  Leases or the Lessor
Leases.

(b) Except as set forth in Schedule 5.11, no payments are required by any Person
within the FJ Group to maintain the Lessee  Leases  relating to the Portland and
Mississauga  facilities (the "Major Leases") other than as provided therein, and
no person  has made any  claim  with  respect  to the Major  Leases  that  would
materially  interfere  with the use of the premises by the tenant in the conduct
of its business.

5.12 Intellectual Property. Schedules 5.12(a-e) set forth a complete and correct
list of the Business  Intellectual  Property that is used  exclusively in, or is
applicable  exclusively  to,  the  Business.  Except as set  forth in  Schedules
5.12(a-e),  Fort  James or  another  member  of the FJ Group  owns the  Business
Intellectual  Property and such Business  Intellectual Property is subsisting on
the date  hereof.  Except  as set  forth on  Schedules  5.12(a-e),  there are no
licenses of Business Intellectual Property to third parties. Except as set forth
in Schedules  5.12(a-e),  there is no claim,  suit, action or proceeding pending
or, to the Knowledge of Fort James,  threatened against any Person within the FJ
Group  asserting that its use of any Business  Intellectual  Property  infringes
upon  the  rights  of any  third  parties.  Except  as set  forth  on  Schedules
5.12(a-e), to the Knowledge of Fort James, there are no third parties infringing
upon the Business Intellectual Property.

(a)  Schedule  5.12(a)  sets  forth a  complete  and  correct  list of the Filed
Business  Intellectual  Property  (including patents,  pending  applications for
letters patent and registered  trademarks)  that is used  exclusively  in, or is
applicable exclusively to, the Business.

(b)  Schedule  5.12(b)  sets  forth a  complete  and  correct  list of the Filed
Business  Intellectual  Property  (including patents,  pending  applications for
letters  patent  and  registered  trademarks)  owned  by third  parties  that is
licensed to Fort James and used exclusively in, or is applicable  exclusively to
the Business.

(c)  Schedule  5.12(c)  sets  forth a  complete  and  correct  list of the Filed
Business  Intellectual  Property  (including patents,  pending  applications for
letters patent and registered  trademarks) that is used in, or is applicable to,
the Business  which is also  applicable to portions of Fort James other than the
Business.

(d)  Schedule  5.12(d)  sets  forth a  complete  and  correct  list of the Filed
Business  Intellectual  Property  (including patents,  pending  applications for
letters  patent  and  registered  trademarks)  owned  by third  parties  that is
licensed to Fort James and is used in, or is applicable to the Business which is
also applicable to portions of Fort James other than the Business.

(e)  Schedule  5.12(e)  sets forth a complete  and  correct  list of the Unfiled
Business  Intellectual  Property which has been reduced to a record of invention
that is used exclusively in, or is applicable exclusively to, the Business.

(f)  Schedule  5.12(f)  sets forth a complete  and  correct  list of the Unfiled
Business  Intellectual  Property which has been reduced to a record of invention
that is used in, or is applicable to, the Business  which is also  applicable to
portions of Fort James other than the Business.

5.13 Listed  Contracts.  Schedule  5.13  contains a complete and correct list of
every contract, agreement or commitment of any Person within the FJ Group, other
than Lessee Leases and Lessor Leases (each, a "Listed Contract"):

(a) which  provides for aggregate  future  payments by the Business of more than
$250,000,  except for purchase  orders or sales  orders  arising in the ordinary
course of business,  in which case such  contract,  agreement or  commitment  is
listed only if any party thereto is obligated to make  payments  during the term
thereof which will exceed $1,000,000 in the aggregate;

(b) which  provides for the sale,  lease to a third party or other  disposition,
after the date hereof and other than in the ordinary course of business,  of any
of the Assets;

(c) which is a mortgage,  indenture,  note, or installment obligation,  or other
instrument evidencing indebtedness to be assumed by Buyer;

(d)  which is a  guaranty  of any  obligation  for  borrowings  or  performance,
excluding  endorsements or guaranties of instruments made in the ordinary course
of business;

(e) which is an  agreement  or other  arrangement  for the  purchase of any real
estate, machinery, equipment, or other capital assets in excess of $250,000; or

(f) which is an agreement imposing material non-competition or exclusive dealing
obligations on the Business.

Except as set forth in Schedule  5.13,  all of the Listed  Contracts are in full
force  and  effect  and there  has not  occurred,  with  respect  to any  Listed
Contract,  any  material  default  or event of default on the part of any Person
within the FJ Group or, to the Knowledge of any Person within the FJ Group,  any
other party thereto.

5.14 Labor  Matters.  Schedule  5.14 sets forth a complete  and correct  list of
every collective  bargaining  agreement covering Business Employees.  Fort James
has  provided  Buyer  with true,  complete  and  correct  copies of each of such
collective bargaining agreements and all amendments and modifications (excluding
exhibits) thereto.

(a) Except as set forth on Schedule 5.14,  and except for  grievances  that have
not ripened into  arbitration or litigation,  as of the date hereof there are no
controversies, disagreements or disputes pending between Fort James or any other
member  of the  FJ  Group  and  any  of  their  respective  employees  or  union
representatives that would have a Fort James Material Adverse Effect.

(b)  Except as set forth on  Schedule  5.14,  or as would not have a Fort  James
Material Adverse Effect:

(i)      during  the last three  years  immediately  preceding  the date of this
         Agreement,  with respect to the Business Employees,  there have been no
         labor strikes,  slow downs,  lockouts or general employment disputes at
         any of the Transferred Sites;

(ii)     there have within the past three years  immediately  preceding the date
         of this Agreement occurred (A) no events that have legally required any
         member of the FJ Group to hold a union  election  with  respect  to any
         Transferred  Site or (B) to the  Knowledge  of Fort  James,  any  union
         organizing  activities,  or any  demand  for  recognition  from a labor
         organization; and

(iii)    there have within the past three years  immediately  preceding the date
         of this Agreement been no unfair labor practice  charges filed with the
         National Labor  Relations  Board against any member within the FJ Group
         related to the Business or the Assets.

5.15  Employee  Benefit  Plans.  (a) Schedule  5.15(a) lists all of the material
employee benefit and compensation plans,  programs and arrangements,  including,
without  limitation:  (i) all retirement,  savings and other pension plans other
than "multiemployer plans," (as defined in Section 4001(a)(3) of ERISA) (ii) all
health, severance,  insurance,  disability and other employee welfare plans; and
(iii) all  employment,  incentive,  vacation and other similar  plans,  that are
maintained  by Fort James,  or any Person  within the FJ Group,  with respect to
Business  Employees,  or to which Fort  James or any Person  within the FJ Group
contributes  on behalf of the Business  Employees  (collectively,  the "Employee
Plans").

(b) Except as would not have a Fort James Material Adverse Effect:  (i) the
Employee Plans that are maintained by Fort James or a member of the FJ Group are
in compliance  with applicable laws and  regulations,  including,  to the extent
applicable,  ERISA and the Code, (ii) Fort James and, to the extent  applicable,
each  other  member  of the FJ Group  has  administered  the  Employee  Plans in
accordance  with  applicable  laws and  regulations,  including,  to the  extent
applicable, ERISA and the Code, and (iii) each Employee Plan that is intended to
be qualified under Section 401(a) of the Code is so qualified.

(c) Fort James has made  available to Buyer  copies of all  Employee  Plans and,
where applicable,  summary plan descriptions and annual reports filed within the
last year pursuant to ERISA or the Code with respect to the Employee Plans.

(d) Except as would not have a Fort James Material Adverse Effect,  neither Fort
James  nor  any  Person  within  the FJ  Group  has  engaged  in any  prohibited
transactions,  as  defined  in  Section  4975 of the Code,  with  respect to any
Employee Plan.  Except as would not have a Fort James Material  Adverse  Effect,
(i) no Employee Plan that is a defined benefit pension plan (as defined in 3(35)
of ERISA)  maintained or contributed  to by Fort James or an ERISA  Affiliate or
any trust  established  thereunder  that is subject to Section  302 of ERISA and
Section 412 of the Code has incurred any  "accumulated  funding  deficiency" (as
defined in Section  302 of ERISA and  Section  412 of the Code),  whether or not
waived,  (ii) all  contributions  required to be made with respect thereto on or
prior to Closing have been timely made, and (iii) with respect to the FJ Pension
Plan,  the present  value of accrued  benefits  under such plan,  based upon the
actuarial  assumptions used to prepare the most recent  actuarial  valuation for
such  plan,  did not,  as of its most  recent  valuation  date,  exceed the then
current value of the assets of such plan.  Except as would not have a Fort James
Material Adverse Effect,  no lien exists with respect to any Employee Plan under
Section  412(n) of the Code with  respect  to any assets of Fort James or of any
ERISA Affiliate.

(e)  Schedule  5.15(e)  contains a true and correct list of all  employment  and
consulting  contracts with an original term in excess of 60 days,  providing for
compensation on a yearly basis in excess of $250,000,  and not otherwise  listed
on Schedule 5.13 or 5.15(a),  to which any Person within the FJ Group is a party
in connection with the Business.  Except as set forth on Schedule 5.15(e),  each
of such  contracts is in full force and effect and there has not occurred,  with
respect to any such  contract,  any material  default or event of default on the
part of any Person within the FJ Group or, to the  Knowledge of Fort James,  any
other party to such contracts.

(f) The Central  States,  Southeast and Southwest areas Pension Fund is the only
multiemployer  plan  (as  defined  in  ERISA)  to which  Fort  James or an ERISA
Affiliate  contributes  with  respect to any  Business  Employee.  The number of
individuals  with  respect to whom  contributions  are being made as of the date
hereof is approximately 15.

5.16 Conduct of Business and  Management  of Assets.  (a) Between March 28, 1999
and the date hereof,  Persons  within the FJ Group have  conducted the Business,
and have managed the Assets in the ordinary  course of business  consistent with
past practice.

(b) Between March 28, 1999 and the date hereof, with respect to the Business and
the Assets, no Person within the FJ Group has:

(i)      made capital expenditures,  other than substantially in accordance with
         the  capital  plan  of  the  Business   attached   hereto  as  Schedule
         5.16(b)(i);

(ii)     made a  disposition  of  assets in excess  of  $1,000,000,  other  than
         dispositions  of inventory  in the  ordinary  course of business of the
         Business;

(iii)    made loans or advances to, or  investments  in, other parties in excess
         of $500,000 in the aggregate;

(iv)     entered into employment,  severance, compensation or similar agreements
         with  Business  Employees,  except (A) for  incentive  programs that by
         their terms expire at or before  Closing or (B) in the ordinary  course
         of business;

(v)      made  increases  in  compensation  or  benefits   payable  to  Business
         Employees other than in the ordinary course of business;

(vi)     suffered or incurred any significant damage, destruction of property or
         other loss, whether or not insured; or

(vii) incurred additional long-term debt.

(c) Between March 28, 1999 and the date hereof, with respect to the Business and
the Assets, the Persons within the FJ Group have:

(i)      maintained their books and records in accordance with past accounting
         practices;

(ii)     maintained the same level and types of insurance as previously
         maintained; and

(iii)    used commercially  reasonable  efforts to preserve the Business and the
         Assets.

5.17 Finders.  Except for Goldman,  Sachs & Co., no broker, finder or investment
banker  is  entitled  to any fee or  commission  from Fort  James  for  services
rendered  on  behalf  of  Fort  James  in  connection   with  the   transactions
contemplated by this Agreement.

5.18 Sufficiency of Assets. The Assets to be transferred  pursuant to paragraphs
(a)-(g),  (i) and (l) of  Section  2.1,  include  all of the assets of the types
covered by such  paragraphs as are reasonably  necessary to conduct the Business
in substantially the same manner as it is presently being conducted.

5.19  Customers.  Schedule  5.19 sets  forth:  (i) a list of the twenty  largest
customers of the  Business,  determined  by dollar volume of gross sales for the
most recently ended fiscal year (the "Large  Customers"),  and the dollar volume
of sales to each such customer  during the most recently  ended fiscal year, and
(ii) a list of the brokers and  distributors  of the Business that accounted for
at least  $1,000,000  in sales by the Business  during the most  recently  ended
fiscal year (the  "Large  Brokers"),  and the dollar  volume of the sales of the
Business to or through each Large Broker during the most  recently  ended fiscal
year.  Except  as  described  on  Schedule  5.19 as of the date  hereof,  to the
Knowledge of Fort James,  no Large Customer or Large Broker has  terminated,  or
given notice that it intends to terminate,  its existing  relationship  with any
Person within the FJ Group.

                                   ARTICLE VI
                     REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to Fort James that

6.1  Organization;  Qualification.  Each Buyer is a corporation  duly organized,
validly existing and in good standing under the laws of Delaware, in the case of
GPC, and Colorado,  in the case of ACX.  Each Buyer has the corporate  power and
authority to own all of its  properties  and assets and to carry on its business
as it is now being  conducted and as is contemplated to be carried on hereunder.
Each  Buyer  is duly  qualified  and in good  standing  to do  business  in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the Business makes such qualification necessary except in those jurisdictions
where the failure to be duly  qualified  and in good  standing  would not have a
material adverse effect on such Buyer.

6.2 Authority Relative to this Agreement and the Related Agreements.  Each Buyer
has the corporate  power and authority to execute and deliver this Agreement and
the  Related  Agreements  to  which  it is  contemplated  to be a  party  and to
consummate the  transactions  contemplated  on its part hereby and thereby.  The
execution  and  delivery  by each  Buyer  of  this  Agreement  and  the  Related
Agreements  to which it is a party  and the  consummation  by each  Buyer of the
transactions  contemplated  on its part  hereby  and  thereby,  have  been  duly
authorized by its Board of Directors and no other  corporate  proceedings on its
part are necessary with respect  thereto.  This Agreement  constitutes,  and any
Related Agreement to which a Buyer is a party, when executed and delivered by it
will constitute,  the valid and binding obligation of such Buyer, enforceable in
accordance with its terms.

6.3 Non-Contravention. Except as set forth in Schedule 6.3 hereto, the execution
and  delivery by each Buyer of this  Agreement  do not,  and its  execution  and
delivery  of any  Related  Agreements  to which  such  Buyer is a party  and the
consummation of the  transactions  contemplated  hereby and thereby will not (a)
violate  or result in a breach of any  provision  of such  Buyer's  Articles  of
Incorporation  or Bylaws,  (b) result in a default (or give rise to any right of
termination,  cancellation  or  acceleration)  under the  terms,  conditions  or
provisions of any note, bond, mortgage,  indenture, license, agreement, lease or
other  instrument  or obligation to which such Buyer is a party or by which such
Buyer may be bound, or (c) violate any order, writ, injunction, decree, statute,
rule or regulation  applicable to Buyer (other than any applicable  "bulk sales"
laws).

6.4 Consents and Approvals.  Except for applicable  filings under the HSR Act or
as set forth in  Schedule  6.3 hereto,  there is no  requirement  applicable  to
either  Buyer to make any filing with,  or to obtain any permit,  authorization,
consent or  approval  from,  any third  party  (including  any  Authority)  as a
condition  to  the  consummation  of  the  transactions   contemplated  by  this
Agreement.

6.5  Litigation.  There  are  no  actions,  suits,  claims,   investigations  or
proceedings (legal, administrative or arbitrative) pending or threatened against
either  Buyer,  whether at law or in equity and  whether  civil or  criminal  in
nature  before  any  federal,  state,  municipal  or  other  court,  arbitrator,
governmental department,  commission,  agency or instrumentality,  nor are there
any  judgments,  decrees or orders of any such court,  arbitrator,  governmental
department,  commission,  agency or instrumentality  outstanding  against either
Buyer which have, or, if adversely  determined,  could be reasonably expected to
have,  a material  adverse  effect on such  Buyer's  ability to  consummate  the
transactions  contemplated  hereunder,  or which seek  specifically  to prevent,
restrict or delay the consummation of the transaction as contemplated  hereby or
the fulfillment of any of the conditions of this Agreement.

6.6  Availability  of  Funds.  Buyer  has,  or will have  prior to the  Closing,
sufficient  cash,  available  lines of credit or other  sources  of  immediately
available funds to enable it to consummate the transactions contemplated by this
Agreement. Buyer has provided to Fort James copies of binding commitment letters
with respect to the financing required for the transaction.

6.7  Finders.  Except for  Donaldson,  Lufkin & Jenrette,  no broker,  finder or
investment  banker is entitled to any fee or commission  from Buyer for services
rendered on behalf of Buyer in connection with the transactions  contemplated by
this Agreement.

                                  ARTICLE VII
                             ADDITIONAL AGREEMENTS

7.1 Conduct of Business and Management of Assets. From and after the date hereof
and until the Closing, Fort James shall use reasonable commercial efforts (a) to
conduct the Business in the  ordinary  course of business  consistent  with past
practice;   (b)  to  preserve  intact  the  present  business  organization  and
operations of the Business;  (c) to keep available the services of its employees
and (d) to  preserve  its  relationships  with  licensors,  suppliers,  dealers,
customers and others having business relationships with the Business.

7.2  Forbearances  by Fort James.  Except as  specifically  contemplated by this
Agreement,  Fort James  shall not,  and shall  cause each  Person  within the FJ
Group,  from the date hereof until the Closing,  without the written  consent of
Buyer (not to be unreasonably withheld), not to:

(a)sell, dispose of, transfer or encumber any of the Assets except in the
ordinary course of business;

(b) make any significant acquisition of assets other than in the ordinary course
of business;

(c) amend,  modify or cancel any Listed  Contract,  Lessee Lease or Lessor Lease
except in accordance with its terms;

(d) enter into any employment,  severance,  compensation  or similar  agreements
with any Business  Employee other than in the ordinary  course of business or as
may be required by law or existing contractual arrangements;

(e) increase the  compensation  of, or benefits  payable to, Business  Employees
other than in the  ordinary  course of  business or as may be required by law or
existing contractual arrangements;

(f) change the  assumptions  underlying  or the methods of  calculating  any bad
debt, contingency, or other reserve relating to the Business;

(g) dispose of or permit to lapse any right to the possession,  use or enjoyment
of any  Business  Intellectual  Property or dispose of or disclose to any person
not  authorized to have such  information  any Non-Filed  Business  Intellectual
Property or other confidential Business Intellectual Property;

(h) incur any long term  indebtedness  that would be  required  hereunder  to be
assumed by Buyer;

(i) enter into or renew any collective  bargaining or labor  agreement (oral and
legally binding or written) with respect to the Business, except with respect to
the agreement with the  Paperworkers  and Allied Chemical  Workers Union AFL-CIO
Local No. 1010,  which relates to the Paperboard  Packaging  Group in Kalamazoo,
Michigan  and is due to expire in July 1999 which Fort James will  negotiate  in
good faith to renew as heretofore  agreed by Buyer, it being  understood that if
Fort James makes such an offer of renewal  and  negotiates  in good  faith,  any
failure by such union to agree to such  renewal  shall not result in a breach by
Fort James of any representation, covenant or closing condition hereunder;

(j) cancel or reduce any insurance coverage relating to the Assets,  unless such
coverage is replaced; or

(k) agree, so as to legally bind Buyer whether in writing or otherwise,  to take
any of the actions set forth in this Section 7.2 and not otherwise  permitted by
this Agreement.

7.3 Mail Received  After Closing.  Following the Closing,  Buyer may receive and
open all mail  addressed to any Person within the FJ Group and may deal with the
contents thereof in its discretion to the extent that such mail and the contents
thereof relate to the Business.  Buyer shall deliver or cause to be delivered to
Fort  James,  promptly  after  receipt by Buyer,  all mail,  including,  without
limitation,  payments of accounts or claims receivable,  addressed to any Person
within the FJ Group which does not relate to the Business.

7.4  Retention  of Books and  Records.  Buyer will  retain and  maintain,  in an
organized and retrievable  manner,  all documents and records  pertaining to the
periods  before the Closing in  accordance  with Fort James'  record  management
policies.  Buyer will retain and maintain all machine-sensible  records, such as
computer tapes, disks,  diskettes,  etc., which are considered books and records
within the meaning of Code Section  6001, in  accordance  with Internal  Revenue
Procedure  91-59 or such  amending  or  superseding  guidance  as  issued by the
Internal Revenue Service.  Buyer will make available such documents and records,
machine sensible  records,  computer time, and assistance from Buyer's personnel
as may be reasonably  requested by Fort James in order to  expeditiously  comply
with all pertinent  requests from the Internal  Revenue Service and state taxing
authorities which relate to periods prior to the Closing.

7.5 Expenses. (a) Except as otherwise provided in this Agreement,  all costs and
expenses  incurred  in  connection  with  this  Agreement  and the  transactions
contemplated  hereby  shall  be paid  by the  party  incurring  such  costs  and
expenses.

(b) All  sales,  use,  transfer  taxes and  other non-income  taxes and any fees
(including deed recordation fees and filing fees, if any) incurred in connection
with this  Agreement and the  transactions  contemplated  hereby (the  "Transfer
Fees")  will be borne by Buyer.  At Fort James'  direction,  Buyer will file all
necessary tax returns and other  documents  required to be filed with respect to
all such  Transfer  Fees.  Fort  James will  cooperate  with Buyer to the extent
reasonably  necessary  to  enable  Buyer to make  such  filings  and join in the
execution of any tax returns or other  documents as may be required in order for
Buyer to comply with the provisions of this Section.

(c) If the  transactions  contemplated by this Agreement are not consummated for
any reason other than (i) a failure by Fort James to satisfy the  conditions set
forth in Article  IX hereof or (ii) by mutual  written  consent  of the  parties
hereto, then within five (5) business days of the termination of this Agreement,
Buyer shall pay to Fort James by wire transfer of immediately available funds to
an  account  designated  by Fort  James an amount  equal to  $20,000,000,  which
payment,  when made,  shall be Fort James' exclusive remedy in the event of such
non-consummation.

7.6 Confidentiality.  Buyer shall hold, and shall cause its respective officers,
directors,  employees,  representatives,   consultants  and  advisors  (each,  a
"Representative"),  to hold,  and Fort James  shall  hold,  and shall  cause its
respective  Representatives  and the Representatives of any Person within the FJ
Group to hold, in strict confidence, unless compelled to disclose by judicial or
administrative  process  or by other  requirements  of law,  all  documents  and
information  obtained by such  parties,  respectively,  in  connection  with the
transactions  contemplated hereby or otherwise obtained hereunder ("Confidential
Information,"  which term  shall,  after  Closing,  with  respect to Fort James'
obligations hereunder, include documents and information relating to the Assets)
except to the extent that such  Confidential  Information has been or has become
(a)  generally  available to the public other than as a result of  disclosure by
any party hereunder or a  Representative  of a party hereunder if such source is
not bound by a confidentiality  agreement  prohibiting such disclosure or is not
entitled to the  protection  offered  hereby,  (b)  available to the public on a
nonconfidential  basis  from a source  other  than a  Representative  of a party
entitled to the protection  offered hereby,  or (c) known to the party receiving
such Confidential Information before the date of disclosure of such Confidential
Information  to  such  party.  Nothing  herein  shall  preclude  a  party  or  a
Representative of a party receiving  Confidential  Information from using and/or
disclosing  information  rightfully  received  from a third  party to the extent
rightfully  permitted by the third party.  Nothing contained in this Section 7.6
shall preclude the disclosure of Confidential Information, on the condition that
it remains confidential, to auditors, attorneys, lenders, financial advisors and
other  consultants  and advisors in  connection  with the  performance  of their
duties in preparation  for the  consummation  of the  transactions  contemplated
hereby nor shall it prevent Buyer's  disclosure after Closing of any document or
information constituting an Asset.

7.7 Public  Announcements.  The parties  shall  consult  with each other  before
issuing  any press  releases  or  otherwise  making any public  statements  with
respect to this Agreement and the transactions  contemplated hereby and, subject
to any applicable disclosure  requirements,  no party shall issue any such press
release or make any such public statement without the consent of the other party
hereto, which consent shall not be unreasonably withheld.

7.8  Efforts  to  Consummate.  Subject  to the  terms  and  conditions  of  this
Agreement,  each of the parties hereto shall use its best efforts to take, or to
cause to be taken,  all  action  and to do, or to cause to be done,  all  things
necessary,  proper or advisable to consummate,  as promptly as practicable,  the
transactions   contemplated   hereby,   including,   but  not  limited  to,  the
satisfaction  of the  conditions  listed in Articles IX or X that are within the
control   of  such  party  and  the   obtaining   of  all   consents,   waivers,
authorizations,  orders  and  approvals  of third  parties,  whether  private or
governmental, required of it by this Agreement. Each party shall cooperate fully
with the other party hereto in assisting  such party to comply with this Section
7.8.

1.9 Further  Assurances.  (a) Fort James shall use its best efforts to implement
the  provisions  of this  Agreement,  and, for such  purpose,  at the request of
Buyer, will, at or after the Closing,  promptly execute and deliver, or cause to
be so executed  and  delivered,  such  documents  to Buyer and take such further
action as Buyer may deem  reasonably  necessary or desirable  to  facilitate  or
better evidence the consummation of the transactions contemplated hereby.

(b)  Buyer  shall use its best  efforts  to  implement  the  provisions  of this
Agreement,  and, for such  purpose,  at the request of Fort James,  will,  at or
after the Closing,  promptly execute and deliver, or cause to be so executed and
delivered,  such  documents to Fort James and take such  further  action as Fort
James  may deem  reasonably  necessary  or  desirable  to  facilitate  or better
evidence the consummation of the transactions contemplated hereby.

7.10 Use of Fort James Name. As soon as practicable after the Closing, Buyer (a)
shall remove all names,  logos or marks which  include the words "Fort James" or
"James River" or the letters "FJ" or "JR" ("Fort James Corporate  Designations")
from,  or render  the same  illegible  on,  all  Assets on which such Fort James
Corporate  Designations are imprinted or legible or (b) shall discontinue use of
any asset  described  in clause (a) bearing Fort James  Corporate  Designations.
Notwithstanding  the  foregoing,  Buyer shall be permitted to use the Fort James
Corporate  Designations with respect to Inventory constituting finished goods on
which a Fort James Corporate  Designation is imprinted or affixed at the Closing
until such Inventory is sold.  After such  Inventory has been sold,  Buyer shall
have no rights to use the Fort James Corporate Designations. Buyer undertakes to
use reasonable  best efforts to sell such  Inventory  within 12 months after the
Closing.  At the end of such period  referred to in the  preceding  sentence (or
upon completion of the removal,  rendering  illegible or  discontinuance  of the
Fort James  Corporate  Designations  and  variations  thereof  described  above,
whichever occurs sooner),  an executive officer of Buyer shall notify Fort James
that (a) all such  Inventory  has been sold or  destroyed;  or (b) such removal,
rendering  illegible or discontinuance  has been completed.  Except as expressly
permitted  by  this  Section  7.10,  neither  Buyer  nor  any of its  respective
Affiliates  shall use the Fort James Corporate  Designations or any similar mark
or name.

7.11 No  Solicitation  of  Employees.  (a) For a period  of one year  after  the
Closing,  neither  party nor any  Representative  of such  party  shall,  in any
manner,  directly or indirectly,  (i) solicit any employee of the other party or
any  Affiliate of the other party to terminate his or her  employment  with such
party or its Affiliate, or (ii) otherwise recruit or encourage any such employee
to become, or hire any such employee as, an employee of, or a consultant to, the
party bound hereby.

(b) As  promptly  as  practicable  after the  Closing,  Buyer shall use its best
efforts to advise the  appropriate  Subsidiaries  and  Representatives  of Buyer
(including  the  department   heads  and  human  resources   personnel)  of  its
obligations set forth in this Section 7.11.

(c)  Notwithstanding  clauses (a) and (b) of this Section  7.11, no party hereto
shall be restricted  from  soliciting  for  employment any employee of any other
party  hereto who has left the  employment  of such other  party other than as a
result of the breach of this Section 7.11 by any party hereto.

7.12  Antitrust  Filings.  (a) Fort James and Buyer shall each (i) take promptly
all  actions  necessary  to  make  the  filings  required  of it or  any  of its
Affiliates  under the  applicable  Antitrust  Laws,  (ii) comply at the earliest
practicable  date with any request for  additional  information  or  documentary
material  received  by it or  any of  its  Affiliates  from  the  Federal  Trade
Commission or the Antitrust  Division of the  Department of Justice  pursuant to
the Antitrust Improvements Act and (iii) cooperate in connection with any filing
under   applicable   Antitrust  Laws  and  in  connection   with  resolving  any
investigation or other inquiry concerning the transactions  contemplated by this
Agreement  commenced  by any of the  Federal  Trade  Commission,  the  Antitrust
Division of the Department of Justice or the Attorney General of any state.

(b) Fort  James  and Buyer  shall  each use all best  efforts  to  resolve  such
objections,  if  any,  as may  be  asserted  with  respect  to the  transactions
contemplated by this Agreement  under any Antitrust Law. If any  administrative,
judicial or  legislative  action or proceeding is instituted or threatened to be
instituted  challenging  the  transactions  contemplated  by this  Agreement  as
violative of any Antitrust Law, each party hereto shall cooperate to contest and
resist any such action or proceeding,  and to have vacated,  lifted, reversed or
overturned any decree,  judgment,  injunction or other order (whether temporary,
preliminary  or  permanent)  that is in effect and that  restricts,  prevents or
prohibits  consummation  of the  transactions  contemplated  by this  Agreement,
including,   without   limitation,   by  pursuing  all  reasonable   avenues  of
administrative and judicial appeal.

(c) Fort James and Buyer  shall  each  promptly  inform  the other  party of any
material  communication  made to, or received  by such party  from,  the Federal
Trade  Commission,  the  Department  of  Justice  or any other  governmental  or
regulatory authority regarding any of the transactions contemplated hereby.

7.13 Title Matters.  (a) Fort James and Buyer will, as soon as practicable after
the execution and delivery of this  Agreement,  cause,  to be issued one or more
title commitments  (whether one or more, the "Title Commitment") for policies of
owner's title  insurance  with respect to the Real Property (the "Real  Property
Title Commitment") and policies of leasehold title insurance with respect to the
Major Leases (the "Major Leases Title  Commitment") and current surveys and will
cause to be made ALTA  surveys.  Fort James and Buyer shall each bear 50% of the
cost of the Title  Commitment  and ALTA  surveys.  Buyer  shall  procure and pay
premiums  for such title  insurance  as it  requires.  At Buyer's  request,  the
Closing may be  postponed  until the date that is 15 days after the later of the
date  hereof or the date of the  delivery  to Buyer of the Real  Property  Title
Commitment  together  with  copies  of all  recorded  documents  listed as title
exceptions  in the Real  Property  Title  Commitment  (collectively,  the  "Real
Property Title  Package").  Within 5 days of the later of the date hereof or the
date of the delivery to Buyer of the Real Property  Title  Package,  Buyer shall
notify  Fort James of any title  matter  reflected  in the Real  Property  Title
Commitment that constitutes a breach of the  representation set forth in Section
5.10 (any such title matter being a "Title Defect").

(b) At Buyer's request,  Closing may be postponed until the date that is 15 days
after  Fort  James'  delivery  to Buyer of the Major  Leases  Title  Commitment,
together with copies of all recorded documents listed as title exceptions in the
Major Leases Title Commitment (collectively,  the "Major Leases Title Package").
Within  5 days of Fort  James'  delivery  to  Buyer of the  Major  Leases  Title
Package,  Buyer shall  notify Fort James of any title  matter  reflected  in the
Major Leases Title  Commitment that  constitutes a breach of the  representation
set forth in Section 5.10 (any such title matter being a "Title Defect").

(c) Within 5 days of receiving notice from Buyer of any Title Defect, Fort James
shall notify Buyer,  with respect to each such Title Defect,  whether Fort James
has  elected to (i) cure such matter or  otherwise  cause the same to be deleted
from, or insured over in, the Title Commitment,  (ii) pay to Buyer the amount by
which the value of the Real  Property is diminished as a result of the existence
of such Title  Defect at  Closing  (or as soon  thereafter  as the amount can be
established,  the parties hereby agreeing to enter into an appropriate agreement
at Closing  relating to the  establishment  of such amount by  reference  to the
conclusion of qualified real estate appraisers if Fort James elects to make such
payment in respect of any Title  Defect and the parties  cannot agree by Closing
as to the  amount of such  diminution  in value);  or (iii) take no action  with
respect to such Title  Defect;  provided  Fort James shall be required to remove
any lien which is not a Permitted Exception securing a monetary obligation which
can be removed by the payment of money the amount of which is ascertainable from
the face of the document or which has been determined in writing from the holder
of such  obligation.  If Buyer does not deliver written notice of its objections
to any Title Defect within the time specified above for such notice, Buyer shall
be deemed to have waived all rights it may have  against  Fort James  (including
the right to refuse to consummate the transactions  called for in this Agreement
or the  right  otherwise  to claim  breach  of the  representation  set forth in
Section 5.10) with respect to such Title Defect. If Fort James fails to respond,
within  the time set forth  above,  to any  objection  to Title  Defects  timely
delivered  by Buyer as set  forth  above,  Fort  James  shall be  deemed to have
elected to respond as set forth in  subsection  (ii) above with  respect to such
Title Defect.  If Fort James elects to respond as set forth in subsection  (iii)
above with  respect  to one or more  Title  Defects,  Buyer may  terminate  this
Agreement by delivering  notice of its election to do so within two days of Fort
James'  delivery  of its notice to Buyer that Fort James has  elected to take no
action with respect to the Title  Defect(s) at issue.  If Buyer does not deliver
written  notice of its  election to  terminate  this  Agreement  within the time
specified above for such notice, Buyer shall be deemed to have waived all rights
it may have against Fort James with  respect to Title  Defects  disclosed in the
Title  Commitment  (including the right to refuse to consummate the transactions
called  for in this  Agreement  or the right  otherwise  to claim  breach of the
representations  set forth in Section 5.10 or breach of this Section).

7.14 Tax Matters.  (a) Buyer will be responsible  for the preparation and filing
of all  federal,  state  and  local  franchise,  property,  payroll,  and  other
non-income  tax returns,  arising with respect to the  operation of the Business
and the ownership of the Assets for all periods after the date of Closing. Buyer
will make all payments required with respect to any such tax returns.

(b) Fort James and Buyer shall  allocate  the  Purchase  Price  (including,  for
purposes of this Section,  any other consideration paid by Buyer and any Assumed
Liabilities)  among the  Assets in the manner  set forth on  Schedule  7.14 (the
"Allocation  Schedule").  Fort  James and  Buyer  each  agrees to file  Internal
Revenue Service Form 8594 and any required  attachments  thereto,  together with
all federal,  state,  local,  and foreign tax returns,  in  accordance  with the
Allocation  Schedule.  Fort  James and Buyer each  agrees to  provide  the other
promptly with any other information  required to update the Allocation  Schedule
at or after the Closing as described in the Allocation Schedule.

7.15 Access to Assets and Business Employees. From the date hereof until Closing
or the earlier  termination  or expiration of this  Agreement,  Fort James shall
provide Buyer,  Buyer's accountants,  representatives,  and prospective lenders,
with reasonable  opportunities  to further  investigate the Assets and interview
Business  Employees  during normal business hours upon  reasonable  prior notice
from Buyer,  for  reasonable  purposes,  including  the  preparation  of audited
financial  statements of the Business and lenders' due diligence,  provided that
no such  investigations  or interviews  shall  unreasonably  interfere  with the
operation of the Business or Fort James' other business.

7.16  Substitute  Letters of Credit;  Guarantees.  Effective  as of the Closing,
Buyer shall procure  substitute  letters of credit, and shall cause itself to be
substituted  in all respects for any member of the FJ Group with respect to, the
letter of credit and guarantees listed in Schedule 7.16.

7.17 Consents and Approvals. Except for any consents, waivers, authorizations or
approvals  the failure of which to obtain  would not have a Fort James  Material
Adverse  Effect,  Fort James shall use its best efforts to obtain all  necessary
consents,  waivers,  authorizations  and approvals of all Authorities and of all
other Persons reasonably required in connection with the execution, delivery and
performance by it of this  Agreement,  including but not limited to, consents to
assign  (a) the  Listed  Contracts,  (b) the  Lessee  Leases  and (c) all  other
contracts  and  commitments  to the extent the same  relate  exclusively  to the
Business.  In the  event  that  any  Listed  Contract  or  Lessee  Lease  is not
transferable to Buyer, Fort James shall use commercially  reasonable  efforts to
maintain such Listed Contract or Lessee Lease for the benefit of Buyer, provided
that Buyer shall be responsible for performing Fort James' obligations under any
such Listed Contract or Lessee Lease. Fort James shall use reasonable efforts to
assign to Buyer the Microsoft licenses  exclusively related to the Business,  it
being  understood  that Fort James  shall not be  required  to incur any cost or
expense in connection therewith.

7.18  Negotiations.  For a period of 75 days from and after the date hereof,  no
Person within the FJ Group, nor their officers or directors nor anyone acting on
behalf of any Person  within the FJ Group or such  persons  shall,  directly  or
indirectly,  encourage,  solicit, engage in discussions or negotiations with, or
provide any  information  to, any person,  firm, or other entity or group (other
than Buyer or its  representatives)  concerning any merger,  sale of substantial
assets,  purchase  or sale of shares of  capital  stock or  similar  transaction
involving  the  Business  or  any  other   transaction   inconsistent  with  the
transactions contemplated hereby.

7.19 Audited  Financial  Statements.  Fort James will use reasonable  efforts to
prepare and  deliver to Buyer  audited  pro forma  balance  sheets and pro forma
statements of income as of December 27, 1998 and December 28, 1997, and for each
of the  three  fiscal  years  in the  period  ended  December  27,  1998,  which
statements  shall  reflect the  Business  as it is  proposed  to be  transferred
hereunder.

1.20 Year 2000 Compliance Program. Fort James shall continue through the Closing
Date the  implementation,  in accordance  with the capital plan, of its existing
program with respect to Year 2000 compliance in connection with the Business.

                                  ARTICLE VIII
                 BUSINESS EMPLOYEE AND EMPLOYEE BENEFIT MATTERS

8.1 Business Employees.  For purposes of this Article VIII, "Business Employees"
are hereby defined as follows:

(a) all persons actively employed by Fort James or any member of the FJ Group in
the Business immediately before Closing;

(b) all  employees  of Fort  James or any member of the FJ Group (i) who are (A)
absent from work with the Business on account of sickness  (other than employees
who are, as of the Closing Date,  on long-term  disability or have been approved
by the carrier for long-term  disability) or leave of absence at Closing and (B)
released  to return  to work  (and  actually  return  to work)  their  regularly
scheduled number of hours within 12 weeks from the day such employee left active
employment  or  commenced  working  a  reduced  schedule  or  (ii)  for  whom an
obligation to recall,  rehire or otherwise return to employment  exists under an
Assumed Collective Bargaining Agreement; and

(c) all  employees  of Fort  James or any  member  of the FJ Group who would not
otherwise  be employed in the Business  immediately  before the Closing but who,
with the  mutual  consent  of Fort  James and  Buyer,  become  employees  of the
Business at or before the Closing.

8.2 Employment.  (a) Effective as of the Closing Date, Buyer shall make an offer
of initial  employment to each Business  Employee at the same base salary and on
substantially the same other terms and conditions as in effect immediately prior
to Closing.  For purposes of the  preceding  sentence,  in order for an offer of
employment to a given Business  Employee to be made on  "substantially  the same
other terms and conditions," it shall also be required to be made for employment
at the same location as that where the particular  Business Employee is employed
as of  Closing,  except  that the  Business  Employees  employed  at  Deerfield,
Illinois and Neenah,  Wisconsin may, instead,  be offered  employment at Golden,
Colorado, or another headquarters, research and development or divisional office
facility  of  Buyer  or the  Business.  Buyer's  employment  of  those  Business
Employees  who accept  offers of  employment  shall be deemed to commence on the
Closing  Date.  Those  Business  Employees  who accept such offers of employment
shall be referred to herein as the "Transferred Employees."

(b) After the Closing,  Fort James shall not be responsible for wages,  salaries
and other employee  benefits for  Transferred  Employees for service  (including
deemed service) of such Transferred  Employees with the Buyer after the Closing;
it being  understood that Buyer shall be responsible for paying or providing (or
reimbursing Fort James for the cost of paying or providing) any wages,  salaries
and other  employee  benefits  to all  Transferred  Employees,  including  those
employees  described in Section  8.1(b)(i) above, for all periods  following the
Closing Date. For purposes of this Article VIII, all persons described above who
are  compensated  on an  hourly  basis  or who  have  been or are  subject  to a
collective  bargaining  agreement  shall  be  referred  to as  "Hourly  Business
Employees,"  and all persons  described  above who are compensated on a salaried
basis (or a non-union  hourly basis) shall be referred to as "Salaried  Business
Employees." Prior to execution of this Agreement,  Fort James has provided Buyer
with a  preliminary  list of Business  Employees,  and Fort James and Buyer will
agree on a final list of Business Employees prior to the Closing, based upon new
employees  hired by the  Business  and  departures  of employees of the Business
prior to Closing, and upon mutually agreed additions and deletions to such list.
Fort James shall  cooperate with Buyer and Fort James shall provide  information
reasonably  requested by Buyer in order to enable Buyer to hire the  Transferred
Employees and enroll the Transferred Employees in Buyer's benefit plans.

8.3 Employee Benefits. (a) Subject to the other provisions of this Article VIII,
Buyer  agrees that for a period of at least one year after the Closing Date (the
"Window  Period") it will (i) provide all  Transferred  Employees with severance
benefits at least as favorable as those provided to such  Transferred  Employees
immediately  prior to the Closing Date; (ii) provide all  Transferred  Employees
who were Salaried Business  Employees  ("Transferred  Salaried  Employees") with
medical and other welfare benefits no less favorable than those provided to such
Transferred  Salaried  Employees  immediately  prior to the Closing Date;  (iii)
provide  Transferred  Salaried  Employees with a wage and salary program no less
favorable  than that in place at the Business  immediately  prior to the Closing
Date; (iv) provide all Transferred  Salaried  Employees with other  compensation
and benefits no less favorable in the aggregate than the compensation (including
incentive  compensation)  and  benefits  provided to such  Transferred  Salaried
Employees  immediately  prior to the Closing Date;  and (v) provide  Transferred
Employees who were Hourly Business  Employees  ("Transferred  Hourly Employees")
covered  under the Assumed  Collective  Bargaining  Agreements  (as  hereinafter
defined),  such  compensation  and benefits as are from time to time required by
such collective  bargaining  agreements.  In addition,  Buyer agrees to give all
Transferred  Employees  service  credit for all periods of employment  with Fort
James or any member of the FJ Group prior to the Closing  Date for all  purposes
under any plan  adopted or  maintained  by Buyer or any of its  Subsidiaries  in
which Transferred Employees  participate.  Buyer agrees to waive any limitations
regarding pre-existing conditions for medical coverage under any medical plan in
which Transferred Employees participate, and to give full credit during calendar
year 1999 for any copayments made and deductibles  fully or partially  satisfied
prior to the Closing with respect to Employee Plans,  under any welfare or other
employee  benefit plans  maintained by Buyer or any of its Subsidiaries in which
Transferred  Employees  participate after the Closing.  Subject to paragraph (d)
hereof,  from and after the Closing Date, Buyer shall be solely  responsible for
all termination and severance  benefits,  costs,  charges and liabilities of any
nature  incurred  with  respect to (A) a  Transferred  Employee  on or after the
Closing, including, without limitation, any claims arising out of or relating to
any plant closing,  mass layoff,  termination or similar event under  applicable
law occurring on or after the Closing and (B) any Business Employee who does not
become a Transferred Employee and with respect to whom Buyer's failure to comply
with the  employment  offer  requirements  of  Section  8.2(a)  results  in such
Business Employee being able to claim a termination or severance benefit.

(b) Buyer shall be responsible  for the  administration  of and shall assume any
and  all  obligations,   if  any,   arising  under  the  continuation   coverage
requirements  of  Section  4980B of the Code and Part 6 of Title I of ERISA with
respect to the Transferred Employees and their beneficiaries who are eligible to
exercise their rights to such coverage as of or following the Closing Date.

(c) Except as  provided  in Section 8.5  hereof,  as of the  Closing  Date,  the
Business Employees shall cease active participation in each Employee Plan and no
additional  benefits shall be accrued  thereunder for such employees.  Except as
provided  hereunder,  Fort James shall retain all assets and  liabilities  under
such Employee Plans for Business Employees.

(d) Buyer shall not be responsible  for assuming any employment  agreements with
the  Transferred  Employees,  and Fort  James  shall  retain  liability  for any
severance benefits due under such employment agreements.

(e) As of the Closing Date,  Buyer shall  designate or establish for the benefit
of  Transferred  Employees a medical and  dependent  care expense  reimbursement
program (the "Buyer FSA Plan") substantially  similar to the Fort James Flexible
Spending  Accounts  program (the "FJ FSA Plan").  Fort James shall  transfer the
assets (up to the maximum  aggregate  limit for claims under the Buyer FSA Plan)
withheld from the  Transferred  Employees'  paychecks  during calendar year 1999
through  the  Closing  Date  less  any  reimbursements  properly  made  to  such
Transferred  Employees for calendar  year 1999  expenses  under the FJ FSA Plan.
With respect to the remainder of the calendar year following the Closing,  Buyer
shall honor and execute under the Buyer FSA Plan the payroll deduction elections
effective for each Transferred  Employee under the FJ FSA Plan as of the Closing
Date and shall pay claims made by such  Transferred  Employee under the terms of
the Buyer FSA Plan, without regard to when the claims arose.

8.4 Assumption of Liabilities. Except as specifically provided otherwise in this
Article VIII, at Closing,  Buyer shall assume all  employee-related  liabilities
and  obligations  that are payable at or after the Closing  Date with respect to
Business  Employees and their  beneficiaries  and dependents,  without regard to
when such  liabilities and obligations  arose;  provided,  however,  that Buyer,
except as  specifically  provided  otherwise in this  Article  VIII  (including,
without limitation,  the last sentence of Section 8.3(a)),  shall not assume any
liabilities  or  obligations  that are payable prior to, at or after the Closing
with respect to any employee  benefit plans that are maintained by Fort James or
its  Affiliates,  or  with  respect  to  Business  Employees  who do not  become
Transferred Employees.

8.5  Collective  Bargaining  Agreements.  (a) At Closing,  Buyer shall adopt and
assume the  collective  bargaining  agreements  listed on  Schedule  8.5(a) (the
"Assumed  Collective  Bargaining  Agreements").  At and after the  Closing,  any
obligations  that  may  be  payable  under  the  Assumed  Collective  Bargaining
Agreements,  with respect to Hourly  Business  Employees,  regardless of whether
such obligations relate to services performed before or after the Closing, shall
be the sole responsibility of Buyer.

(b) With respect to each  multiemployer  plan that is listed on Schedule  8.5(b)
and that  covers  Hourly  Business  Employees,  Fort  James and  Buyer  agree as
follows, in accordance with the provisions of Section 4204 of ERISA:

(i)      Buyer hereby  assumes,  effective  at Closing,  the  obligation  of any
         Person  within the FJ Group to  contribute  to each such  multiemployer
         plan for such Hourly Business Employees.

(ii)     Buyer shall provide to each such  multiemployer plan the bond or escrow
         amount described in Section  4204(a)(1)(B) of ERISA, unless the bond or
         escrow amount is waived by the PBGC.

(iii)    The parties  agree that,  unless the PBGC waives the  requirements  of
         Section  4204(a)(1)(C)  of  ERISA,  if Buyer  withdraws  from any such
         multiemployer plan in a withdrawal described in Section  4204(a)(1)(C)
         of ERISA with respect to the Business during the first five plan years
         beginning  after  Closing  and  does  not  pay  its  liability  to the
         multiemployer plan on account of such withdrawal,  Fort James shall be
         secondarily  liable  to the  multiemployer  plan  for  any  withdrawal
         liability  that any Person  within the FJ Group  would have had to the
         plan with respect to the Hourly  Business  Employees in the absence of
         Section  4204(a) of ERISA,  to the extent  required by Section 4204 of
         ERISA.  Notwithstanding  the provisions of the preceding  sentence and
         Section  4204 of ERISA,  it is  hereby  expressly  agreed  that if any
         Person within the FJ Group incurs any secondary  withdrawal  liability
         under the preceding  sentence,  Buyer shall  indemnify  Fort James and
         hold it harmless  from any and all Losses  incurred by any such Person
         within the FJ Group by reason of such secondary liability.

As soon as is practicable after Closing, Fort James and Buyer shall request from
the PBGC an  exemption  from  the  requirements  of  Section  4204(a)(1)(B)  and
4204(a)(1)(C) of ERISA.

8.6 Pension Plan for Salaried Business Employees.  Buyer shall not assume any of
Fort James' rights and  obligations  with respect to the Fort James  Corporation
Pension Plan for Salaried and Other  Non-Bargaining  Unit  Employees.  As of the
Closing,  the Business  Employees shall cease active  participation in such plan
and no additional benefits shall accrue thereunder.  Fort James shall retain all
assets and liabilities under such plan.

8.7 401(k)  Plan.  (a)  Effective  as of the  Closing,  Buyer shall  establish a
defined  contribution plan and trust (or amend an existing defined  contribution
plan)  for  Transferred  Employees  (which  for a period  of at  least  one year
following  Closing  shall be generally  comparable to the Fort James 401(k) Plan
(the "FJ 401(k) Plan")) and which shall be qualified  under Sections 401 and 501
of the Code and which shall provide for salary reduction  contributions pursuant
to Section 401(k) of the Code ("Buyer's DC Plan"). Buyer's DC Plan shall provide
that each Transferred  Employee shall be given credit under Buyer's DC Plan, for
purposes of determining  eligibility to  participate,  eligibility for benefits,
benefit calculations,  benefit forms and vesting, for the Transferred Employee's
service  with  Fort  James,  or any  member  of the FJ  Group  and each of their
predecessor  companies,  to the extent  that the FJ 401(k)  Plan gave credit for
such  service.  If the Buyer amends one or more  existing  defined  contribution
plans, the Buyer shall ensure that all "section  411(d)(6)  protected  benefits"
(as defined in Treasury  Regulation  1.411(d)-4)  provided by the FJ 401(k) Plan
are preserved in the amended existing, defined contribution plan. From and after
the Closing,  Transferred  Employees shall not accrue additional  benefits under
defined contribution plans maintained by Fort James or its Affiliates.

(b)  Assets  of  the  FJ  401(k)  Plan  equal  to the  account  balances  of the
Transferred  Employees  under the FJ 401(k) Plan shall be transferred to Buyer's
DC Plan as soon as practicable after the Closing.  If practicable,  the transfer
shall be made as of the last day of the first calendar  quarter ending after the
Closing.  The transfer  shall be made in kind, and Buyer shall cause the Buyer's
DC Plan to continue to maintain an  investment  fund for Fort James common stock
for such Transferred Employees;  provided, that Buyer's DC Plan may provide that
(i) no new contributions to Buyer's DC Plan shall be invested in such investment
fund and (ii) any portion of the account balance of a Transferred  Employee that
is  transferred  out of  such  investment  fund  may  not be  reinvested  in the
investment  fund. Any outstanding  plan loans to Transferred  Employees shall be
transferred  with  the  underlying   accounts.   The  account  balances  of  the
Transferred  Employees  shall be valued as of the date on which the  transfer is
made. The account balances of Transferred  Employees in the FJ 401(k) Plan shall
share in the earnings,  appreciation and depreciation of the investment funds in
which the accounts are invested for the period  between the Closing and the date
on which the transfer is made.

(c) Any benefits that are payable to  Transferred  Employees  from the FJ 401(k)
Plan after the Closing and before assets are transferred  shall be paid from the
FJ 401(k) Plan in the ordinary  course.  The amount to be transferred to Buyer's
DC Plan shall be reduced by the amount of such payments.

(d) The account  balances to be credited  under Buyer's DC Plan for  Transferred
Employees  shall  not be less  than  the  account  balances  of the  Transferred
Employees under the FJ 401(k) Plan as of the date on which the transfer is made.
Effective on the date of the  transfer of FJ 401(k) Plan assets,  (i) Buyer's DC
Plan shall assume all  liabilities  in connection  with the account  balances of
Transferred  Employees  under  the FJ 401(k)  Plan,  and (ii)  Fort  James,  its
Affiliates  and the FJ 401(k) Plan shall have no further  liability with respect
to the account balances of Transferred Employees.  Fort James and its Affiliates
shall have no liability with respect to Buyer's DC Plan.

(e) Buyer shall  request that the  Internal  Revenue  Service  issue a favorable
determination  letter with respect to the  qualification  under Sections 401 and
501 of the Code of Buyer's DC Plan and the related trust.  Buyer shall make such
changes to Buyer's DC Plan as may be required by the Internal Revenue Service in
order  for the  Internal  Revenue  Service  to issue a  favorable  determination
letter.  Buyer shall provide Fort James with a copy of the determination  letter
received  from the Internal  Revenue  Service with respect to Buyer's DC Plan as
soon as the determination letter is received.

(f) The  transfer  under this  Section  8.7 shall not take place until Buyer has
delivered  to Fort James  either (i) a copy of a  determination  letter from the
Internal  Revenue  Service to the effect that the  Buyer's DC Plan is  qualified
under  Section  401(a)  of the  Code,  together  with  documentation  reasonably
satisfactory  to Fort James of the due adoption of any amendments to the Buyer's
DC  Plan  required  by the  Internal  Revenue  Service  as a  condition  to such
qualification and certification from the Buyer that no events have occurred that
would  adversely  affect the  continued  validity of such  determination  letter
(apart from the  enactment of any Federal law for which the  remedial  amendment
period under Section 401(b) of the Code has not yet expired), or (ii) an opinion
of outside counsel  reasonably  satisfactory in form and substance to Fort James
that the Buyer's DC Plan is qualified under Section 401(a) of the Code as of the
date of transfer, and Fort James has delivered to the Buyer either (A) a copy of
a determination  letter from the Internal Revenue Service to the effect that the
FJ 401(k) Plan is qualified  under  Section  401(a) of the Code,  together  with
documentation  reasonably  satisfactory  to the Buyer of the due adoption of any
amendments to the FJ 401(k) Plan required by the Internal  Revenue  Service as a
condition  to such  qualification  and a  certification  from Fort James that no
events have occurred that would adversely affect the continued  validity of such
letters  (apart from the  enactment  of any  Federal law for which the  remedial
amendment  period under Section 401(b) of the Code has not yet expired),  or (B)
an opinion of outside counsel  reasonably  satisfactory in form and substance to
the Buyer that the FJ 401(k) Plan is qualified  under Section 401(a) of the Code
as of the date of transfer.

8.8 Pension Plan For Hourly Business Employees.  (a) Effective as of the Closing
Date, Buyer shall establish a new defined benefit pension plan,  and/or amend an
existing defined benefit pension plan ("Buyer's  Pension Plan"),  to provide the
benefits described in this Section 8.8. From and after the Closing Date, Buyer's
Pension  Plan shall cover at least those  Transferred  Employees  who, as of the
Closing Date,  are active  participants  in the JR II  Retirement  Plan (the "FJ
Pension Plan").  Such  Transferred  Employees are referred to hereinafter as the
"Transferred Pension Participants."


(b) Effective as of the date of the asset transfer  contemplated by this Section
8.8,   Buyer  shall  assume  under  Buyer's   Pension  Plan  all  liability  and
responsibility  for the  provision  of the accrued  pension  benefits for and on
behalf of the Transferred  Pension  Participants and for the eligible  surviving
spouses  and/or  other  contingent  beneficiaries  of such  Transferred  Pension
Participants, which liability and responsibility had been the obligation of Fort
James prior to the date of the asset transfer  contemplated in this Section 8.8.
Fort James shall retain all liability and  responsibility,  under the applicable
pension plans,  for  participants in the FJ Pension Plan who are not Transferred
Employees,  and for the  eligible  surviving  spouses  and/or  other  contingent
beneficiaries of such participants.

(c) Buyer's  Pension Plan with respect to all Transferred  Pension  Participants
shall be governed by the applicable collective bargaining  agreements.  For each
Transferred Pension Participant, Buyer's Pension Plan shall recognize periods of
employment  by, and  compensation  from,  Fort James and its  Affiliates and any
predecessors of such entities,  as employment by, and  compensation  from, Buyer
for all purposes under Buyer's Pension Plan, to the extent  recognized under the
FJ Pension Plan.

(d) In conjunction  with the  establishment  and/or amendment of Buyer's Pension
Plan, Buyer as of the Closing Date shall, to the extent necessary, establish, or
amend, a funding  arrangement for Buyer's Pension Plan through a qualified trust
under  Section 501 of the Code.  Such funding  arrangement  shall be referred to
hereinafter as "Buyer's  Pension Trust." The Fort James qualified  pension trust
shall be referred to hereinafter as "FJ's Pension Trust."

(e) As soon as practicable after the later of (i) the Closing Date, and (ii) the
final determination of the Transfer Amount (as hereinafter  defined) pursuant to
Sections  8.8(f) and (g),  Fort James shall  direct the trustee of FJ's  Pension
Trust to transfer to Buyer's  Pension Trust,  in cash, the amount of assets (the
"Transfer   Amount")  of  FJ's  Pension  Trust  described   below.   Subject  to
subparagraph  (f) below,  the Transfer  Amount shall be determined by an actuary
selected by Fort James,  and shall be the amount required to be transferred with
respect to the Transferred  Pension  Participants to satisfy the requirements of
Section  414(l) of the Code,  determined  as of the Closing Date (based upon the
actuarial  assumptions  deemed  appropriate  by the PBGC as of the Closing  Date
under Section 414(l) of the Code for purposes of  determining  the discount rate
and retirement  rates,  and all other  actuarial  assumptions  used to determine
accrued benefit  obligations for the last actuarial  report performed for the FJ
Pension  Plan prior to Closing).  The transfer of the Transfer  Amount shall not
take place until  after the latest of (A) the  expiration  of the 30-day  period
following the filing of any required  notices with the Internal  Revenue Service
pursuant  to  Section  6058(b)  of the  Code,  and (B) the  date the  Buyer  has
delivered  to Fort James  either (1) a copy of a  determination  letter from the
Internal  Revenue  Service  to the  effect  that  the  Buyer's  Pension  Plan is
qualified  under  Section  401(a)  of  the  Code,  together  with  documentation
reasonably  satisfactory  to Fort James of the due adoption of any amendments to
the Buyer's Pension Plan required by the Internal Revenue Service as a condition
to such  qualification  and  certification  from the Buyer  that no events  have
occurred  that  would   adversely   affect  the   continued   validity  of  such
determination  letter (apart from the enactment of any Federal law for which the
remedial amendment period under Section 401(b) of the Code has not yet expired),
or (2) an  opinion  of  outside  counsel  reasonably  satisfactory  in form  and
substance to Fort James that the Buyer's Pension Plan is qualified under Section
401(a)  of the Code as of the date of  transfer,  and the date  Fort  James  has
delivered  to the Buyer  either (1) a copy of a  determination  letter  from the
Internal  Revenue  Service to the effect that the FJ Pension  Plan is  qualified
under  Section  401(a)  of the  Code,  together  with  documentation  reasonably
satisfactory  to the  Buyer  of the due  adoption  of any  amendments  to the FJ
Pension  Plan  required by the Internal  Revenue  Service as a condition to such
qualification  and a certification  from Fort James that no events have occurred
that would adversely  affect the continued  validity of such letters (apart from
the enactment of any Federal law for which the remedial  amendment  period under
Section  401(b) of the Code has not yet  expired),  or (2) an opinion of outside
counsel  reasonably  satisfactory in form and substance to the Buyer that the FJ
Pension Plan is  qualified  under  Section  401(a) of the Code as of the date of
transfer.

(f) Fort James shall, within the period of ninety (90) consecutive calendar days
next following the date on which its actuary has received all  information  from
Buyer which is required to determine,  in accordance with the preceding  Section
8.8(e),  the Transfer  Amount,  notify Buyer of the Transfer  Amount,  and shall
provide  Buyer  with  a copy  of  the  actuarial  computations  relating  to the
determination  of the Transfer Amount and all information and data on which such
calculations  were based.  Buyer  shall  notify Fort James in writing of Buyer's
agreement with such determination,  or shall submit to Fort James a written list
of points of disagreement,  within a period of thirty (30) consecutive  calendar
days next following the date of Buyer's receipt of Fort James' notification.  If
Buyer submits to Fort James any such written list of points of disagreement, and
if such disagreement cannot be resolved by Buyer's and Fort James' actuaries, or
otherwise  to the  satisfaction  of Buyer and Fort  James,  within the period of
thirty (30) consecutive calendar days next following the date of receipt of such
list  by  Fort  James,  then  the  disagreement  shall  be  resolved  by a third
independent  actuary to be  mutually  selected  by Buyer and Fort James no later
than thirty (30)  consecutive  calendar  days after the end of the first  thirty
(30) day period.  The opinion of such third  actuary  shall be returned to Buyer
and Fort James in writing as soon as possible thereafter,  and shall be accepted
by both Buyer and Fort James as conclusive  in the matter.  The fees and charges
of such third actuary shall be shared equally by Buyer and Fort James.

(g) The  transfer of the  Transfer  Amount,  as finally  determined  pursuant to
Sections 8.8(e) and (f), from FJ's Pension Trust to Buyer's Pension Trust, shall
be completed as soon as practicable after such final determination. The Transfer
Amount:

(i)      shall be  increased or decreased by the rate of return on the assets in
         the FJ Pension Trust (the "Rate of Return") commencing on the date next
         following the Closing Date and ending on the date immediately  prior to
         the date on which the  Transfer  Amount is so  transferred  (the "Asset
         Transfer Date"), as applied solely to the Transfer Amount; and

(ii)     shall be  decreased  by the sum of the amount of any  benefit  payments
         which are made to or on behalf of the Transferred Pension  Participants
         from FJ's  Pension  Trust prior to the Asset  Transfer  Date (with such
         amount  increased or decreased by the Rate of Return as applied  solely
         to the amount of such  benefit  payments  from the Closing Date through
         the Asset Transfer Date).

(h) On and after the Closing Date, but prior to the Asset  Transfer  Date,  Fort
James shall direct the trustee of FJ's Pension  Trust to pay benefits  therefrom
to or on behalf  of any  Transferred  Pension  Participant  who is,  or  becomes
entitled to benefits under the FJ Pension Plan on or after the Closing Date, but
prior to the Asset  Transfer  Date,  with such payments to be made in accordance
with  written  instructions  furnished by Buyer to Fort James from time to time;
subject, however, to Fort James' audit and approval of the proper computation of
such benefits.

8.9 Worker's  Compensation.  At Closing,  Buyer shall assume  liability  for all
claims under worker's compensation laws that are payable at or after the Closing
with respect to Transferred  Employees,  without regard to when the  liabilities
arose.

8.10 Vacation  Pay.  Buyer shall assume  liability  for all unpaid  vacation pay
earned, banked or accrued by Transferred  Employees prior to the Closing.  After
the Closing, Fort James shall have no liability for vacation pay for Transferred
Employees.

8.11  Welfare  Plans.  (a) Fort James  shall  retain all assets  relating to the
Employee Plans that are welfare  benefit plans and shall be liable for and shall
hold Buyer harmless from and against all claims for the benefits described below
by  participants of such plans which are incurred prior to the Closing Date. For
purposes of this Agreement,  the following claims shall be deemed to be incurred
as follows:  (i) life,  accidental death and  dismemberment  and business travel
accident  insurance  benefits,  upon the death or  accident  giving rise to such
benefits;  (ii) health,  dental and/or  prescription drug benefits,  on the date
such  services,  materials  or  supplies  were  provided;  and  (iii)  long-term
disability  benefits,  on the  eligibility  date  determined  by  the  long-term
disability carrier for the individual.

(b) Fort  James  shall be liable  for and shall  hold  Buyer  harmless  from and
against any retiree welfare  benefits to be provided to retirees of the Business
who have actually retired prior to the Closing Date or to the Business Employees
who have attained age 55 with 15 years of service as of the Closing Date and are
eligible for retiree  welfare  benefits under an Employee Plan as of the Closing
Date.  Buyer  shall be liable for and shall hold Fort  James  harmless  from and
against any retiree welfare benefits for Transferred Hourly Employees who are or
may  become  eligible  for  retiree  welfare  benefits  pursuant  to an  Assumed
Collective Bargaining Agreement.

8.12 Plant Closing  Laws.  Buyer shall be  responsible  for providing any notice
required, pursuant to the United States Federal Worker Adjustment and Retraining
Act of 1988, any successor  United States federal law, and any applicable  plant
closing  notification  law with respect to a layoff or plant closing relating to
the Business  that occurs as a result of or after the Closing.  Fort James shall
be  responsible  for providing any such notice with respect to a layoff or plant
closing occurring prior to the Closing.

                                   ARTICLE IX
                       CONDITIONS TO OBLIGATIONS OF BUYER

The  obligations of Buyer to consummate the  transactions  contemplated  by this
Agreement  shall be subject,  to the extent not waived,  to the  satisfaction of
each of the following conditions before or at the Closing:

9.1  Representations  and  Warranties.  Except for changes  contemplated by this
Agreement,  the  representations  and warranties of Fort James contained in this
Agreement  that are qualified by  materiality  shall be true, and all other such
representations  and  warranties  shall  be true  and  correct  in all  material
respects,  in each  case at and as of the date of this  Agreement  and as of the
Closing,  provided that  representations  and warranties  made as of a specified
date need be so true and correct (as  described  above) only as of the specified
date.

9.2  Performance  of  this  Agreement.  Fort  James  shall  have  performed  all
obligations  and complied with all  conditions  required by this Agreement to be
performed  or complied  with by it before or at the  Closing,  to the extent not
waived.

9.3 Proceedings.  All corporate and other  proceedings to be taken by Fort James
in  connection  with  the  transactions  contemplated  hereby  shall  have  been
completed,  all such  proceedings  and all documents  incident  thereto shall be
reasonably  satisfactory  in  substance  and form to Buyer and Buyer  shall have
received  all such  counterpart  originals  or certified or other copies of such
documents as Buyer may reasonably request.

9.4 Consents and Approvals. All consents, authorizations, orders or approvals of
any  Authority  or Person  which  Fort James is  required  to obtain in order to
consummate  the  transactions  contemplated  by this  Agreement  shall have been
obtained by Fort James and all waiting  periods  specified  by law with  respect
thereto shall have passed, other than any such consents, authorizations,  orders
or  approvals  for which the  failure  to so obtain  would not have a Fort James
Material Adverse Effect.

9.5 Injunction,  Litigation, etc. No order of any court or administrative agency
shall  be in  effect  which  restrains  or  prohibits  the  consummation  of the
transactions  contemplated  hereby,  nor shall  there be  pending  any action or
proceeding  by  or  before  any  Authority  which  is  likely  to  prohibit,  or
successfully  challenge the validity of any of the transactions  contemplated by
this Agreement.

9.6  Legislation.  No statute,  rule or regulation shall have been enacted which
prohibits or restricts the consummation of the transactions contemplated hereby.

9.7 Related  Agreements.  Each Person of the FJ Group  shall have  executed  and
delivered each of the Related Agreements to which it is a party.

9.8 Material Adverse Change. There shall not have occurred since March 28, 1999,
any event which has resulted in a Fort James Material Adverse Effect.

9.9 Opinion of Counsel for Fort James. Buyer shall have received an opinion from
Wachtell,  Lipton,  Rosen & Katz as to the matters specified in Schedule 9.9, in
form and substance reasonably satisfactory to Buyer and its counsel.

9.10 Officer's Certificate.  Buyer shall have received a certificate,  dated the
Closing Date,  signed by the Chief Financial  Officer of Fort James,  certifying
that the conditions specified in this Article IX have been fulfilled.

9.11  Audited  Financial  Statements.  Buyer shall have  received an audited pro
forma  balance  sheet and pro forma  statement  of income for the Business as of
December 27, 1998.

                                   ARTICLE X
                    CONDITIONS TO OBLIGATIONS OF FORT JAMES

The  obligations of Fort James to consummate the  transactions  contemplated  by
this Agreement shall be subject,  to the extent not waived,  to the satisfaction
of each of the following conditions before or at Closing:

10.1  Representations  and Warranties.  Except for changes  contemplated by this
Agreement,  the  representations  and  warranties  of  Buyer  contained  in this
Agreement  that are qualified by  materiality  shall be true, and all other such
representations  and  warranties  shall  be true  and  correct  in all  material
respects,  in each case at and as of the date of this  Agreement,  and as of the
Closing,  provided that  representations  and warranties  made as of a specified
date need be so true and correct (as  described  above) only as of the specified
date.

10.2  Performance of this Agreement.  Buyer shall have performed all obligations
and complied with all  conditions  required by this Agreement to be performed or
complied with by it before or at the Closing, to the extent not waived.

10.3  Proceedings.  All corporate and other  proceedings to be taken by Buyer in
connection with the transactions  contemplated hereby shall have been completed,
all such  proceedings  and all  documents  incident  thereto shall be reasonably
satisfactory  in  substance  and form to Fort  James,  and Fort James shall have
received all such  counterpart  originals  or other copies of such  documents as
Fort James may reasonably request.

10.4 Consents and Approvals. All consents,  authorizations,  orders or approvals
of any Authority  which Buyer is required to obtain in order to  consummate  the
transactions  contemplated  by this Agreement  shall have been obtained by Buyer
and all waiting periods specified by law with respect thereto shall have passed.

10.5 Injunction, Litigation, etc. No order of any court or administrative agency
shall  be in  effect  which  restrains  or  prohibits  the  consummation  of the
transactions  contemplated  hereby,  nor shall there be  pending,  any action or
proceeding  by  or  before  any  Authority  which  is  likely  to  prohibit,  or
successfully  challenge the validity of any of the transactions  contemplated by
this Agreement.

10.6 Legislation.  No statute,  rule or regulation shall have been enacted which
prohibits or restricts the consummation of the transactions contemplated hereby.

10.7 Related  Agreements.  Buyer shall have executed and  delivered  each of the
Related Agreements to which it is to be a named party.

10.8 Officer's Certificate. Fort James shall have received a certificate,  dated
the Closing Date,  signed by the Chief  Financial  Officer of Buyer,  certifying
that the conditions specified in this Article X have been fulfilled.

                                   ARTICLE XI
                  DELIVERIES, ETC., IN CONNECTION WITH CLOSING

11.1 Time and Place of Closing.  The closing (the "Closing") shall occur as soon
as  practicable,  but in no event later than five  business  days  following the
satisfaction of the conditions set forth in Articles IX and X, at the offices of
Wachtell,  Lipton,  Rosen & Katz, 51 West 52nd Street, New York, New York, or at
the  request of either  party,  such other date and place as the  parties  shall
agree.  If the Closing  takes  place,  the  Closing and all of the  transactions
contemplated by this Agreement  shall be deemed to have occurred  simultaneously
and become effective as of 12:01 a.m. on the date of Closing.  The date on which
the Closing shall occur is referred to herein as the "Closing Date."

11.2 Deliveries by Fort James.At or before the Closing, Fort James shall deliver
to Buyer, as applicable, the following:

(a) duly executed deeds from the applicable member of the FJ Group in recordable
form which  convey to Buyer  title to the Real  Property,  subject to  Permitted
Exceptions and subject to the  exceptions and exclusions  contained in the Title
Commitment  as of the Closing,  other than any Title Defect which Fort James has
elected to cure or otherwise delete pursuant to Section  7.13(c)(i).  Fort James
will provide to Buyer's  title  insurance  company (i)  customary  good standing
certificates and corporate authorizations, (ii) owner's affidavits acceptable to
such title insurer to remove any exception for (A)  mechanics' or  materialmens'
liens and (B)  rights  of  parties  in  possession,  and  (iii) a gap  indemnity
acceptable  to such title  insurer for  insuring  over the "gap" (i.e.  the time
period since the effective date of the title company's last checkdown of title);

(b) a bill of sale and such other  document or documents  (suitable  for filing,
registration or recording,  if applicable) as are necessary to transfer to Buyer
the Assets  other than the Real  Property,  which  transfer  documents  shall be
without recourse and shall contain no representations or warranties;

(c) evidence that all of the  proceedings  contemplated by Section 9.3 have been
completed;

(d) copies of any consents obtained as contemplated by Section 9.4;

(e) certificates  from the State Corporation  Commission of Virginia  evidencing
the good standing of Fort James in the  Commonwealth  of Virginia as of a recent
date;

(f) each of the Related  Agreements  executed by the Person of the FJ Group that
is a party thereto; and

(g) such additional documents as Buyer may reasonably request.

11.3 Deliveries by Buyer. At or before the Closing,  Buyer shall deliver to Fort
James, as applicable, the following:

(a) the Purchase Price pursuant to Section 3.1;

(b) a duly executed assumption of the Assumed Liabilities;

(c) evidence that all of the proceedings  contemplated by Section 10.3 have been
completed;

(d) copies of any consents obtained as contemplated by Section 10.4;

(e)  certificates  from the  Secretary  of State of the States of  Delaware  and
Colorado  as to the good  standing  of each  Buyer in such  State as of the most
recent date obtainable;

(f) each of the Related Agreements duly executed by the Buyer; and

(g) such additional documents as Fort James may reasonably request.

11.4  Deliveries of Related  Agreements.  At or before the Closing,  each of the
parties  to each  Related  Agreement  shall  deliver  an  executed  copy of such
Agreement to the other parties thereto.

                                  ARTICLE XII
                                INDEMNIFICATION

12.1 Indemnification by Fort James. (a) Subject to the limitations  contained in
this Article XII,  effective  upon the Closing,  Fort James shall  indemnify and
hold Buyer harmless against all Losses arising out of

(i)       any breach of a representation  or warranty made by Fort James in this
          Agreement (other than the representations and warranties  contained in
          (A)  Section  5.6,  which  representations  and  warranties  shall not
          survive  Closing,  with  Buyer's  sole  recourse  being under  Section
          12.1(c), and (B) Section 5.10(a), which representations and warranties
          shall not survive Closing, with Buyer's sole recourse being under such
          title  insurance  policies as Buyer  chooses to procure  under Section
          7.13 hereof);

(ii)     the breach of any agreement of Fort James  contained in this  Agreement
         (but not the Related  Agreements,  or  obligations  under  Article VIII
         hereof, which shall stand on their own); or

(iii)     any Excluded Liability.

(b) Notwithstanding the foregoing, in the case of Losses incurred as a result of
the events  described in Sections  12.1(a)(i) and (ii),  Fort James shall not be
liable for  indemnification  hereunder  unless and until the aggregate amount of
such Losses exceeds  $20,000,000  (the "Basket"),  in which event Buyer shall be
entitled to  indemnification  as set forth above  solely to the extent that such
Losses  exceed  such  Basket,  provided,  however,  that Fort  James'  aggregate
liability with respect to Sections  12.1(a)(i) and (ii) shall in no event exceed
$100 million  (the "Cap").  Neither the Basket nor the Cap shall apply to Losses
under Section 12.1(a)(iii) above or Section 12.1(c) below.

(c) Any Loss to the extent  attributable  to conditions  existing at, or acts or
omissions on or before, the Closing with respect to any Environmental  Condition
existing on any Transferred Site (including  Losses arising under  Environmental
Laws with respect to hazardous substances, contaminants, pollutants or petroleum
products  leaching or physically  migrating from Transferred  Sites that results
from  contamination  or pollution of a Transferred  Site),  that, as of Closing,
constitutes a violation of, or otherwise gives rise to any Liability  under, any
Environmental  Laws,  but excluding any such Loss to the extent arising from any
change in law after the Closing, is a "Pre-Closing Environmental Loss." The date
that a  requirement  of  remediation  or other  action,  or a claim for damages,
penalties,  fines or other similar costs or expenses or for equitable  relief is
first made by an Authority, or demanded by a potential plaintiff with respect to
any such  Environmental  Condition  is the  "Environmental  Accrual  Date"  with
respect to such Environmental  Condition.  Notwithstanding any provision of this
Agreement to the contrary, Buyer shall not be entitled to any indemnification or
reimbursement from Fort James with respect to any Pre-Closing Environmental Loss
except to the extent that such Pre-Closing  Environmental  Loss arises out of an
Environmental  Condition having an  Environmental  Accrual Date before the fifth
anniversary of Closing and such Pre-Closing  Environmental Losses from and after
Closing, in the aggregate,  exceed $10 million and then, only for the percentage
of such excess specified  herein.  Subject to the foregoing:  for each period of
twelve months following the Closing and before the fifth anniversary of Closing,
Fort James shall indemnify Buyer for  Pre-Closing  Environmental  Losses arising
from items having an Environmental  Accrual Date during such twelve month period
in  an  amount  equal  to  the   Applicable   Percentage  of  such   Pre-Closing
Environmental  Loss.  The  "Applicable  Percentage"  shall be 80% for  events or
conditions with an Environmental  Accrual Date during the period between Closing
and the first  anniversary  of  Closing,  60% for events or  conditions  with an
Environmental  Accrual Date during the period  between the first  anniversary of
Closing and the second anniversary of Closing, 40% for events or conditions with
an Environmental  Accrual Date during the period between the second  anniversary
of Closing and the third  anniversary  of Closing,  20% for events or conditions
with  an  Environmental  Accrual  Date  during  the  period  between  the  third
anniversary of Closing and the fourth anniversary of Closing, and 10% for events
or conditions with an  Environmental  Accrual Date during the period between the
fourth anniversary of Closing and the fifth anniversary of Closing.

12.2 Indemnification by Buyer. (a) Subject to the limitations  contained in this
Article XII,  effective  upon the Closing,  Buyer shall  indemnify and hold Fort
James harmless against all Losses arising out of:

(i)      any breach of a representation or warranty made by Buyer in this
         Agreement;

(ii)     the breach of any agreement of Buyer  contained in this  Agreement (but
         not the Related  Agreements,  or obligations under Article VIII hereof,
         which shall stand on their own); or

(iii)    any Assumed  Liability or the failure by Buyer to discharge any Assumed
         Liability.

(b) Notwithstanding the foregoing, in the case of Losses incurred as a result of
the events described in Sections  12.2(a)(i) and (ii), Buyer shall not be liable
for  indemnification  hereunder  unless and until the  aggregate  amount of such
Losses  exceeds  the  Basket,  in which  event Fort James  shall be  entitled to
indemnification  as set forth above solely to the extent that such Losses exceed
such Basket; provided, however, that Buyer's aggregate liability with respect to
Sections  12.2(a)(i)  and (ii)  shall in no event  exceed the Cap.  Neither  the
Basket nor the Cap shall apply to Losses under Section 12.2(a)(iii) above.

12.3 Article VIII Rights and Obligations Excluded. The rights and obligations of
Fort James and Buyer under Section  12.1(c) and Article VIII hereof shall not be
subject to the Basket or the Cap, or in the case of  obligations  under  Article
VIII,  any other  provisions of this Article XII, but shall apply  separately in
accordance with their terms.

12.4  Survival  Date.  (a) The  indemnification  obligations  of each party (the
"Indemnitor")   obligated   to  provide   indemnification   to  the  other  (the
"Indemnitee")  under Section  12.1(a)(i) or Section  12.2(a)(i)  shall lapse and
become of no  further  force and effect  with  respect to all claims not made by
Indemnitee's  delivery to the  Indemnitor of written notice  containing  details
reasonably  sufficient  to  disclose to  Indemnitor  the nature and scope of the
claim by the eighteen month anniversary of the Closing. Notwithstanding anything
contained  herein to the  contrary,  no  indemnified  party shall be entitled to
indemnification   with  respect  to  any  claim  under  Section   12.1(a)(i)  or
12.2(a)(i),  if such indemnified  party has actual knowledge prior to Closing of
any circumstance  constituting a breach or failure of any such representation or
warranty  resulting  in such claim where such breach  would have  entitled  such
indemnified  party  not to  consummate  the  transactions  contemplated  by this
Agreement at Closing.

The  indemnification  obligations  under  Sections  12.1(a)(ii)  and  (iii)  and
Sections  12.2(a)(ii)  and (iii) shall not be limited by time, but shall survive
in accordance with the terms of the underlying obligations to which they relate.

12.5  Definition  of Loss.  For purposes of this  Article XII and Article  VIII,
"Losses" shall mean,  collectively,  any and all claims,  damages,  Liabilities,
liens, losses or other obligations whatsoever, together with costs and expenses,
including, without limitation,  reasonable fees and disbursements of counsel and
any  consultants  or  experts  and  expenses  of  investigation  incurred  by an
Indemnitee entitled to indemnification  hereunder as a result of a matter giving
rise to a claim for indemnification  hereunder,  incurred in connection with any
action,  suit or proceeding  ("Legal Action")  instituted against the Indemnitee
determined, net of the: (a) tax savings realized by the Indemnitee in respect of
such matter net of any tax consequences of the indemnity payment;

(b)  insurance proceeds to which the Indemnitee is entitled in respect of such
matter; and

(c)  indemnity  payments to which the  Indemnitee is entitled from parties other
than the indemnifying party hereunder in respect of such matter.

Notwithstanding  any  provision  of this  Article XII, any damages to the extent
attributable  to a failure to reasonably  mitigate  damages shall not constitute
Losses.

12.6 Third Party Claims.  (a) Each of the parties must follow the procedures set
forth in the  following  paragraphs of this Section 12.6 in order to be entitled
to  indemnification  with  respect to claims  resulting  from the  assertion  of
liability by persons or entities not parties to this Agreement, including claims
by any Authority for penalties, fines and assessments.

(b) The party seeking  indemnification  shall give prompt  written notice to the
party from whom  indemnification  is sought of any  assertion  of liability by a
third party which might give rise to a claim by the  indemnified  party  against
the  indemnifying  party based on the  indemnity  agreements  contained  in this
Agreement, stating the nature and basis of the assertion and the amount thereof,
to the extent known.

(c) In the event that any Legal Action is brought  against an indemnified  party
with  respect  to which  the  indemnifying  party  may have  liability  under an
indemnity  agreement  contained in this Agreement,  the Legal Action shall, upon
the  written  agreement  of the  indemnifying  party  that  it is  obligated  to
indemnify  under such an indemnity  agreement,  be defended by the  indemnifying
party and such defense  shall  include all appeals or reviews  which counsel for
the  indemnifying  party shall deem  appropriate.  In any such Legal  Action the
indemnified party shall have the right to be represented by advisory counsel and
accountants,  at its own  expense,  and the  indemnifying  party  shall keep the
indemnified  party fully informed as to such proceeding,  at all stages thereof,
whether or not the indemnified party is represented by its own counsel.

(d) Until the  indemnifying  party  shall have  assumed the defense of any Legal
Action, or if the indemnified and indemnifying parties are both named parties in
such Legal Action and the indemnified party shall have reasonably concluded that
there may be defenses  available to it that are materially  different from or in
addition to the defenses  available to the indemnifying party (in which case the
indemnifying  party  shall not be  entitled  to assume the defense of such Legal
Action, but shall remain  responsible for its obligation as an indemnitor),  all
legal and other  reasonable  expenses  incurred  by the  indemnified  party as a
result of such Legal Action shall be borne by the  indemnifying  party.  In such
event, the indemnified party shall make available to the indemnifying  party and
its attorneys  and  accountants,  for review and copying,  its books and records
relating to such Legal  Action and the parties  shall  render to each other such
assistance as may  reasonably be requested to facilitate the proper and adequate
defense of any such Legal Action.

(e) The  indemnifying  party shall not make any  settlement of any claim without
the  written  consent  of the  indemnified  party,  which  consent  shall not be
unreasonably  withheld.  Without  limiting the generality of the  foregoing,  it
shall not be deemed  unreasonable to withhold consent to a settlement  involving
injunctive  or other  equitable  relief  against  the  indemnified  party or its
assets, employees, business or methods of doing business.

(f) The indemnifying  party shall be relieved of its obligation to indemnify the
indemnified  party to the  extent  that any  failure  to give or delay in giving
timely  notice as required by this  Section  12.6  prejudices  the  indemnifying
party.

12.7 Subrogation  Rights; No Duplication.  (a) Any Indemnitor required to make a
payment  under  this  Article  XII shall be  subrogated,  to the  extent of such
payment,  to the rights of the entity to which  such  payment  has been made for
reimbursement or indemnification  against third parties relating to the claim on
which such payment has been based.

(b)  Notwithstanding   anything  in  this  Article  XII  to  the  contrary,  the
obligations of each  Indemnitor and its Affiliates  pursuant to this Article XII
shall be without  duplication as between  entities to which such  Indemnitor and
its Affiliates are required to make payments.

                                  ARTICLE XIII
                       TERMINATION, AMENDMENT AND WAIVER




13.1      Termination. This Agreement may be terminated at any time before the
         Closing:

(i)      by mutual written consent of the parties hereto;

(ii)     by either Fort James on the one hand,  or Buyer on the other,  if there
         has  been  a   material   breach   on  the  part  of  the  other  of  a
         representation,  warranty  or  agreement  contained  herein,  or in any
         writing delivered  pursuant to the provisions of this Agreement,  which
         remains uncured; provided, however, that no breach of representation or
         warranty shall form the basis of a right to terminate this Agreement if
         the  party to whom  such  representation  or  warranty  was made or its
         officers,  directors or representatives  had notice of the existence of
         such breach on or before the date of this Agreement; or

(iii)    by Fort  James or Buyer if the  Closing  has not  occurred  by the date
         which is 120 days after the date of this Agreement.

13.2 Effect of Termination.  If this Agreement is terminated pursuant to Section
13.1, this Agreement shall become wholly void and of no further force and effect
and there shall be no further  liability or  obligation on the part of any party
hereto,  except to pay such  expenses and amounts as are required of it pursuant
to Section 7.5  hereof,  and to comply with the  confidentiality  provisions  of
Section 7.6. No such termination  shall relieve either party of any liability to
the other for any  breach of this  Agreement  prior to the date of  termination;
provided  that in no event  shall  either  party be  liable to the other for any
amount in excess of $20,000,000 in connection with such a pre-Closing breach.

13.3  Amendment.  This  Agreement  may be  amended  at any time only by  writing
executed by each of the parties hereto.

13.4  Extension;  Waiver.  At any time  before  the  Closing,  any party to this
Agreement which is entitled to the benefits  thereof may (a) extend the time for
the performance of any of the obligations of another party hereto, (b) waive any
misrepresentation  (including  an  omission)  or breach of a  representation  or
warranty of another party hereto,  whether  contained  herein or in any exhibit,
schedule or document  delivered  pursuant  hereto,  or (c) waive  compliance  of
another party hereto with any of the agreements or conditions  contained herein.
Any such extension or waiver shall be valid if set forth in a written instrument
signed by the party or parties giving the extension or waiver.


                                  ARTICLE XIV
                               GENERAL PROVISIONS


14.1  Notices.  All  notices  and other  communications  required  or  permitted
hereunder shall be in writing  (including  telefax or similar writing) and shall
be given,

(a)       if to Fort James, to:

                           Fort James Corporation
                           1650 Lake Cook Road
                           PO Box 89
                           Deerfield, Illinois 60015-0089
                           Attention:   Clifford A. Cutchins, IV
                           Telefax:     (847) 317-5481

                           with copies to:

                           Wachtell, Lipton, Rosen & Katz
                           51 West 52nd Street
                           New York, New York  10019
                           Attention:   Patricia A. Vlahakis
                           Telefax:     (212) 403-2000

(b)      if to Buyer, to:

                           ACX Technologies, Inc.
                           16000 Table Mountain Parkway
                           Golden, Colorado 80403
                           Attention:  Jill B.W. Sisson
                           Telefax:     (303) 271-7055

                           with a copy to:

                           Holme Roberts & Owen LLP
                           1700 Lincoln Street
                           Suite 4100
                           Denver, Colorado 80203
                           Attention:  W. Dean Salter
                           Telefax:     (303) 866-0200

or (c) in either case,  to such other person or to such other address or telefax
number as the party to whom notice is to be given may have  furnished  the other
parties in writing by like notice. If mailed,  any such  communication  shall be
deemed to have been given on the third  business day  following the day on which
the  communication  is posted by  registered or certified  mail (return  receipt
requested).  If given by any other  means it shall be deemed to have been  given
when delivered to the address specified in this Section 14.1.

14.2 Interpretation.  The headings contained in this Agreement are for reference
purposes  only and  shall not  affect  the  meaning  or  interpretation  of this
Agreement.  Unless the context  otherwise  requires,  terms  (including  defined
terms) used in the plural include the singular, and vice versa.

14.3  Counterparts.  This Agreement may be executed in two or more counterparts,
each of which  shall be  deemed an  original,  but all of which  together  shall
constitute one and the same instrument.

14.4  Miscellaneous.  This Agreement (a)  constitutes  the entire  agreement and
supersedes all other prior agreements and understandings, both written and oral,
between  the  parties  with  respect to the subject  matter  hereof;  (b) is not
intended to and shall not confer upon any person,  association or entity,  other
than the  parties  hereto,  any rights or remedies  with  respect to the subject
matter or any provision hereof; (c) shall not be assigned by operation of law or
otherwise,  except  that  Buyer may  assign  this  Agreement  to a  wholly-owned
subsidiary of ACX provided that each of ACX and GPC remains  obligated under the
terms  hereunder;  and (d) shall be governed in all  respects by the laws of the
state of Delaware  without regard to its laws or regulations  relating to choice
of law.

14.5 Third Party  Beneficiaries.  Nothing herein  contained,  whether express or
implied,  is intended  to confer any right or remedy  under or by reason of this
Agreement other than to the parties hereto and their  respective  successors and
assigns, and no action may be brought by a third party claiming as a third party
beneficiary to this Agreement or the transactions contemplated herein.







         IN WITNESS  WHEREOF the parties hereto have caused this Agreement to be
executed by their duly authorized officers.

                                                 FORT JAMES CORPORATION


                                                 By: /s/ Ernst A. Haberli
                                                 Name:  Ernst A. Haberli
                                                 Title:  EVP - CFO



                                                 ACX TECHNOLOGIES, INC.


                                                 By:  /s/ Jeffrey H. Coors
                                                 Name:  Jeffrey H. Coors
                                                 Title:  President and CO - CEO



                                                 GRAPHIC PACKAGING CORPORATION


                                                 By:  /s/ Jeffrey H. coors
                                                 Name:  Jeffrey H. Coors
                                                 Title:  President and CEO