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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 10-K

(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 28, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

Commission file number: 1-13868

CROWN VANTAGE INC.
(Exact name of registrant as specified in its charter)

VIRGINIA 54-1752384
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(State of incorporation) (I.R.S. Employer Identification No.)

300 LAKESIDE DRIVE, OAKLAND, CALIFORNIA 94612-3592
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(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (510) 874-3400

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, no par
value

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]

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

The aggregate market value of voting stock held by non-affiliates of the
registrant as of March 20, 1998 was approximately $89,480,000.

As of March 20, 1998, 9,673,549 shares of Common Stock of the registrant
were outstanding.

Portions of the registrant's Annual Report to Shareholders for the fiscal
year ended December 28, 1997 are incorporated by reference in Parts I, II and IV
hereof. Portions of the registrant's definitive Proxy Statement for the Annual
Meeting of Shareholders scheduled for May 5, 1998 are incorporated by reference
in Part III hereof.

(THIS PAGE INTENTIONALLY LEFT BLANK)

PART 1

ITEM 1. BUSINESS

GENERAL

Crown Vantage Inc. and subsidiaries (the "Company" or "Crown Vantage") became an
independent company after the Board of Directors of James River Corporation of
Virginia ("James River"), now known as Fort James Corporation, approved the
spin-off of assets, liabilities and operations which comprised a substantial
part of James River's Communication Papers Business and the paper-based part of
its Food and Consumer Packaging Business (collectively the "Predecessor
Business"). As of the close of business on August 25, 1995, James River
distributed to its common shareholders all of the outstanding shares of the
Company (the "Distribution"). The Distribution was made in the form of a
tax-free dividend on the basis of one share of the Company's common stock for
every ten shares of James River common stock. A total of 8,446,362 shares of
the Company's common stock was issued and began trading on NASDAQ on August 28,
1995.

James River transferred to the Company (including transfers to its wholly-owned
subsidiary Crown Paper Co.) certain assets of the Predecessor Business and the
Company assumed certain related liabilities from James River. In addition,
Crown Paper Co. received $250 million in cash through a public offering of
Senior Subordinated Notes and $253 million from initial borrowings under credit
facilities with certain banks (collectively, the "Financing"). The proceeds
from the Financing after payment of expenses and retention of $1.2 million cash
($485 million) were paid to James River together with $100 million Senior
Pay-in-Kind Notes issued by the Company, as a return of James River's capital
investment. The Distribution, transfer of assets and liabilities, Financing,
and return of capital are collectively referred to as the "Spin-Off."

Also in connection with the Spin-Off, the Company entered into a Contribution
Agreement and certain transition agreements with James River. The Company has
relied on such agreements for certain services, and the supply of a portion of
the products necessary to conduct the Company's manufacturing business,
generally over terms of one to three years from the Spin-Off, at agreed to
prices consistent with market terms.

On March 18, 1998, Crown Vantage entered into an agreement with Fort James
Corporation ("Fort James") related to Crown Vantage's 11.45% Senior
Pay-in-Kind Notes ("PIK Notes") which are held by Fort James. The agreement
provides for the delivery to Crown Vantage and Crown Paper Co. of PIK Notes
totaling $25 million and $8 million, respectively, in exchange for the mutual
release from a variety of claims that have arisen from prior transactions
between Fort James and Crown Vantage. In addition, Crown Vantage was granted
an option to purchase the remaining PIK Notes and accrued interest (the notes
having a face amount totaling $100 million at March 18, 1998) for a fixed
price of $80 million in cash. The option must be exercised by September 30,
1998 and funding of the purchase price must occur on or before October 31,
1998. Pursuant to the agreement, funds would be obtained through an equity
offering, asset sales, or a combination thereof. Both the delivery of the $33
million in PIK Notes and funding of the option are subject to consent by the
Company's bondholders and bank group. There is no assurance that the Company
will be successful in raising the required funding in time to exercise the
option. See "Liquidity and Capital Resources" on page 21 and Note 6 to the
financial statements at page 35 of the Company's 1997 ANNUAL REPORT TO
SHAREHOLDERS for more information concerning the PIK Notes.

The Company is a major producer of value-added paper products for a diverse
array of end-uses. The Company's two business sectors and corresponding
principal product categories are (i) printing and publishing papers, for
applications such as special interest magazines, books, custom business forms
and corporate communications and promotions (E.G. annual reports and
stationery); and (ii) specialty papers, principally for food and retail
packaging applications and conversion into such items as coffee filters, cups
and plates. In total, the Company operates 10 facilities using 31 diverse paper
machines.

The Company believes that its broad manufacturing capabilities allow it to offer
a wider range of products and basis weights than most of its North American
competitors. The Company focuses its operations on the higher value-added
market niches of the sectors in which it competes. Papers produced for such
niches generally command higher prices and tend to be less cyclical than
commodity grades because they are used for more specialized applications and
because there are fewer substitutes for these products.

The Company has implemented a business strategy that builds on Crown Vantage's
unique strengths and technical expertise and that further differentiates it from
other paper producers. The Company's objectives are to enhance its position as
a leading supplier of value-added paper products to target markets, and to
continue to pursue cost reductions and manufacturing efficiencies to maximize
profitability. The Company's business strategy to accomplish such objectives
is to: i) accelerate the introduction of additional value-added papers into the
Company's mix; ii) obtain market share with innovative new products; iii) add
value through high levels of customer service and product quality; and iv)
reduce costs and improve productivity.

BUSINESS SECTORS AND END USE MARKETS

PRINTING AND PUBLISHING PAPERS

The Company's coated groundwood papers are produced at its fully integrated
(i.e. pulp is manufactured on site) facility in St. Francisville, Louisiana.
These papers are produced and sold for end-use products such as specialty
magazines, catalogs, direct mail, and advertising supplements. The strength of
the coated groundwood market is largely driven by the health of the retail
market and is correlated with advertising expenditures.

Uncoated printing and publishing papers are manufactured at the Company's fully
integrated facilities in Berlin and Gorham, New Hampshire. Customer end-use
products within the uncoated printing and publishing paper category include
stationery, custom business forms, books and manuals, annual reports and other
forms of corporate communications. Crown Vantage also produces uncoated
printing and publishing papers at its non-integrated facilities in Adams,
Massachusetts; Ypsilanti, Michigan; and Dalmore and Guardbridge, Scotland.
Demand for uncoated printing and publishing papers is correlated with economic
cycles, since these papers are predominantly used in business related activities
and commercial printing. However, the Company's specialty niches within the
uncoated printing and publishing paper category make Crown Vantage less
susceptible, though not immune, to economic cycles.

SPECIALTY PAPERS

Crown Vantage manufactures and sells specialty papers for use in food and retail
packaging. The Company's products, which are concentrated in niche markets for
coated and uncoated papers within the specialty packaging industry, are used by
its customers to produce items such as multi-wall bags for pet foods, food
service papers, labels and cereal liners. The Company's specialty packaging
business is principally driven by consumer spending trends and has historically
exhibited less cyclicality to general economic trends as compared to producers
of papers for other end-use products. The Company's specialty packaging papers
operations purchase all of their pulp and are therefore more susceptible to pulp
price fluctuations. Operating results benefit during periods of decreasing pulp
prices and suffer during periods of increasing pulp prices. The Company's
specialty papers are produced at non-integrated facilities in Port Huron and
Parchment, Michigan and Milford, New Jersey.

Crown Vantage manufactures specialty converting papers at its fully integrated
facility in St. Francisville, Louisiana. In order to meet customer-specific
requirements, the Company imparts technical qualities to these value-added
papers for conversion by its customers into end-uses such as paper cups and
plates, coffee filters, and bacon board. Converting papers also includes the
Company's toweling operations in Berlin-Gorham, New Hampshire as well as the
Company's cast-coating operations in Richmond, Virginia. The Richmond facility
provides cast-coating capabilities for a premium grade of coated paperboard for
packaging and printing applications.

During the fourth quarter of 1997 the Company closed its Newark, Delaware
facility and is seeking a buyer for this site. Newark produced approximately
2,200 tons of paper during 1997. The Company shifted most of the Newark mill's
production to its other mills. The Company recorded a charge related to the
closure of the mill in the fourth quarter of 1997 of $3.3 million primarily for
closure activities, fixed asset write downs and severance costs.

MARKET PULP SALES AND PURCHASES

The Berlin-Gorham, New Hampshire facility sold approximately 57,000 and 43,000
tons of pulp in 1997 and 1996, respectively. The Company also purchases pulp to
supply non-integrated mills, to obtain species not produced by the Company, and
to minimize transportation costs. In 1997 and 1996, the Company purchased
approximately 252,000 and 261,000 tons of pulp, respectively.

SUPPLY REQUIREMENTS

FIBER. Wood fiber represents the largest single material cost for the Company's
two integrated facilities. In 1997, the Company's integrated mills required a
total of approximately 2,289,000 green tons of wood, of which 1,155,000 green
tons and 1,134,000 green tons were required by the Company's mills in St.
Francisville and Berlin-Gorham, respectively.

St. Francisville's wood supply requirements come primarily from outside sources,
including wood supplied under various arrangements including a "Cutting Plan"
and a long-term supply arrangement with a third party that runs to 2016.
Groundwood papers are made largely from pulp produced by mechanically grinding
wood to extract wood fibers and other by-products. Approximately 5% of St.
Francisville's total 1997 wood requirements, including 8% of its wood fiber
needs for its coated groundwood pulp production requirements, were provided by
the Company's Fitler Managed Forest. Essentially all of the lands associated
with this forest were sold, approximately 24,600 acres. However, the Company
retained ownership and management of the fast-growth plantation cottonwood as
well as silvicultural technology for the short-rotation cottonwoods. The
Company entered into a "Cutting Plan" agreement with the buyer in order to
continue supplying certain of its wood fiber needs.

Wood chips are used in the kraft pulp process (chemical pulp produced by an
alkaline cooking process) and are either chipped by the Company or purchased
directly. In 1997, Berlin-Gorham purchased approximately 99% of its softwood
and softwood chips from area lumber mills under long-term supply agreements,
while nearly all hardwood chips were chipped on site. The Company sold 83,200
acres of woodlands in New Hampshire and Maine in October 1997, which provided
approximately 3% of Berlin-Gorham's fiber needs in 1997. The Company entered
into a long-term wood supply contract with the buyer to supply wood to the
Berlin Mill.

PULP. Pulp represents the largest single material cost for the Company's
non-integrated facilities. In 1997, the Company had purchases of approximately
252,000 tons of several types of pulp. Purchased pulp is used to supply
non-integrated mills, to obtain species not produced by the Company, and to
minimize transportation costs.

COMPETITION

The markets in which the Company competes are highly competitive, with a number
of major companies competing in each market. Competition is primarily based on
price, although product quality, distinctive characteristics and customer
service are often factors that determine a customer's choice of preferred
supplier. Breadth of product line, product innovation, distribution and sales
support are also important competitive factors, as many customers choose to
maintain long-term relationships with suppliers who provide these benefits.

In the paper industry, companies tend to compete with other companies having
paper machines of like capacity and capability. Capacity of paper machines in
the industry varies widely and can range from 10 tons per day to over 1,000 tons
per day. The capacity of the Company's machines ranges from 10 tons per day to
approximately 400 tons per day. The Company generally focuses its machines and
work force on shorter run production and multiple grade changes of high margin,
value-added papers. As a result, the Company believes its broad manufacturing
capabilities are important in enhancing its competitiveness.

The top ten producers of coated groundwood papers accounted for approximately
91% of North American capacity in 1997. Crown Vantage ranked 8th in 1997, with
coated groundwood capacity market share of approximately 5%. The top 15
producers of uncoated printing and publishing papers accounted for 87% of North
American capacity in 1997. The Company ranked 15th in 1997, with an uncoated
printing and publishing papers capacity market share of approximately 2.1%. The
Company ranked 3rd in North American production of a broad market sector called
Packaging and Specialty Papers. Although it does not participate in some
niches of this sector, it held a 7% market share overall.

CUSTOMERS

There were no individual customers to which sales exceeded 10% of the Company's
consolidated 1997 net sales. Sales to the Company's five largest customers in
1997 accounted for approximately 16% of consolidated net sales. The Company's
loss of any single customer would not have a material adverse effect on the
financial condition of the Company.

EMPLOYEES

At fiscal year end 1997, the Company had approximately 3,850 employees of whom
approximately 1/4 were salaried and 3/4 were hourly employees. All of the
hourly employees are represented under various union collective bargaining
contracts. In the U.S., most hourly workers are members of the United
Paperworkers International Union. Collective bargaining agreements covering the
Ypsilanti, Michigan and Richmond, Virginia mills, which cover approximately 5%
of the Company's hourly employees, expire before January 1, 1999. In the United
Kingdom, most hourly personnel are covered by an ongoing national agreement that
addresses worker conditions and safety, with wage increases negotiated annually.
The Company believes that it has a generally positive relationship with its
employees. In the last 10 years, the Company has not had any strikes or
labor-related work stoppages.

RESEARCH AND DEVELOPMENT

The Company has not expended and does not plan to expend significant efforts on
broad-based research and development activities. The Company instead emphasizes
the development of new and improved products primarily by using existing
technology and utilizing product development personnel located at all of its
mills.

ENVIRONMENTAL PROTECTION EFFORTS

Information concerning environmental expenditures, hazardous substance cleanup,
environmental legal proceedings and other environmental matters affecting the
Company is incorporated herein by reference from the text under the caption
"Other Matters" on page 23 of the Company's 1997 ANNUAL REPORT TO SHAREHOLDERS,
and Note 10 of the Notes to the Consolidated Financial Statements included in
the Company's 1997 ANNUAL REPORT TO SHAREHOLDERS.

CAPITAL EXPENDITURES

Information concerning the Company's capital expenditures is incorporated herein
by reference from the text under the captions "Investing Activities" on page 22
of the Company's 1997 ANNUAL REPORT TO SHAREHOLDERS.

TRADEMARKS AND PATENTS

The Company owns or has the right to use certain marks, which are registered
trademarks of the Company or are otherwise subject to protection under
applicable intellectual property laws. Some of its marks have been registered
in such foreign jurisdictions as the U.K., Germany and the Benelux countries.
The Company has registrations for numerous other trademarks routinely used in
the Company's marketing, advertising and promotions. Such registrations may be
kept in force in perpetuity through continued use of the marks and timely
renewal. The Company considers these marks and the accompanying goodwill and
customer recognition valuable and material to its business. The Company has a
number of patents which collectively it believes are also beneficial to the
Company, however the Company believes that the expiration of any patent would
not have a material adverse effect on the Company.

INTERNATIONAL SALES

In 1997, net sales by the Company's foreign subsidiaries totaled $68.5 million,
or 7.6% of total net sales. The Company's domestic sales to foreign customers
were $49.4 million in 1997, approximately 5.0% of total net sales. The majority
of the Company's international sales were to customers in Europe, Canada,
Mexico, Australia and South Africa.

MARKETING AND DISTRIBUTION

The Company's products are sold either on a direct basis or through merchant
distributors to publishers, printers, converters or other end-users. The
Company's sales and marketing staff work with merchants and converters, or
directly with end-users, to identify paper customization and service
opportunities that can help the Company differentiate itself from competitors
and make the Company a preferred source of supply. A strong integration between
manufacturing, product development and sales helps the Company to respond
favorably and quickly to customer inquiries and orders. As a result of this
teamwork, the Company's sales staff has the ability and authority to respond to
many non-standard customer requests immediately.

The Company's finished products are generally marketed on a delivered price
basis and shipped by common carrier. Crown Vantage believes that timely and
economical delivery of finished products is a critical element of a customer's
selection of preferred suppliers and is a significant factor in the Company's
ability to compete. The Company typically ships by rail, truck or intermodal
service, using the most economical mode that meets service specifications. In
many cases, Crown Vantage has contracted with key carriers for guaranteed space,
which benefits the Company's cost structure and its customers through more
dependable delivery. The mills seek to control warehouse costs by limiting
finished goods inventory to generally between 2 and 14 days. The Company leases
a warehouse and distribution center in Southampton, Pennsylvania where text and
cover products from four manufacturing sites are stocked and combined for
shipment by guaranteed pool trucks to stocking merchants and printers throughout
the U.S. and Canada. Because these products are generally ordered in relatively
small quantities, pooling orders from multiple customers in the same geographic
area is cost-effective.

CYCLICAL NATURE OF THE PAPER INDUSTRY

The markets for paper products, including those in which the Company competes,
are highly cyclical, characterized by periods of supply and demand imbalance and
sensitivity to changes in industry capacity. Demand for paper products is
influenced to a significant degree by the overall level of domestic economic
activity, which is beyond the Company's control. A number of structural
factors also serve to accentuate the cyclicality of the paper industry,
including the substantial capital investment and high fixed costs required to
manufacture paper products; the significant exit costs associated with capacity
reductions; and, at times, intensified competition from overseas market
conditions. Because of the high fixed costs associated with paper production,
paper manufacturers need to maintain high levels of capacity utilization
(operating rates) to cover fixed costs and, accordingly, relatively small
changes in operating rates due to changes in domestic demand, capacity, and
levels of imports may significantly affect prices. In addition, operating
results at the Company's non-integrated facilities are more susceptible to pulp
price fluctuations -- benefiting during periods of decreasing pulp prices and
suffering during periods of pulp price increases.

LEVERAGE RESULTING FROM THE SPIN-OFF

As a result of the Spin-Off, the Company has significant debt service
requirements. The degree to which the Company is leveraged could impact its
ability to obtain additional financing for working capital, capital
expenditures, acquisitions and general corporate purposes.

ITEM 2. PROPERTIES

The Company owns and operates three pulp mills, seven paper mills and one
cast-coating facility in the United States and two paper mills in Scotland. The
following table summarizes the location, 1997 volumes and pertinent production
characteristics of each facility. The Company's bank credit facility is
collateralized by substantially all of the Company's assets, including the
facilities listed below.

COATED AND UNCOATED
COATED UNCOATED FREESHEET PAPERS
GROUNDWOOD FREESHEET ---------------------------------------------------
PRINTING AND PRINTING AND SPECIALTY SPECIALTY
PUBLISHING PUBLISHING PACKAGING CONVERTING
---------- ---------- --------- ----------

FACILITIES: St. Francisville, LA Berlin and Gorham, NH Port Huron, MI St. Francisville, LA
Guardbridge, Scotland Parchment, MI Richmond, VA (b)
Dalmore, Scotland Milford, NJ Berlin and Gorham, NH (c)
Adams, MA
Ypsilanti, MI

1997 SALES
VOLUMES: 280,000 tons 239,000 tons (a), (d) 238,000 tons 168,000 tons (c)

PRIMARY No. 4, No. 5 medium to heavy Custom forms papers, Grease resistant paper, Coffee filters, cup and
PRODUCTION: weight grades for magazines text, cover and writing labels, multi-wall bags plate stock and cast-
and catalogs grades, security papers and other packaging and coated board
and specialty specialty applications
applications

SPECIAL PRODUCTION Coating, calendering Calendering, watermarks, Coating, waxing, Calendering, cast-
CAPABILITIES: sheeting, embossing calendering, chemical coating, sheeting
treatment

PAPER MACHINES AND 2 paper machines with on- 12 paper machines, 14 paper machines, 3 3 paper machines, 4 cast-
RELATED EQUIPMENT: machine coating, 4 off-machine assorted sheeters, with on-machine coating coating machines, 4
super calenders rewinders and embossers and hot/soft sheeters
calendering, 3 with on-
machine waxers, 3 off-
machine coaters, 6 off-
machine waxers

(a) Does not include 57,000 tons of market pulp sold by the Company's
Berlin-Gorham facility in 1997.
(b) The Richmond facility does not produce paper but provides cast-coating
capabilities for the production of coated paperboard.
(c) Includes 34,000 tons of toweling manufactured and sold by the Company's
Berlin-Gorham facility in 1997.
(d) Includes approximately 2,200 tons sold by the Newark, Delaware facility
that was closed during the fourth quarter of 1997.

ITEM 3. LEGAL PROCEEDINGS

In 1994, the Company filed a suit against the City of Berlin, New Hampshire
relating to an approximately $107 million increase from 1992 to 1994 of the
City's assessed value of the Berlin portion of the Berlin-Gorham facility. The
increased assessed value resulted in an annual increase in property taxes of
approximately $2.5 million. The Company is seeking abatement of the tax
increase on the grounds that the City's valuations are excessive, and that New
Hampshire law exempts certain income producing equipment, such as the chemical
recovery unit, from property taxation. In April 1996, the trial court affirmed
most of the City's positions, and the Company appealed that decision to the New
Hampshire Supreme Court. On December 31, 1997, the Supreme Court released an
opinion which, in part, resulted in a remand of various issues back to the trial
court. The trial court has set a rehearing date in April 1998. Due to
uncertainties surrounding the remand of issues to the trial court, it is not
possible to determine the ultimate outcome of the suit. However, based on facts
and circumstances currently known to the Company as well as an analysis of the
Supreme Court opinion, management does not believe that the final outcome will
adversely affect the Company's financial position or results of operations.

The Company has been identified as a potentially responsible party ("PRP") under
the Comprehensive Environmental Response, Compensation and Liability Act or
similar federal and state laws regarding past disposal of wastes at 20 sites in
the United States. The Company has previously settled its remediation
obligation at 11 sites. At 8 other sites, the Company is one of many
potentially responsible parties and its alleged contribution to the site and
remediation obligation is not considered significant. At one other site,
remedial investigation is under way and a loss estimate for the potential
remediation effort is not yet possible. However, the Company's accrual for the
remediation investigation effort was $.6 million and $.7 million at December 28,
1997 and December 29, 1996, respectively. The liabilities can change
substantially due to such factors as the solvency of other potentially
responsible parties, the Company's share of the responsibility, additional
information as to the nature or extent of contamination, methods of remediation
required, and other actions by governmental agencies or private parties. While
it is not feasible to predict the outcome of all environmental liabilities,
based on its most recent review, management is of the opinion that its share of
the costs of investigation and remediation of the sites of which it is currently
aware will not have a material adverse effect upon the consolidated financial
condition of the Company. However, because of uncertainties associated with
remediation activities, regulations, technologies, and the allocation of costs
among various other parties, actual costs to be incurred at identified sites may
vary from estimates. Therefore management is unable to determine if the ultimate
disposition of all known environmental liabilities will have a material adverse
effect on the results of operations in a given fiscal quarter or year. In
addition, as is the case with most manufacturing companies and many other
companies, there can be no assurance that the Company will not be named as a
potentially responsible party at additional sites in the future or that the
costs associated with such additional sites would not be material.

In addition to the matters described above, the Company is a party to various
legal proceedings generally incidental to its business and is subject to a
variety of environmental protection statutes and regulations. As is the case
with other companies in similar industries, the Company faces exposure from
actual or potential claims and legal proceedings involving environmental
matters. Although the ultimate disposition of legal proceedings cannot be
predicted with certainty, it is the opinion of the Company's management that
the outcome of any claim that is pending or threatened, either individually
or on a combined basis, will not have a materially adverse effect on the
consolidated financial position of the Company but could materially affect
consolidated results of operations in a given period.

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

Not applicable

EXECUTIVE OFFICERS OF CROWN VANTAGE INC.:

Name Age Position
- ---- --- --------

Ernest S. Leopold 64 Chairman, Chief Executive Officer, Director
Robert A. Olah 49 President and Chief Operating Officer
F. Allen Byrd 46 Senior Vice President, Coated Printing and
Publishing Papers
Katie Cutler 53 Senior Vice President, Corporate
Communications
Frederick T. Dalrymple 65 Senior Vice President, Specialty Papers
Antoinette S. Gabriel 53 Senior Vice President, Chief Administrative
Officer
C. Neil Henderson 59 Senior Vice President, Uncoated Printing and
Publishing Papers
Michael J. Hunter 37 Vice President, Chief Accounting Officer
Christopher M. McLain 54 Senior Vice President and General Counsel,
Secretary
David A. Nelson 40 Senior Vice President, Uncoated Printing and
Publishing Papers
R. Neil Stuart 43 Senior Vice President, Chief Financial
Officer

Ernest S. Leopold has been Chairman and Chief Executive Officer since creation
of the Company in 1995. In addition to Chairman and Chief Executive Officer,
previously served as President since the creation of the Company in 1995.
Previously served as Executive Vice President, Communications Papers of James
River Corporation.

Robert A. Olah has been President and Chief Operating Officer since December 9,
1997, and Senior Vice President, Specialty Papers since 1996 and previous
thereto served as Senior Vice President, Packaging Papers Group since creation
of the Company in 1995. Previously served as Vice President, General Manager,
James River Corporation Packaging Papers Division.

F. Allen Byrd has been Senior Vice President, Coated Printing and Publishing
Papers since 1996 and previous thereto served as Senior Vice President, St.
Francisville Group since creation of the Company in 1995. Previously served as
Vice President, General Manager, James River Corporation Printing Papers Group.

Katie Cutler has been Senior Vice President, Corporate Communications since
creation of the Company in 1995. Previously served as Vice President, External
Affairs, James River Corporation Communication Papers Business.

Frederick T. Dalrymple has been Senior Vice President for Specialty Papers since
January 1998 and previous thereto served as Vice President for mill operations
for Specialty Papers since 1996.

Antoinette S. Gabriel has been Senior Vice President, Chief Administrative
Officer since creation of the Company in 1995. Previously served as Vice
President, Planning and Administration, James River Corporation Communication
Papers Business.

C. Neil Henderson has been Senior Vice President, Uncoated Printing and
Publishing Papers since 1996 and previous thereto served as Senior Vice
President, Curtis Fine Papers Group since creation of the Company in 1995.
Previously served as Chief Executive of James River Fine Papers Group and Chief
Executive of James River Fine Papers, Ltd.

Michael J. Hunter has been Vice President, Chief Accounting Officer since
January 1997. Previously served as Director of Financial Reporting for the
Company since December 1995 and prior thereto was Senior Manager at Ernst &
Young LLP, San Francisco.

Christopher M. McLain has been Senior Vice President and General Counsel,
Secretary since October 1995. Previously an attorney with Sonnenschein Nath &
Rosenthal, San Francisco, and prior thereto was Senior Vice President, General
Counsel and Secretary, Transamerica Corporation, San Francisco.

David A. Nelson has been Senior Vice President, Uncoated Printing and Publishing
Papers since 1996 and previous thereto served as Senior Vice President,
Berlin-Gorham Group since creation of the Company in 1995. Previously served as
Vice President, General Manager, James River Corporation Berlin-Gorham
Operations.

R. Neil Stuart has been Senior Vice President, Chief Financial Officer since May
1996. Previously thereto served as Managing Director at the Toronto-Dominion
Bank, New York.

The directors of Crown Vantage will hold office until the next annual meeting of
stockholders of Crown Vantage and until their successors are duly elected and
qualified. The executive officers named above will be elected to serve in such
capacities until the next annual meeting of the Board of Directors, or until
their respective successors have been duly elected and have been qualified, or
until their earlier death, resignation, disqualification or removal from office.
There is no family relationship between any of the officers.

PART II

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

The Company had approximately 8,500 shareholders of record of its Common Stock
as of March 20, 1998. The Company's Common Stock is traded on the NASDAQ
National Market System under the symbol CVAN.

Information concerning dividend restrictions and the high and low sales prices
of the Company's Common Stock is incorporated herein by reference from Note 6
and Note 15, respectively, on pages 35 and 46, respectively, of the Company's
1997 ANNUAL REPORT TO SHAREHOLDERS.

ITEM 6. SELECTED FINANCIAL DATA

Selected financial data is incorporated herein by reference from page 16 of the
Company's 1997 ANNUAL REPORT TO SHAREHOLDERS.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Management's Discussion and Analysis of Financial Condition and Results of
Operations is incorporated herein by reference from pages 17 through 24 of the
Company's 1997 ANNUAL REPORT TO SHAREHOLDERS.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Report of Independent Auditors as of and for the years ended December 28,
1997 and December 29, 1996, and the consolidated financial statements of Crown
Vantage Inc. are incorporated herein by reference from pages 25 through 46 of
the Company's 1997 ANNUAL REPORT TO SHAREHOLDERS. The Report of Independent
Accountants as of December 31, 1995 and for the year ended December 31, 1995 is
included herein as Exhibit 23.1 to this Form 10-K. See Item 14 of this report
for information concerning financial statements and schedule filed with this
report.

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

Information concerning the Company's change in accountants is included in the
Company's Current Reports on Form 8-K and Form 8-K/A dated June 25, 1996 and
June 28, 1996, respectively, which are incorporated herein by reference.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information concerning the Company's Board of Directors and compliance with
Section 16(a) of the Securities Exchange Act of 1934 is incorporated herein by
reference from the text under the captions "Election of Directors," "Certain
Information Concerning the Board of Directors and its Committees" and "Section
16(a) Beneficial Ownership Reporting Compliance" included in the Company's Proxy
Statement for the May 5, 1998 Annual Meeting of Shareholders.

Information concerning the Company's Executive Officers appears under the
caption "Executive Officers of Crown Vantage Inc." included in Part I of this
Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION

Information concerning executive compensation is incorporated herein by
reference from the text in the following tables which are included in the
Company's Proxy Statement for the May 5, 1998 Annual Meeting of Shareholders:
Summary Compensation Table, Options/SAR Grants in 1997, Aggregated Option/SAR
Exercises in 1997 and Fiscal Year End Option/SAR Values, Ten-Year Option
Repricings, and Approximate Annual Pension Benefit at Age 65.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information concerning ownership of equity stock of the Company by certain
beneficial owners and management is incorporated herein by reference from the
text under the caption "Principal Shareholders" and "Common Stock Ownership of
Directors and Executive Officers" included in the Company's Proxy Statement for
the May 5, 1998 Annual Meeting of Shareholders.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information concerning certain relationships and related transactions with
officers and directors is incorporated herein by reference from the text under
the caption "Certain Relationships and Related Transactions" included in the
Company's Proxy Statement for the May 5, 1998 Annual Meeting of Shareholders.

PART IV

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

(a)(1) FINANCIAL STATEMENTS. The report of independent auditors as of December
28, 1997 and December 29, 1996 and for the two years then ended and the
following consolidated financial statements of the Company are incorporated
herein by reference from the Company's 1997 ANNUAL REPORT TO SHAREHOLDERS. The
report of independent accountants for the year ended December 31, 1995 is
included herein as Exhibit 23.1

1997 Annual
Report Page
-----------

Report of Independent Auditors....................................... 25
Consolidated Statements of Operations- Years Ended December 28, 1997,
December 29, 1996 and December 31, 1995............................ 26
Consolidated Balance Sheets - December 28, 1997 and December 29, 1996 27
Consolidated Statements of Cash Flows - Years Ended December 28, 1997,
December 29, 1996 and December 31, 1995 ........................... 28
Consolidated Statement of Changes in Equity- Years Ended December 28,
1997, December 29, 1996, and December 31, 1995 .................... 29
Notes to Consolidated Financial Statements........................... 30

PAGE OR
EXHIBIT NUMBER
(a)(2) FINANCIAL STATEMENT SCHEDULE. IN FORM 10-K
------------

Report of Independent Auditors on Financial Statement Schedule
as of and for the years ended December 28, 1997 and
December 29, 1996............................................... Page 18
Report of Independent Accountants on Financial Statement
Schedule for the period since inception through December 31, 1995. Exhibit 23.1
Schedule I - Condensed Financial Information of Registrant........ Page 19

All schedules other than that indicated above are omitted because of the absence
of the conditions under which they are required or because the required
information is set forth in the consolidated financial statements and notes
thereto.

(a)(3) EXHIBITS

All exhibits, including those incorporated by reference:

Exhibit
No. Description
- ------- -----------

2.1(1) Form of Contribution Agreement among Crown Paper Co. ("Crown Paper"),
Crown Vantage, Inc. ("Crown Vantage"), James River Corporation of
Virginia ("JRC") and James River Paper Company, Inc. ("James River
Paper")
3.1(1) Articles of Incorporation of Crown Vantage
3.2(5) Articles of Amendment to the Articles of Incorporation dated May 13,
1996 and July 31, 1996
3.3(6) Restated Bylaws of Crown Vantage
3.4(1) Articles of Designation for Preferred Shares, Series A
4.1(1) Form of Rights Agreement between Crown Vantage and Norwest Bank
Minnesota, N.A., as Rights Agent
10.1(1) Form of Tax Sharing Agreement among JRC, James River Paper, Crown
Vantage and Crown Paper
10.2(1) Form of Berlin Product Supply Agreement between James River Paper and
Crown Paper
10.3(1) Form of Pulp Purchase Agreement between James River Paper and Crown
Paper
10.4(1) Form of Pulp Sales Transition Agreement between James River Paper and
Crown Paper
10.5(1) Form of Transition Services Agreement between James River Paper and
Crown Paper
10.6(1) Form of Technical Services Agreement between James River Paper and
Crown Paper
10.7(1) Form of Information Technology Services Agreement between James River
Paper and Crown Paper
10.8(1) Form of Environmental Services Agreement between James River Paper and
Crown Paper
10.9(1) Form of Offices Sharing Agreement between James River Paper and Crown
Paper
10.10(1) Form of Pulp Technology Services Agreement between James River Paper
and Crown Paper
10.11(1) Form of Cottonwood Pedigreed Plant Material Agreement between James
River Paper and Crown Paper
10.12(1) Form of St. Francisville Product Supply Agreement (Consumer Products
Business) between James River Paper and Crown Paper
10.13(1) Form of St. Francisville Product Supply Agreement (Packaging Business)
between James River Paper and Crown Paper
10.14(1) Form of Landfill Agreement between James River Paper and Crown Paper
10.15(1) Form of Allocation Agreement among JRC, James River Paper and Crown
Paper
10.16(1) Form of Packaging Papers Product Supply Agreement between James River
Paper and Crown Paper
10.17(1) Form of Naheola Product Supply Agreement between James River Paper and
Crown Paper
10.18(1) Form of Confidentiality Agreement between JRC and Crown Paper
10.19(1) Form of St. Francisville Wood Chip Supply Agreement between James
River Paper and Crown Paper
10.20(1) Form of St. Francisville Roundwood Supply and Cutting Rights Agreement
between James River Paper and Crown Paper
10.21(1) Form of Northeast Roundwood Supply Agreement between James River Paper
and Crown Paper
10.22(1) Form of Pension Funding Agreement among Crown Paper, Crown Vantage and
James River
10.23(1) Form of Guaranty Support Agreement among Crown Paper, Crown Vantage
and James River
10.24(1) Forms of KVP Parchment Lease and KVP Parchment Services Agreement,
between Crown Paper and James River
10.25(1) Form of Eureka Trademark Agreement
10.26(1) Form of Crown Vantage Stock Option Plan for Outside Directors **
10.27(8) Crown Vantage Inc. Stock Award Plan for Outside Directors (as
amended) **
10.28(8) Second Amendment to the Crown Vantage Inc. Stock Award Plan for
Outside Directors **
10.29(6) Crown Vantage Inc. 1995 Incentive Stock Plan **
10.30(1) Form of Crown Vantage Inc. Stock Plus Employee Stock Ownership Plan
**
10.31(4) Form of Employment Agreement for Ernest S. Leopold dated December 5,
1995 **
10.32(2) Form of Nonstatutory Stock Option with Reload Feature Agreement under
the Registrant's 1995 Omnibus Incentive Stock Plan **
10.33(2) Form of Restricted Stock Award Agreement under the Registrant's 1995
Omnibus Incentive Stock Plan **
10.34(2) Form of Nonstatutory Stock Option Agreement under the Registrant's
1995 Stock Option Plan for Outside Directors **

10.35(2) Form of Restricted Stock Award Agreement under the Registrant's 1995
Stock Award Plan for Outside Directors **
10.36(4) Form of Agreement (Severance) dated December 5, 1995 **
10.37(4) Form of Amendment No. 1 to the Crown Vantage Inc. Stock Plus Employee
Stock Ownership Plan
10.38(3) Indenture between the Bank of New York, as trustee, and the Company,
relating to the Notes
10.39(8) First Supplemental Indenture between the Bank of New York, as trustee,
and the Company, relating to the Notes
10.40(3) Bank Credit Agreement among Morgan Guaranty Trust Company of New York,
as Agent, the Banks named therein, Crown Paper and Crown Vantage
10.41(8) Amendment No. 1 to Credit Agreement
10.42(8) Amendment No. 2 to Credit Agreement
10.43(3) Note Purchase Agreement Between JRC and Crown Vantage, relating to the
PIK Notes
10.44(8) Receivables Purchase Agreement
10.45(8) Purchase and Sale Agreement (relating to Receivables Purchase
Agreement)
10.46(8) Loan Agreement between Business Finance Authority of the State of New
Hampshire and Crown Paper Co.
10.47(8) Refunding Loan Agreement between Business Finance Authority of the
State of New Hampshire and Crown Paper Co.
10.48* Amendment No. 3 to Credit Agreement
10.49* Amendment No. 4 to Credit Agreement
10.50(9) Option and Settlement Agreement Between Fort James Corporation and
Crown Vantage, relating to the PIK Notes
11* Statement Re: Computation of Per Share Earnings
13.1* Portions of the 1997 Annual Report to Shareholders, which are
specifically incorporated by reference herein
16(7) Letter regarding change in certifying accountant and related
information
21.1(8) Subsidiaries
23.1* Report of Coopers & Lybrand L.L.P. on the consolidated financial
statements and financial statement schedule of the Company for the
year ended December 31, 1995.
23.2* Consent of Coopers & Lybrand L.L.P. to the incorporation by reference
of their report dated February 23, 1996 into the Registration
Statements on Form S-8, File Nos. 33-96788, 33-96854, 33-96856,
333-09361, and 333-4420
23.3* Consent of Ernst & Young LLP to the incorporation by reference of
their report dated January 30, 1998 into the Registration Statements
on Form S-8, File Nos. 33-96788, 33-96854, 33-96856, 333-09361, and
333-4420
27* Financial Data Schedule

- -------------------------
(1) Previously filed as Exhibits to Crown Vantage Inc. Registration Statement
No. 33-95736 on Form S-1 filed with the Securities and Exchange Commission
("SEC") on August 14, 1995 and all amendments thereto, concerning the
distribution of Common Stock of Crown Vantage Inc.
(2) Previously filed as Exhibits to Crown Vantage Inc. Form 10-Q for the
quarterly period ended September 24, 1995.
(3) Previously filed as exhibits to the Crown Paper Co. Registration Statement
No. 33-93494 on Form S-1 filed with the SEC June 15, 1995 and all
amendments thereto, concerning the offering of the $250,000,000 aggregate
principal amount of Senior Subordinated Notes due 2005 to be issued by
Crown Paper Co.
(4) Previously filed as Exhibits to Crown Vantage Inc.'s Annual Report on Form
10-K for the year ended December 31, 1995.
(5) Previously filed as Exhibits to Crown Vantage Inc. Registration Statement
No. 333-09361 on Form S-8 and to Crown Vantage Inc.'s report on Form 10-Q
for the quarter ended June 30, 1996, respectively.
(6) Previously filed as Exhibits to Crown Vantage Inc.'s report on Form 10-Q
for the quarter ended September 29, 1996.
(7) Previously filed in Form 8-K and Form 8-K/A dated June 25, 1996 and
June 28, 1996, respectively.
(8) Previously filed as Exhibits to Crown Vantage Inc.'s Annual Report on Form
10-K for the year ended December 29, 1996
(9) Previously filed in Form 8-K dated March 25, 1998.

* Included as an exhibit herein.
** Indicates management contract or compensatory plan or arrangement.

(b) REPORTS ON FORM 8-K. No reports on Form 8-K were filed during the quarter
ended December 28, 1997.

SIGNATURES

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

March 17, 1998 CROWN VANTAGE INC.
(Registrant)

/s/ R. Neil Stuart /s/ Michael J. Hunter
- ----------------------- ------------------------
R. Neil Stuart, Michael J. Hunter
Senior Vice President, Vice President,
Chief Financial Officer Chief Accounting Officer

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Christopher M. McLain, R. Neil Stuart,
and Michael J. Hunter, and each of them, his or her true and lawful agent, proxy
and attorney-in-fact, with full power of substitution and resubstitution, for
him or her and in his or her name, place and stead, in any and all capacities,
to (i) act on, sign and file with the Securities and Exchange Commission any and
all amendments to this report on Form 10-K together with all schedules and
exhibits thereto, (ii) act on, sign and file such certificates, instruments,
agreements and other documents as may be necessary or appropriate in connection
therewith, and (iii) take any and all actions which may be necessary or
appropriate to be done, as fully for all intents and purposes as he or she might
or could do in person, hereby approving, ratifying and confirming all that such
agent, proxy and attorney-in-fact or any of his or her substitutes may lawfully
do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on March 17, 1998.

Signature Title
- --------- -----

/s/ George B. James Director
- --------------------------------------
George B. James

/s/ Ernest S. Leopold Chairman, Chief Executive Officer and
- -------------------------------------- Director
Ernest S. Leopold

/s/ Joseph T. Piemont Director
- --------------------------------------
Joseph T. Piemont

/s/ E. Lee Showalter Director
- --------------------------------------
E. Lee Showalter

/s/ William D. Walsh Director
- --------------------------------------
William D. Walsh

/s/ James S. Watkinson Director
- --------------------------------------
James S. Watkinson

/s/ Donna L. Weaver Director
- --------------------------------------
Donna L. Weaver

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 17, 1998.

Signature Title
- --------- -----

/s/ R. Neil Stuart Chief Financial Officer
- --------------------------------------
R. Neil Stuart

/s/ Michael J. Hunter Chief Accounting Officer
- --------------------------------------
Michael J. Hunter

CROWN VANTAGE INC.

FINANCIAL STATEMENT SCHEDULE I

CONDENSED FINANCIAL STATEMENTS OF REGISTRANT

REPORT OF INDEPENDENT AUDITORS

We have audited the consolidated financial statements of Crown Vantage Inc. and
subsidiaries as of December 28, 1997 and December 29, 1996, and for the years
then ended, and have issued our report thereon dated January 30, 1998. Our
report on the consolidated financial statements of Crown Vantage Inc. has been
incorporated by reference in this Form 10-K from page 25 of the 1997 Annual
Report to Shareholders of Crown Vantage Inc. In connection with our audits of
such financial statements, we have also audited the related financial statement
schedule listed in Item 14(a) of this Form 10-K. This schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this schedule based on our audits. The schedule of Crown Vantage
Inc. for the period since inception through December 31, 1995 was audited by
other auditors whose report dated February 23, 1996 expressed an unqualified
opinion on that schedule.

In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.

ERNST & YOUNG LLP

San Francisco, California
January 30, 1998

CROWN VANTAGE INC.
CONDENSED STATEMENTS OF OPERATIONS

Year Ended Year Ended Since Inception through
(amounts in thousands) December 28, 1997 December 29, 1996 December 31, 1995
----------------- ----------------- -----------------

Interest expense $(14,907) $(13,381) $ (4,616)
-------- -------- --------
Loss before income taxes and equity in
undistributed loss of subsidiaries (14,907) (13,381) (4,616)

Income tax benefit 5,218 5,113 1,835

Equity in undistributed loss of subsidiaries (22,531) (16,536) 15,968
-------- -------- --------
Net loss $(32,220) $(24,804) $ 13,187
-------- -------- --------
-------- -------- --------

See notes to condensed financial statements.

CROWN VANTAGE INC.
CONDENSED BALANCE SHEETS

(dollar amounts in thousands) December 28, 1997 December 29, 1996
- ---------------------------- ----------------- -----------------

ASSETS
Deferred income taxes $ 6,327 $ 1,107
Investment in subsidiaries 110,607 130,963
-------- --------
Total Assets $116,934 $132,070
-------- --------
-------- --------
LIABILITIES AND EQUITY

Current Liabilities:
Accrued liabilities $ 4,718 $ 4,255
-------- --------
Total current liabilities 4,718 4,255
-------- --------
Long-term debt 113,185 98,742
-------- --------
Total Liabilities 117,903 102,997
-------- --------
Shareholders' Equity:
Preferred Stock, no par value;
Authorized - 500,000 shares;
Issued and outstanding - None
Common Stock, no par value;
Authorized - 50,000,000 shares;
Issued and outstanding - 9,668,313 and
9,107,535 shares at December 28, 1997
and December 29, 1996, respectively 45,831 44,578
Unearned ESOP shares and other (4,301) (7,253)
Cumulative foreign currency translation
adjustment 1,338 3,365
Retained deficit (43,837) (11,617)
-------- --------
(969) 29,073
-------- --------
Total Liabilities and Equity $116,934 $132,070
-------- --------
-------- --------

See notes to condensed financial statements.

Notes to Condensed Financial Statements

Note 1 -- Basis of Presentation

Crown Vantage Inc. ("Crown Vantage" or the "Parent Company") was incorporated in
Virginia in March 1995. Crown Vantage's only significant asset is all of the
outstanding shares of Crown Paper Co. and subsidiaries ("Crown Paper"). The
Parent Company's investment in subsidiaries is stated at cost plus (minus)
equity in undistributed income (loss) of its subsidiaries since the Spin-Off.
Net income (loss) of the Parent Company reflects its income and expense as well
as the earnings (losses) of Crown Paper.

Note 2 -- Long-Term Debt

In connection with the Spin-Off, the Parent Company issued to James River 11.45%
Senior Pay-in-Kind Notes (the "PIK Notes") which are due in 2007. Interest is
due semi-annually in March and September and may be paid in cash or in
additional PIK Notes until September 2003. Thereafter interest must be paid in
cash. The PIK Notes are redeemable at the option of the Company on or after
September 2000 at a redemption price of 105.725% declining to par in 2003 and
thereafter. In addition, the Company may redeem up to 33-1/3% of the
outstanding principal amount prior to September 1998 from the proceeds of one or
more public offerings at a redemption price of 110.45% of the principal amount
(100% of the principal amount if held by James River). In the event of a Change
of Control (as defined in the underlying agreement) the holders of the PIK Notes
have the right to require the Company to purchase the PIK Notes in cash at 101%.
The PIK Notes have been recorded at a discount to reflect an approximate market
rate of interest of 13% at the Spin-Off.

Note 3 -- Cash Flow Information

In connection with the establishment of Crown Vantage Inc.'s Employee Stock
Ownership Plan (the "ESOP"), the Parent Company in 1995 initially sold 444,000
shares of Common Stock to the ESOP for $10 million that was funded through a
loan from Crown Paper Co. to the ESOP. The loan was completely repaid in 1997.
On May 2, 1997 an additional 500,000 shares of Common Stock were sold to the
ESOP for $3 million. Prior to the sale, Crown Paper borrowed the $3 million
under its Bank Credit Facility and lent that sum to the ESOP. Upon receipt of
the funds from the ESOP, the Parent contributed the $3 million to Crown Paper,
which used the funds to reduce borrowings on its Bank Credit Facility. The
purchase price was at the average of the high and low prices for the previous 10
days trading period. The loan bears interest at 11% and is due May 1, 2004.
Other than the cash flows described above, there were no other cash flows of the
Parent.

Note 4 -- Dividends

During 1997, 1996, and 1995, Crown Paper Co. neither paid nor declared dividends
to the Parent.