FORT JAMES CORP, 424B4, 1998-02-17

FORT JAMES CORP
424B4, 1998-02-17
PAPER MILLS

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FILED PURSUANT TO RULE 424(B)(4)
FILE NO. 333-45519

PROSPECTUS
FORT JAMES(ICON)
14,416,237 SHARES

FORT JAMES CORPORATION
COMMON STOCK
------------------------

ALL OF THE 14,416,237 SHARES OF COMMON STOCK, PAR VALUE $.10 PER SHARE ("COMMON
STOCK"), OF FORT JAMES CORPORATION, A VIRGINIA CORPORATION ("FORT JAMES" OR THE
"COMPANY"), BEING OFFERED HEREBY ARE BEING SOLD BY CERTAIN STOCKHOLDERS OF THE
COMPANY (COLLECTIVELY THE "SELLING STOCKHOLDERS"). SEE "SELLING
STOCKHOLDERS." THE COMPANY WILL NOT RECEIVE ANY OF THE PROCEEDS FROM THE
SALE OF SHARES OF COMMON STOCK BY THE SELLING STOCKHOLDERS. OF THE
14,416,237 SHARES OF COMMON STOCK BEING OFFERED HEREBY, 12,728,737
SHARES ARE BEING OFFERED INITIALLY IN THE UNITED STATES AND CANADA BY
THE U.S. UNDERWRITERS AND 1,687,500 SHARES ARE BEING OFFERED INITIALLY
OUTSIDE THE UNITED STATES AND CANADA BY THE INTERNATIONAL
UNDERWRITERS. SEE "UNDERWRITING." THE COMMON STOCK IS LISTED ON THE
NEW YORK STOCK EXCHANGE (THE "NYSE") UNDER THE SYMBOL "FJ." ON
FEBRUARY 12, 1998, THE REPORTED LAST SALES PRICE OF THE
COMMON STOCK ON THE NYSE COMPOSITE TRANSACTIONS
TAPE WAS $43 3/16 PER SHARE.
------------------------

SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR INFORMATION THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------

PRICE $43 3/16 A SHARE
------------------------

<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND SELLING
PUBLIC COMMISSIONS (1) STOCKHOLDERS (2)
------------------------ ------------------------ ------------------------
<S> <C> <C> <C>
PER SHARE............................................. $43.1875 $1.40 $41.7875
TOTAL................................................. $622,601,236 $20,182,732 $602,418,504
</TABLE>

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

(1) THE COMPANY AND THE SELLING STOCKHOLDERS HAVE AGREED TO INDEMNIFY THE
UNDERWRITERS AGAINST CERTAIN LIABILITIES, INCLUDING LIABILITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. SEE "UNDERWRITING."

(2) TOTAL EXPENSES (EXCLUSIVE OF UNDERWRITING DISCOUNTS AND COMMISSIONS) IN
CONNECTION WITH THE OFFERING OF SHARES HEREUNDER ARE ESTIMATED TO BE
APPROXIMATELY $695,000, ALL OF WHICH WILL BE PAID BY THE COMPANY.
------------------------

THE SHARES OF COMMON STOCK ARE OFFERED, SUBJECT TO PRIOR SALE, WHEN, AS,
AND IF ACCEPTED BY THE UNDERWRITERS AND SUBJECT TO APPROVAL OF CERTAIN LEGAL
MATTERS BY SHEARMAN & STERLING, COUNSEL FOR THE UNDERWRITERS. IT IS EXPECTED
THAT THE DELIVERY OF THE SHARES WILL BE MADE ON OR ABOUT FEBRUARY 19, 1998, AT
THE OFFICE OF MORGAN STANLEY & CO. INCORPORATED, NEW YORK, NEW YORK, AGAINST
PAYMENT THEREFOR IN IMMEDIATELY AVAILABLE FUNDS.

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

MORGAN STANLEY DEAN WITTER

MERRILL LYNCH & CO.

SALOMON SMITH BARNEY

FEBRUARY 12, 1998

<PAGE>

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE COMMON STOCK OR
ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH COMMON STOCK IN
ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF OR THAT THE INFORMATION
CONTAINED HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

FOR INVESTORS OUTSIDE THE UNITED STATES: NO ACTION HAS BEEN OR WILL BE
TAKEN IN ANY JURISDICTION BY THE COMPANY, BY THE SELLING STOCKHOLDERS OR BY ANY
UNDERWRITER THAT WOULD PERMIT A PUBLIC OFFERING OF THE COMMON STOCK OR
POSSESSION OR DISTRIBUTION OF THIS PROSPECTUS IN ANY JURISDICTION WHERE ACTION
FOR THAT PURPOSE IS REQUIRED, OTHER THAN IN THE UNITED STATES. PERSONS INTO
WHOSE POSSESSION THIS PROSPECTUS COMES ARE REQUIRED BY THE COMPANY, THE SELLING
STOCKHOLDERS AND THE UNDERWRITERS TO INFORM THEMSELVES ABOUT AND TO OBSERVE ANY
RESTRICTIONS AS TO THE OFFERING OF THE COMMON STOCK AND THE DISTRIBUTION OF THIS
PROSPECTUS.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................................................................................................. 1
Incorporation of Certain Documents by Reference........................................................................ 1
Cautionary Statement Concerning
Forward-Looking Statements........................................................................................... 2
Prospectus Summary..................................................................................................... 3
Risk Factors........................................................................................................... 9
The Company............................................................................................................ 10
Use of Proceeds........................................................................................................ 15
Price Range of Common Stock and Dividend Policy........................................................................ 15
Capitalization......................................................................................................... 16
Selected Historical and Unaudited Consolidated Financial and Other Data................................................ 17
Management's Discussion and Analysis of Results of Operations and Financial Condition.................................. 19
Description of Common Stock............................................................................................ 22
Management............................................................................................................. 25
Selling Stockholders................................................................................................... 26
Certain United States Tax Consequences to Non-U.S. Holders of Common Stock............................................. 27
Underwriting........................................................................................................... 29
Legal Matters.......................................................................................................... 31
Experts................................................................................................................ 32
</TABLE>

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING,
AND MAY BID FOR, AND PURCHASE, SHARES OF THE COMMON STOCK IN THE OPEN MARKET.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

<PAGE>

AVAILABLE INFORMATION

Fort James is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy and information statements, and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy and information statements, and other information filed by the Company can
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the following Regional Offices of the Commission: Chicago Regional Office,
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661;
and New York Regional Office, 7 World Trade Center, Suite 1300, New York, New
York 10048. Copies of such material can also be obtained by mail from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. Such information may also be accessed electronically
by means of the Commission's website on the Internet (HTTP://WWW.SEC.GOV) . The
Common Stock is listed on the NYSE, and such reports, proxy and information
statements, and other information concerning the Company can be inspected at the
offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New
York 10005.

This Prospectus does not contain all the information set forth in the
registration statement to which this Prospectus relates (the "Registration
Statement") and the exhibits thereto which the Company has filed with the
Commission under the Securities Act of 1933, as amended (the "Securities Act"),
and to which reference is hereby made.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed with the Commission are hereby incorporated
by reference into this Prospectus:

(a) the Annual Report of the Company on Form 10-K for the fiscal year ended
December 29, 1996;

(b) the Quarterly Reports of the Company on Form 10-Q for the quarters
ended March 30, 1997, June 29, 1997 and September 28, 1997;

(c) the Current Reports of the Company on Form 8-K dated May 4, 1997 (2
reports), June 29, 1997, July 2, 1997, August 7, 1997, August 8, 1997, August
12, 1997, August 13, 1997 (4 reports), September 15, 1997, October 23, 1997 and
February 3, 1998; and

(d) the description of the Rights to Purchase Series M Cumulative
Participating Preferred Stock included in the Company's Registration Statement
on Form 8-A dated March 3, 1989, as amended by Amendment No. 1 to Application or
Report on Form 8 dated July 28, 1992.

All documents filed by the Company pursuant to Sections 13(a), 13(c), 14,
or 15(d) of the Exchange Act subsequent to the date of the Registration
Statement on Form S-3 of which this Prospectus is a part and prior to the
effectiveness thereof or subsequent to the date of the final prospectus and
prior to the termination of the offering made hereby shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
respective dates of filing of such documents. Any statement contained herein or
in a document all or any portion of which is incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus. As used herein, the
terms "Prospectus" and "herein" mean this Prospectus, including the documents
incorporated by reference, as the same may be amended, supplemented, or
otherwise modified from time to time. Statements contained in this Prospectus as
to the contents of any contract or other document referred to herein do not
purport to be complete and are qualified in all respects by reference to all of
the provisions of such contract or other document.

The Company will provide without charge to any person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the documents referred to above which have been or may be
incorporated in this Prospectus by reference, other than exhibits to such
documents which are not specifically incorporated by reference in such
documents. Requests for such copies should be directed to Celeste Gunter, Vice
President, Investor Relations, Fort James Corporation, 120 Tredegar Street,
Richmond, Virginia 23219 (telephone (804) 649-4307 or (888) 649-4362).

<PAGE>

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This Prospectus and the documents incorporated by reference herein contain
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. These statements are based on
management's beliefs and assumptions, relying on information currently available
to management, and are subject to risks and uncertainties. Forward-looking
statements include the information concerning possible or assumed future results
of operations of the Company set forth (1) under "Prospectus Summary -- Recent
Developments," "The Company," "Risk Factors," "Selected Historical and Unaudited
Consolidated Financial and Other Data" and "Management's Discussion and Analysis
of Results of Operations and Financial Condition" herein, (2) under "Business"
and "Management's Discussion and Analysis" in the Company's Annual Report on
Form 10-K and in each Quarterly Report on Form 10-Q and certain Current Reports
on Form 8-K incorporated by reference herein and (3) in this Prospectus and the
documents incorporated by reference herein preceded by, followed by or that
include the words "believes," "expects," "anticipates," "intends," "plans,"
"estimates" or similar expressions.

Forward-looking statements are not guarantees of performance as they
involve risks, uncertainties and assumptions. The future results of the Company
may differ materially from those expressed in these forward-looking statements.
Many of the factors that will determine these results are beyond the Company's
ability to control or predict. Purchasers of Common Stock are cautioned not to
put undue reliance on any forward-looking statements. The Company claims the
protection of the safe harbor for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995.

Purchasers of Common Stock should understand that the following important
factors, in addition to those discussed herein and elsewhere in the documents
which are incorporated by reference herein, could affect the future results of
the Company and could cause results to differ materially from those expressed in
such forward-looking statements: (1) the effect of economic conditions; (2) the
ability of the former James River Corporation of Virginia and the former Fort
Howard Corporation to successfully integrate their operations; (3) the impact of
competitive products and pricing; (4) product development; (5) changes in laws
and regulations, including changes in accounting standards and environmental
regulations affecting the paper and pulp industry; (6) customer demand; (7)
changes in raw material, energy and other costs; and (8) opportunities that may
be presented to and pursued by the Company.

<PAGE>

PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS AND IN THE DOCUMENTS
INCORPORATED BY REFERENCE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED,
REFERENCES IN THIS PROSPECTUS TO THE "COMPANY" REFER TO FORT JAMES CORPORATION
AND ITS CONSOLIDATED SUBSIDIARIES. THE OFFERING HEREBY OF 12,728,737 SHARES OF
COMMON STOCK IN THE UNITED STATES AND CANADA (THE "U.S. OFFERING") AND THE
CONCURRENT OFFERING OF 1,687,500 SHARES OF COMMON STOCK OUTSIDE OF THE UNITED
STATES AND CANADA (THE "INTERNATIONAL OFFERING"), ARE COLLECTIVELY REFERRED TO
AS THE "OFFERING." THE CLOSING OF EACH OF THE U.S. OFFERING AND THE
INTERNATIONAL OFFERING IS CONDITIONED UPON THE CLOSING OF THE OTHER. UNLESS
OTHERWISE INDICATED, THE MARKET SHARE INFORMATION AND THE INDUSTRY STATISTICAL
INFORMATION PRESENTED IN THIS PROSPECTUS ARE BASED ON REVENUES AND REFLECT THE
COMPANY'S ESTIMATES. NO ASSURANCE CAN BE GIVEN REGARDING THE ACCURACY OF SUCH
ESTIMATES AND STATISTICS.

THE COMPANY

Fort James is a preeminent worldwide manufacturer and marketer of
paper-based consumer products, including towel and tissue products as well as
disposable tabletop and foodservice products. The Company's principal towel and
tissue products include bathroom tissue, paper towels, table napkins, boxed
facial tissue and wipers. Disposable tabletop and foodservice products include
paper and plastic cups, paper plates, and plastic cutlery. Fort James also
produces and markets paper-based packaging for food and pharmaceuticals and
communications papers. Consumer products, packaging and communications papers
products accounted for 84%, 10% and 6%, respectively, of consolidated revenues
in 1997. In 1997, the Company reported net sales of $7,259.0 million, income
from operations of $602.7 million and a net loss of $27.0 million. Fort James
reported income from operations before restructuring and other unusual items in
1997 of $1,057 million; and net income before restructuring and other unusual
items and extraordinary items of $439 million, or $1.97 per diluted share.

Fort James is the result of the merger of a subsidiary of James River
Corporation of Virginia ("James River") into Fort Howard Corporation ("Fort
Howard") in August 1997 (the "Merger"). In connection with the Merger, James
River was renamed "Fort James Corporation."

Fort James is the world's second largest producer of tissue products, with
approximately three million tons of worldwide capacity. In the United States,
Fort James ranks number one in tissue-making, with 2.1 million tons of annual
capacity, representing approximately 30% of the U.S. tissue industry capacity.
In Europe, where Fort James has 860,000 tons of annual tissue capacity,
representing approximately 17% of the European tissue industry capacity, the
Company believes it is tied for the number two position in the European tissue
industry.

The Company's consumer tissue and tabletop products are sold through both
retail (at-home) and commercial (away-from-home) distribution channels. In North
America, approximately 60% of the Company's sales of consumer tissue and
tabletop products are into retail distribution channels and the remaining
approximately 40% are into away-from-home distribution channels.

In the U.S. retail channel, Fort James produces both branded and private
label products. The Company's principal U.S. retail tissue brands include
QUILTED NORTHERN bathroom tissue (the number two domestic bathroom tissue
brand), BRAWNY paper towels (the number two domestic paper towel brand), MARDI
GRAS printed napkins (the leading domestic paper napkin brand) and paper towels,
VANITY FAIR premium dinner napkins (the number three domestic paper napkin
brand), NORTHERN paper napkins, SOFT'N GENTLE bath and facial tissue, SO-DRI
paper towels, and GREEN FOREST, the leading domestic line of environmentally
positioned, recycled tissue products. The Company's principal retail tabletop
brand is its number two-ranked DIXIE brand of disposable cups and plates. Fort
James also believes it is the leading supplier of private label tissue products
and the leading supplier of both tissue and disposable tabletop products to the
growing warehouse club channel.

The U.S. away-from-home channel, where the Company sells its products to
foodservice, janitorial supply and sanitary paper distributors for use in
restaurants, offices, factories, hospitals, schools and hotels, is also an
important distribution channel for the Company. Fort James believes it is the
top producer of tissue products for the 2.2 million ton U.S. away-from-home
channel, where it estimates its share at approximately 40% of total industry
revenues. The Company is also one of the largest producers of disposable cups,
plates and related products for the away-from-home foodservice industry.

<PAGE>

pan-European base, and is among the category leaders in most western European
countries, with the exception of Germany, Austria and Switzerland, where the
Company has no operations. European branded products include LOTUS bathroom
tissue and VANIA feminine hygiene products, both of which hold leading positions
in France, COLHOGAR, a leading Spanish bathroom tissue, TENDERLY bathroom tissue
sold in Italy, and KITTENSOFT and INVERSOFT, bathroom tissue brands sold in the
British Isles.

The Company believes that it is among the lowest-cost producers of tissue
products in North America. Fort James' operating margins in its North American
Consumer Products Business have increased steadily over the last several years,
rising to 19.4% for 1997, excluding restructuring charges. The Company believes
its cost advantage in North America is derived from a number of factors,
including the size and scale of certain of its manufacturing plants, the
competitive state of its tissue-making manufacturing assets and the benefits it
realizes from the Fort Howard proprietary deinking technology.

Fort James' near-term business initiatives are focused in three primary
areas: leveraging revenue growth opportunities, pursuing aggressive cost
reduction and achieving financing cost savings through both refinancing
activities and debt reduction.

The Company's principal executive offices are currently located at 75
Tri-State International Office Center, Suites 100 and 175, Lincolnshire,
Illinois 60069, telephone (847) 317-5000. In the spring of 1998, the Company's
principal executive offices will be located at 1650 Lake Cook Road, Deerfield,
Illinois 60015-4753.

RECENT DEVELOPMENTS

FOURTH QUARTER RESULTS

Excluding non-recurring items, Fort James reported earnings for the fourth
quarter of 1997 of $.48 per diluted share, compared to $.30 per diluted share in
1996, an improvement of 60%. Including a restructuring charge of $1.53 per
diluted share and an extraordinary charge on the early extinguishment of debt of
$.41 per diluted share, the Company reported a net loss of $1.46 per diluted
share for the fourth quarter of 1997. The restructuring and debt extinguishment
charges were both related to the Merger.

Compared with the fourth quarter of 1996, income from operations in the
fourth quarter of 1997 increased 15% to $242.3 million from $210.9 million and
net income increased 48% to $106.5 million from $71.9 million, excluding
restructure and debt extinguishment charges and a 1996 tax benefit. Net sales
for the quarter declined approximately 1% to $1,761.5 million from $1,785.6
million, primarily due to the impact of foreign currency translation. Excluding
this impact, sales increased approximately 1%. Operating margins for the fourth
quarter of 1997 increased to 13.8%, from 11.8% in the fourth quarter of 1996,
excluding restructuring charges.

NON-RECURRING ITEMS

Results for the fourth quarter of 1997 reflect a pretax charge of $458.0
million ($317.6 million net of taxes, or $1.53 per diluted share) for
restructuring and other unusual items and an extraordinary charge on the early
extinguishment of debt of $138.2 million ($84.4 million net of taxes, or $.41
per diluted share). In the fourth quarter of 1996, Fort James reported a
non-recurring charge of $10.6 million ($8.2 million net of taxes, or $.04 per
diluted share). The Company also recorded a $36 million tax benefit ($.19 per
diluted share) in 1996 as a result of a U.S. Tax Court decision allowing the
Company to deduct certain expenses relating to the former Fort Howard's 1988
leveraged buy-out. Additionally, the fourth quarter of 1996 included a loss on
the early extinguishment of debt of $7.9 million ($4.8 million net of taxes, or
$.03 per diluted share).

FULL YEAR RESULTS

For the full year, excluding non-recurring items, net income increased 44%
to $439.5 million, or $1.97 per diluted share, in 1997 from $304.9 million, or
$1.35 per diluted share, in 1996. Including the non-recurring items, Fort James
reported a net loss of $27.0 million, or a loss of $.28 per diluted share, in
1997, compared to net income of $319.9 million, or $1.43 per diluted share, in
1996. Net sales of $7,259.0 million in 1997 were 5.8% below the $7,707.1 million
reported in 1996, due to divestitures and foreign currency translation. Net
sales increased approximately 1% excluding these items.

FOURTH QUARTER RESULTS BY BUSINESS SEGMENT

The following fourth quarter operating results by business segment exclude
non-recurring items.

The North American Consumer Products Business posted operating profits of
$189.8 million in the fourth quarter of 1997, compared to the $173.7 million
reported in the fourth quarter of 1996, while sales increased slightly to
$1,046.2 million
4

<PAGE>

in 1997 versus $1,039.5 million in 1996. Results for the prior year's quarter
included an $18 million charge for revised estimates of costs for certain
environmental matters. The fourth quarter 1997 performance of this business was
impacted by a number of transition issues related to the Merger. The former Fort
Howard operations were converted to the James River 52/53-week fiscal year
cut-off, resulting in a loss of three days of shipments in the quarter.
Additionally, discretionary downtime was taken at selected tissue mills to
adjust inventory levels and to perform maintenance originally scheduled for
1998. Volumes in both the retail tissue and retail DIXIE tabletop businesses
improved over the prior year levels and aggregate market shares have
strengthened. Volumes declined in the away-from-home tissue business,
principally as a result of the early year-end cut-off for the Fort Howard
operations. Volumes also declined in the away-from-home DIXIE foodservice
business. Pricing in Fort James' retail tissue and DIXIE businesses was
generally unchanged from the prior year's quarter, before the effect of modestly
higher promotional spending in response to competitive activity. Away-from-home
tissue prices were moderately higher reflecting a fourth quarter 1997 price
increase.

The European Consumer Products Business reported operating profits of $48.8
million in the fourth quarter of 1997, a 14% improvement over the $42.7 million
reported in the prior year, while sales declined 6.2%, from $481.5 million in
1996 to $451.6 million in 1997. Changes in foreign currency translation
associated with the strengthening of the dollar caused the decline in sales and
also impacted operating profits. Absent these changes, fourth quarter 1997 sales
would have increased 2.5% and operating profits would have increased 22%
compared to the prior year's quarter. The improvement in profits resulted from a
2.3% increase in finished goods volumes, partially offset by slightly lower
pricing and higher raw material costs. In addition, the fourth quarter of 1996
was adversely impacted by a two-month strike at the Company's Spanish tissue
facility.

The Packaging Business reported fourth quarter 1997 operating profits of
$13.6 million on sales of $187.9 million, down from the $15.2 million of profits
on $198.8 million of sales in the prior year's fourth quarter. Transition issues
associated with a significant change in its customer base negatively impacted
the Packaging Business' sales and profits.

Operating profits for the Communications Papers Business increased modestly
to $12.0 million in the fourth quarter of 1997, compared to $10.0 million in the
fourth quarter of 1996. Sales increased by 3.6%, to $118.6 million in 1997
compared to $114.5 million in 1996. Increased sales and profits were principally
the result of a small increase in volumes and average pricing for uncoated free
sheet papers.

General corporate expenses declined to $21.9 million compared to $30.7
million in 1996, primarily as a result of reduced spending on new, integrated
management information systems.

FULL YEAR RESULTS BY BUSINESS SEGMENT

The following full-year operating results by business segment exclude
non-recurring items.

Compared to 1996, operating profits for the North American Consumer
Products Business improved 12.2% to $845.4 million in 1997. Operating profits
for the European Consumer Products Business increased to $202.4 million in 1997,
a 22% increase over the prior year, excluding the effects of changes in foreign
currency translation. The Packaging Business posted operating profits of $81.3
million in 1997, a decrease of 5% from the prior year, excluding divested
operations. The Communications Papers Business reported 1997 operating profits
of $19.8 million, an 11% decline over 1996 profits, despite a steady improvement
in results during 1997.

RESTRUCTURING CHARGE

In conjunction with the Merger integration, Fort James recorded a $458
million pretax restructuring charge in the fourth quarter of 1997. This charge
covers activities which will integrate the operations of James River and Fort
Howard and enable the Company to realize Merger-related savings estimated to
ultimately total $200 million annually. The restructuring charge includes
approximately $235 million of costs associated with planned plant closures and
the write-off of redundant assets. On January 20, 1998, the Company announced it
will permanently close its two smallest U.S. tissue facilities, in Ashland,
Wisconsin, and Carthage, New York, in the spring of 1998. Production from these
two mills, which produce approximately 84,000 tons per year of away-from-home
tissue products, will be transferred to other, more modern Fort James tissue
mills. Also included in the reserve are amounts for additional rationalization
of Fort James' manufacturing operations planned in North America and Europe. The
restructuring charge includes severance and other employee-related costs in
excess of $100 million associated with a planned net headcount reduction of
approximately 2,500 employees, representing 8% of Fort James' current worldwide
workforce. Cash costs of the restructure program are estimated to total
approximately $150 million, net of tax benefits. An additional estimated $60
million of Merger-related costs, which could not be recognized in 1997 under
applicable accounting regulations, will be recorded in 1998 as incurred.
5

<PAGE>

CASH FLOW AND REFINANCING ACTIVITIES

Cash provided by operations totaled $764.2 million for the year in 1997.
Total debt was reduced by $244.3 million during the year. In addition, $98.1
million of cash was used to redeem the Company's Series O 8 1/4% Cumulative
Preferred Stock ("Series O Preferred Stock") and $152.3 million of cash premiums
were paid on the early extinguishment of debt. Lower average debt levels,
combined with the benefits from the Company's refinancing activities allowed
Fort James to reduce interest expense by 17%, from $424.4 million in 1996 to
$351.8 million in 1997. In early October, the Company completed the refinancing
of a total of approximately $2.1 billion of debt. The Company estimates these
debt refinancings will reduce annual interest expense by more than $50 million.
An extraordinary charge of $215.0 million ($131.5 million net of taxes, or $.63
per diluted share) was recorded in the third and fourth quarters of 1997
associated with the refinancings.

SUMMARY HISTORICAL FINANCIAL INFORMATION

The summary historical consolidated statements of operations data, per
share data and other data for each of the two years in the period ended December
29, 1996, have been derived from, and should be read in conjunction with, the
Company's audited consolidated financial statements included in its Current
Report on Form 8-K dated August 13, 1997 (filed February 3, 1998), incorporated
by reference herein. The unaudited summary historical consolidated statement of
operations data, per share data and other data for the 39-week periods ended
September 28, 1997, and September 29, 1996, have been derived from the Company's
unaudited interim consolidated financial statements incorporated by reference
herein. The unaudited summary historical consolidated financial and other data
for the year ended December 28, 1997 have been derived from the unaudited
financial information set forth in the Company's Current Report on Form 8-K
dated February 3, 1998, incorporated by reference herein. The unaudited summary
historical consolidated financial and other data have been prepared on the same
basis as the audited consolidated financial statements incorporated by reference
herein, and in the opinion of management reflect all adjustments necessary to
fairly state results of operations and cash flows for such periods. Such
adjustments are of a normal recurring nature.

The consolidated financial statements give retroactive effect to the Merger
in a transaction accounted for as a pooling of interests. The pooling of
interests method of accounting requires the restatement of all periods presented
as if Fort Howard and James River had always been combined. All fees and
transaction expenses related to the Merger and the restructuring of the combined
companies have been expensed as required under the pooling of interests
accounting method.

The summary historical consolidated financial and other data should be read
in conjunction with the consolidated financial statements of Fort James included
in the Current Reports on Form 8-K dated August 13, 1997 (filed February 3,
1998) and February 3, 1998 and its Quarterly Report on Form 10-Q for the quarter
ended September 28, 1997. See "Incorporation of Certain Documents by Reference"
and "Available Information."
6

<PAGE>

FORT JAMES AND CONSOLIDATED SUBSIDIARIES
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA
(IN MILLIONS, EXCEPT PER SHARE DATA AND RATIOS)

<TABLE>
<CAPTION>
FISCAL YEAR NINE MONTHS
------------------------------------- ----------------------
UNAUDITED UNAUDITED UNAUDITED
1995(A) 1996(B) 1997 1996 1997
-------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................................ $8,887.9 $7,707.1 $7,259.0 $5,921.5 $5,497.5
Restructure and other unusual items (income)
expense (c)........................................ 51.9 10.7 454.2 .1 (3.8)
Income from operations............................... 783.4 909.3 602.7 709.0 818.4
Interest expense..................................... 536.3 424.4 351.8 (h) 327.3 277.6
Income (loss) before
extraordinary item................................. 159.9 328.0(d) 104.5 (h) 228.3 315.6
Net income (loss) (e)................................ 141.1 319.9 (27.0) 225.0 268.5
Preferred dividend requirements...................... 58.5 58.5 30.5 (h) 43.9 24.4
Weighted average number of common shares and common
share equivalents.................................. 164.1 183.1 207.6 181.0 206.9
PER SHARE DATA:
Income (loss) before extraordinary item (c).......... $ .62(f) $ 1.47(d)(f) $ .35 (h) $ 1.02(f) $ 1.41
Net income (loss) (e)................................ .50(f) 1.43(f) (.28) 1.00(f) 1.18
Cash dividends....................................... .60 .60 .60 .45 .45
OTHER DATA:
EBITDA (g)........................................... $1,462.6 $1,459.7 $1,572.4 $1,116.9 $1,209.8
</TABLE>

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

(a) In August 1995, Fort James completed the spin-off of Crown Vantage which had
annual net sales of approximately $1 billion.

(b) In August 1996, Fort James completed the sale of its Flexible Packaging and
related Inks divisions which had annual net sales of approximately $500
million.

(c) The after-tax impact of the restructure and other unusual items was $32.1
million, or $.19 per diluted share in 1995; $12.9 million, or $.07 per
diluted share in 1996; and $335.0 million, or $1.62 per diluted share in
1997. For the first nine months of 1996, the after-tax impact of such
charges was $4.7 million, or $.03 per diluted share. For the first nine
months of 1997, the after-tax impact of the net restructure and other
unusual items was a loss of $17.4 million, or $.08 per diluted share,
primarily due to certain non-tax-deductible Merger transaction costs.

(d) Includes a credit of $36 million (or $.20 per diluted share) for the
reversal of previously accrued income taxes related to 1988 financing
transactions.

(e) Includes after tax extraordinary losses related to the early retirement of
debt.

(f) In 1995 and 1996, the Company issued 34.7 million and 14.5 million shares of
Common Stock, respectively. Net proceeds of the offerings of $284 million in
1995 and $204 million in 1996 were used to reduce debt.

(g) EBITDA is defined as income from operations before restructure and other
unusual items, depreciation and amortization, and including other income and
minority interests. Fort James believes that EBITDA is a measure commonly
used by analysts and investors. Accordingly, this information has been
disclosed herein to permit a more complete analysis of operating
performance. EBITDA should not be considered in isolation or as a substitute
for net income or other consolidated statement of operations or cash flow
data prepared in accordance with generally accepted accounting principles as
a measure of profitability or liquidity. EBITDA does not take into account
debt service requirements and other commitments and, accordingly, is not
necessarily indicative of amounts that may be available for discretionary
uses.

(h) On a pro forma basis giving effect to (i) the purchase of Fort Howard debt
securities in the Tender Offers; (ii) borrowings under the New Bank Credit
Facility; (iii) the sale of $720 million aggregate principal amount of
Senior Notes in the Senior Notes Offering; (iv) the repurchase of all of the
Company's outstanding 9.77% Senior Notes; (v) the Series P Conversion; and
(vi) the Series O Redemption, as if these transactions had occurred at the
beginning of the year ended December 28, 1997, interest expense would have
been approximately $317.8 million, income before extraordinary item would
have been $125.3 million (or an increase in income before extraordinary item
of $.10 per diluted share) and preferred dividends would have been $24.4
million (or an increase in income before extraordinary item of $.03 per
diluted share). The unaudited pro forma financial and other data presented
are not necessarily indicative of actual results that would have been
achieved had the above transactions been completed on the date assumed and
do not purport to project the Company's financial position at any future
date or its results of operations for any future period.
7

<PAGE>

SELLING STOCKHOLDERS

All of the shares of Common Stock being offered hereby are being sold by
the Selling Stockholders. The Selling Stockholders are (1) Mellon Bank, N.A., as
Trustee for First Plaza Group Trust and (2) Morgan Stanley, Dean Witter,
Discover & Co. ("Morgan Stanley") and certain of its affiliates. The Selling
Stockholders acquired the shares of Common Stock offered hereunder pursuant to
the Merger. See "Selling Stockholders."

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Selling Stockholders:
U.S. Offering............................................ 12,728,737 shares
International Offering................................... 1,687,500 shares
Total............................................... 14,416,237 shares
Common Stock outstanding after the Offering................ 209,667,511 shares (1)

Use of Proceeds............................................ The Company will not receive any proceeds from the sale of the
shares of Common Stock sold by the Selling Stockholders.

NYSE Symbol................................................ "FJ"
</TABLE>

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

(1) Based upon the number of shares of Common Stock outstanding as of February
2, 1998 and excludes 6,090,683 shares of Common Stock issuable upon exercise
of outstanding options.
8

<PAGE>

RISK FACTORS

PROSPECTIVE INVESTORS IN THE SHARES OF COMMON STOCK OFFERED HEREBY SHOULD
CONSIDER THE FOLLOWING RISK FACTORS, TOGETHER WITH THE OTHER INFORMATION SET
FORTH IN THIS PROSPECTUS OR INCORPORATED HEREIN BY REFERENCE, WHEN EVALUATING
SUCH AN INVESTMENT.

RISKS ASSOCIATED WITH INTEGRATION

The Merger was completed in August 1997 and Fort James is in the process of
combining the operations of James River and Fort Howard. As a result of its
integration efforts, Fort James expects to realize cost savings estimated to be
at a $150 million annual run rate by the end of 1998, increasing to $200 million
per year over time. While the Company's rationalization plans are proceeding as
planned, there can be no assurance that Fort James will not encounter
difficulties in the integration process or that the benefits expected from such
integration will be realized. Any material delays or unexpected costs incurred
in connection with such integration could have an adverse effect on the
Company's ability to achieve the expected benefits of integration. See "The
Company -- Business Initiatives."

COMPETITION

Fort James experiences intense competition in both North America and
Europe. Fort James' competitors include a number of large diversified paper and
consumer products companies, such as The Procter & Gamble Company,
Kimberly-Clark Corporation and Georgia-Pacific Corporation. Fort James also
competes with smaller low-cost regional producers that seek to displace the
Company's private label products mainly through price competition. The Company
competes on the basis of price, product quality and performance, product
development effectiveness, service and sales and distribution support.
Aggressive competitive pricing actions, which may become more intense due to
changing industry conditions (see " -- Industry Conditions"), could reduce
revenues and could adversely affect the Company's operating results or financial
condition. Increased marketing expenditures by manufacturers of competing
branded products could prompt the Company to increase its advertising
expenditures for key branded products.

INDUSTRY CONDITIONS

Finished product prices in all of the Company's segments are significantly
affected by the relationships among, and changes in, industry conditions in
North America and Europe, including industry capacity and operating rates,
prices for raw materials and levels of demand. Based upon historical demand
growth in the U.S. tissue industry (which generally averages between 2% and 2.5%
per annum) and upon the Company's current expectations for industry-wide
capacity and operating rates during 1998 and 1999 (which are in part derived
from information published by the American Forest and Paper Association and
public announcements by competitors and in part from internal estimates), the
Company believes that supply and demand for tissue products in the United States
should be in approximate balance during 1998 and 1999. In Europe, where
increases in demand for tissue products are expected to average slightly higher
than in the United States, the Company believes that supply could modestly
outpace demand in 1998 and 1999. Capacity expansion or increased run rates on
existing machines within the tissue industry in the United States or Europe, or
lower than expected demand growth in either the United States or Europe, could
prompt intensified price competition and could adversely affect the Company's
operating results.

Changes in the cost of wastepaper and pulp, the Company's primary raw
materials, also affect the Company's finished goods pricing. Significant
reductions in the cost of these raw materials from the middle of 1995 through
the middle of 1996 and higher industry operating rates contributed to the
Company's positive operating results during that period. Although wastepaper and
pulp prices have remained relatively stable since the middle of 1996, decreasing
wastepaper or pulp prices under different industry conditions could result in
lower product prices. There can be no assurance that any future reductions in
the cost of raw materials would have a positive impact on the Company's
operating results. Historically, sales price increases for finished products
generally have lagged increases in raw material costs. There can be no assurance
that any future increases in the cost of wastepaper or pulp would be recovered
through product price increases, and any such increased raw materials costs
could adversely impact the Company's operating results.

<PAGE>

THE COMPANY

Fort James is the result of the Merger of a subsidiary of James River into
Fort Howard in August 1997. In connection with the Merger, James River was
renamed "Fort James Corporation."

Fort James is the world's second largest producer of tissue products, with
approximately three million tons of worldwide capacity. In the United States,
Fort James ranks number one in tissue-making, with 2.1 million tons of annual
capacity, representing approximately 30% of the U.S. tissue industry capacity.
In Europe, where Fort James has 860,000 tons of annual tissue capacity,
representing approximately 17% of European tissue industry capacity, the Company
believes it is tied for the number two position in the European tissue industry.

In Europe, approximately 75% of Fort James' sales of consumer products are
into retail distribution channels and the remaining approximately 25% are into
away-from-home distribution channels. Sales into retail channels are supported
by both branded and private label product offerings. With production facilities
located in 10 countries, Fort James has a broad, pan-European base, and is among
the category leaders in most western European countries, with the exception of
Germany, Austria and Switzerland, where the Company has no operations. European
branded products include LOTUS bathroom tissue and VANIA feminine hygiene
products, both of which hold leading positions in France, COLHOGAR, a leading
Spanish bathroom tissue, TENDERLY bathroom tissue sold in Italy, and KITTENSOFT
and INVERSOFT, bathroom tissue brands sold in the British Isles.

<PAGE>

BUSINESS INITIATIVES

Fort James' near-term business initiatives focus on three areas: leveraging
revenue growth opportunities, pursuing aggressive cost reduction and achieving
financing cost savings through both refinancing activities and debt reduction.

LEVERAGING REVENUE GROWTH OPPORTUNITIES

The Company believes it has revenue growth opportunities in all of its
primary target markets. As a result of the Merger, Fort James has a larger
manufacturing and customer base upon which to grow, greater critical mass and an
improved geographic balance. Additionally, the Company has attractive
international growth opportunities through which it can take advantage of less
developed, faster growing markets.

Fort James has a broader, more complete product line offering than did
either James River or Fort Howard separately. With the majority of its tissue
capacity based on virgin pulp-based products, James River had focused its
product offerings primarily in the near-premium to premium end of the product
quality spectrum. Conversely, Fort Howard, because of its use of wastepaper for
substantially all of its fiber requirements, had focused its product offerings
primarily in the value and economy end of the product quality spectrum. The
combination of these two targeted product lines has given Fort James a more
complete range of product offerings, expanding revenue growth opportunities
across a broader line of products and a broader customer base.

The Merger has also enabled the Company to improve its geographical
balance. Although James River's eight domestic tissue manufacturing facilities
are located across the U.S., its away-from-home tissue sales are more highly
concentrated in the western U.S., from its three northwestern mills. The former
Fort Howard, on the other hand, concentrated both its away-from-home and retail
tissue sales primarily in mid-western and eastern markets surrounding its mills
in Wisconsin, Georgia and Oklahoma. Fort James' broader geographical balance has
created revenue growth opportunities, as premium product offerings can be more
fully developed in the east and mid-west, and value and economy product
offerings can be more fully developed in the west.

Fort James also has attractive international revenue growth opportunities
both in Europe and in selected emerging markets. In Europe, the Company believes
it has greater than average growth opportunities resulting from a combination of
factors. Geographically, Fort James has a strong presence in southern European
countries such as Spain, Italy, Greece and Turkey, where per capita consumption
of tissue products is growing faster than in the northern and western European
regions. Additionally, the Company is well-positioned to take advantage of the
less-developed, faster growing away-from-home channel in Europe through the
former Fort Howard's away-from-home expertise and proprietary deinking
technology. The Company is also pursuing growth opportunities for tissue sales
in selected emerging markets. In 1997, Fort James opened a tissue converting
plant in Russia, and in 1995, the Company formed a joint venture for a tissue
converting operation in Shanghai, China.

Finally, the Company believes it is well-positioned to support these
revenue growth activities. Prior to the Merger, Fort Howard had begun
construction of a new world-class tissue machine at its Rincon, Georgia, site
and James River was aggressively pursuing incremental tissue capacity growth
through streamlined operations. This additional capacity, augmented by
productivity gains expected to occur from technology sharing between James River
and the former Fort Howard on product formation and tissue machine optimization,
will provide a broader manufacturing base to support additional revenue growth.

AGGRESSIVE COST REDUCTION

Fort James believes the Merger will enable it to achieve significant cost
reductions that were not available to either Fort Howard or James River
individually. By combining complementary technologies, optimizing product
manufacturing and logistics across the combined system, increasing purchasing
efficiencies, eliminating redundant overhead costs and consolidating work forces
where duplication exists, Fort James expects to reduce costs and increase
productivity. As a result of these integration efforts, Fort James expects to
realize cost savings estimated to be at a $150 million annual run rate by the
end of 1998, increasing to $200 million per year over time.

Approximately 30% of the synergy savings opportunities are expected to be
derived from technology transfers between the former Fort Howard and James
River. These opportunities include the benefits of applying Fort Howard's
proprietary deinking technology in James River's deinked-based mills, both
domestically and in Europe. This proprietary deinking process has historically
allowed Fort Howard to incur lower raw material costs than its competitors.
Additional technology transfer benefits are expected to accrue from transferring
James River product formation and development technologies to

<PAGE>

former Fort Howard products, including the application of James River's
"multi-layer" technology in Fort Howard multi-ply tissue products.

An additional approximately 30% of the synergy savings opportunities are
expected to result from savings in logistics, distribution and transportation
costs. These savings will be achieved through increased mill-to-customer
shipments, improved geographic coverage, reduced outside warehouse needs and
increased opportunities to back-haul.

Purchasing cost savings are expected to account for another approximately
30% of total synergy savings. Historically, both Fort Howard and James River
purchased significant amounts of similar raw materials, including commodities
such as waste paper, chemicals and packaging materials. Opportunities are
arising to lower the cost of these purchased raw materials by not only comparing
current purchasing costs and moving to the low-cost supplier, but also by taking
advantage of increased economies of scale. The remaining synergy savings are
expected to accrue from eliminating organizational redundancies and making
staffing reductions.

FINANCING COST SAVINGS

Fort James is focusing on reducing financing costs, both through
refinancing of higher-cost debt and through aggressive debt reduction. In
connection with the Merger, Fort James refinanced an aggregate of approximately
$2.1 billion principal amount of its $4 billion of total debt.

At the time of the Merger, the Company entered into a new $2.5 billion bank
credit facility (the "New Bank Credit Facility") and borrowed $666 million
thereunder to replace certain pre-Merger bank credit facilities, which were
canceled. On the same date, the Company repurchased and retired $200 million
principal amount of James River 9.77% Senior Notes due 2014 (the "9.77% Senior
Notes"), principally using cash on hand. As a second step in its refinancing
activities, on September 8, 1997, Fort Howard commenced cash tender offers (the
"Tender Offers") for approximately $1.47 billion aggregate principal amount of
Fort Howard outstanding public debt securities. A total of $1.28 billion
aggregate principal amount of debt securities was tendered in these offers and
was retired. These repurchases and retirements pursuant to the Tender Offers
were funded principally with borrowings under the New Bank Credit Facility and
proceeds received from the issuance of $720 million of Fort James senior notes
on September 29, 1997 (the "Senior Notes Offering"). On a combined basis, these
debt refinancing activities are expected to result in an annual reduction in
interest expense in excess of $50 million. In addition, Fort James plans to
continue to reduce interest costs through an aggressive focus on debt reduction,
which will be the primary use of the Company's free cash flow in the near-term
future.

Following the Merger, the Company also simplified its capital structure and
reduced cash dividend requirements by (1) converting its Series P 9% Cumulative
Convertible Preferred Stock, with a face value of $287.5 million, into 15.3
million shares of Common Stock (the "Series P Conversion") and (2) redeeming its
Series O Preferred Stock for $98.1 million in cash (the "Series O Redemption").
On a combined basis, this conversion and redemption reduced the Company's annual
dividend requirements by approximately $25 million while increasing interest
expense by only $7 million. See "Management's Discussion and Analysis of Results
of Operations and Financial Condition -- Financial Condition."

BUSINESS

Fort James operates in three principal business segments: (1) consumer
products, which includes towel and tissue products such as bathroom and facial
tissue and paper towels and napkins, and disposable tabletop and foodservice
products, such as paper and plastic cups, paper plates and plastic cutlery; (2)
packaging, which includes paper-based folding cartons for food and
pharmaceuticals; and (3) communications papers, which includes uncoated
printing, publishing and office copy papers. In 1997, consumer products,
packaging and communications papers products accounted for 84%, 10%, and 6%,
respectively, of consolidated revenues. These businesses accounted for 91%, 7%
and 2%, respectively, of 1997 income from operations before general corporate
expenses and restructuring and other unusual items.

CONSUMER PRODUCTS BUSINESS

Fort James' Consumer Products Business is currently conducted primarily in
North America and Europe. In 1997, the North American Consumer Products Business
had sales of $4.4 billion, representing 59% of consolidated total sales, and the
European Consumer Products Business had sales of $1.8 billion, representing 25%
of consolidated total sales. The North American Consumer Products Business
reported operating profits, before restructuring and other unusual items, of
$845.4 million in 1997, and the European Consumer Products Business reported
operating profits, before restructuring and other unusual items, of $202 million
in 1997.

<PAGE>

NORTH AMERICAN CONSUMER PRODUCTS BUSINESS. Within Fort James' North
American Consumer Products Business, tissue-based products account for
approximately 76% of current annual sales, tabletop products account for
approximately 18% of sales, and sales of virgin and recycled pulp and fiber
account for the remaining 6% of sales. The Company's consumer tissue and
tabletop products are each sold through both retail and away-from-home
distribution channels. Sales into retail channels are supported by both branded
and private label product offerings. In North America, approximately 60% of the
Company's sales of consumer tissue and tabletop products are into retail
distribution channels and the remaining approximately 40% are into
away-from-home distribution channels.

In the U.S. retail channel, Fort James believes that its well-known brand
names have contributed to its products achieving leading competitive positions.
The following data is based on information provided by Information Resources
Inc. for the 52-week period ending December 21, 1997, based on revenues derived
from sales to grocery stores, drug stores and mass merchandisers. Of $3.5
billion in U.S. industry bathroom tissue sales, Fort James' brands held a 19.5%
share, representing the overall number three ranking. The Company's bathroom
tissue brands include QUILTED NORTHERN (the number two ranked individual brand),
SOFT'N GENTLE and GREEN FOREST. Of $2.3 billion in U.S. industry paper towel
sales, Fort James' brands held an 18.2% share, representing the overall number
two ranking. The Company's paper towel brands include BRAWNY (the number two
ranked individual brand), MARDI GRAS, SO-DRI and GREEN FOREST. Of $570 million
in U.S. industry paper napkin sales, Fort James' brands held a 35.9% share,
representing the overall number one ranking. The Company's paper napkins brands
include MARDI GRAS (the number one ranked individual brand), VANITY FAIR (the
number three ranked individual brand), NORTHERN, ZEE, and GREEN FOREST. Of $400
million in U.S. industry disposable cup sales, Fort James' brands held a 23.2%
share, representing the overall number two ranking. Of $910 million in U.S.
industry disposable plate sales, Fort James' brands held a 16.5% share,
representing the overall number two ranking. The Company's disposable cups and
plates are both sold under the DIXIE brand name.

Fort James believes it is also the leading supplier of private label tissue
products, where it estimates its share in excess of 40% of U.S. private label
tissue sales. The Company's private label customers include retailers such as
Wal-Mart, Kroger, Aldi and Federated Stores. Additionally, the Company believes
it is the leading supplier of both tissue and disposable tabletop products to
the warehouse club channel, which includes Price/Costco and Sam's Clubs.

The U.S. away-from-home channel, where the Company sells its tissue and
tabletop products to foodservice, janitorial supply and sanitary paper
distributors for use in restaurants, offices, factories, hospitals, schools and
hotels, is also an important distribution channel for the Company. Fort James
believes it is the top producer of tissue products for the 2.2 million ton U.S.
away-from-home channel, where it estimates its share at approximately 40% of
total industry revenues. Based on internal Company estimates, Fort James
believes it holds the leading position in the sale of away-from-home towels,
bathroom tissue, and napkins and the number two position in away-from-home
wipers and facial tissue. Fort James is also one of the largest producers of
disposable cups, plates and related products for the away-from-home foodservice
industry.

EUROPEAN CONSUMER PRODUCTS BUSINESS. Within Fort James' European Consumer
Products Business, tissue-based products account for approximately 85% of
current annual sales, feminine hygiene products account for 6% of sales,
ancillary products, such as health care and pharmacy items, account for 5% of
sales, and unconverted tissue parent rolls account for the remaining 4% of
sales. Fort James sells its tissue products through both retail and
away-from-home distribution channels in Europe. Sales into retail channels are
supported by both branded and private label product offerings. In Europe,
approximately 75% of sales of consumer products are into retail distribution
channels and the remaining approximately 25% are into away-from-home channels.

With production facilities in 10 countries, Fort James has a broad,
pan-European base, and is among the category leaders in most European countries,
with the exception of Germany, Austria and Switzerland, where the Company has no
operations. The Company's largest European operations are in France and the
United Kingdom, which account for approximately 40% and 30%, respectively, of
the European Consumer Products Business' sales. Based on its estimates, the
Company believes it holds the leading position in French tissue sales, with a
share greater than 35%, and the number two position in the British Isles, with a
share greater than 30%. Fort James is also well-represented in the
faster-growing southern European and Mediterranean regions including Spain,
Italy, Greece and Turkey, where the Company believes its shares of tissue sales
approximate 13%, 10%, 16% and 57%, respectively.

The Company's principal European brands include LOTUS bathroom tissue and
VANIA feminine hygiene products, both of which hold leading positions in France,
COLHOGAR, a leading Spanish bathroom tissue, TENDERLY bathroom tissue sold in
Italy, and KITTENSOFT and INVERSOFT, bathroom tissue brands sold in the British
Isles.

PRODUCTION FACILITIES. The Company believes that it is among the lowest
cost producers of tissue products in North America. Fort James' operating
margins in its North American Consumer Products Business have increased steadily
over the last several years, rising to 19.4% for 1997, excluding restructuring
charges. The Company believes its cost advantage in

<PAGE>

North America is derived from a number of factors, including the size and scale
of certain of its manufacturing plants, the competitive state of its
tissue-making manufacturing assets and the benefits it realizes from the Fort
Howard proprietary deinking technology. In North America, Fort James currently
produces tissue products at eleven mills located across the United States. In
the spring of 1998, the Company will permanently close its two smallest domestic
tissue facilities, in Ashland, Wisconsin, and Carthage, New York. Production
from these two mills will be transferred to other, more modern Fort James tissue
mills, which the Company believes will further reduce operating costs. The
Company's three largest domestic tissue mills, located in Green Bay, Wisconsin,
Muskogee, Oklahoma, and Rincon, Georgia, each have tissue capacity in excess of
300,000 tons, and the Company's fourth largest domestic tissue mill in
Pennington, Alabama, has tissue capacity of approximately 225,000 tons. Together
these four mills account for approximately two-thirds of the Company's total
U.S. capacity. Ten of the world's eleven largest tissue machines (270 inch wide)
are located in the Company's U.S. mills, and more than 600,000 tons of its
domestic tissue-making capacity have been built in the last 13 years. Fort James
produces disposable tabletop and foodservice products at 10 converting plants
located across the United States and three converting plants in Canada.
Approximately three-quarters of the paperboard utilized in the Company's cup and
plate-making operations is supplied by Fort James' 300,000 ton per year bleached
paperboard operation in Alabama, which also supplies paperboard to the Company's
Packaging Business. The North American Consumer Products Business currently
employs approximately 17,100 workers.

The Company's European Consumer Products Business currently has 26
operating facilities, employing approximately 7,000 workers. In 1997 the Company
opened a tissue converting plant in Russia, and in 1995 the Company formed a
joint venture for a tissue converting operation in Shanghai, China.

Following the Merger, Fort James' raw material base is fairly evenly split
between virgin pulp and recycled pulp. The Company believes this combination
reduces the cyclical impact that raw material price changes can have on
profitability. In North America, the Company's tissue operations are largely
on-site integrated to either virgin or deinked pulp. In Europe, where Fort James
has no virgin pulping capacity, approximately one-third of the Company's fiber
requirements are provided by integrated deinked pulp, with the balance provided
by purchased market pulp.

MARKETING. The Company's North American Consumer Products Business has
organized its marketing efforts along distribution channels and by product line.
Fort James' consumer products are marketed directly to customers both through
national and regional sales organizations. The Company's retail sales force
markets both consumer tissue and tabletop products directly to grocery stores,
drug stores and mass merchandisers. Separate sales forces market the Company's
away-from-home tissue products and its away-from-home foodservice products.
Away-from-home tissue products are largely sold through outside distributors,
who generally focus on specific market segments. Regional distribution centers
located throughout the United States are utilized to minimize inventories and
transportation costs.

Marketing of Fort James' products within Europe is generally similar to
such efforts in the United States. However, national (individual country) sales
organizations are necessary due to customer preferences and language and
cultural differences among countries. Additionally, logistics and distribution
costs remain much higher in Europe than in the United States, and thus, the
majority of products are produced and sold within national or regional markets.

PACKAGING BUSINESS

The Packaging Business is conducted primarily in North America. In 1997,
the Packaging Business had sales of $783 million, representing 10% of
consolidated sales, and operating profits before restructuring and other unusual
items of $81.3 million. During 1996, the Company downsized this business through
the sale of the plastic-based Flexible Packaging and the related Inks Divisions,
which had combined annual sales of approximately $500 million. Following these
divestitures, the Packaging Business is concentrated primarily on the sale of
paper-based folding cartons for packaging food, health care products and other
consumer products. Folding cartons account for more than 80% of the business'
current annual sales, with the balance represented by sales of unconverted
paperboard.

Fort James produces its folding cartons at 15 carton manufacturing and
supporting plants located across the United States, employing approximately
3,400 workers. The Company's carton operations are backward integrated to a
300,000 ton per year bleached paperboard operation in Alabama and a 320,000 ton
per year coated recycled paperboard operation in Michigan. The Alabama bleached
paperboard mill also provides cup and plate stock for the Company's DIXIE line
of disposable tabletop products. The Company estimates it is currently ranked
number three in sales of folding cartons in the United States, and it believes
it holds leading positions in the sale of cartons for ice cream, cereal, meats,
frozen foods and microwave packaging. Transition issues associated with a
significant change in its customer base negatively impacted this business' sales
and profits in the fourth quarter of 1997 and are expected to create challenges
for this business in the near term.

<PAGE>

COMMUNICATIONS PAPERS BUSINESS

The Communications Papers Business is conducted primarily in the western
United States. In 1997, the Communications Papers Business had sales of $468
million, representing 6% of total consolidated sales, and operating profits
before restructuring and other unusual items of $19.8 million. In 1995, the
Company spun off Crown Vantage Inc. ("Crown Vantage"), which represented a large
part of the Company's Communications Papers Business, thus decreasing its
exposure to the cyclical printing and publishing papers market. Following the
spin-off, the Communications Papers Business is concentrated on the sale of
printing and publishing papers used in brochures, catalogs, manuals, direct mail
and advertising inserts, and on cut-size office printing and copying papers used
in high-speed printers, copiers and offset duplicators. Stabilized pricing and
an improved balance between demand and capacity growth expected in 1998 could be
impacted by any future weakening in the pulp markets or wood cost increases. See
"Risk Factors -- Industry Conditions."

Fort James produces business and printing papers at two manufacturing
sites, located in Oregon and Washington, employing approximately 1,100 workers.
The Company has the capacity to produce approximately 520,000 tons per year of
uncoated free-sheet papers and 150,000 tons per year of uncoated groundwood
papers.

USE OF PROCEEDS

All of the shares offered hereby are being sold by the Selling
Stockholders. The Company will not receive any proceeds from such sale of such
shares of Common Stock. The Company will pay certain expenses relating to the
Offering, estimated to be approximately $695,000.

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

The Common Stock is listed on the NYSE under the symbol "FJ." The following
table sets forth, for the periods indicated, which correspond to the Company's
quarterly fiscal periods for financial reporting purposes, the high and low
reported sale prices per share of the Common Stock on the NYSE Composite
Transactions Tape (the "NYSE Composite Tape") and cash dividends paid per share
of Common Stock.

<TABLE>
<CAPTION>
MARKET PRICE
---------------------------- DIVIDENDS
PERIOD HIGH LOW ---------
- ------------------------------------------------------------------------ ------------ ------------
<S> <C> <C> <C>
1995
First Quarter......................................................... $ 25 5/8 $ 20 $.15
Second Quarter........................................................ 28 5/8 23 1/4 .15
Third Quarter......................................................... 37 3/8 25 3/8 .15
Fourth Quarter........................................................ 33 3/4 22 1/4 .15
1996
First Quarter......................................................... 28 1/8 22 3/8 .15
Second Quarter........................................................ 27 3/8 24 3/4 .15
Third Quarter......................................................... 27 1/4 24 5/8 .15
Fourth Quarter........................................................ 34 1/4 27 5/8 .15
1997
First Quarter......................................................... 36 1/4 29 1/4 .15
Second Quarter........................................................ 38 7/8 27 1/4 .15
Third Quarter......................................................... 45 1/16 36 5/8 .15
Fourth Quarter........................................................ 47 1/8 36 1/16 .15
1998
First Quarter (through February 12, 1998)............................. 43 7/8 34 .15
</TABLE>

On February 12, 1998, the reported last sales price of the Common Stock on
the NYSE Composite Tape was $43 3/16 per share. Prospective purchasers of shares
of Common Stock are urged to obtain current quotations for the market price of
the Common Stock.

The Company currently pays regular quarterly cash dividends and, while
future dividends will be subject to the discretion of the Company's Board of
Directors, the Board of Directors currently intends to continue this policy.
Future dividends will depend on the Company's results of operations, financial
condition, capital expenditure program, debt repayment requirements and other
factors, some of which are beyond the Company's control. There can be no
assurance as to whether or when the Company's Board of Directors will change the
current policy regarding dividends.

<PAGE>

CAPITALIZATION

The following table sets forth the unaudited consolidated capitalization of
Fort James as of December 28, 1997.

<TABLE>
<CAPTION>
DECEMBER
28, 1997
--------
<S> <C>
(IN MILLIONS)
CURRENT MATURITIES OF LONG-TERM DEBT:
Total current maturities of long-term debt....................................... $ 34.4

LONG-TERM DEBT:
New Bank Credit Facility......................................................... 1,312.0
Revolving credit facilities...................................................... 452.6
New Senior Notes................................................................. 718.3
Fort James notes and debentures.................................................. 1,230.7
Fort Howard Notes................................................................ 188.2
Revenue bonds.................................................................... 107.7
Capital lease obligations........................................................ 180.4
--------
Total debt.................................................................... 4,189.9
Less current maturities of long-term debt..................................... 34.4
--------
Total long-term debt, net of current maturities............................. 4,155.5
--------
MINORITY INTERESTS................................................................. 10.4
SHAREHOLDERS' EQUITY:
Preferred stock:
Series K......................................................................... 100.0
Series L......................................................................... 199.9
Series N......................................................................... 52.8
--------
Total preferred stock....................................................... 352.7
Common stock -- $.10 par value -- 209.3 million shares issued and outstanding.... 20.9
Additional paid-in capital....................................................... 2,807.9
Retained deficit................................................................. (2,597.2)
--------
Total shareholders' equity.................................................. 584.3
--------
Total capitalization................................................... 4,7$84.6
=========

</TABLE>

<PAGE>

SELECTED HISTORICAL AND UNAUDITED CONSOLIDATED FINANCIAL
AND OTHER DATA

The following sets forth selected historical and unaudited consolidated
financial and other data for Fort James for the dates and periods indicated. The
selected historical consolidated balance sheet data as of December 29, 1996, and
December 31, 1995, and the historical statements of operations data, per share
data and other data for each of the two years in the period ended December 29,
1996, have been derived from, and should be read in conjunction with, the
Company's audited consolidated financial statements included in its Current
Report on Form 8-K dated August 13, 1997 (filed February 3, 1998), incorporated
by reference herein. The selected unaudited historical consolidated financial
and other data as of September 28, 1997, and for the 39-week periods ended
September 28, 1997, and the unaudited historical statement of operations data,
per share data and other data for the 39 weeks ended September 29, 1996, have
been derived from the Company's unaudited interim consolidated financial
statements incorporated by reference herein. The selected unaudited historical
consolidated financial and other data as of December 28, 1997, and for the year
then ended have been derived from the unaudited financial information set forth
in the Company's Current Report on Form 8-K dated February 3, 1998, incorporated
by reference herein. The balance sheet data as of September 29, 1996, have been
derived from the Company's unaudited financial statements. The unaudited
consolidated financial and other data have been prepared on the same basis as
the audited consolidated financial statements incorporated by reference herein,
and in the opinion of management reflect all adjustments necessary to fairly
state results of operations and cash flows for such periods. Such adjustments
are of a normal recurring nature.

The following selected historical and unaudited consolidated financial and
other data should be read in conjunction with the consolidated financial
statements of Fort James included in the Current Reports on Form 8-K dated
August 13, 1997 (filed February 3, 1998) and February 3, 1998 and its Quarterly
Report on Form 10-Q for the quarter ended September 28, 1997. See "Incorporation
of Certain Documents by Reference" and "Available Information."

<PAGE>

FORT JAMES AND CONSOLIDATED SUBSIDIARIES
SELECTED HISTORICAL AND UNAUDITED CONSOLIDATED FINANCIAL AND OTHER DATA
(IN MILLIONS, EXCEPT PER SHARE DATA AND RATIOS)

<TABLE>
<CAPTION>
FISCAL YEAR NINE MONTHS
------------------------------------- ------------------------
UNAUDITED UNAUDITED UNAUDITED
1995(A) 1996(B) 1997 1996 1997
-------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................................ $8,887.9 $7,707.1 $7,259.0 $5,921.5 $5,497.5
Restructure and other unusual items (income)
expense (c)........................................ 51.9 10.7 454.2 .1 (3.8)
Income from operations............................... 783.4 909.3 602.7 709.0 818.4
Interest expense..................................... 536.3 424.4 351.8 (h) 327.3 277.6
Income (loss) before extraordinary item.............. 159.9 328.0(d) 104.5 (h) 228.3 315.6
Net income (loss) (e)................................ 141.1 319.9 (27.0 ) 225.0 268.5
Preferred dividend requirements...................... 58.5 58.5 30.5 (h) 43.9 24.4
Weighted average number of common shares and common
share equivalents.................................. 164.1 183.1 207.6 181.0 206.9
PER SHARE DATA:
Income (loss) before extraordinary item (c).......... $ .62(f) $ 1.47(d)(f) $ .35 (h) $ 1.02 (f) $ 1.41
Net income (loss) (e)................................ .50(f) 1.43(f) (.28) 1.00 (f) 1.18
Cash dividends....................................... .60 .60 .60 .45 .45
BALANCE SHEET DATA:
Total assets......................................... $8,911.3 $8,156.9 $7,733.2 $8,212.4 $7,832.2
Long-term debt....................................... 5,406.3(f) 4,305.3(f) 4,155.5 4,534.3(f) 3,879.9
Preferred stock...................................... 740.3 738.4 352.7 738.4 450.4
Common shareholders' equity (deficit)................ (324.5)(f) 113.1(f) 231.6 11.7(f) 530.7
OTHER DATA:
EBITDA (g)........................................... $1,462.6 $1,459.7 $1,572.4 $1,116.9 $1,209.8
Capital spending..................................... 488.5 499.5 505.9 328.7 313.5
Depreciation and amortization........................ 586.7 525.6 497.9 398.0 375.5
Ratio of earnings to fixed charges................... 1.45x 2.06x 1.65x(h) 2.08x 2.77x
Ratio of EBITDA to interest expense.................. 2.73x 3.44x 4.47 x(h) 3.41x 4.36x
</TABLE>

- ---------------
(a) In August 1995, Fort James completed the spin-off of Crown Vantage which had
annual net sales of approximately $1 billion.

(b) In August 1996, Fort James completed the sale of its Flexible Packaging and
related Inks divisions which had annual net sales of approximately $500
million.

(c) The after-tax impact of the restructure and other unusual items was $32.1
million, or $.19 per diluted share in 1995; $12.9 million, or $.07 per
diluted share in 1996; and $335.0 million, or $1.62 per diluted share in
1997. For the first nine months of 1996, the after-tax impact of such
charges was $4.7 million or $.03 per diluted share. For the first nine
months of 1997, the after-tax impact of the net restructure and other
unusual items was a loss of $17.4 million, or $.08 per diluted share,
primarily due to certain non-tax-deductible Merger transaction costs.

(d) Includes a credit of $36 million (or $.20 per diluted share) for the
reversal of previously accrued income taxes related to 1988 financing
transactions.

(e) Includes after tax extraordinary losses related to the early retirement of
debt.

(h) On a pro forma basis giving effect to (i) the purchase of Fort Howard debt
securities in the Tender Offers; (ii) borrowings under the New Bank Credit
Facility; (iii) the sale of $720 million aggregate principal amount of
Senior Notes in the Senior Notes Offering; (iv) the repurchase of all of the
Company's outstanding 9.77% Senior Notes; (v) the Series P Conversion; and
(vi) the Series O Redemption, as if these transactions had occurred at the
beginning of the year ended December 28, 1997, interest expense would have
been approximately $317.8 million, income before extraordinary item would
have been $125.3 million (or an increase in income before extraordinary item
of $.10 per diluted share) and preferred dividends would have been $24.4
million (or an increase in income before extraordinary item of $.03 per
diluted share). In addition, the ratio of earnings to fixed charges would
have increased to 1.80x and the ratio of EBITDA to interest expense would
have increased to 4.95x. The unaudited pro forma financial and other data
presented are not necessarily indicative of actual results that would have
been achieved had the above transactions been completed on the date assumed
and do not purport to project the Company's financial position at any future
date or its results of operations for any future period.

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 28, 1997

OVERVIEW

Fort James reported net income of $268.5 million, or $1.18 per share, for
the nine months ended September 28, 1997, compared with $225.0 million, or $1.00
per share in 1996. Net sales for the first nine months of 1997 were $5,498
million compared to $5,922 million in 1996. The comparability of these results
was impacted by nonrecurring charges, extraordinary loss on early extinguishment
of debt, the 1996 divestitures of the Flexible Packaging and related Inks
divisions, as well as several small domestic Consumer Products facilities, and
the estimated impact of foreign currency translation.

ITEMS AFFECTING COMPARABILITY

Nonrecurring charges for the nine months ended September 28, 1997, and
September 29, 1996, were as follows (in millions, except per share amounts):

<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 28, 1997 SEPTEMBER 29, 1996
------------------------- -------------------------
NET NET
INCOME PER INCOME PER
GROSS IMPACT SHARE GROSS IMPACT SHARE
------ ------ ----- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
Severance costs and asset write-downs................................... $ 47.0 $ 28.9 $ .16
Transaction costs....................................................... $ 53.9 $ 53.9 $ .25
Net gain on asset divestitures.......................................... (57.7) (35.2) (.17) (46.9) (24.2) (.14)
------ ------ ----- ------ ------ -----
Total (income) expense........................................... $ (3.8) $ 18.7 $ .08 $ .1 $ 4.7 $ .02
======== ====== ===== ======= ======= ======

</TABLE>

Net income for the nine months ended September 28, 1997, excluding
nonrecurring items and extraordinary loss on early extinguishment of debt, was
$334.3 million, or $1.49 per share, compared with $233.0 million, or $1.04 per
share in the same period of 1996. Net sales for the nine month period, excluding
divested operations and the estimated impact of foreign currency translation,
were $5,611 million in 1997, compared with $5,537 million for the comparable
period in 1996.

Fort James' net sales and income from operations by business segment were
as follows for the nine months ended September 28, 1997, and September 29, 1996
(in millions):

<TABLE>
<CAPTION>
CONSUMER PRODUCTS
-------------------- COMMUNI- INTERSEGMENT
NORTH CATIONS ELIMINATION/
AMERICA EUROPE PACKAGING PAPERS CORPORATE TOTAL
-------- -------- --------- -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Nine months ended September 1997
Net sales.......................................... $3,313.8 $1,376.5 $ 595.0 $349.1 $ (136.9) $5,497.5
Segment results before restructure and other
unusual items................................... 655.6 153.6 67.7 7.8 (70.1) 814.6
Restructure and other unusual items income
(expense)....................................... 57.7 (53.9) 3.8
-------- -------- --------- -------- ------------ --------
Income from operations............................. 713.3 153.6 67.7 7.8 (124.0) 818.4

Nine months ended September 1996
Net sales.......................................... $3,322.5 $1,498.7 $ 941.1 $342.2 $ (183.0) $5,921.5
Segment results before restructure and other
unusual items................................... 579.6 134.4 76.7 12.2 (93.8) 709.1
Restructure and other unusual items income
(expense)....................................... (31.8) (4.7) 37.6 (1.2) (0.1)
-------- -------- --------- -------- ------------ --------
Income from operations............................. 547.8 129.7 114.3 12.2 (95.0) 709.0
</TABLE>

NORTH AMERICAN CONSUMER PRODUCTS BUSINESS

For the nine months ended September 28, 1997, operating profits before
restructuring and other unusual items, excluding results from divestitures, for
the North American Consumer Products Business were $655.6 million, an increase
of 13% over the comparable nine months in 1996. Excluding divestitures, revenues
for the first nine months of 1997 increased 1%

<PAGE>

over the prior year. The increase in profitability for the first nine months of
1997 as compared to the prior year was attributable to strong sales volumes, and
reduced wood costs, combined with continued cost reduction benefits.

EUROPEAN CONSUMER PRODUCTS BUSINESS

Operating profits for the European Consumer Products Business for the nine
months ended September 28, 1997 were $153.6 million, 14% above the $134.4
million reported in the same period of the prior year. This improvement was
attributable to a combination of stronger finished goods volumes of
approximately 2% and lower raw material costs and other cost reductions,
partially offset by the strengthening of the U.S. dollar and lower average
pricing. The net impact of foreign currency translation to the U.S. dollar for
the nine months ended September 28, 1997, was a reduction in operating profits
of approximately 8%. Net sales adjusted for the effects of foreign currency
translation were comparable in the first nine months of 1997 and 1996. While
finished product sales volumes improved compared to the first nine months of
1996, revenues continued to be negatively impacted by the strengthening of the
U.S. dollar and a decline in average pricing.

PACKAGING BUSINESS

Excluding the results attributable to the divested Flexible Packaging and
Inks divisions in 1996, operating profits before restructuring and other unusual
items for the Packaging Business for the first nine months of 1997 decreased 4%
to $67.7 million from $70.7 million in the same period of the prior year. Net
sales, adjusted for the Flexible Packaging and Inks divestitures, for the first
nine months of 1997 were $595 million compared to $613 million in 1996. The 1997
results reflected benefits of increased volumes for folding cartons and
paperboard and cost reductions, offset by lower average selling prices,
increased wastepaper costs and transition costs incurred in connection with new
customers.

COMMUNICATIONS PAPERS BUSINESS

Operating profits for the Communications Papers Business for the first nine
months decreased to $7.8 million in 1997 from $12.2 million for the same period
in 1996 due to lower average selling prices, partly offset by increased volumes,
lower wood costs and cost reduction initiatives. Net sales for the nine months
improved 2% to $349 million from $342 million in the prior year reflecting the
volume gains offset by lower average pricing.

OTHER INCOME AND EXPENSE ITEMS

General corporate expenses, before restructuring and other unusual items,
totaled $70.1 million in the first nine months of 1997, compared to $93.8
million for the same period in the prior year. The majority of the decrease was
related to reductions in spending on new integrated management information
systems, as design and installation projects were completed and systems became
operational. Interest expense decreased from $327.3 million for the first nine
months of 1996 to $277.6 million for the first nine months of 1997. This
decrease was attributable to the reduction in average outstanding debt combined
with the initial benefits from the Company's debt refinancing activities in the
1997 nine-month period. Other income increased to $22.3 million in the nine
months ended September 28, 1997 from $12.4 million for the same period in 1996,
principally due to improved earnings of unconsolidated affiliates and gains on
sales of assets. The Company's effective income tax rate was 43.5% for the nine
months ended September 28, 1997, compared to 41.4% for the first nine months of
1996. The increase in the effective tax rate from the prior year was primarily
due to certain non-tax-deductible Merger transaction costs in 1997, partially
offset by the reduced relative size of non-tax-deductible permanent differences
to pretax income. The extraordinary loss on early extinguishment of debt of
$47.1 million, net of taxes, for the nine months ended September 28, 1997,
primarily relates to the debt refinancings described below.

ADOPTION OF ACCOUNTING PRONOUNCEMENT

In June 1997, the Financial Accounting Standards Board issued Statement No.
130, "Reporting Comprehensive Income" ("SFAS 130") which is effective for
periods beginning after December 15, 1997, including interim periods. SFAS 130
establishes standards for reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements, either in the
statement of operations or a separate statement. Additionally, SFAS 130 requires
the display of the accumulated balance of other comprehensive income. On a pro
forma basis, comprehensive income for the nine months ended September 28, 1997
was $146.5 million, compared to $206.7 million for the nine months ended
September 29, 1996. Pro forma comprehensive income for the first nine months of
1997 included a loss on foreign currency translation of $135.9 million, compared
to a loss on foreign currency translation of $27.2 million included in pro forma
comprehensive income for the first nine months of 1996.

<PAGE>

In June 1997, the Financial Accounting Standards Board also issued
Statement No. 131, "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS 131") which is effective for periods beginning after
December 15, 1997, including interim periods after the year of initial adoption.
SFAS 131 established standards for the way public companies report information
about operating segments in both interim and annual financial statements,
including related disclosures about products and services, geographic areas, and
major customers. The Company has not determined what, if any, impact SFAS 131
will have on the operating segments reported nor the impact SFAS 131 will have
on the related disclosures.

In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share" ("SFAS 128"), which is effective for periods
ending after December 15, 1997, including interim periods. SFAS 128 establishes
standards for computing and presenting earnings per share ("EPS") by replacing
primary EPS with the presentation of basic EPS and requiring dual presentation
of basic and diluted EPS on the face of the income statement. On a pro forma
basis, basic EPS per share and diluted EPS per share as reported would have been
$1.21 and $1.18, respectively, for the nine months ended September 28, 1997, and
$1.01 and $1.00, respectively, for the nine months ended September 29, 1996.

YEAR 2000

The Company has developed plans to address the possible exposure related to
the impact on its computer systems of the year 2000. Key financial information
and operational systems have been assessed, and the Company is in the process of
executing the plans to modify systems prior to December 31, 1999. The financial
impact of making the required system changes has not been quantified and is not
expected to be material to the Company's consolidated financial position or
results of operations.

FINANCIAL CONDITION

Cash provided by operating activities totaled $564.5 million in the first
nine months of 1997, compared with the $803.9 million provided in the prior
year. This decrease in cash provided by operating activities resulted from a
payment for the unwinding of the Company's foreign currency hedge (described
below) and increases in accounts receivable and inventory. Inventory increases
occurred in anticipation of the possible retirement of older, less efficient
machines. The Company's current ratio was 1.2 as of September 28, 1997, and
December 29, 1996. Capital expenditures decreased to $313.5 million for the nine
months ended September 28, 1997, from $328.7 million in the first nine months of
1996 due to divested operations. This decrease was partially offset by spending
on a new tissue machine at the Savannah, Georgia mill scheduled for completion
in late 1998.

Total indebtedness decreased by $415 million from $4,434 million as of
December 29, 1996, to $4,019 million as of September 28, 1997. As of September
28, 1997, the Company had outstanding borrowings of approximately $885 million
supported by revolving credit facilities. These borrowings included $793 million
outstanding under such facilities, $69 million of commercial paper and $23
million of money market notes. Total outstanding debt as of September 28, 1997,
included approximately $2,977 million of fixed rate and $1,042 million of
floating rate obligations.

The Company held $1,138 million and $1,286 million in notional amount of
interest rate swaps with fair value liabilities of $8 million and $15 million as
of September 28, 1997, and December 29, 1996, respectively. In the third quarter
of 1997, the Company entered into $500 million in notional amount of interest
rate swaps to hedge the New Bank Credit Facility. During the first quarter of
1997, the Company effectively unwound $648 million in notional amount of
interest rate swaps at a cost of approximately $8 million. The cost of unwinding
the interest rate swaps is being amortized to interest expense through January
1999. The Company is also party to LIBOR-based interest rate cap agreements
which limit the interest cost to the Company with respect to $500 million of
floating rate obligations. The fair value of these cap agreements was $.1
million compared to a carrying value of $5 million as of September 28, 1997.

During the first quarter of 1997, the Company unwound all $470 million in
notional amount of foreign exchange contracts, along with interest rate
agreements, at a cost of $31 million, net of tax benefits. The foreign exchange
contracts were designated as hedges of a portion of the Company's net investment
in its European Consumer Products Business. The net termination cost was
recorded as a component of equity. The Company terminated such contracts prior
to their original expiration in September 1998.

In connection with the Merger, Fort James refinanced an aggregate of
approximately $2.1 billion principal amount of debt of Fort James and Fort
Howard (the "Debt Refinancing"). The Debt Refinancing is expected to result in a
reduction of interest expense in excess of $50 million annually. In connection
with the Debt Refinancing, the Company incurred a $47.1 million, net of taxes,
extraordinary loss for prepayment penalties.

<PAGE>

At the time of the Merger, as the first step in the Debt Refinancing, Fort
James and Fort Howard entered into the New Bank Credit Facility and borrowed
$666 million thereunder to replace certain of the pre-Merger bank credit
facilities. As of September 28, 1997, the Company had $661 million outstanding
under the New Bank Credit Facility. Additionally, on August 13, 1997, prior to
the effectiveness of the Merger, Fort James repurchased and retired $200 million
in aggregate principal amount of its 9.77% Senior Notes with proceeds from
previous divestitures and excess cash from operations. As the second step in the
Debt Refinancing, on September 8, 1997, Fort Howard commenced cash tender offers
for approximately $1.47 billion of its outstanding public debt securities and,
upon expiration of the Tender Offers, on October 8, 1997 purchased a total of
$1.28 billion of such debt securities as follows: (i) $89.9 million of 8 1/4%
Senior Notes due 2002; (ii) $395.0 million of 9 1/4% Senior Notes due 2001;
(iii) $559.3 million of 9% Senior Subordinated Notes due 2006 and (iv) $234.2
million of 10% Subordinated Notes due 2003. The Tender Offers were funded
through a combination of borrowings under the New Bank Credit Facility and the
issuance of $720 million aggregate principal amount of Senior Notes in the
Senior Notes Offering. The Senior Notes were issued subsequent to the end of the
third quarter, on September 29, 1997, as follows: (i) $100 million 6 1/2% Senior
Notes due 2002, (ii) $320 million 6 5/8% Senior Notes due 2004 and (iii) $300
million 6 7/8% Senior Notes due 2007.

During the third quarter of 1997, all outstanding shares of the Company's
Series P 9% Cumulative Convertible Preferred Stock, having a face value of
$287.5 million, were converted into approximately 15.3 million shares of Common
Stock. On October 1, 1997, subsequent to the end of the third quarter, the
Company redeemed all outstanding shares of its Series O 8 1/4% Cumulative
Preferred Stock for a redemption price of approximately $98.1 million. This
conversion and redemption will reduce aggregate cash dividends by approximately
$25 million annually.

As part of the Company's ongoing program of timberland divestitures, on
April 29, 1997, pursuant to an offering memorandum dated September 12, 1996,
Fort James completed the sale of approximately 95,000 acres of timberlands
located in Alabama and Mississippi for cash proceeds of $111 million. The
Company recorded a second quarter after-tax gain of $35.2 million on this sale.

DESCRIPTION OF COMMON STOCK

The following summary of certain provisions of the Company's Articles of
Incorporation, as amended (the "Articles"), the Company's Bylaws (the "Bylaws")
and the Rights Agreement (as defined below) does not purport to be complete and
is qualified in its entirety by reference to such instruments, each of which is
an exhibit to the Registration Statement of which this Prospectus is a part.

AUTHORIZED CAPITAL

The authorized capital stock of the Company consists of 500,000,000 shares
of Common Stock and 5,000,000 shares of preferred stock, par value $10 per share
(the "Preferred Stock"). Each outstanding share of Common Stock currently has
attached to it one preferred share purchase right, as described under
" -- Rights Plan" below. The Board of Directors is authorized, without
shareholder approval, to designate classes or series of shares of Preferred
Stock and to determine the relative rights, preferences and limitations of any
such class or series.

As of February 2, 1998, there were 209,667,511 shares of Common Stock
issued and outstanding and an aggregate of 3,966,241 shares of Preferred Stock
had been designated, of which 3,263,512 shares were issued and outstanding.

GENERAL

Subject to the prior rights of the holders of any Preferred Stock then
outstanding, holders of Common Stock are entitled to receive such dividends as
may be declared by the Board of Directors out of funds legally available
therefor and, in the event of liquidation or dissolution, to receive the net
assets of the Company remaining after payment of all liabilities and after
payment to holders of all shares of Preferred Stock of the full preferential
amounts to which such holders are respectively entitled, in proportion to their
respective holdings.

Subject to the rights of the holders of any Preferred Stock then
outstanding, all voting rights are vested in the holders of the shares of Common
Stock, each share being entitled to one vote on all matters requiring
stockholder action and in the election of directors. Holders of Common Stock
have no preemptive, subscription or conversion rights. All of the outstanding
shares of Common Stock, including the shares being sold by the Selling
Stockholders in the Offering, are fully paid and nonassessable.

<PAGE>

RIGHTS PLAN

Fort James has adopted the Amended and Restated Rights Agreement, dated as
of May 12, 1992, as amended, between the Company and NationsBank of Virginia,
N.A., as Rights Agent (the "Rights Agreement"). Wachovia Bank of North Carolina,
N.A., became successor Rights Agent as of June 8, 1992, by an amendment to the
Rights Agreement.

The following description of the Rights Agreement is qualified in its
entirety by reference to the terms of the Rights Agreement. See "Incorporation
of Certain Documents by Reference."

Pursuant to the Rights Agreement, a right (a "Right") is attached to each
share of Common Stock outstanding and entitles the registered holder thereof to
purchase from Fort James a unit (a "Unit") consisting of one one-thousandth of a
share of Series M Cumulative Participating Preferred Stock ("Series M Preferred
Stock"), at an initial purchase price of $150 per Unit (the "Purchase Price"),
subject to adjustment.

Each share of Series M Preferred Stock, when issued will have a minimum
preferential quarterly dividend of $1.00 per share, but will be entitled to an
aggregate dividend of 1,000 times the Common Stock dividend. In the event of any
merger, consolidation or other transaction in which the Common Stock is
exchanged for other securities or assets, each share of Series M Preferred Stock
will be entitled to receive 1,000 times the amount received per share of Common
Stock. Each share of Series M Preferred Stock will have 1,000 votes, voting
together with the Common Stock and such other voting rights provided by law.
Additionally, in the event of liquidation, each share of Series M Preferred
Stock will entitle the holder thereof to receive a preferential liquidation
payment equal to the greater of $150,000 or 1,000 times the liquidation value of
a share of Common Stock, plus accrued and unpaid dividends, or a ratable
distribution in the event that the assets of Fort James are insufficient to pay
the liquidation preferences in full.

The Rights will separate from the corresponding shares of Common Stock upon
the earlier of (1) ten days following a public announcement that a person or
group of affiliated or associated persons (an "Acquiring Person") has acquired,
or has obtained the right to acquire, beneficial ownership of 15 percent or more
of the outstanding shares of Common Stock and (2) ten business days after the
date of commencement of, or first public announcement of the intent of any
person (other than Fort James and certain related entities) to commence, a
tender or exchange offer, the consummation of which would result in a person or
group beneficially owning 15 percent or more of outstanding shares of Common
Stock (the earlier of (1) and (2), the "Distribution Date"). Until the
Distribution Date, (1) Rights will be evidenced by one or more certificates held
by the rights agent under the Rights Agreement, and will be represented by the
related Common Stock certificates (2) may be transferred with and only with such
Common Stock certificates, (3) new Common Stock certificates will contain a
notation incorporating the Rights Agreement by reference and (4) the surrender
for transfer of any certificates for Common Stock outstanding will also
constitute the transfer of Rights associated with the Common Stock represented
by such certificate. As soon as practicable after the Distribution Date, rights
certificates (the "Rights Certificates") will be mailed to holders of record of
the Common Stock as of the close of business on the Distribution Date and,
thereafter, the separate Rights Certificates alone will represent the Rights.

The Rights are not exercisable until the Distribution Date and will expire
at the close of business on March 1, 1999, unless earlier exercised by the
holder thereof or redeemed by Fort James as described below. Until a Right is
exercised, the holder thereof, as such, will have no rights as a shareholder of
Fort James, including without limitation, the right to vote or to receive
dividends. While the distribution of Rights will not be taxable to Fort James or
to its shareholders, shareholders may, depending upon the circumstances,
recognize taxable income in the event that the Rights become exercisable.

Each holder of a Right will have the right to receive, upon exercise of a
Right, Common Stock (or, in certain circumstances, cash, property or other
securities of Fort James) having a value equal to two times the Purchase Price
then in effect, if after the Distribution Date, (1) Fort James is the surviving
company in a merger with an Acquiring Person and the shares of Common Stock are
not changed or exchanged, (2) an Acquiring Person consummates, with Fort James
or any subsidiary, any one of a number of transactions listed in the Rights
Agreement, examples of which include acquiring stock or convertible securities
except on a pro rata basis with other shareholders, obtaining any assets except
on an arm's-length basis, obtaining any assets having a fair market value of
more than $5 million or receiving certain financial benefits such as loans,
guarantees, tax benefits or compensation except as a full-time employee at
normal rates, (3) while there is an Acquiring Person, an event occurs which
results in such Acquiring Person's ownership interest being increased by more
than 1 percent (e.g. a reverse stock split), or (4) an Acquiring Person becomes
the beneficial owner of 15 percent or more of the Common Stock except pursuant
to a cash tender offer for all outstanding shares which is determined to be fair
by the Continuing Directors (as defined below) (each of which events is
popularly termed a "flip-in" event). Notwithstanding any of the foregoing,
following the occurrence of any of the events set forth in this paragraph, all
Rights that are, or (under certain circumstances specified in

<PAGE>

the Rights Agreement) were, beneficially owned by an Acquiring Person will be
null and void. The "Continuing Directors" are the directors on the Distribution
Date or new directors elected or nominated by a majority of the Continuing
Directors in office on the date of such election or nomination.

For example, if the Purchase Price is $150, upon exercise of a Right and
the payment of $150, a Right holder would receive $300 worth of Common Stock (or
other consideration, as noted above).

Each holder of a Right will have the right to receive, upon exercise,
common stock (or equivalent securities) of the acquiring entity having a value
equal to two times the Purchase Price then in effect, if after an announcement
that a person or group has become an Acquiring Person, (1) Fort James is
acquired in a merger or other business combination transaction (other than a
merger of the type described pursuant to certain flip-in events), or (2) 50
percent or more of Fort James' assets or earning power is sold or transferred
(each of which events is popularly termed a "flip-over" event).

If Fort James is not able to issue the Series M Preferred Stock or Common
Stock because of the absence of necessary regulatory approval, restrictions
contained in the Articles or for any other reason, a person exercising Rights
will be entitled to receive a combination of cash or property or other
securities having a value equal to the value of the Series M Preferred Stock or
the Common Stock which would otherwise have been issued upon exercise of the
Rights.

At any time until ten days after the announcement that a person or group
has become an Acquiring Person, Fort James may redeem the Rights in whole, but
not in part, at a price of $.01 per Right, payable in cash or Common Stock. When
the Board of Directors of Fort James orders a redemption of the Rights, the
Rights will terminate and the only right of the holders of Rights will be to
receive the redemption price.

After a person or group becomes an Acquiring Person and before the
Acquiring Person acquires 50 percent or more of the outstanding Common Stock,
Fort James, with the approval of a majority of the Continuing Directors, may
require a holder to exchange all or any portion of his Rights for one share of
Common Stock or one one-thousandth of a share of Series M Preferred Stock (or a
share of a class or series of Preferred Stock having equivalent rights), per
Right.

Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Agreement may be amended by the Fort
James Board of Directors prior to the Distribution Date. After the Distribution
Date, the Rights Agreement may still be amended by the Board of Directors (under
certain circumstances only with the approval of a majority of the Continuing
Directors) in order to cure any ambiguity, defect or inconsistency, to make
changes which do not adversely affect the interests of holders of Rights
(excluding the interests of any Acquiring Person), or to shorten or lengthen any
time period under the Rights Agreement (including the time period for redeeming
the Rights); PROVIDED, HOWEVER, that no amendment to adjust the time period
governing redemption shall be made if the Rights are not redeemable.

The Rights will not prevent a takeover of the Company. The Rights, however,
may cause substantial dilution to a person or group that acquires 15 percent or
more of Common Stock unless the Rights are first redeemed or terminated by the
Board of Directors of the Company. Nevertheless, the Rights should not interfere
with a transaction that is in the best interests of the Company and its
shareholders because the Rights can be redeemed or terminated, as hereinabove
described, before the consummation of such transaction.

The complete terms of the Rights are set forth in the Rights Agreement. The
Rights Agreement is incorporated by reference as an exhibit to the Registration
Statement of which this Prospectus is a part, and the foregoing description is
qualified in its entirety by reference thereto.

OTHER PROVISIONS

In addition to the Rights Plan, the Articles and Bylaws of the Company
contain a number of provisions which may be deemed to have the effect of
discouraging or delaying attempts to gain control of the Company, including
certain provisions of the Articles. The Articles provide generally that
amendments to the Articles must be approved, subject to the rights of holders of
Preferred Stock, by a majority of the outstanding shares entitled to vote on
such an amendment. An amendment which has the effect of reducing the vote
required to approve a merger or certain other extraordinary transactions,
however, requires a two-thirds vote.

The Bylaws provide for "constitutive resolutions" of the Board of Directors
of the Company, which must be designated by the Board of Directors as such and
which must be adopted by a unanimous vote of the directors present and voting
when a quorum is present. Constitutive resolutions may be rescinded, revoked,
amended or modified only by the vote of all of the directors then in office
(subject to overriding action by the shareholders of the Company).

<PAGE>

The Bylaws also include provisions setting forth specific conditions under
which: (1) business may be transacted at an annual or special meeting of
shareholders; and (2) persons may be nominated for election as directors of the
Company at an annual meeting of shareholders.

The Virginia "control share acquisition" statute allows corporations to
elect to either be covered or not be covered by such statute. The Company
elected not to be covered by such statute.

In addition to the foregoing, in certain instances the issuance of
authorized but unissued shares of Common Stock or Preferred Stock may have an
anti-takeover effect.

The existence of the foregoing provisions could result in the Company being
less attractive to a potential acquiror, and the Company's shareholders
receiving less for their shares of Common Stock than otherwise might be
available in the event of a take-over attempt.

REGISTRAR AND TRANSFER AGENT

Norwest Bank Minnesota, N.A. is the Registrar and Transfer Agent for the
Common Stock.

MANAGEMENT

The following table sets forth certain information concerning the executive
officers and other key personnel of the Company.

<TABLE>
<CAPTION>
NAME POSITION
- ----- -----------
<S> <C>
Miles L. Marsh............................... Chairman and Chief Executive Officer
Michael T. Riordan........................... President and Chief Operating Officer
James K. Goodwin............................. President, North American Consumer Business
John F. Lundgren............................. President, Consumer Products Business, Europe
Joe R. Neil.................................. President, Communications Papers
Timothy G. Reilly............................ President, North American Commercial Business
B. Gregory Stroh............................. President, Packaging
Ernst A. Haberli............................. Executive Vice President and Chief Financial Officer
John F. Rowley............................... Executive Vice President, Operations and Logistics
Clifford A. Cutchins, IV..................... Senior Vice President and General Counsel
Daniel J. Girvan............................. Senior Vice President, Human Resources
R. Michael Lempke............................ Senior Vice President and Treasurer
Joseph W. McGarr............................. Senior Vice President, Strategy
William A. Paterson.......................... Senior Vice President and Controller
</TABLE>

<PAGE>

SELLING STOCKHOLDERS

The following table sets forth certain information as of the date of this
Prospectus with respect to the Selling Stockholders' holdings of Common Stock.

<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK OWNED SHARES TO BE
PRIOR TO OWNED AFTER
THE OFFERING THE OFFERING
NAME AND ADDRESS --------------------- --------------------
OF SELLING STOCKHOLDERS NUMBER %(1) NUMBER %(1)
- -------------------------------------------------------------------------- --------- ------ --------- -----
<S> <C> <C> <C> <C>
First Plaza Group Trust, Mellon Bank, N.A.,
as Trustee (2).......................................................... 8,070,881 3.8 0 --
c/o General Motors Investment Management Corporation
767 Fifth Avenue
New York, New York 10153
Morgan Stanley Entities (3)............................................... 6,345,356 3.0 0 --
1585 Broadway
New York, New York 10036
</TABLE>

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

(1) Based on 209,667,511 shares of Common Stock outstanding on February 2, 1998.

(2) Mellon Bank, N.A. acts as trustee for First Plaza Group Trust, a trust under
and for the benefit of certain employee benefit plans of General Motors
Corporation.

(3) Includes 3,114,372 shares of Common Stock held directly by Morgan Stanley
and 2,470,396 shares of Common Stock held directly by Morgan Stanley
Leveraged Equity Fund II, Inc. ("MSLEF II"), a wholly owned subsidiary of
Morgan Stanley. Also includes an additional 760,588 shares of Common Stock
held by Morgan Stanley Leveraged Equity Holdings, Inc. ("MSLEH") and Morgan
Stanley Equity Investors, Inc. ("MSEI"), wholly owned subsidiaries of Morgan
Stanley. Morgan Stanley, MSLEF II, MSLEH and MSEI are referred to as the
"Morgan Stanley Entities." Morgan Stanley, MSLEF II, MSLEH and MSEI intend
to sell 3,114,372, 2,470,396, 389,982 and 370,606 shares, respectively, in
the Offering. Following the Offering, none of the Morgan Stanley Entities
will own any shares of Common Stock.

The Company and the Selling Stockholders (with respect to any unsold shares
of Common Stock) have agreed, with certain exceptions, that, for the period
beginning 14 days prior to the effective date of the Registration Statement of
which this Prospectus is a part until 90 days after the date of this Prospectus,
they will not, without the prior consent of Morgan Stanley & Co. Incorporated
("MS&Co."), offer, sell, contract to sell or otherwise dispose of any shares of
Common Stock. See "Underwriting."

The Selling Stockholders acquired their shares of Common Stock in the
Merger. In connection with the Merger, Morgan Stanley and certain of its
subsidiaries (collectively, the "Director Nominating Stockholders") entered into
a stockholders agreement with the Company (the "Stockholders Agreement")
providing for the appointment of four individuals specified in the merger
agreement as members of the Fort James Board of Directors immediately following
the effectiveness of the Merger and granting the Director Nominating
Stockholders the right to nominate for election at subsequent annual or special
meetings up to two members. Under the Stockholders Agreement, so long as the
Director Nominating Stockholders and their affiliates (other than MS&Co. and
Dean Witter Reynolds Inc. ("Dean Witter")) continue to own at least 5 million
shares of Common Stock issued to them in the Merger (including as a result of
certain specified transfers to such stockholders), Morgan Stanley will be
entitled to nominate two individuals for election as directors. Further, until
such time as the Director Nominating Stockholders and their affiliates (other
than MS&Co. and Dean Witter) no longer hold 2 million shares of Common Stock
issued to them in the Merger (including as a result of certain specified
transfers), Morgan Stanley will be entitled to nominate one director. The 5
million and two million share thresholds described above will be appropriately
adjusted in the event of any stock dividend, stock split, reclassification or
similar change with respect to the Common Stock.

The four individuals specified in the merger agreement who became directors
of the Company immediately following the effectiveness of the Merger are Michael
T. Riordan, Dr. James L. Burke, Robert H. Niehaus and Frank V. Sica. Messrs.
Niehaus and Sica are officers of MS&Co. The terms of such directors expire in
1998.

<PAGE>

CERTAIN UNITED STATES TAX CONSEQUENCES
TO NON-U.S. HOLDERS OF COMMON STOCK

The following is a general discussion of certain United States federal
income and estate tax consequences of the ownership and disposition of Common
Stock by a person that, for United States federal income tax purposes, is a
non-resident alien individual, a foreign corporation, a foreign partnership, a
foreign estate or a foreign trust, in each case not subject to United States
federal income tax on a net income basis in respect of income or gain from
Common Stock (a "non-U.S. holder"). This discussion does not consider the
specific facts and circumstances that may be relevant to particular holders and
does not address the treatment of non-U.S. holders of Common Stock under the
laws of any state, local or foreign taxing jurisdiction. Further, the discussion
is based on provisions of the United States Internal Revenue Code of 1986, as
amended (the "Code"), Treasury regulations thereunder, and administrative and
judicial interpretations thereof, all as in effect on the date hereof and all of
which are subject to change on a possibly retroactive basis. Each prospective
holder is urged to consult a tax advisor with respect to the United States
federal tax consequences of acquiring, holding and disposing of Common Stock, as
well as any tax consequences that may arise under the laws of any state, local
or foreign taxing jurisdiction.

DIVIDENDS

Dividends paid to a non-U.S. holder of Common Stock will be subject to
withholding of United States federal income tax at a 30 percent rate or such
lower rate as may be specified by an applicable income tax treaty, unless the
dividends are effectively connected with the conduct of a trade or business
within the United States (and are attributable to a United States permanent
establishment of such holder, if an applicable income tax treaty so requires as
a condition for the non-U.S. holder to be subject to United States income tax on
a net income basis in respect of such dividends). Such "effectively connected"
dividends are subject to tax at rates applicable to United States citizens,
resident aliens and domestic United States corporations, and are not generally
subject to withholding. Any such effectively connected dividends received by a
non U.S. holder that is a corporation may also, under certain circumstances, be
subject to an additional "branch profits tax" at a 30 percent rate or such lower
rate as may be specified by an applicable income tax treaty.

Under currently effective United States Treasury regulations, dividends
paid to an address in a foreign country are presumed to be paid to a resident of
that country (unless the payor has knowledge to the contrary) for purposes of
the withholding discussed above and, under the current interpretation of United
States Treasury regulations, for purposes of determining the applicability of a
tax treaty rate. Under United States Treasury regulations released on October 6,
1997 (the "New Regulations") and effective for payments made after December 31,
1998, however, a non-U.S. holder of Common Stock who wishes to claim the benefit
of an applicable treaty rate would be required to satisfy applicable United
States Internal Revenue Service certification requirements. Certification and
disclosure requirements relating to the exemption from withholding under the
effectively connected income exemption discussed above are slightly modified
under the New Regulations with respect to payments made after December 31, 1998.

A non-U.S. holder of Common Stock that is eligible for a reduced rate of
United States withholding tax pursuant to a tax treaty may obtain a refund of
any excess amounts currently withheld by filing an appropriate claim for refund
with the United States Internal Revenue Service.

GAIN ON DISPOSITION OF COMMON STOCK

A non-U.S. holder generally will not be subject to United States federal
income tax in respect of gain recognized on a disposition of Common Stock except
in the following circumstances: (1) the gain is effectively connected with a
trade or business conducted by the non-U.S. holder in the United States (and is
attributable to a permanent establishment maintained in the United States by
such non-U.S. holder if an applicable income tax treaty so requires as a
condition for such non-U.S. holder to be subject to United States taxation on a
net income basis in respect of gain from the sale or other disposition of the
Common Stock); (2) in the case of a non-U.S. holder who is an individual and
holds the Common Stock as a capital asset, such holder is present in the United
States for 183 or more days in the taxable year of the sale and certain other
conditions are met; or (3) the Company is or has been a "United States real
property holding corporation" for federal income tax purposes and, assuming that
the Common Stock continues to be "regularly traded on an established securities
market" for federal income tax purposes, the non-U.S. holder held, directly or
indirectly at any time during the five-year period ending on the date of
disposition, more than 5 percent of the Common Stock (and is not eligible for
any treaty exemption). Effectively connected gains realized by a corporate
non-U.S. holder may also, under certain circumstances, be subject to an
additional "branch profits tax" at a 30 percent rate or such lower rate as may
be specified by an applicable income tax treaty. The

<PAGE>

Company has not been, is not, and does not anticipate becoming a "United States
real property holding corporation" for federal income tax purposes.

FEDERAL ESTATE TAXES

Common Stock held by an individual that is a non-resident for United States
federal estate tax purposes at the time of death will be included in such
holder's gross estate for United States federal estate tax purposes, unless an
applicable estate tax treaty provides otherwise.

INFORMATION REPORTING AND BACKUP WITHHOLDING

The Company must report annually to the Internal Revenue Service and to
each non-U.S. holder the amount of dividends paid to such holder and the tax
withheld with respect to such dividends. These information reporting
requirements apply regardless of whether withholding is required. Copies of the
information returns reporting such dividends and withholding may also be made
available to the tax authorities in the country in which the non-U.S. holder
resides under the provisions of an applicable income tax treaty.

Under current law, United States backup withholding tax generally will not
apply to dividends paid to non-U.S. holders that are either subject to the 30
percent withholding discussed above or that are not so subject because an
applicable tax treaty reduces such withholding. Otherwise, backup withholding of
United States federal income tax at a rate of 31 percent may apply to dividends
paid with respect to Common Stock to holders that are not "exempt recipients"
and that fail to provide certain information (including the holder's United
States taxpayer identification number). Generally, unless the payor of dividends
has definite knowledge that the payee is a United States person, the payor may
treat dividend payments to a payee with a foreign address as exempt from backup
withholding. However, under the New Regulations, dividend payments made after
December 31, 1998 generally will be subject to information reporting and backup
withholding unless applicable United States Internal Revenue Service
certification requirements are satisfied.

In general, United States information reporting and backup withholding
requirements will not apply to a payment made outside the United States of the
proceeds of a sale of Common Stock through an office outside the United States
of a non-United States broker. However, United States information reporting (but
not backup withholding) requirements will apply to a payment made outside the
United States of the proceeds of a sale of Common Stock through an office
outside the United States of a broker that is a United States person, a foreign
person that derives 50 percent or more of its gross income for certain periods
from the conduct of a trade or business in the United States, a "controlled
foreign corporation" as to the United States, or, effective after December 31,
1998, through a foreign office of certain other persons unless the broker has
documentary evidence in its records that the holder or beneficial owner is a
non-United States person or the holder or beneficial owner otherwise establishes
an exemption. Payment of the proceeds of the sale of Common Stock to or through
a United States office of a broker is currently subject to both United States
backup withholding and information reporting unless the holder certifies its
non-United States status under penalties of perjury or otherwise establishes an
exemption.

A non-United States holder generally may obtain a refund of any excess
amounts withheld under the backup withholding rules by filing the appropriate
claim for refund with the United States Internal Revenue Service.

<PAGE>

UNDERWRITING

Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof (the "Underwriting Agreement"), the U.S.
Underwriters named below for whom MS&Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") and Smith Barney Inc. ("Smith Barney") are acting
as U.S. Representatives, and the International Underwriters named below for whom
Morgan Stanley & Co. International Limited, Merrill Lynch International and
Smith Barney are acting as International Representatives, have severally agreed
to purchase, and the Selling Stockholders have agreed to sell to them,
severally, the respective number of shares of Common Stock set forth opposite
the names of such Underwriters below:

<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- ----- -----------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated............................................................................ 3,582,913
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................................................................... 3,582,912
Smith Barney Inc. ........................................................................................... 3,582,912
Robert W. Baird & Co. Incorporated........................................................................... 180,000
BancAmerica Robertson Stephens............................................................................... 180,000
Bear, Stearns & Co. Inc...................................................................................... 180,000
BT Alex. Brown Incorporated.................................................................................. 180,000
Chase Securities Inc......................................................................................... 180,000
Credit Suisse First Boston Corporation....................................................................... 180,000
EVEREN Securities, Inc....................................................................................... 90,000
Janney Montgomery Scott Inc.................................................................................. 90,000
Edward D. Jones & Co., L.P................................................................................... 90,000
Nationsbanc Montgomery Securities LLC........................................................................ 180,000
PaineWebber Incorporated..................................................................................... 180,000
Prudential Securities Incorporated........................................................................... 180,000
Scott & Stringfellow, Inc.................................................................................... 90,000
-----------

Subtotal................................................................................................ 12,728,737
-----------
International Underwriters:
Morgan Stanley & Co. International Limited................................................................... 562,500
Merrill Lynch International.................................................................................. 562,500
Smith Barney Inc............................................................................................. 562,500
-----------
Subtotal................................................................................................ 1,687,500
-----------
Total.............................................................................................. 14,416,237
============

</TABLE>

The U.S. Underwriters and the International Underwriters, and the U.S.
Representatives and the International Representatives, are collectively referred
to as the "Underwriters" and the "Representatives," respectively. The
Underwriting Agreement provides that the obligations of the several Underwriters
to pay for and accept delivery of the shares of Common Stock offered hereby are
subject to the approval of certain legal matters by their counsel and to certain
other conditions. The Underwriters are obligated to take and pay for all of the
shares of Common Stock offered hereby if any such shares are taken. All shares
of Common Stock to be purchased by the Underwriters under the Underwriting
Agreement are referred to herein as the "Shares."

Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented and agreed that, with certain exceptions, (1)
it is not purchasing any Shares for the account of anyone other than a United
States or Canadian Person (as defined herein), and (2) it has not offered or
sold, and will not offer or sell, directly or indirectly, any Shares or
distribute any prospectus relating to the Shares outside the United States or
Canada or to anyone other than a United States or Canadian Person. Pursuant to
the Agreement between U.S. and International Underwriters, each International
Underwriter has represented and agreed that, with certain exceptions: (1) it is
not purchasing any Shares for the account of any United States or Canadian
Person, and (2) it has not offered or sold, and will not offer or sell, directly
or indirectly, any Shares or distribute any prospectus relating to the Shares in
the United States or Canada or to any United States or Canadian Person. With
respect to any Underwriter that is a U.S. Underwriter and an International
Underwriter, the

<PAGE>

foregoing representations and agreements (1) made by it in its capacity as a
U.S. Underwriter apply only to it in its capacity as a U.S. Underwriter and (2)
made by it in its capacity as an International Underwriter apply only to it in
its capacity as an International Underwriter. The foregoing limitations do not
apply to stabilization transactions or to certain other transactions specified
in the Agreement between U.S. and International Underwriters. As used herein,
"United States or Canadian Person" means any national or resident of the United
States or Canada, or any corporation, pension, profit-sharing or other trust or
other entity organized under the laws of the United States or Canada or of any
political subdivision thereof (other than a branch located outside the United
States and Canada of any United States or Canadian Person), and includes any
United States or Canadian branch of a person who is otherwise not a United
States or Canadian Person.

Pursuant to the Agreement between U.S. and International Underwriters,
sales may be made between the U.S. Underwriters and International Underwriters
of any number of Shares as may be mutually agreed. The per share price of any
Shares sold shall be the public offering price set forth on the cover page
hereof, in United States dollars, less an amount not greater than the per share
amount of the concession to dealers set forth below.

Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has agreed
not to offer or sell, any Shares, directly or indirectly, in any province or
territory of Canada or to, or for the benefit of, any resident of any province
or territory of Canada in contravention of the securities laws thereof and has
represented that any offer or sale of Shares in Canada will be made only
pursuant to an exemption from the requirement to file a prospectus in the
province or territory of Canada in which such offer or sale is made. Each U.S.
Underwriter has further agreed to send to any dealer who purchases from it any
of the Shares a notice stating in substance that, by purchasing such Shares,
such dealer represents and agrees that it has not offered or sold, and will not
offer or sell, directly or indirectly, any of such Shares in any province or
territory of Canada or to, or for the benefit of, any resident of any province
or territory of Canada in contravention of the securities laws thereof and that
any offer or sale of Shares in Canada will be made only pursuant to an exemption
from the requirement to file a prospectus in the province or territory of Canada
in which such offer or sale is made, and that such dealer will deliver to any
other dealer to whom it sells any of such Shares a notice containing
substantially the same statement as is contained in this sentence.

Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has represented and agreed that (1) it has not offered
or sold and, prior to the date six months after the closing date for the sale of
the Shares to the International Underwriters, will not offer or sell, any Shares
to persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995, (2) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Shares in, from or otherwise involving
the United Kingdom and (3) it has only issued or passed on and will only issue
or pass on in the United Kingdom any document received by it in connection with
the offering of the Shares to a person who is of a kind described in Article
11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 or is a person to whom such document may otherwise
lawfully be issued or passed on.

Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has further represented that it has not offered or
sold, and has agreed not to offer or sell, directly or indirectly, in Japan or
to or for the account of any resident thereof, any of the Shares acquired in
connection with the distribution contemplated hereby, except for offers or sales
to Japanese International Underwriters or dealers and except pursuant to any
exemption from the registration requirements of the Securities and Exchange Law
and otherwise in compliance with applicable provisions of Japanese law. Each
International Underwriter has further agreed to send to any dealer who purchases
from it any of the Shares a notice stating in substance that, by purchasing such
Shares, such dealer represents and agrees that it has not offered or sold, and
will not offer or sell, any of such Shares, directly or indirectly, in Japan or
to or for the account of any resident thereof except for offers or sales to
Japanese International Underwriters or dealers and except pursuant to any
exemption from the registration requirements of the Securities and Exchange Law
and otherwise in compliance with applicable provisions of Japanese law, and that
such dealer will send to any other dealer to whom it sells any of such Shares a
notice containing substantially the same statement as is contained in this
sentence.

The Underwriters initially propose to offer part of the Shares directly to
the public at the public offering price set forth on the cover page hereof and
part to certain dealers at a price that represents a concession not in excess of
$.87 per share under the public offering price. The Underwriters may allow, and
such dealers may reallow, a concession not in excess of $.10 per share to other
Underwriters or to certain dealers. After the initial offering of the Shares,
the offering price and other selling terms may from time to time be varied by
the Representatives.

<PAGE>

The Company has agreed (without the prior written consent of MS&Co. on
behalf of the Underwriters) (1) that it will not effect any public sale or
distribution of any Common Stock or any securities convertible into or
exchangeable or exercisable for Common Stock (together with the Common Stock,
"Securities") (other than any such sale or distribution of such Securities
pursuant to registration of such Securities on Form S-4 or S-8 or any successor
forms or any such sale or distribution of such Securities in connection with any
merger or consolidation involving the Company or a subsidiary of the Company or
the acquisition by the Company or a subsidiary of the Company of the capital
equity or substantially all of the assets of any other person or entity), during
the 14 days prior to, and during the 90 days beginning on, the effective date of
the Registration Statement of which this Prospectus is a part, except as part of
such Registration Statement and (2) that any agreement entered into after the
date of the Underwriting Agreement pursuant to which the Company issues or
agrees to issue any privately placed Securities will contain a provision under
which holders of such Securities agree not to effect any public sale or
distribution of any such Securities during the periods described in (1) above,
in each case including a sale pursuant to Rule 144 (or any similar provision
then in force) under the Securities Act. The restrictions described above do not
apply to the conversion or exchange of any Securities pursuant to their terms
into or for other Securities.

In order to facilitate the Offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
shares of Common Stock. Specifically, the Underwriters may over-allot in
connection with the Offering, creating a short position in the shares of Common
Stock for their own account. In addition, to cover over-allotments or to
stabilize the price of the shares of Common Stock, the Underwriters may bid for,
and purchase, shares of Common Stock in the open market. Finally, the
underwriting syndicate may reclaim selling concessions allowed to an Underwriter
or a dealer for distributing the shares of Common Stock in the Offering, if the
syndicate repurchases previously distributed shares of Common Stock in
transactions to cover syndicate short positions, in stabilization transactions
or otherwise. Any of these activities may stabilize or maintain the market price
of the shares of Common Stock above independent market levels. The Underwriters
are not required to engage in these activities, and may end any of these
activities at any time.

Because affiliates of MS&Co. are receiving more than 10% of the proceeds of
the Offering, not including underwriting compensation, the Offering is being
conducted in compliance with the National Association of Securities Dealers
(NASD) Conduct Rule 2710(c)(8).

Certain of the Underwriters and their respective affiliates have, from time
to time, performed various investment banking and financial advisory services
for, and engaged in general financing and banking transactions with, the Company
for which they have received usual and customary fees. MS&Co. acted as financial
advisor to Fort Howard, and Merrill Lynch and Salomon Brothers Inc ("Salomon
Brothers") acted as financial advisors to the Company, in connection with the
Merger. MS&Co. acted as Dealer Manager and Consent Solicitation Agent in
connection with the Tender Offers, which were completed in October 1997 and as
Consent Solicitation Agent in connection with Fort Howard's solicitation of
consents with respect to the Participation Agreements governing certain
sale-lease back transactions.

Merrill Lynch, Salomon Brothers and MS&Co. acted as underwriters in
connection with the Senior Notes Offering, which was completed in September
1997.

In connection with the Merger, Morgan Stanley and certain of its
subsidiaries entered into the Stockholders Agreement with the Company. See
"Selling Stockholders."

The Company, the Selling Stockholders and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act. The Company has agreed to pay the expenses of the Selling
Stockholders (excluding underwriting discounts and commissions) in connection
with the Offering.

LEGAL MATTERS

Certain legal matters relating to the validity of the Shares offered hereby
will be passed upon for the Company by McGuire, Woods, Battle & Boothe LLP,
Richmond, Virginia. Certain legal matters relating to the Offering will be
passed upon for the Underwriters by Shearman & Sterling, New York, New York.
Anne M. Whittemore, a director of the Company, is a partner of McGuire, Woods,
Battle & Boothe LLP. Lawyers of such firm who have performed services in
connection with the offering made hereby own an aggregate of approximately 350
shares of the Common Stock. Shearman & Sterling has represented Fort Howard in
various matters, including in connection with the Merger.

<PAGE>

EXPERTS

The consolidated balance sheets of James River and subsidiaries as of
December 29, 1996 and December 31, 1995, and the related consolidated statements
of operations, cash flows and changes in capital accounts for each of the three
years in the period ended December 29, 1996, included in James River's 1996
Annual Report on Form 10-K, have been audited by Coopers & Lybrand L.L.P.,
independent accountants, as set forth in their report thereon included therein,
and incorporated by reference herein. The supplemental consolidated balance
sheets of the Company as of December 29, 1996, and December 31, 1995, and the
supplemental consolidated statements of operations, cash flows and changes in
capital accounts for each of the three years in the period ended December 29,
1996, contained in the Company's Current Report on Form 8-K dated August 13,
1997 (filed on August 27, 1997), have been audited by Coopers & Lybrand L.L.P.,
independent accountants, as set forth in their report thereon included therein
and incorporated by reference herein. The consolidated balance sheets of Fort
James as of December 29, 1996, and December 31, 1995, and the consolidated
statements of operations, cash flows and changes in capital accounts for each of
the three years in the period ended December 29, 1996, contained in the
Company's Current Report on Form 8-K dated August 13, 1997 (filed February 3,
1998) have been audited by Coopers & Lybrand L.L.P., independent accountants, as
set forth in their report thereon included therein and incorporated herein. Such
consolidated financial statements and supplemental consolidated financial
statements have been incorporated herein by reference in reliance on such
reports given on the authority of such firm as experts in accounting and
auditing.

The consolidated balance sheets of Fort Howard and subsidiaries as of
December 31, 1996 and December 31, 1995, and the related consolidated statements
of operations, cash flows and changes in capital accounts for each of the three
years in the period ended December 31, 1996, included in the Company's Current
Report on Form 8-K dated August 13, 1997 (filed on August 25, 1997), have been
audited by Arthur Andersen LLP, independent public accountants, as set forth in
their report thereon included therein and incorporated herein by reference. Such
consolidated financial statements have been incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.