FIBERMARK INC, S-3, 1997-11-19

FIBERMARK INC
S-3, 1997-11-19
PAPERBOARD MILLS

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER , 1997

REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM S-3

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------

FIBERMARK, INC.
(Exact name of Registrant as specified in its charter)
------------------------------

<TABLE>
<S> <C> <C>
DELAWARE 161 WELLINGTON ROAD 82-0429330
(State or other jurisdiction of P.O. BOX 498 (I.R.S. Employer
incorporation or organization) BRATTLEBORO, VT 05302 Identification No.)
(802) 257-0365
</TABLE>

(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
------------------------------

MR. BRUCE MOORE
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
FIBERMARK, INC.
161 WELLINGTON ROAD
P.O. BOX 498
BRATTLEBORO, VT 05302
(802) 257-0365
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------

COPIES TO:

<TABLE>
<S> <C>
FRANK L. SCHIFF, ESQ. WILLIAM M. HARTNETT, ESQ.
WHITE & CASE CAHILL GORDON & REINDEL
1155 AVENUE OF THE AMERICAS 80 PINE STREET
NEW YORK, NEW YORK 10036 NEW YORK, NEW YORK 10005
(212) 819-8200 (212) 701-3000
</TABLE>

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
- ------------------------

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
- ------------------------

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
OF SECURITIES REGISTERED REGISTERED(1) PER UNIT(2) PRICE(2) FEE
<S> <C> <C> <C> <C>
Common Stock (par value $.001 per share) 1,725,000 $19.75 $34,068,750 $10,323.86
</TABLE>

(1) Includes 225,000 shares which the Underwriters have the option to purchase
solely to cover over-allotments, if any.

(2) Estimated solely for the purpose of calculating the registration fee. Such
estimate has been calculated pursuant to Rule 457(c) under the Securities
Act of 1933, as amended, based on the average of the high and low sales
price of the common stock as reported on the New York Stock Exchange on
November 18, 1997.
------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

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- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED NOVEMBER , 1997

1,500,000 Shares

[LOGO]

Common Stock
---------

FiberMark, Inc. (the "Company") is offering (the "Offering") hereby
1,500,000 shares of its common stock, $.001 par value (the "Common Stock"). The
Common Stock is listed on the New York Stock Exchange (the "NYSE") under the
symbol FMK. On , 1997, the last reported sale price of the Common Stock on
the NYSE was $ per share.

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

SEE "RISK FACTORS" BEGINNING ON PAGE FOR INFORMATION THAT SHOULD BE
CONSIDERED IN CONNECTION WITH THE COMMON STOCK.

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

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.

<TABLE>
<CAPTION>
PROCEEDS
PRICE TO UNDERWRITING TO
PUBLIC DISCOUNT(1) COMPANY(2)
<S> <C> <C> <C>
Per Share........................................... $ $ $
Total(3)............................................ $ $ $
</TABLE>

(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "Underwriting."

(2) Before deducting expenses payable by the Company estimated at $ .

(3) The Company has granted the Underwriters an option, exercisable for 30 days
after the date of this Prospectus, to purchase up to an additional 225,000
shares of Common Stock to cover over-allotments, if any. If all of such
additional shares are purchased, the total Price to Public, Underwriting
Discount and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."

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

The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as, and if delivered to and accepted by the Underwriters,
and subject to approval of certain legal matters by counsel. It is expected that
delivery of the shares of Common Stock subject to the Offering will be made in
Baltimore, Maryland on or about , 1997.

BT ALEX. BROWN PAINEWEBBER INCORPORATED

THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK IN
CONNECTION WITH THE OFFERING, INCLUDING OVER-ALLOTMENT, STABILIZING, AND
SHORT-COVERING TRANSACTIONS IN SUCH SECURITIES, AND THE IMPOSITION OF PENALTY
BIDS.

AVAILABLE INFORMATION

The Company 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 statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549 and at the following regional
offices of the Commission: Seven World Trade Center, Suite 1300, New York, New
York 10048; Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material can be obtained at prescribed
rates by writing to the Commission, Public Reference Section, 450 Fifth Street,
N.W., Washington, D.C. 20549. Such material can also be inspected at the offices
of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005
on which exchange the Common Stock of the Company is listed. Electronic filings
filed through the Commission's Electronic Data Gathering, Analysis and Retrieval
system ("EDGAR") are publicly available through the Commission's home page on
the Internet at http://www.sec.gov.

This Prospectus constitutes part of a registration statement (the
"Registration Statement") filed by the Company with the Commission under the
Securities Act. This Prospectus omits certain of the information contained in
the Registration Statement, and reference is hereby made to the Registration
Statement and to the exhibits relating thereto for further information with
respect to the Company and the Common Stock offered hereby. Any statements
contained herein concerning the provisions of any document are not necessarily
complete, and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission. Each such statement is qualified in its entirety by such reference.

The Company will provide without charge to each person, including beneficial
owners, to whom a copy of this Prospectus has been delivered, on the request of
any 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 (unless such exhibits are specifically incorporated
by reference into such documents). Request for such copies should be directed to
the Office of the Vice President and Chief Financial Officer, FiberMark, Inc.,
161 Wellington Road, P.O. Box 498, Brattleboro, Vermont 05302, telephone number
(802) 257-0365.

2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The Company hereby incorporates by reference in this Prospectus the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1996, the Company's Quarterly Reports on Form 10-Q for the quarters ended March
31, 1997, June 30, 1997 and September 30, 1997 and the Company's Current Reports
on Form 8-K dated January 14, 1997, January 23, 1997, April 3, 1997 and May 5,
1997, all of which have been filed with the Commission. The consolidated balance
sheets of CPG Investors Inc. as of October 31, 1996 and December 31, 1995 and
1994 and the related consolidated statements of income, stockholders' equity and
cash flows for the respective periods then ended and the consolidated balance
sheets of Arcon Holdings Corp. and subsidiary as of October 31, 1996, 1995 and
1994 and the related consolidated statements of income, retained earnings and
cash flows for the years ended October 31, 1996 and 1995 and the period from
April 14, 1994 (inception) through October 31, 1994 are incorporated by
reference to the prospectus included in the Company's Registration Statement on
Form S-4 (File No.: 333-17471) filed with the Commission on February 11, 1997.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Common Stock offered hereby shall be deemed
to be incorporated by reference in this Prospectus and to be a part hereof from
the date of filing of such documents. Any statement contained herein or in a
document all or a 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 such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.

FORWARD LOOKING STATEMENTS

Except for historical information contained herein, the following contains
forward-looking statements that involve risks and uncertainties. The actual
results of the Company could differ materially from those discussed here.
Factors that could cause or contribute to such differences include, but are not
limited to: failure to sustain future sales growth; failure to identify or carry
out suitable strategic acquisitions; the loss of certain major customers;
increases in the price of raw materials under market conditions which preclude
passing such increases on to customers; increased competition (especially from
competitors with access to substantially greater resources); failure to renew
certain labor agreements; and overall economic conditions in the United States
and Europe. Each of the foregoing factors is discussed in greater detail in this
Prospectus.

3
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL DATA, INCLUDING
THE FINANCIAL STATEMENTS AND NOTES THERETO, APPEARING ELSEWHERE OR INCORPORATED
BY REFERENCE IN THIS PROSPECTUS. ALL REFERENCES TO "DOLLARS" AND "$" REFER TO
U.S. DOLLARS. ALL REFERENCES TO "DM" REFER TO DEUTSCHE MARKS. EXCEPT WHERE
OTHERWISE NOTED, ALL CONVERSIONS OF DEUTSCHE MARKS TO U.S. DOLLARS ARE BASED ON
A CONVERSION RATE OF DM1.75 TO $1.00 (WHICH WAS THE RATE IN EFFECT AS OF
SEPTEMBER 30, 1997). UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS
PROSPECTUS ASSUMES THE UNDERWRITERS' OVER-ALLOTMENT OPTION WILL NOT BE EXERCISED
AND THAT NO OUTSTANDING OPTIONS WILL BE EXERCISED. UNLESS OTHERWISE STATED IN
THIS PROSPECTUS, REFERENCES TO THE "COMPANY" SHALL MEAN FIBERMARK, INC. AND ITS
SUBSIDIARIES.
THE COMPANY

The Company is a leading manufacturer and converter of specialty fiber-based
materials with a wide range of consumer and industrial end-uses. Through its
nine United States paper mills and converting facilities, the Company has
focused on niche markets where it can provide high value-added specialty paper
products which meet rigorous technical specifications and customer service
requirements. The Company has also focused on growth through strategic
acquisitions. The acquisition of Steinbeis Gessner GmbH ("Gessner") will
represent the third significant acquisition since October 1996. The Company's
products are sold worldwide, serving four distinct markets which represented the
following percentages of total net sales for the nine months ended September 30,
1997: office products (24%); technical specialties (33%); durable specialties
(25%); and filter products (18%). Net sales for the nine months ended September
30, 1997, totaled $176.7 million as compared to $77.7 million for the
corresponding period in 1996. Between 1993 and 1996, net sales grew at a
compound annual growth rate of 16.0% from $80.0 million to $124.8 million while
earnings per share (as adjusted for a 3-for-2 split of the Common Stock
effective May 13, 1997) grew at a compound annual growth rate of 31.8% from
$0.52 per share to $1.19 per share during the same period.

OFFICE PRODUCTS. The Company manufactures a wide range of materials used in
the manufacture of office products. The Company believes that it is the largest
domestic supplier of pressboard, which is converted into data binders, notebook
covers, report covers, ring binders, and file and index guides. Other products
manufactured for the office supplies market include lightweight filing and cover
materials. The Company believes that its capabilities and customer relationships
give it a competitive advantage in meeting customer specifications.

TECHNICAL SPECIALTIES. The Company manufactures specialty fiber-based
materials customized to meet the unique performance characteristics required by
specific customers and end-use markets. The Company believes that it is the U.S.
market leader in many of its markets, including electrical transformer papers,
acid-free picture mounting board, wet-strength tag and heavyweight industrial
abrasive backing materials. In addition, the Company is a leading producer of
saturating base paper for the manufacture of printed circuit boards. The Company
believes that it is also one of the two leading domestic producers of latex-
reinforced material used in book covers and related products.

DURABLE SPECIALTIES. The Company is one of the largest producers of
specialty tape substrates and a broad range of saturated, coated and non-woven
materials. The Company's tape substrates are used in the manufacture of
industrial and consumer masking tapes, barrier tapes, other pressure-sensitive
tapes and bandoliering tapes. The Company also converts specialty paper into
endsheets and spine reinforcement materials for use in the bookbinding industry
and provides specialty tapes for use in binding materials for checkbooks and
deposit books. The Company believes that it also is the leading provider of tape
and edge covering materials converted from Tyvek-Registered Trademark- and other
materials, used to strengthen and reinforce various office supply products,
including checkbooks, note pads, legal pads, composition books, file folders and
red wallet expansion folders.

- ------------------------
- -Registered Trademark-DuPont registered trademark.

4
<PAGE>
FILTER PRODUCTS. The Company is a major supplier of saturated and
non-saturated filter papers used in air and fluid filters for the automotive,
heavy-duty truck and equipment industries. The Company also manufactures filter
papers used in various industrial applications, including fruit juice
processing, the manufacture of paints and lacquers and hot oil filters for the
fast-food industry. The Company pursues niche markets in the filter products
market where its manufacturing and technical capabilities give it a competitive
advantage in meeting customer specifications.

THE GESSNER ACQUISITION

Pursuant to a Share Purchase Agreement, dated as of November 18, 1997 (the
"Gessner Stock Purchase Agreement"), the Company has agreed to purchase all of
the outstanding capital stock of Gessner for a purchase price of approximately
$43.0 million, subject to certain post-closing adjustments (the "Gessner
Acquisition"). The Company intends to finance the Gessner Acquisition with a
portion of the proceeds of the Offering, along with borrowings of up to DM54.0
million (approximately $30.9 million) under a bank facility to be provided by
Bayerische Vereinsbank AG and an unsecured note issued by Gessner and guaranteed
by the Company to Gessner's former stockholders in the amount of DM8.0 million
(approximately $4.6 million) (the "Steinbeis Note"). The consummation of the
Gessner Acquisition is subject to certain conditions. See "The Gessner
Acquisition" and "Risk Factors -- Possible Non-Consummation of the Gessner
Acquisition."

Gessner is a leading European producer of technical and filter paper located
near Munich, Germany. Gessner manufactures crepe masking and specialty tape
materials, wet and dry abrasive papers, filter media for automotive air, oil and
gasoline filters and filter media for automobile cabins and vacuum cleaner bags.
Gessner's products are sold worldwide, serving three distinct markets. Gessner's
net sales for the nine months ended September 30, 1997 were DM108.7 million
(approximately $62.1 million). Gessner is the leading worldwide producer of
vacuum filter media and the number two European producer of automotive filter
paper. Gessner is also one of two leading European producers of masking tape
base and impregnated abrasive paper. Gessner operates two production facilities
located in Bruckmuhl and Feldkirchen in the State of Bavaria, which include
three paper machines, three saturators, one meltblown production unit and one
methanol recycling unit. Total paper production capacity is approximately 38,500
metric tons per year and total saturation capacity is approximately 26,000
metric tons per year.

The Company believes that the Gessner Acquisition offers the Company a
number of opportunities for synergies. First, technology transfer opportunities
should advance the Company's papermaking and converting capabilities. Second,
the Gessner Acquisition offers the Company the opportunity to increase its
position in key market segments. Third, the Company's product line breadth would
be enhanced in three of the Company's four core businesses. Finally, with
manufacturing facilities in Europe, and the market position gained through the
Gessner Acquisition, the Company believes it will be better positioned to
compete for the business of key global customers that want suppliers to meet
their needs worldwide with global production capacity and a demonstrated
commitment to supporting their product and service needs.

BUSINESS STRATEGY

The Company's strategy is to increase sales and earnings by pursuing
selected strategic acquisitions, rationalizing production capacity and building
a global customer-focused company. The following are the key elements of this
strategy:

- STRATEGIC ACQUISITIONS. The Company intends to continue pursuing growth
through strategic acquisitions that complement the Company's core markets,
provide distribution or sales and marketing efficiencies or provide
opportunities for technology gains or other operating efficiencies.

- STRENGTHEN INTERNATIONAL PRESENCE IN SPECIALTY FIBER-BASED
MATERIALS. Historically, the Company has devoted significant resources to
its international marketing efforts which were intended to create export
markets for the Company's products. The Gessner Acquisition will
strengthen the Company's international presence and allow it to capitalize
on Gessner's extensive sales and marketing capabilities to further
increase sales of the Company's products to international customers.

5
<PAGE>
- BUSINESS RATIONALIZATION. The Company continually evaluates its
organizational structure and manufacturing operations to identify
opportunities to more effectively meet its customers' requirements and to
reduce costs. As a result, the Company may reconfigure its manufacturing
operations, including the number of facilities operated and the locations
at which products are manufactured.

- INVEST IN TECHNOLOGY AND CAPITAL IMPROVEMENTS. The Company seeks to reduce
costs, increase capacity where needed, enhance manufacturing capabilities
and improve product quality through selected capital investments. The
Company invested approximately $8.5 million in new equipment, technology
and leasehold improvements at its facilities during the fiscal year ended
December 31, 1996 and $9.7 million during the nine months ended September
30, 1997. The Company intends to continue to upgrade its facilities and
equipment to achieve further operating efficiencies and, in particular, to
take advantage of the technology transfer opportunities it expects to
realize from the Gessner Acquisition.

- EFFECTIVE UTILIZATION OF DIVERSE FIBERS, INCLUDING RECYCLED MATERIALS. The
Company intends to continue to capitalize on its position as a leading
manufacturer of specialty fiber-based materials. In order to meet customer
demand for recycled content and high performance, as well as to achieve
greater cost controls, the Company seeks to leverage its investments in
fiber-cleaning technology and maximize its use of recycled materials. The
Company is actively pursuing new product development projects with
existing and potential new customers. See "Business of the Company --
Manufacturing -- Use of Recycled Fiber."

RECENT DEVELOPMENTS

On November 18, 1997, as part of its ongoing strategy of business
rationalization, the Company announced plans to cease operations at its
Owensboro, Kentucky facility by the first quarter of 1998. Production at this
facility will be moved into certain of the Company's other operations.
Management currently estimates that the closing of this facility will result in
a one-time pre-tax charge of approximately $10.0 million during the fourth
quarter of 1997, however, it expects that the resulting cost reductions will
result in annual net savings of approximately $1.5 million beginning in 1998.
The Owensboro facility currently employs 41 people.

6
<PAGE>
THE OFFERING

<TABLE>
<S> <C>
Common Stock Offered (1)........ 1,500,000
Common Stock Outstanding
Before the Offering (at
October 31, 1997) (2)....... 6,076,181 shares
After the Offering (1)........ 7,576,181 shares
Dividends....................... For historical information related to dividends declared
and the Company's future dividend policy see "Price Range
of Common Stock and Dividend Policy."
Use of Proceeds................. The Company intends to use approximately $15.0 million of
the net proceeds of the Offering to pay a portion of the
purchase price of the Gessner Acquisition and related fees
and expenses. The Company intends to use the remainder of
the net proceeds to fund certain capital expenditures
related to technology transfer projects resulting from the
Gessner Acquisition and for general corporate purposes,
including future acquisitions and reduction of the
Company's debt. In the event that the Gessner Acquisition
is not consummated, the Company expects to use the
proceeds of the Offering for general corporate purposes,
which may include future acquisitions and reduction of the
Company's debt. See "Risk Factors -- Possible
Non-Consummation of qthe Gessner Acquisition" and "Use of
Proceeds."
NYSE Symbol..................... FMK
</TABLE>

- ------------------------
(1) Does not include up to 225,000 shares of Common Stock subject to the
over-allotment option granted by the Company to the Underwriters.

(2) Does not include options to purchase 736,984 shares of Common Stock at a
weighted average exercise price of $7.87.

RISK FACTORS

An investment in the Common Stock involves certain risks that a prospective
investor should carefully consider before investing in the Common Stock. See
"Risk Factors."

7
<PAGE>
SUMMARY CONSOLIDATED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA
THE COMPANY
The following summary historical consolidated financial data for each of the
years in the three-year period ended December 31, 1996 have been derived from,
and are qualified by reference to, the audited consolidated financial statements
of the Company included elsewhere in this Prospectus. The selected historical
consolidated financial data for the fiscal year ended December 31, 1993 have
been derived from the audited consolidated financial statements of the Company.
The summary historical consolidated unaudited PRO FORMA financial data set forth
below for the year ended December 31, 1996 and the nine months ended September
30, 1997 have been derived from, and are qualified by reference to, the
Company's consolidated unaudited financial statements included elsewhere herein.
The unaudited financial data gives PRO FORMA effect, in the manner described
under "Unaudited Pro Forma Consolidated Financial Data" and the notes thereto,
to the Gessner Acquisition, the Offering (collectively with the Gessner
Acquisition, the "Transactions") and the acquisitions of CPG Investors Inc.
("CPG") and Arcon Holdings Corp. ("Arcon"), each of which occurred on October
31, 1996 (collectively, the "Prior Acquisitions"), as if (i) the Transactions
and the Prior Acquisitions had occurred on January 1, 1996, in the case of
Income Statement Data for the year ended December 31, 1996 and (ii) the
Transactions had occurred on January 1, 1997, in the case of Income Statement
Data for the nine months ended September 30, 1997. The Income Statement Data do
not purport to represent what the Company's results of operations actually would
have been if the Prior Acquisitions and the Transactions had occurred as of such
dates or what such results will be for any future periods. The final allocation
of purchase price and the resulting amortization expenses in the Income
Statement Data will differ from the preliminary estimates for the reasons
described in more detail in "Unaudited Pro Forma Consolidated Financial Data."
The information contained in this table should be read in conjunction with "Risk
Factors -- Possible Non-Consummation of the Gessner Acquisition," "Selected
Historical Consolidated Financial Data -- The Company," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
consolidated financial statements of the Company and accompanying notes thereto.

<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA NINE MONTHS
YEAR ENDED DECEMBER 31, YEAR ENDED ENDED
----------------------------------------------- DECEMBER 31, SEPTEMBER 30,
1993 1994 1995 1996 1996 1997
-------- --------- --------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales.................................... $ 79,982 $ 105,416 $ 117,516 $ 124,771 $313,534 $240,051
Cost of sales................................ 66,360 88,138 100,106 101,981 249,328 188,013
-------- --------- --------- --------- ------------ -------------
Gross profit............................. 13,622 17,278 17,410 22,790 64,206 52,038
Selling, general and administrative
expenses................................... 7,881 8,584 8,397 9,908 32,742 23,330
-------- --------- --------- --------- ------------ -------------
Income from operations................... 5,741 8,694 9,013 12,882 31,464 28,708
Other (income) expenses, net................. 374 (658) (1,198) (1,030) (1,739) (32)
Loss on sale of assets....................... -- -- 8,302 -- -- --
Cogeneration income (a)...................... (4,404) -- (6,512) (97) (97) --
Interest expense............................. 3,137 1,356 892 1,798 12,103 8,718
-------- --------- --------- --------- ------------ -------------
Income before income taxes and
extraordinary item..................... 6,634 7,996 7,529 12,211 21,197 20,022
Income tax (benefit) expense................. 1,921 2,768 (424) 4,697 8,164 7,747
-------- --------- --------- --------- ------------ -------------
Income before extraordinary item......... 4,713 5,228 7,953 7,514 13,033 12,275
Extraordinary item........................... (2,103) (149) -- (297) -- --
-------- --------- --------- --------- ------------ -------------
Net income............................. $ 2,610 $ 5,079 $ 7,953 $ 7,217 $ 13,033 $ 12,275
-------- --------- --------- --------- ------------ -------------
-------- --------- --------- --------- ------------ -------------
Earnings per common and common equivalent
share (b).................................. $ 0.52 $ 0.84 $ 1.31 $ 1.19 $ 1.73(c) $ 1.58(d)
-------- --------- --------- --------- ------------ -------------
-------- --------- --------- --------- ------------ -------------
Weighted average number of common and common
equivalent shares outstanding (b).......... 4,985 6,032 6,050 6,054 7,554 7,775
-------- --------- --------- --------- ------------ -------------
-------- --------- --------- --------- ------------ -------------
</TABLE>

8
<PAGE>
- ------------------------

(a) The Company has entered into an agreement with Kamine/Besicorp Beaver Falls
L.P. ("Kamine") pursuant to which the Company is the host to a cogeneration
facility developed by Kamine at the Company's Beaver Falls mill, in
consideration of which the Company received an initial cash payment of $4.4
million in 1993 and received deferred cash payments totaling $7.0 million
from Kamine between May 1995 and May 1997. The present value of these
deferred cash payments, in the amount of $6.5 million, was recorded as
income in the first quarter of 1995. Cash payments of $3.0 million, $2.0
million and $2.0 million, respectively, were received in May 1995, May 1996
and May 1997. The payment received in May 1997 was the last payment due
under this agreement.

(b) Weighted average number of common and common equivalent shares outstanding
and earnings per common and common equivalent share have been restated to
give effect to a 3-for-2 stock split effective May 13, 1997. Weighted
average number of common and common equivalent shares outstanding and
earnings per common and common equivalent share for the nine months ended
September 30, 1997 reflect common stock equivalents which were excluded in
previous periods due to immateriality.

(c) If the Gessner Acquisition is not consummated, the Company's earnings per
share for the year ended December 31, 1996, giving PRO FORMA effect to the
Offering and to the Prior Acquisitions, would be $1.42.

(d) If the Gessner Acquisition is not consummated, the Company's earnings per
share for the nine months ended September 30, 1997, giving PRO FORMA effect
to the Offering, would be $1.16.

9
<PAGE>
RISK FACTORS

PROSPECTIVE PURCHASERS IN SHARES OF THE COMMON STOCK OFFERED HEREBY SHOULD
CAREFULLY READ THIS PROSPECTUS AND THE DOCUMENTS INCORPORATED BY REFERENCE
HEREIN. IN DETERMINING WHETHER TO PURCHASE THE SHARES OF COMMON STOCK BEING
OFFERED HEREBY, PROSPECTIVE PURCHASERS SHOULD CAREFULLY CONSIDER THE FOLLOWING
FACTORS, IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS OR
INCORPORATED BY REFERENCE HEREIN.

EXPOSURE TO FLUCTUATIONS IN RAW MATERIALS COSTS AND SUPPLY

The Company's principal raw materials are hardwood and softwood pulp and
secondary fiber, which are cyclical in both price and supply. The cyclical
nature of pulp pricing presents a risk to the Company's gross profit margins to
the extent that the Company is unable to pass along price increases to its
customers on a timely basis. The Company is also subject to the risk that it
will be unable to purchase sufficient quantities of pulp to meet its production
requirements during times of tight supply. In addition, customer perception that
prices are low in relation to anticipated future prices for the Company's
products may result in customers accumulating substantial inventories of
products of the type produced by the Company. To the extent that, as a response
to subsequent price increases or the accumulation of excess inventories, such
customers choose to fill their raw materials needs out of supplies on hand, the
Company's sales of such products may be materially adversely affected until such
inventories are reduced.

The Company's sole source of Tyvek-Registered Trademark- is DuPont. Although
management believes it has a good relationship with DuPont, there can be no
assurances that the Company will be able to continually purchase adequate
supplies of Tyvek-Registered Trademark-. Any material limitation or interruption
in the Company's supply of Tyvek-Registered Trademark- could have a material
adverse effect on the financial condition and results of operations of the
Company. Furthermore, significant increases in the price of
Tyvek-Registered Trademark-, if not offset by product price increases, could
have a material adverse effect on the financial condition and results of
operations of the Company. There can be no assurances that the Company will be
able to pass any future increases in the price of Tyvek-Registered Trademark- on
to its customers in the form of price increases.

SPECIALTY PAPER MARKET

The Company's competition within the specific markets in which it operates
comes primarily from a number of other specialty paper producers, as well as
from producers of vinyl, plastic, fiberglass and other materials. Some of these
producers have substantially greater resources than the Company. Competition in
the Company's markets is based principally on quality, product performance and
characteristics, service and price as they relate to the specific needs of the
customer. Competitors with like materials, and different competitive materials,
could displace the Company's materials and adversely affect the Company's
financial condition and results of operations.

In recent years there has been some consolidation among participants in the
Company's markets and some vertical integration by the Company's customers. To
the extent that consolidations in the Company's markets continue and result in
the purchase of one or more of the Company's customers by the Company's
competitors or a decision by one of the Company's customers to manufacture or
convert products that were previously purchased from the Company in its own
facilities, the Company's financial condition and results of operations may be
materially adversely affected.

IMPACT OF ENVIRONMENTAL REGULATION; GOVERNMENTAL REGULATION

Like similar companies, the Company's operations and properties are subject
to a wide variety of federal, state and local laws and regulations, including
those governing the use, storage, handling, generation, treatment, emission,
release, discharge and disposal of certain materials, substances and wastes, the
remediation of contaminated soil and groundwater, and the health and safety of
employees (collectively, "Environmental Laws"). As such, the nature of the
Company's operations exposes it to the risk of claims with respect to
environmental protection and health and safety matters and there can be no

10
<PAGE>
assurance that material costs or liabilities will not be incurred in connection
with such claims. Based upon its experience to date, management of the Company
believes that the future costs of compliance with existing Environmental Laws,
and liability for known claims of this type, will not have a material adverse
effect on the Company's financial condition and results of operations. However,
future events, such as new information, changes in existing Environmental Laws
or their interpretation, and more vigorous enforcement policies of regulatory
agencies, may give rise to additional expenditures or liabilities that could be
material to the Company's financial condition and results of operations. See
"Business of the Company -- Environmental Regulation and Compliance."

HIGH LEVERAGE AND DEBT SERVICE

Upon completion of the Offering, the Company will continue to have
substantial indebtedness. As of September 30, 1997, the Company's total
outstanding indebtedness on a pro forma basis for the Gessner Acquisition was
$135.4 million. The Company's leverage poses certain risks, including the risk
that the Company may not generate sufficient cash flow to service its
indebtedness; that the Company may not be able to renegotiate the terms of its
indebtedness; that the Company may be unable to obtain additional financing in
the future; that, to the extent it is more leveraged than its competitors, the
Company may be placed at a competitive disadvantage; and that the Company's
ability to borrow to the extent necessary to respond to market conditions and
other factors may be adversely affected. The Company's ability to service or
refinance its debt will depend on its future performance, which will be subject
to prevailing economic and competitive conditions and other specific factors
discussed herein, as well as developments in capital markets generally. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS

The indenture for the Company's outstanding senior notes restricts, among
other things, the Company's ability to incur additional indebtedness, incur
liens, pay dividends or make certain other restricted payments, consummate
certain asset sales, enter into certain transactions with affiliates, impose
restrictions on the ability of a subsidiary to pay dividends or make certain
payments to the Company, merge or consolidate with any other person or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of the assets of the Company. In addition, the Company's existing credit
facility and the operating lease entered into in connection with the
sale-leaseback of substantially all of the equipment at the Brattleboro mill
contain other and more restrictive covenants customary for transactions of these
types.

ACQUISITION STRATEGY

The Company intends to continue to grow through selected strategic
acquisitions of businesses in specialty markets. See "Business of the Company --
Business Strategy." There can be no assurance that the Company will be able to
locate suitable acquisition candidates, consummate acquisitions on favorable
terms or successfully integrate newly acquired businesses with the Company's
operations.

INTERNATIONAL OPERATIONS

Upon consummation of the Gessner Acqusition, the Company's financial results
will be dependent in part on its international operations. The Company will
operate two facilities in Germany and sell its products in approximately 50
countries. For the nine months ended September 30, 1997, PRO FORMA for the
Gessner Acquisition, net sales of the Company's products outside the United
States will total approximately $80.9 million, representing approximately 34% of
the Company's PRO FORMA net sales for the same period. As a result, the Company
will be subject to risks associated with operating in foreign countries,
including imposition of limitations on conversion of foreign currencies into
U.S. dollars or remittance of dividends and other payments by foreign
subsidiaries, imposition or increase of withholding and other taxes on
remittances and other payments by foreign subsidiaries and exchange rate
fluctuations. The

11
<PAGE>
occurrence of any one or more of such events could have a material adverse
effect on the Company's financial condition and results of operations.

DIVIDEND POLICY; LIMITATIONS IMPOSED BY LENDERS

The Company has never paid any cash dividends on its Common Stock and does
not anticipate paying cash dividends in the foreseeable future. The terms of the
Company's existing credit facility and outstanding senior notes contain
restrictive covenants, including limitations on the payment by the Company of
cash dividends on the Common Stock.

DEPENDENCE ON KEY MANAGEMENT

The Company's success will continue to depend to a significant extent on its
executive officers and other key management personnel. There can be no assurance
that the Company will be able to retain its executive officers and key personnel
or attract additional qualified management in the future. In addition, the
success of certain of the Company's acquisitions may depend, in part, on the
Company's ability to retain management personnel of the acquired companies.
There can be no assurance that the Company will be able to retain such
management personnel.

ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER AND BY-LAW PROVISIONS AND DELAWARE LAW

The Board of Directors has authority to issue up to 2,000,000 shares of
Preferred Stock and to fix the rights, preferences, privileges and restrictions,
including voting rights, of those shares without any further vote or action by
the stockholders. The rights of the holders of the Common Stock will be subject
to, and may be adversely affected by, the rights of the holders of any Preferred
Stock that may be issued in the future. The issuance of Preferred Stock, while
providing flexibility in connection with possible acquisitions and other
corporate purposes, could have the effect of making it more difficult for a
third party to acquire a majority of the outstanding voting stock of the
Company. The Company has no present plan to issue shares of Preferred Stock.
Furthermore, certain provisions of the Company's Restated Certificate of
Incorporation and By-laws and of Delaware law could delay or make more difficult
a merger, tender offer or proxy contest involving the Company. See "Description
of Capital Stock."

POSSIBLE NON-CONSUMMATION OF THE GESSNER ACQUISITION

While the Company expects that the closing of the Gessner Acquisition will
occur on or prior to December 31, 1997, such closing is subject to various
conditions, including the approval of the Board of Directors of the Company,
which approval will be significantly influenced by the consummation of the
Offering and the receipt of certain financing from Bayerische Vereinsbank AG on
terms acceptable to the Company. In addition, Gessner may elect to terminate the
transaction if the ongoing environmental due diligence reveals environmental
liabilities in excess of DM5.0 million (approximately $2.9 million). As a
result, no assurance can be given that the Gessner Acquisition will occur on or
prior to December 31, 1997, if at all. If the closing of the Gessner Acquisition
does not occur (or is materially delayed), the Company may not realize any or
all of the benefits of the Gessner Acquisition described elsewhere in this
Prospectus, and the Company's future per share earnings may be adversely
affected. See Note (h) to the Unaudited Pro Forma Combined Consolidated
Statements of Income for the Year Ended December 31, 1996, and Note (g) to the
Unaudited Pro Forma Consolidated Statements of Income for the Nine Months Ended
September 30, 1997. In the event that the Gessner Acquisition is not
consummated, the Company expects to use the proceeds of the Offering for general
corporate purposes, which may include future acquisitions and reduction of the
Company's debt.

12
<PAGE>
STOCK PRICE VOLATILITY

From time to time, there may be significant volatility in the market price
of the Common Stock. Factors such as announcements of fluctuations in the
Company's or its competitors' operating results, pulp and fiber costs, market
conditions for paper industry stocks or manufacturing stocks in general, changes
in general conditions in the economy or financial markets or other developments
could cause the market price of the Common Stock to fluctuate substantially. In
addition, the stock market in general in recent years has experienced
substantial price and volume fluctuations that often have been unrelated or
disproportionate to the operating performance of affected companies. These broad
fluctuations may adversely affect the market price of the Common Stock.

SEASONALITY AND CYCLICALITY

The Company's business is mildly seasonal in nature with the third quarter
of each year having the lowest level of net sales and operating income. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Seasonality." In addition, sales of specialty fiber-based
materials historically have been cyclical, fluctuating with general economic
cycles. During economic downturns, the Company tends to experience similar
periods of decline and recession as the general economy. There can be no
assurance that the industry will not experience sustained periods of decline in
sales in the future, and that such decline would not have a material adverse
effect on the Company's financial condition and results of operations.

LABOR RELATIONS

A substantial portion of the Company's employees are unionized. While the
Company believes that, in general, it has good relations with its employees,
there can be no assurance that a labor dispute or disturbance will not occur in
the future, which could have a material adverse effect on the Company. The
Company currently is subject to nine collective bargaining agreements, all of
which expire on or before August 31, 2002. There can be no assurance that new
agreements will be reached on terms satisfactory to the Company or that labor
costs will not increase, perhaps substantially, as a result thereof. See
"Business of the Company -- Employees."

13
<PAGE>
USE OF PROCEEDS

The Company intends to use approximately $15.0 million of the net proceeds
of the Offering to pay a portion of the purchase price of the Gessner
Acquisition and related fees and expenses. The Company intends to use the
remainder of the net proceeds to fund certain capital expenditures related to
the Gessner Acquisition. These capital expenditures are expected to be related
to technology transfer projects between Gessner and the Company, which the
Company believes will provide quality improvements, cost reductions, product
performance enhancements and the ability to produce a broader range of products.
The Company currently anticipates that the implementation of these projects can
be accomplished over a two to three year period, at a cost of $20 to $25
million. See "Risk Factors -- Possible Non-Consummation of the Gessner
Acquisition." Any remaining proceeds from the Offering will be used for general
corporate purposes, including future acquisitions and reduction of the Company's
debt. In the event that the Gessner Acquisition is not consummated, the Company
expects to use the proceeds of the Offering for general corporate purposes,
including future acquisitions and reduction of the Company's debt.

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

The Common Stock was first traded on the NASDAQ National Market System
("NASDAQ") under the symbol "SPBI". As of the close of business on April 8,
1997, the Common Stock ceased trading on NASDAQ and on April 9, 1997 was listed
on the NYSE under the symbol "FMK". The following table sets forth the high and
low sale prices per share of the Common Stock as reported on NASDAQ and on the
NYSE Composite Transactions Tape, as the case may be. The high and low sales
prices for the first quarter of 1995 through the first quarter of 1997 have been
adjusted to give effect to a 3-for-2 stock split in the form of a dividend which
was announced on April 24, 1997, and was effective May 13, 1997, for
shareholders of record at the close of business on May 6, 1997 (the "Stock
Split").

<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
1995
First Quarter................................................................................ $ 8.17 $ 6.67
Second Quarter............................................................................... 9.00 7.67
Third Quarter................................................................................ 8.67 6.67
Fourth Quarter............................................................................... 9.00 7.17
1996
First Quarter................................................................................ 10.00 7.83
Second Quarter............................................................................... 10.17 8.50
Third Quarter................................................................................ 13.00 8.67
Fourth Quarter............................................................................... 14.17 10.83
1997
First Quarter................................................................................ 18.00 13.33
Second Quarter............................................................................... 21.38 15.25
Third Quarter................................................................................ 22.50 19.00
Fourth Quarter (through November 18, 1997)................................................... $ 21.00 $ 19.13
</TABLE>

The last reported sale price of the Common Stock on the NYSE Composite
Transactions Tape on November 18, 1997, was $19.50 per share, and there were in
excess of 2,200 beneficial owners of the Common Stock.

The Company has never paid any cash dividends on its Common Stock and does
not anticipate paying cash dividends in the foreseeable future.

14
<PAGE>
CAPITALIZATION
(UNAUDITED)

The following table sets forth the capitalization of the Company giving
effect to the Transactions as if they had occurred on September 30, 1997. This
table should be read in conjunction with the "Selected Historical Consolidated
Financial Data" and "Unaudited Pro Forma Consolidated Financial Data" included
elsewhere in this Prospectus.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
----------------------
ACTUAL PRO FORMA
--------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash.................................................................... $ 9,075 $ 30,899

Revolving Credit Facilities(a).......................................... $ -- $ --
German Bank Facility.................................................... -- 30,857
Steinbeis Note.......................................................... -- 4,571
Senior Notes............................................................ 100,000 100,000
--------- -----------
Total Debt.......................................................... $ 100,000 $ 135,428

Stockholders' Equity:
Preferred Stock, $.001 par value; 2,000,000 shares
authorized and none outstanding................................... $ -- $ --
Common Stock, $.001 par value; 20,000,000 shares
authorized; 7,576,181 shares issued and outstanding, as
adjusted(b)....................................................... 6 8
Additional Paid-in Capital.......................................... 44,802 73,975
Retained Earnings................................................... 12,342 12,342
--------- -----------
Total Stockholders' Equity.......................................... 57,150 86,325
--------- -----------
Total Capitalization................................................ $ 157,150 $ 221,753
--------- -----------
--------- -----------
</TABLE>

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

(a) The Company is party to a revolving credit facility with The CIT
Group/Business Credit Corp., (the "U.S. Lender") pursuant to which the U.S.
Lender has agreed to make revolving credit loans, subject to the terms and
conditions of such credit facility, in an amount not to exceed $20.0
million. The Company currently has no borrowings outstanding and an
availability of $20.0 million under such credit facility. In addition, upon
consummation of the Gessner Acquisition, Gessner will enter into two DM15.0
million (approximately $17.2 million) revolving credit facilities with
Bayerische Vereins-bank AG, under which Gessner will have, subject to the
terms and conditions of such facilities, an availability of DM30.0 million
at the consummation of the Gessner Acquisition.

(b) Does not include, as of September 30, 1997, options to purchase 736,984
shares of Common Stock at a weighted average exercise price of $7.87.

15
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA

The following Unaudited Pro Forma Combined Consolidated Statements of Income
give effect to the Transactions and the Prior Acquisitions as if they had
occurred on January 1, 1996, in the case of the Income Statement Data for the
year ended December 31, 1996, and give effect to the Transactions as if they had
occurred on January 1, 1997, in the case of the Income Statement Data for the
nine months ended September 30, 1997. The unaudited PRO FORMA financial data are
based on the historical consolidated financial statements of the Company, CPG,
Arcon and Gessner and the assumptions and adjustments described in the
accompanying notes. The Unaudited Pro Forma Combined Consolidated Statements of
Income do not (a) purport to represent what the Company's results of operations
actually would have been if the Transactions and the Prior Acquisitions had
occurred as of the dates indicated or what such results will be for any future
periods or (b) give effect to certain non-recurring charges expected to result
from the Transactions and Prior Acquisitions.

The following Unaudited Pro Forma Combined Consolidated Balance Sheet as of
September 30, 1997, was prepared as if the Transactions had occurred on such
date. The Unaudited Pro Forma Combined Consolidated Balance Sheet reflects the
preliminary allocation of the Gessner Acquisition purchase price to the
Company's tangible and intangible assets and liabilities. The final allocation
of such purchase prices, and the resulting amortization expense in the
accompanying Unaudited Pro Forma Combined Consolidated Statements of Income,
will differ from the preliminary estimates due to the final allocation being
based on: (a) actual closing date amounts of assets and liabilities, and (b)
actual values of property, plant and equipment and any identifiable intangible
assets.

The unaudited PRO FORMA financial data are based upon assumptions that the
Company believes are reasonable and should be read in conjunction with the
consolidated financial statements of the Company and the accompanying notes
thereto, the consolidated financial statements of CPG and the accompanying notes
thereto, the consolidated financial statements of Arcon and the accompanying
notes thereto and the consolidated financial statements of Gessner and the
accompanying notes thereto included elsewhere or incorporated by reference in
this Prospectus.

The CPG and Arcon acquisitions took place on October 31, 1996, and,
accordingly, the results of operations for CPG and Arcon are included in the
Company's results of operations subsequent to that date.

16
<PAGE>
UNAUDITED PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
GESSNER
OFFERING ACQUISITION COMPANY
COMPANY GESSNER ADJUSTMENTS ADJUSTMENTS PRO FORMA
-------- ------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash............................................... $ 9,075 $ 258 $ 29,175(a) $ (8,109)(b)(c) $ 30,399
Accounts receivable................................ 24,645 11,058 -- -- 35,703
Inventories........................................ 34,358 9,225 -- -- 43,583
Deferred income taxes.............................. 2,090 -- -- -- 2,090
Other.............................................. 2,862 26 -- -- 2,888
-------- ------- ----------- ----------- ----------
Total current assets........................... 73,030 20,567 29,175 (8,109) 114,663

Property, plant and equipment, net................. 95,730 32,017 -- 12,983(e) 140,730
Organizational and financing costs................. 5,614 346 -- 500 6,460
Goodwill........................................... 45,761 -- -- 5,144(e) 50,905
-------- ------- ----------- ----------- ----------
Total assets................................... $220,135 $52,930 $ 29,175 $ 10,518 $312,758
-------- ------- ----------- ----------- ----------
-------- ------- ----------- ----------- ----------

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Current portion of long-term debt.................. $ -- $ 1,569 $ -- $ (1,569)(e) $ --
Accounts payable................................... 16,315 2,343 -- -- 18,658
Accrued liabilities................................ 23,846 5,315 -- -- 29,161
Accounts payable--affiliates....................... -- 6,945 -- (6,945)(e) --
-------- ------- ----------- ----------- ----------
Total current liabilities...................... 40,161 16,172 -- (8,514) 47,819

Senior Notes....................................... 100,000 -- -- -- 100,000
Long-term debt..................................... -- 1,714 -- 33,714(b)(c)(d)(e) 35,428

Deferred gain...................................... 11,314 -- -- -- 11,314
Deferred income taxes.............................. 11,510 9,420 -- -- 20,930
Other long-term liabilities........................ -- 9,228 -- 1,714(e) 10,942
-------- ------- ----------- ----------- ----------
Total liabilities.............................. 162,985 36,534 -- 26,914 226,433

Minority interest.................................. -- 57 -- (57)(e) --

Stockholders' Equity:
Common stock....................................... 6 4,278 2(a) (4,278)(e) 8
Preferred stock.................................... -- -- -- -- --
Additional paid in capital......................... 44,802 -- 29,173(a) -- 73,975
Retained earnings.................................. 12,342 12,827 -- (12,827)(e) 12,342
Translation adjustment............................. -- (766) -- 766(e) --
-------- ------- ----------- ----------- ----------
Total stockholders' equity..................... 57,150 16,339 29,175 (16,339) 86,325
-------- ------- ----------- ----------- ----------
Total liabilities and stockholders' equity..... $220,135 $52,930 $ 29,175 $ 10,518 $312,758
-------- ------- ----------- ----------- ----------
-------- ------- ----------- ----------- ----------
</TABLE>

See accompanying notes.

17
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)

The Pro Forma Combined Consolidated Balance Sheet reflects the Transactions
as if they had occurred as of September 30, 1997 as follows (the Gessner
Acquisition is expected to occur in December 1997; actual amounts will differ
from amounts estimated below):

(a) Reflects the issuance of the Common Stock in the Offering:

<TABLE>
<C> <S> <C>
Issuance of the Common Stock in the Offering.................................. $31,500
Expenses for issuance of the Common Stock in the Offering..................... (2,325)
---------
$29,175
---------
---------
(b) Reflects the following:
Issuance of German bank debt and application of the proceeds therefrom........ $30,857
Debt issuance costs........................................................... 500
---------
30,357
---------
---------

(c) Represents the cash payment to Gessner's former stockholders:
Cash paid to sellers.......................................................... $38,466
---------
---------
(d) Reflects the following:
Steinbeis Note................................................................ $4,571
---------
---------
</TABLE>

(e) The Gessner Acquisition will be accounted for as a purchase in accordance
with Accounting Principles Based Opinion No. 16, "Business Combinations."
The purchase price is being allocated first to the tangible and
identifiable assets and liabilities of Gessner based upon preliminary
estimates of their fair market values, with the remainder allocated to
goodwill.

<TABLE>
<C> <S> <C> <C>
Purchase price........................................................ $43,037
Book value of net assets as of September 30, 1997..................... 16,396
Net liabilities excluded or eliminated at acquisition:
Land.................................................................. (2,171)
Current portion of long-term debt..................................... 1,569
Accounts payable-affiliated........................................... 6,945
Long-term debt........................................................ 1,714
---------
Book value of net assets acquired..................................... 24,453 (24,453)
--------- ---------
Increase in basis..................................................... $18,584
---------
---------
Allocation of increase in basis:
Increase in fair value of property, plant and equipment............... $15,154
Increase in other long-term liabilities............................... (1,714)
Increase in goodwill.................................................. 5,144
---------
$18,584
---------
---------
</TABLE>

18
<PAGE>
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA
FOR PRIOR ACQUISITION COMPANY
ACQUISITIONS(A) GESSNER(B) ADJUSTMENTS PRO FORMA
---------------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales..................... $227,822 $85,712 $-- $313,534
Cost of sales................. 186,504 65,292 (2,468)(c) 249,328
-------- ---------- ----------- ---------
Gross profit................ 41,318 20,420 2,468 64,206
Selling, general and
administrative expenses..... 15,225 17,620 (103)(d) 32,742
-------- ---------- ----------- ---------
Income from operations...... 26,093 2,800 2,571 31,464
Other (income) expenses,
net......................... (1,030) (709) -- (1,739)
Cogeneration income........... (97) -- -- (97)
Interest expense.............. 9,680 709 1,714(e) 12,103
-------- ---------- ----------- ---------
Income before income
taxes..................... 17,540 2,800 857 21,197
Income tax provision
(benefit)................... 6,831 990 343(f) 8,164
-------- ---------- ----------- ---------
Net income before minority
interest.................. 10,709 1,810 514 13,033
Minority interest............. -- 66 (66)(g) --
-------- ---------- ----------- ---------
Net income................ $ 10,709 $ 1,744 $ 580 $ 13,033
-------- ---------- ----------- ---------
-------- ---------- ----------- ---------
Pro forma earnings per common
and common equivalent
share....................... $ 1.73(h)
---------
---------
Weighted average number of
common and common equivalent
shares outstanding.......... 7,554
---------
---------
</TABLE>

See accompanying notes.

19
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The Pro Forma Combined Consolidated Statements of Income for the year ended
December 31, 1996 reflects the Transactions as if they had occurred on January
1, 1996 as follows (the Gessner Acquisition is expected to occur in December
1997; actual amounts will differ from amounts estimated below):

<TABLE>
<C> <S> <C>
(a) The following Pro Forma Combined Consolidated Statements of
Income give effect to the Prior Acquisitions as if they had
occurred on January 1, 1996:
</TABLE>

<TABLE>
<CAPTION>
TEN MONTHS TEN MONTHS
ENDED ENDED
YEAR ENDED OCTOBER 31, OCTOBER
DECEMBER 31, 1996 31, 1996 TOTAL PRO FORMA COMPANY
1996 COMPANY CPG ARCON HISTORICAL ADJUSTMENTS PRO FORMA
------------ ----------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales............................... $124,771 $78,875 $ 24,176 $ 227,822 $-- $ 227,822
Cost of sales........................... 101,981 65,662 17,493 185,136 1,368(i) 186,504
------------ ----------- ---------- ---------- ----------- ---------
Gross profit.......................... 22,790 13,213 6,683 42,686 (1,368) 41,318
Selling, general and administrative
expenses.............................. 9,908 5,125 2,600 17,633 (2,408)(ii) 15,225
------------ ----------- ---------- ---------- ----------- ---------
Income from operations................ 12,882 8,088 4,083 25,053 1,040 26,093
Other (income) expenses, net............ (1,030) -- -- (1,030) -- (1,030)
Cogeneration income..................... (97) -- -- (97) -- (97)
Interest expense........................ 1,798 891 1,747 4,436 5,244 (iii 9,680
------------ ----------- ---------- ---------- ----------- ---------
Income before income taxes............ 12,211 7,197 2,336 21,744 (4,204) 17,540
Income tax provision (benefit).......... 4,697 2,873 1,121 8,691 (1,860)(iv) 6,831
------------ ----------- ---------- ---------- ----------- ---------
Net income before extraordinary
item................................ 7,514 4,324 1,215 13,053 (2,344) 10,709
Extraordinary item...................... (297) -- -- (297) 297(v) --
------------ ----------- ---------- ---------- ----------- ---------
Net income.......................... $ 7,217 $ 4,324 $ 1,215 $ 12,756 $(2,047) $ 10,709
------------ ----------- ---------- ---------- ----------- ---------
------------ ----------- ---------- ---------- ----------- ---------
</TABLE>

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

<TABLE>
<C> <S> <C>
(i) Reflects the following:
Conversion of CPG inventory from LIFO to fair value........................ $ 1,177
Additional depreciation expense on increased property basis due to purchase
accounting adjustment...................................................... 1,253
Reduction in headcount and operational expenses due to integration of
Arcon...................................................................... (1,062)
---------
$ 1,368
---------
---------
(ii) Reflects the following:
Reversal of amortization of prior goodwill................................. $ (680)
Reversal of amortization of financing costs relating to debt to be
retired.................................................................... (320)
Reversal of management fees................................................ (84)
Amortization of goodwill acquired.......................................... 1,072
Reversal of deferred compensation expense.................................. (42)
Reduction of headcount and operational expense due to integration of CPG
and Arcon.................................................................. (2,354)
---------
$ (2,408)
---------
---------
</TABLE>

20
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED
STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<C> <S> <C>
(iii) Reflects the following:
Interest costs on the Senior Notes due 2006.............................. $ 7,808
Reversal of interest expense............................................. (1,986)
Reversal of warrant accretion............................................ (838)
Reversal of amortization of financing costs relating to debt to be
retired................................................................ (157)
Amortization of financing costs relating to the issuance of the Senior
Notes due 2006......................................................... 417
---------
$ 5,244
---------
---------

(iv) Reflects the net additional income tax provision (benefit) as a result of
the above adjustments, except the goodwill amortization and warrant
accretion adjustments, at an effective tax rate of 40%..................... $ (1,860)
---------
---------

(v) Reflects the reversal of loss on extinguishment of debt.................... $ 297
---------
---------
</TABLE>

<TABLE>
<C> <S> <C>
(b) All income statement amounts are based on a conversion rate of DM1.50 to $1.00
(which was the average rate in effect for the year ended December 31, 1996).

(d) Reflects the following:
$ 171
Amortization of goodwill acquired..............................................
(345)
Reversal of management fee.....................................................
71
Amortization of financing costs relating to German bank debt...................
---------
$ (103)
---------
---------
(e) Reflects the following:
$ 2,157
Interest cost on the German bank debt..........................................
266
Interest cost on the Steinebeis Note...........................................
(709)
Reversal of interest expense...................................................
---------
$ 1,714
---------
---------

(f) Reflects the net additional income tax provision as a result of the above
adjustments at an effective tax rate of 40%.

(g) Reflects the elimination of minority interest.

(h) If the Gessner Acquisition is not consummated, the Company's earnings per share
for the year ended December 31, 1996, giving PRO FORMA effect to the Offering
and to the Prior Acquisitions, would be $1.42.
</TABLE>

21
<PAGE>
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
ACQUISITION COMPANY PRO
COMPANY GESSNER(A) ADJUSTMENTS FORMA
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales................................................. $ 176,659 $ 63,392 $ -- $ 240,051
Cost of sales............................................. 142,559 46,953 (1,499)(b) 188,013
---------- ----------- ----------- -----------
Gross profit............................................ 34,100 16,439 1,499 52,038
Selling, general and administrative expenses.............. 12,234 11,173 (77)(c) 23,330
---------- ----------- ----------- -----------
Income from operations.................................. 21,866 5,266 1,576 28,708
Other (income) expenses, net.............................. 218 (250) -- (32)
Interest expense.......................................... 6,900 330 1,488(d) 8,718
---------- ----------- ----------- -----------
Income before income taxes.............................. 14,748 5,186 88 20,022
Income tax provision (benefit)............................ 5,762 1,950 35(e) 7,747
---------- ----------- ----------- -----------
Net income before minority interest..................... 8,986 3,236 53 12,275
Minority interest......................................... -- 43 (43)(f) --
---------- ----------- ----------- -----------
Net income............................................ $ 8,986 $ 3,193 $ 96 $ 12,275
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
Pro forma earnings per common and common equivalent
share................................................... $ 1.58(g)
-----------
-----------
Weighted average number of common and common equivalent
shares outstanding...................................... 7,775
-----------
-----------
</TABLE>

See accompanying notes.

22
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The Pro Forma Combined Consolidated Statement of Income for the nine months
ended September 30, 1997 reflects the Transactions as if they had occurred on
January 1, 1997 as follows (the Gessner Acquisition is expected to occur in
December 1997; actual amounts will differ from amounts estimated below):

<TABLE>
<C> <S> <C>
(a) All income statement amounts are based on a conversion rate of DM1.71 to $1.00
(which was the average rate in effect for the nine months ended September 30,
1997).

(b) Reflects a reduction in depreciation expense.

(c) Reflects the following:
Amortization of goodwill acquired.............................................. $ 128
Reversal of management fee..................................................... (259)
Amortization of financing costs relating to German bank debt................... 54
---------
(77)
---------
---------

(d) Reflects the following:
Interest cost on the German bank debt.......................................... $1,618
Interest cost on the Steinbeis Note............................................ 200
Reversal of interest expense................................................... (330)
---------
$1,488
---------
---------

(e) Reflects the net additional income tax provisions as a result of the above
adjustments at an effective tax rate of 40%.

(f) Reflects the elimination of minority interest.

(g) If the Gessner Acquisition is not consummated, the Company's earnings per
share, giving PRO FORMA effect to the Offering, would be $1.16.
</TABLE>

23
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

The following selected historical consolidated financial data for each of
the years in the three-year period ended December 31, 1996 have been derived
from, and are qualified by reference to the audited consolidated financial
statements of the Company included elsewhere or incorporated by reference in
this Prospectus. The selected historical consolidated financial data for each of
the years in the two year period ended December 31, 1993, have been derived from
the audited consolidated financial statements of the Company. The selected
historical consolidated unaudited financial data set forth below for the nine
month periods ended September 30, 1996 and 1997, have been derived from, and are
qualified by reference to, the Company's consolidated unaudited financial
statements included elsewhere or incorporated by reference in this Prospectus
and include all adjustments, consisting of normal recurring adjustments, which
management considers necessary for a fair presentation of the results of the
Company for such periods. Results for the interim periods are not necessarily
indicative of the results for the full year. The selected historical
consolidated financial data set forth below should be read in conjunction with,
and are qualified by reference to, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the consolidated financial
statements of the Company and accompanying notes thereto included elsewhere or
incorporated by reference in this Prospectus.

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
INCOME STATEMENT DATA:
Net sales............................................ $ 84,219 $ 79,982 $ 105,416 $ 117,516 $ 124,771 $ 77,734 $ 176,659
Cost of sales........................................ 68,614 66,360 88,138 100,106 101,981 64,105 142,559
--------- --------- --------- --------- --------- --------- ---------
Gross profit....................................... 15,605 13,622 17,278 17,410 22,790 13,629 34,100
Selling, general and administrative expenses......... 5,955 7,881 8,584 8,397 9,908 6,316 12,234
--------- --------- --------- --------- --------- --------- ---------
Income from operations............................. 9,650 5,741 8,694 9,013 12,882 7,313 21,866
Loss on sale of assets, net.......................... -- -- -- 8,302 -- -- --
Other (income) expenses, net......................... 464 374 (658) (1,198) (1,030) (991) 218
Cogeneration income (a).............................. -- (4,404) -- (6,512) (97) -- --
Interest expense..................................... 7,752 3,137 1,356 892 1,798 310 6,900
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes and extraordinary
items............................................ 1,434 6,634 7,996 7,529 12,211 7,994 14,748
Income tax (benefit) expense......................... 583 1,921 2,768 (424) 4,697 3,037 5,762
--------- --------- --------- --------- --------- --------- ---------
Income before extraordinary items.................. 851 4,713 5,228 7,953 7,514 4,957 8,986
Extraordinary items.................................. 573 (2,103) (149) -- (297) -- --
--------- --------- --------- --------- --------- --------- ---------
Net income....................................... $ 1,424 $ 2,610 $ 5,079 $ 7,953 $ 7,217 $ 4,957 $ 8,986
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------

Earnings per common and common equivalent share
(b)................................................ $ 2.80 $ 0.52 $ 0.84 $ 1.31 $ 1.19 $ 0.82 $ 1.43
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Weighted average number of common and common
equivalent shares outstanding (b).................. 509 4,985 6,032 6,050 6,054 6,053 6,275
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 30,
1997
-------------
<S> <C>
BALANCE SHEET DATA:
Working capital.................................................................................... $ 32,869
Total assets....................................................................................... 220,135
Long-term debt, less current maturities............................................................ 100,000
Stockholders' equity............................................................................... 57,150
</TABLE>

- ------------------------
(a) The Company has entered into an agreement with Kamine pursuant to which the
Company is the host to a cogeneration facility developed by Kamine at the
Company's Beaver Falls mill, in consideration of which the Company received
an initial cash payment of $4.4 million in 1993 and received deferred cash
payments totaling $7.0 million from Kamine between May 1995 and May 1997.
The present value of these deferred cash payments, in the amount of $6.5
million, was recorded as income in the first quarter of 1995. Cash payments
of $3.0 million, $2.0 million and $2.0 million, respectively, were received
in May 1995, May 1996 and May 1997. The payment received in May 1997 was the
last payment due under this agreement.

24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The Company is a leading manufacturer and converter of specialty fiber-based
materials with a wide range of consumer and industrial end-uses.

ACQUISITIONS AND DISPOSITION. On October 31, 1996, the Company completed
the acquisitions of CPG and Arcon for an aggregate purchase price of
approximately $91.5 million. These acquisitions were accounted for on the
purchase method which resulted in goodwill of approximately $46.7 million, which
is being amortized over 30 years. On June 30, 1994, the Company completed the
acquisition of the Endura Products Division ("Endura") of W.R. Grace & Co. (the
"Endura Acquisition") for a total purchase price of approximately $26.4 million
plus approximately $1.0 million in expenses paid. The Endura Acquisition was
accounted for on the purchase method which resulted in goodwill of approximately
$526,000, which is being amortized over 30 years. On March 22, 1995, the Company
sold the assets of its Lewis mill and gasket business to Armstrong World
Industries, Inc. ("Armstrong") for $12.9 million, together with $1.1 million of
inventory, which was sold to Armstrong at book value. This transaction resulted
in a loss of $8.3 million before taxes.

PURCHASE ACCOUNTING. The Gessner Acquisition will be accounted for as a
purchase of Gessner by the Company. As a result, the assets and liabilities of
Gessner will be recorded at their estimated fair market value. An amount equal
to the excess of the purchase price over the fair value of assumed liabilities
will be allocated to inventories, property and equipment, identifiable
intangible assets and goodwill. Goodwill will be amortized over 30 years.
Consequently, the post-Gessner Acquisition statements of income will be affected
by the amortization of such excess purchase price. See "Unaudited Pro Forma
Consolidated Financial Data."

RAW MATERIALS. Hardwood and softwood pulp and secondary fiber are the
Company's primary raw material requirements. These materials are cyclical in
both price and supply with the cyclic trends generally coinciding with the
strength of the overall economy and therefore the overall demand level for the
Company's products. Historically, there have been periods of significant and
rapid short-term pulp price changes, both up and down, with a concurrent
short-term impact on the Company's operating margins. However, over the full
cycle of the pulp market, the Company generally has been able in the past to
maintain margin stability with the larger impact to earnings coming from the
overall level of demand for the Company's products.

25
<PAGE>
RESULTS OF OPERATIONS

THE COMPANY

The Company has four principal product lines: office products, technical
specialties, durable specialties and filter products. These four product lines
were established in January 1997, as a result of the reconfiguration of the
Company's business following the Prior Acquisitions. The following table
summarizes the Company's historical net sales by product line.

<TABLE>
<CAPTION>
NINE
MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
1994 1995 1996 (1) 1996 1997
--------- --------- --------- --------- ---------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Office Products........................... $ 54,874 $ 57,326 $ 54,436 $ 39,420 $ 41,633
Technical Specialties (2)................. 35,132 30,565 31,077 16,909 58,190
Durable Specialties....................... 15,410 29,625 32,216 21,405 44,103
Filter Products (3)....................... -- -- 7,042 -- 32,733
--------- --------- --------- --------- ---------
$ 105,416 $ 117,516 $ 124,771 $ 77,734 $ 176,659
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

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

(1) Includes two months of results of CPG and Arcon following their acquisition.

(2) Net sales of Technical Specialties for the fiscal year ended December 31,
1994, and during the first three months of the fiscal year ended December
31, 1995, include net sales from the Company's former gasket business, which
was sold in March 1995.

(3) The Company entered this market in October 1996, upon consummation of the
Prior Acquisitions.

NINE MONTHS ENDED SEPTEMBER 30, 1997, COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1996.

Net sales increased 227.4% to $176.7 million in the first nine months of
1997 from $77.7 million in the comparable period in 1996.

The Prior Acquisitions added $95.4 million in sales revenue for the first
nine months of 1997. For the balance of the company's markets, net sales
increased 4.5% to $81.2 million in the first nine months of 1997 from $77.7 in
the comparable period in 1996. Office products net sales increased by 6.6% or
$2.6 million to $42.0 million for the first nine months of 1997 as compared to
$39.4 million in the comparable period in 1996. Durable specialty net sales
increased by 6.3% or $1.6 million to $26.8 million for the first nine months of
1997 as compared to $25.2 million in the comparable period in 1996. The book
cover component of technical specialties net sales was $11.6 million in the
first nine months of 1997 as compared to $11.8 million for the comparable period
in 1996.

Gross profit margin increased to 19.3% in the first nine months of 1997 as
compared to 17.5% for the comparable period in 1996. Current year margins were
impacted positively by lower fiber prices and productivity gains at the
Brattleboro, Vermont mill. These benefits were partially offset by reduced
selling prices to customers with whom the Company has cost-indexed supply
contracts. The cost-indexed customers account for approximately 15% of the
Company's sales. The new product mix within the Company due to the Prior
Acquisitions slightly reduced margins.

General and administrative expenses increased 94% to $12.2 (6.9% of net
sales) million in the first nine months of 1997 as compared to $6.3 million
(8.1% of net sales) for the comparable period in 1996. This increase was
primarily due to the impact of the Prior Acquisitions. Additional expenses were
also incurred relating to the change of the Company's name and the switching of
the Company's listing from NASDAQ to the NYSE.

26
<PAGE>
Income from operations increased $14.6 million to $21.9 million (12.4% of
net sales) in 1997 as compared to $7.3 million (9.4% of net sales) in the
comparable period in 1996. This increase was primarily due to the impact of the
Prior Acquisitions.

Other expenses increased by $1.2 million in the first nine months of 1997 to
$0.2 million as compared to ($1.0) million of other income for the comparable
period in 1996. This increase was due to higher levels of amortization related
to the Prior Acquisitions.

Interest expense increased to $6.9 million in the first nine months of 1997
as compared to $0.3 million for the comparable period in 1996. This increase was
due to the debt incurred to finance the Prior Acquisitions.

Net income for the first nine months of 1997 was $9.0 million or $1.43 per
share as compared to $5.0 million or $0.82 per share for the comparable period
in 1996.

YEAR ENDED DECEMBER 31, 1996, COMPARED TO YEAR ENDED DECEMBER 31, 1995

Net sales increased 6.2% to $124.8 million in 1996 from $117.5 million in
1995.

The Prior Acquisitions added $20.2 million in sales revenue over the final
two months of 1996. In March 1995 the Company sold its gasket business to
Armstrong. This caused its gasket product revenue, part of technical
specialties, to decline by $6.7 million in 1996 as compared to 1995.

For the balance of the Company's markets, office products sales declined by
5.1% or $2.9 million to $54.4 million in 1996 from $57.3 million in 1995. This
decline in sales for office products was due to the capacity loss associated
with the sale of Lewis mill to Armstrong in March 1995, predominantly in the
lightweight cover and filing grades. Technical specialties net sales increased
by 2.0% or $0.5 million to $31.1 million in 1996 from $30.6 million in 1995 due
to the impact of the Prior Acquisitions in the last two months of 1996, offset
by the capacity loss associated with the sale of the Lewis mill. Durable
specialties net sales increased by 8.8% or $2.6 million to $32.2 million in 1996
from $29.6 million in 1995. Filter products net sales increased from $0.0 in
1995 to $7.0 million in 1996, due to the impact of the acquisition of CPG.

Gross profit margin increased to 18.3% in 1996 from 14.8% in 1995. This
improvement was primarily due to lower prices for pulp and recycled fiber and to
improved manufacturing efficiencies resulting from equipment upgrades.

General and administrative expenses increased 17.9% to $9.9 million (7.9% of
sales) in 1996 from $8.4 million (7.1% of sales) in 1995. This increase was
primarily due to expenses incurred in connection with the Prior Acquisitions.

Income from operations increased 43.3% to $12.9 million (10.4% of sales) in
1996 from $9.0 million (7.7% of sales) in 1995.

Other income decreased 8.3% to $1.1 million in 1996 as compared to $1.2
million in 1995. On April 29, 1994, the Company sold and leased back certain
operating assets at the Brattleboro, Vermont mill. The sale of these assets
resulted in a deferred gain of $17.2 million which is being amortized at the
rate of $1.7 million per year. This income was offset by amortization of
organizational and financing costs and goodwill.

Interest expense increased to $1.8 million in 1996 as compared to $0.9
million in 1995. This increase is due to the debt incurred to fund the Prior
Acquisitions.

Income taxes were $4.7 million or 38.5% of taxable income in 1996.

Net income in 1996 was $7.2 million or $1.19 per share compared to $8.0
million or $1.31 per share in 1995, in each case, adjusted to give effect to the
Stock Split.

27
<PAGE>
YEAR ENDED DECEMBER 31, 1995, COMPARED TO YEAR ENDED DECEMBER 31, 1994

Net sales increased 11.5% to $117.5 million from $105.4 million in 1994. Net
sales for 1995 included the first full year of sales from Endura which was
acquired by the Company on June 30, 1994.

Office products net sales increased by 4.5% or $2.4 million to $57.3 million
in 1995 from $54.9 million in 1994. This increase was primarily due to strong
order levels that the Company believes were principally related to positive
economic conditions during the first half of 1995, offset by the capacity loss
associated with the sale of the Lewis mill to Armstrong in March 1995,
predominantly in the lightweight cover and filing grades. Technical specialties
net sales decreased by 13.0% or $4.5 million to $30.6 million in 1995 from $35.1
million in 1994. This decrease was due to the sale of the Lewis mill and gasket
business to Armstrong in 1995, offset by an increase in book cover sales of 5.3%
or $0.8 million to $15.8 million in 1995 from $15.0 million in 1994 and the
addition of technical specialties from the Endura Acquisition. The largest
portion of this decrease resulted from the sale of the gasket business which
represented $9.2 million in net sales. Durable specialties net sales increased
92.0% or $14.2 million to $29.6 million in 1995 from $15.4 million in 1994 due
to the full year impact of the Endura Acquisition.

Gross profit margin decreased to 14.8% in 1995 from 16.4% in 1994. This
decline was primarily due to higher prices for pulp and recycled fiber and
higher lease expenses related to sale-leaseback financing entered into in April
1994. These increased costs were offset in part by higher selling prices.

General and administrative expenses decreased to $8.4 million (7.1% of net
sales) in 1995 from $8.6 million (8.2% of net sales) in 1994. This decrease
resulted from reduced levels of expenses due to the sale of the Company's gasket
business and lower premiums for directors' and officers' insurance.

Income from operations increased 3.7% to $9.0 million (7.7% of net sales) in
1995 from $8.7 million (8.2% of net sales) in 1994. This increase resulted
primarily from lower levels of general and administrative expenses described
above, offset in part by higher costs for pulp and secondary fiber.

Other income increased 82.1% to $1.2 million in 1995 as compared to $0.7
million in 1994. Other income in 1995 was positively impacted by the
amortization of $1.7 million in deferred gain on the sale-leaseback transaction.
On April 29, 1994, the Company sold and leased back certain operating assets at
the Brattleboro, Vermont mill. The sale of these assets resulted in a deferred
gain of $17.2 million which is being amortized over the ten-year life of the
lease.

Interest expense decreased 34.2% to $0.9 million in 1995 from $1.4 million
in 1994. This decrease was due to lower levels of debt resulting primarily from
debt repayment using proceeds from the Lewis mill sale.

Income tax benefit was $0.4 million in 1995. This represents an effective
tax rate of (5.6%) and reflects the reversal of a $3.0 million valuation
allowance. Income tax expense was $2.8 million in 1994 which represented an
effective tax rate of 34.6% and reflects utilization of $21.4 million of net
operating loss carry-forwards.

Net income in 1995 was $8.0 million or $1.31 per share compared to $5.1
million or $0.84 per share in 1994, in each case, adjusted to give effect to the
Stock Split.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 1997, the Company had outstanding $100.0 million of
Senior Notes. The notes have a ten-year term, are non-amortizing and carry a
fixed interest rate of 9.375%. Additionally, the Company had available to it a
$20.0 million revolving credit facility as of September 30, 1997. As of such
date, no advances were outstanding under such credit facility.

The Company's historical requirements for capital have been primarily for
servicing debt, capital expenditures, working capital and acquisitions. Cash
flows from operating activities were $3.3 million and

28
<PAGE>
$8.8 million for the nine month periods ended September 30, 1997, and September
30, 1996, respectively. During these periods additions to property, plant and
equipment were $9.7 million and $4.3 million, respectively. In addition, the
Company expects to fund certain expenditures related to technology transfer
projects between Gessner and the Company, which the Company believes will
provide quality improvements, cost reductions, product performance enhancements
and the ability to produce a broader range of products. The Company currently
anticipates that the implementation of these projects can be accomplished over a
two to three year period, at a cost of $20 to $25 million. The Company believes
that cash flow from operations, together with the net proceeds of the Offering
plus amounts available under credit facilities, will be sufficient to fund its
capital requirements, debt service and working capital requirements for the
foreseeable future.

The Company intends to pursue strategic acquisitions that will enhance its
range of products, complement the Company's core markets, provide distribution
or sales and marketing efficiencies or provide opportunities for technology
gains or other operating efficiencies. Any such acquisition could require the
Company to secure independent debt or equity financing to complete such
transaction. See "The Gessner Acquisition."

INFLATION

During the past several years, the rate of general inflation has been
relatively low and has not had a significant impact on the Company's results of
operations. The Company purchases raw materials which are subject to cyclical
changes in costs that may not reflect the rate of general inflation.

SEASONALITY

The Company's business is mildly seasonal, with the third quarter of each
year typically having the lowest level of net sales and operating income. This
seasonality is the result of a lower level of purchasing activity in the third
quarter, since many converters shut down their operations during portions of
July.

NEW ACCOUNTING STANDARDS

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share." This statement
is effective for periods ending after December 31, 1997. The Company has yet to
analyze the potential impact on its financial statements upon adoption of this
pronouncement.

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income." This
statement is effective for periods beginning after December 15, 1997. The
Company has yet to analyze the potential impact on its financial statements upon
adoption of this pronouncement.

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information." This statement is effective for periods
beginning after December 15, 1997. The Company has yet to analyze the potential
impact on its financial statements upon adoption of this pronouncement.

29
<PAGE>
BUSINESS OF THE COMPANY

HISTORY

The Company was created in 1989 when Boise Cascade Corporation sold certain
assets and liabilities of its Specialty Paperboard division to a group of
investors which included the Company's management and McCown De Leeuw & Co.
("MDC"), a private investment firm. The Company completed an initial public
offering of its common stock in early 1993 and is currently traded on the NYSE
under the symbol "FMK".

Since its inception, the Company has pursued a strategy of establishing
itself as a leading manufacturer and converter of specialty paper products for
markets where its manufacturing expertise, proprietary production methods and
customer relationships provide a competitive advantage. Prior to 1994, the
Company focused on two primary market areas, office products and technical
specialties. Office products primarily consisted of pressboard products made
into products for filing, binding and storage of documents. Technical
specialties primarily consisted of latex saturated and coated book cover
materials and gasket materials. In 1994, through the Endura Acquisition, the
Company broadened its product offerings to include durable specialties, such as
industrial and consumer masking tape substrates and printed circuit board
substrates. In 1995, the Company sold its automotive gasket business to
Armstrong. In 1996, the Company acquired CPG, an acquisition which gave the
Company strong positions in markets for the automotive fuel and oil filtration
materials and technical specialties including electrical transformer paper and
acid-free picture mounting art board. These products, together with the
saturated and coated book cover materials and other technical specialty products
manufactured by the Company prior to the acquisition of CPG, form the core of
the technical specialties division. Also in 1996, the Company acquired Arcon,
which led the industry in pioneering the use and treatment of
Tyvek-Registered Trademark- as a low cost, durable binding alternative for books
and a wide range of edge binding and reinforcing for products such as pressboard
folders, memo pads and checkbooks. The products formerly manufactured by Arcon
were incorporated into the product offerings of the durable specialties
division. The Company's headquarters is located at 161 Wellington Road, P.O. Box
498, Brattleboro, Vermont 05302. The Company's home page on the Internet is
located at http://www.fibermark.com.

- ------------------------
- -Registered Trademark- DuPont registered trademark.

30
<PAGE>
OVERVIEW

The Company has four distinctive categories of products. The table below
provides an overview of the Company's primary product lines and facilities:
<TABLE>
<CAPTION>
TECHNICAL DURABLE
OFFICE PRODUCTS SPECIALTIES SPECIALTIES
<S> <C> <C> <C> <C> <C> <C> <C>
PRIMARY - Pressboard - Electrical - Tape substrates -
PRODUCTS: filing, cover and transformer paper
binder materials

- Lightweight - Acid-free board - Binding tapes -
filing and cover
materials

- Premium cover - Abrasive backing - Hinge and -
papers paper reinforcing tapes

- Premium cover
papers

- Printed circuit
board base paper

- Photographic
packaging paper
and board

- Wet-strength tag

- Heavyweight book
cover

- Lightweight book
cover

FACILITIES(a): Brattleboro, Fitchburg, MA(b) Quakertown, PA(b)
VT(b) Warren Glen, NJ Owensboro, KY(c)
Warren Glen, NJ Hughesville, NJ
Hughesville, NJ Owensboro, KY(c)
Beaver Falls, NY
Richmond, VA

<CAPTION>
FILTER PRODUCTS
<S> <C>
PRIMARY Saturated filter
PRODUCTS: paper
Non-saturated
filter paper
Industrial
filter paper
FACILITIES(a): Richmond, VA(b)
Rochester, MI
Fitchburg, MA
</TABLE>

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

(a) The Company also has sales offices in Annecy, France; Hong Kong, People's
Republic of China; and Tokyo, Japan.

(b) Division Headquarters.

(c) The Company has decided to cease operations at this facility during the
first quarter of 1998. The Company intends to transfer the production of
this facility to certain of its other facilities.

31
<PAGE>
BUSINESS STRATEGY

- BUSINESS RATIONALIZATION. The Company continually evaluates its
organizational structure and manufacturing operations to identify
opportunities to more effectively meet its customers' requirements and to
reduce costs. As a result, the Company may reconfigure its manufacturing
operations, including the number of facilities operated and the locations
at which products are manufactured.

- INVEST IN TECHNOLOGY AND CAPITAL IMPROVEMENTS. The Company seeks to reduce
costs, increase capacity where needed, enhance manufacturing capabilities
and improve product quality through selected capital investments. The
Company invested approximately $8.5 million in new equipment, technology
and leasehold improvements at its facilities during the fiscal year ended
December 31, 1996, and $9.7 million during the nine months ended September
30, 1997. The Company intends to continue to upgrade its facilities and
equipment to achieve further operating efficiencies and, in particular, to
take advantage of the technology transfer opportunities it expects to
realize from the Gessner Acquisition.

OFFICE PRODUCTS

MARKET. The Company manufactures a wide range of materials used in the
manufacture of office products. The Company believes that it is the largest
domestic supplier of pressboard, which is converted into data binders, notebook
covers, report covers, ring binders, and file and index guides. The Company also
pursues niche markets within the office supplies market where its capabilities
and customer relationships give it a competitive advantage.

32
<PAGE>
PRODUCTS. The table below sets forth the Company's primary office products
materials.

OFFICE PRODUCTS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PRODUCT TYPE CHARACTERISTICS TYPICAL END USES
- ----------------------------- ----------------------------- -----------------------------
<S> <C> <C>
Pressboard filing cover and High density paperboard Data binders; ring binders;
binder material designed for strength, report covers; notebook
rigidity, durability and covers
appearance; may be embossed
or acrylic coated; high
recycled content

Lightweight filing and cover Lighter weight paperboard, Filing products; portfolios;
materials designed for decorative report covers; document
embellishments and less covers; presentation covers
demanding end-uses than
pressboard

Premium cover papers Well-formed papers with good Printed report covers;
strength, color/texture and promotional and advertising
printable surfaces materials
</TABLE>

The largest component of the office products division's net sales is a
heavyweight paperboard (pressboard) which is densified through a proprietary
manufacturing process developed by the Company. This densification process
provides pressboard with the strength, rigidity, durability and appearance
required for data binders, ring binders, notebook covers and report covers. The
Company and its predecessors have offered their pressboard line of products for
more than 100 years and believes it has established significant brand awareness
and loyalty among its customers.

The Company produces certain types of lightweight filing and cover materials
for conversion into file folders, expanding wallets, notebook covers and report
covers. The Company is continuing its focus on certain products for the
lightweight filing and cover material market, such as colored file folder and
report covers for the growing on-demand document printing market, with specific
emphasis on products meeting the market's recycled content requirements. The
Company's lightweight filing and cover materials are generally manufactured
using similar equipment and processes and are sold to many of the same customers
as the Company's heavyweight office products. The Company continues to
experience the benefits of the Brattleboro paper machine upgrade, completed in
October 1995, which increased capacity by 25%. With the added capacity, the
Company is working to build this lightweight business through the strength of
its relationships with office products converters. These lightweight materials,
manufactured to meet consumer and government demand for recycled paper products,
provide an opportunity for the Company to increase its penetration in the office
products market.

The Company manufactures a line of premium cover stocks sold through paper
distributors to commercial printers. These papers have good strength and may
have colored or textured surfaces and are typically used for printed report
covers and promotional and advertising materials.

The Company offers many of its products in acrylic coated and embossed form,
providing additional durability and stain resistance. The Company has the
capability to custom manufacture materials in a variety of colors and can finish
its products to customer specifications, including glazing (densification),
coating, embossing, laminating, sheeting, slitting and rewinding.

CUSTOMERS. The Company sells its office products through its own sales
representatives to major domestic office products converters, including: Acco
World Corporation, a division of American Brands Inc.; Smead Manufacturing
Company and Esselte Pendaflex Corp. The Company has long-term relationships with
all of its major customers in this market. The Company's customers produce
office products

33
<PAGE>
from the Company's paper-based materials and sell end-use products through
contract stationers, paper merchants, office products wholesalers, buying
groups, warehouse clubs, catalog sales, office products superstores, retail
office supply stores and other outlets. The Company also markets its materials
through direct sales representatives or manufacturer's representatives in Asia,
Canada, Mexico, Central and South America and Europe.

COMPETITION. In the office products supply market, the Company competes
with a number of other producers of heavyweight pressboard, colored file folder
paper and lightweight filing and cover materials, including International Paper
Company, Temple-Inland Inc., Brownville Specialty Products and Merrimac Paper
Co., Inc. ("Merrimac"). The Company believes it holds a leading position in the
domestic market for pressboard and a growing presence in the lightweight filing
and cover materials market. In markets that use pressboard, the Company also
competes with producers of vinyl and plastic office products materials. In the
premium cover and text market, the Company also competes against divisions of
Georgia Pacific Corp., Fox River Paper Co., Crown Vantage Inc. and a number of
other manufacturers.

TECHNICAL SPECIALTIES

MARKET. The Company manufactures specialty fiber-based materials customized
to meet the unique performance characteristics required by specific customers
and end-use markets. Technical specialties include paper used as insulation
material in electrical transformer coils, acid-free board used for archival
quality picture mounting and records storage applications, photographic
packaging paper and board, printed circuit board base papers, wet-strength tag
used primarily in the laundry and dry-cleaning industries and paper backings for
sandpaper and other abrasives. The Company has been able to successfully enter
niche markets in the technical specialties area in which it believes its
manufacturing flexibility and technical expertise give it a competitive
advantage in meeting rigorous customer requirements. The Company believes that
it is the U.S. market leader in many of its markets, including electrical
transformer papers, acid-free board, wet-strength tag and heavyweight industrial
abrasive backing materials. In addition, the Company is a leading producer of
saturating base paper for the manufacture of printed circuit boards. Many of the
Company's technical specialties have been used in their current applications for
many years and have proven to be cost-effective in meeting the performance
requirements for which they are utilized. To supplement these products, the
Company works to develop new products that have the potential to experience
positive growth due to superior performance, lower cost or both.

The Company is one of the two leading domestic producers of latex-reinforced
material used in book covers and related products. These materials are used by
customers in applications where durability and distinctive appearance are
important, such as flexible covers for books, menus, photo albums, desktop
calendars, appointment books and reports.

34
<PAGE>
PRODUCTS. The table below sets forth the Company's primary technical
specialties:

TECHNICAL SPECIALTIES
- --------------------------------------------------------------------------------

Acid-free board High pH (acid-free), Archival quality picture
exceptional cleanliness mounting and document storage

Abrasive backing paper High-tear strength, smooth Heavyweight sandpaper and
surfaces and controlled other commercial abrasives
electrostatic properties

Printed circuit board base Low density; uniform high Interior of printed circuit
paper bulk boards

Photographic packaging paper Totally opaque; high-strength Photographic film protection
and board

Wet-strength tag High-strength saturated Laundry and dry-cleaning
sheet; moisture and solvent labels
resistant

Heavyweight book cover Strong cotton fiber base Flexible covers for softbound
sheets latex-reinforced and books, menus, photo albums,
leather-texture desktop calendars and
accessories, appointment
books and reports

Lightweight book cover Latex-reinforced base sheets Exterior cover material for
of higher bulk and lower hardbound books; photo
weight albums, report covers

Premium cover papers Well-formed papers with good Printed report covers;
strength, color/texture and promotional and advertising
printable surfaces materials
</TABLE>

The Company supplies electrical transformer papers with high dielectric
strength which are wrapped around individual electrical transformer coils as
insulating material. The Company is the major supplier of such paper to Bedford
Materials, Inc., which operates the transformer insulation business formerly
owned by Westinghouse Electrical Corp., and is one of two major suppliers to the
other major U.S. manufacturer of electrical transformers.

The Company manufactures acid-free board used as picture mounting art board
and archival storage media. Acid-free picture mounting art board and storage
media are designed to prevent the degradation and discoloration of artwork and
documents caused by acidic exposure. The Company believes that its acid-free
products have superior performance characteristics which have resulted in their
wide acceptance in the marketplace.

The Company's photographic packaging paper is primarily dual composition
paper used by Eastman Kodak Company ("Kodak") and Polaroid Corp. ("Polaroid") to
package certain films. Such products must meet demanding standards for opacity
in order to prevent premature exposure of the film. The Company's strong
position in the market for photographic packaging paper is based in part upon
the Company's ability to manufacture multi-ply paper.

The Company also manufactures printed circuit board base papers which are
used in the manufacture of circuit boards for remote control devices and other
electrical components. The Company's printed

35
<PAGE>
circuit board base papers have the advantage of low density and high bulk,
allowing circuit board manufacturers to lower their costs and increase their
output by processing fewer sheets than they would with competing materials.

The Company's wet-strength papers are primarily used as tags in the laundry
and dry cleaning industries to identify clothing as it is processed through
washing machines and dry cleaning equipment.

These products, in addition to withstanding physically and chemically harsh
processes, are manufactured in multiple colors that must not be transferred onto
the clothing to which they are attached. The Company is a major producer of this
paper in the United States and is now exporting to the United Kingdom, with
opportunities to expand into other European markets.

Sandpaper and other abrasive backing papers are used in the manufacture of
heavyweight sandpaper and other commercial abrasives. The Company's sandpaper
and other abrasive backing papers are designed to meet customers' exacting
specifications for tear strength, smooth surfaces and controlled electrostatic
properties.

Using proprietary manufacturing processes, the Company combines pulp, latex,
recycled rag fiber and other materials to produce flexible and durable specialty
materials for use in a variety of book cover applications. The Company sells its
book cover materials directly to customers in this market, who in turn coat,
emboss and decorate the material and sell it to manufacturers of end-use
products.

The Company's primary latex product is manufactured using recycled rag
fibers, resulting in increased durability and a leather-like texture and
appearance. These products are used for day books, diaries, menu covers and
softcover books. The Company is also a leading supplier of light-weight
materials used in covering hardbound books.

CUSTOMERS. The Company sells its technical specialties through its own
sales force to a variety of customers. Major customers include: Bedford
Materials, Inc. and the TMC division of Avery Dennison Corp. (electrical
transformer paper); the Nielsen and Bainbridge division of Esselte Corp. and the
Crescent Cardboard division of Potomac Corp. (acid-free paper); Kodak
(photographic packaging paper); Pajco-Holliston (coating base for book covers).
The Company works with its customers to develop new products and to provide
technical support for existing products.

COMPETITION. The Company's competitors in technical specialties vary by
product type. Generally, the Company faces competition from both foreign and
domestic specialty manufacturers. The Company's focus is to compete in products
and markets which require manufacturing flexibility, product properties and
quality levels not provided by integrated paper mills. The Company's key
competitors include Kimberly-Clark Corporation ("Kimberly-Clark"), Sorg Paper
Co., a subsidiary of Mosinee Paper Corp., Arjo Wiggins USA, Inc., Robert Cordier
AG and Merrimac. In the latex-reinforced book cover market, the Company
primarily competes with Rexam DSI, Inc. and, to a lesser degree, with products
of plastic-coated and coated cloth book cover materials.

36
<PAGE>
DURABLE SPECIALTIES

MARKET. The Company is one of the largest producers of specialty tape
substrates and a broad range of saturated, coated and non-woven materials. The
primary markets for the Company's durable specialties are tape substrates
(primarily industrial and consumer masking tapes), binding tapes and hinge and
reinforcing tapes, and book cover materials. There are seven major North
American producers of pressure sensitive tape, who, together, account for the
majority of the industry's total sales. Most of these producers have
self-saturating capabilities for general purpose tapes and look to suppliers
like the Company for specialty paper backings.

The Company believes it is a leading supplier of binding tapes and hinge and
reinforcing tapes converted from specialty papers and substitutes for the
manufacture of notepads, books, expandable file folders and checkbooks.

The Company has also sought out niche markets in which it believes it can
have a competitive advantage for its durable specialties. The Company produces
high strength materials used in the apparel industry as blue jean tags and for
various other tag and label applications.

PRODUCTS. The table below sets forth the Company's primary durable
specialties.

<TABLE>
<CAPTION>
DURABLE SPECIALTIES
- -------------------------------------------------------------------------------------------
<S> <C> <C>
PRODUCT TYPE CHARACTERISTICS TYPICAL END USES
- ----------------------------- ----------------------------- -----------------------------
Tape substrates Enhanced strength, release, Industrial and commercial
impermeability or heat masking tapes; barrier tapes;
resistance pressure-sensitive tapes;
bandolier tapes; packaging
tapes

Binding tapes Tyvek-Registered Trademark- Notepads; composition books;
and latex-impregnated paper checkbooks
tapes

Hinge and reinforcing tapes Durable Expandable file folders
Tyvek-Registered Trademark-
high fold-and tear-strength
reinforcing materials
</TABLE>

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

- -Registered Trademark-DuPont registered trademark.

The Company's tape substrates are used in the manufacture of industrial and
consumer masking tapes, barrier tapes, other pressure-sensitive tapes and
bandoliering tapes. The Company's products have the strength and technical
properties to meet various performance demands. These products include
barrier-coated and heat resistant industrial masking tapes for the automotive
paint and aircraft manufacturing industries and packaging tapes which withstand
the rigors of the worldwide shipping. The Company's bandoliering tapes are used
by the electronics industry to carry resistors, capacitators and other items
during high-speed automated assembly of electronic devices.

The Company is a leading producer of high strength binding tapes and hinge
and reinforcing tape using Tyvek-Registered Trademark- as a base material. These
products are primarily used to protect, bind and decorate books and documents,
checkbooks and notepads. The Company's Tyvek-Registered Trademark- tapes,
marketed under the trade name Super ArcoFlex-TM-, are used to decorate pad
bindings and are able to withstand the stress incurred during cutting in high
volume manufacturing. The Company also uses Tyvek-Registered Trademark- in the
manufacture of supported gussets for red wallet expansion folders. Gussets are
the accordion folder material between the two folder side sheets that allow the
folder to expand. The Company has developed a method to strengthen the gussets
by laminating coated Tyvek-Registered Trademark- to the folder material forming
the gusset and sells this material under the name Expanlin. The Company also
sells coated Tyvek-Registered Trademark- to converters who laminate it to the
folder material themselves. The result is a material that is stronger, longer
lasting and more reliable than

37
<PAGE>
unsupported gussets. The Company believes that Expanlin has become the preferred
material used in supported gussets by expansion folder manufacturers.

Other durable specialties include imitation leather stock which is sold to
garment label manufacturers who cut and print the material with various brand
and product information for use as blue jean tags. This material is expected to
maintain its crisp appearance after repeated washing cycles. The Company has
also developed a tag and label product line for manufacturers who require tags
and labels with the strength of Tyvek-Registered Trademark-. These products can
be color-coated and are used as luggage tags by the airline industry, as flame-
retardant labels for the automotive industry and other types of demanding
packaging applications.

CUSTOMERS. The Company offers its customers a broad product line with
flexible product development and manufacturing capabilities. This flexibility
has fostered long-term relationships with its client base. The Company sells its
specialty tape substrates to many of the leading tape manufacturers, including
American Tape Company and 3M. The Company believes that the international
customer base for these products may increase as the Company's sales force is
trained to sell these additional product lines. In the checkbook industry, the
Company's major customer is Deluxe Check Printers, a division of Deluxe Corp.
The Company sells blue jean tags and its other tag and label products to a
variety of converters and end-users.

COMPETITION. For tape backing the Company primarily competes against
Kimberly-Clark. In the binding tape and hinge and reinforcing tape markets, the
Company competes against several smaller competitors including Rexford Paper
Co., Northeast Paper Converting Company and Southern Label Company, Inc. The
Company believes it holds a leading position in the market for
Tyvek-Registered Trademark- based binding tapes and hinge and reinforcing tapes.
In other niche markets, the Company competes with various small competitors,
none of which has a dominant market position.

FILTER PRODUCTS

MARKET. The Company is a major supplier of saturated and non-saturated
filter papers used in fluid and air filters for the automotive and heavy-duty
truck and equipment industries. The Company estimates that the market for both
saturated and non-saturated papers was approximately $170 million in 1996, of
which 80% was utilized in the automotive and heavy-duty truck and equipment
markets. The other major market for these products include dry cleaner solvent
filtration and potable water filtration. The market for automotive and
heavy-duty truck and equipment filters has grown at a compound annual growth
rate of approximately 5.7% over the ten-year period from 1986 to 1996. The
Company also manufactures industrial filter paper used in a variety of
industrial applications and processes.

38
<PAGE>
PRODUCTS. The table below sets forth the Company's primary filter products
materials.

<TABLE>
<CAPTION>
FILTER PRODUCTS
- -------------------------------------------------------------------------------------------
<S> <C> <C>
PRODUCT TYPE CHARACTERISTICS TYPICAL END USES
- ----------------------------- ----------------------------- -----------------------------
Saturated filter paper Controlled porosity; enhanced Air, oil, fuel and hydraulic
strength and rigidity; high filters for heavy and light
temperature and chemical duty trucks and passenger
resistance cars;
dry-cleaning solvent filters

Non-saturated filter paper Controlled porosity; high Oil filters for heavy-duty
density; may be impregnated equipment and diesel trucks;
with activated carbon and home water filters
other fillers

Industrial filter paper Controlled porosity; high Hot oil filters for the
temperature resistance; fast-food industry; paint and
cleanliness lacquer manufacturing; fruit
juice processing
</TABLE>

The Company's major filter product is solvent-based saturated filter paper,
which is controlled porosity paper saturated with phenolic and other resins to
increase its strength and rigidity for use in various high temperature
applications. This product is purchased by filter manufacturers who cut, pleat
and cure the paper for use in oil, fuel and hydraulic fluid filters for heavy
and light duty trucks and passenger cars. These filters are sold primarily to
the replacement market but also to original equipment manufacturers. The Company
manufactures many grades of saturated filter paper to specifications provided by
its customers. The Company believes that it is one of the three largest
producers of saturated filter paper in the United States.

The Company also produces non-saturated filter paper. This category includes
non-saturated paper containing activated carbons and other fillers and edge
filter media. Primary uses of non-saturated filter paper include oil filtration
in heavy equipment and diesel trucks and home water filters. In addition, the
Company produces industrial filter papers for various food service and
industrial applications, including filtration of hot oil used in fast-food
preparation, the manufacture of paints and lacquers and the processing of fruit
juices.

CUSTOMERS. The Company sells its filter products primarily through its own
sales staff directly to its customers. Principal customers for the Company's
saturated filter papers include the Fleetguard Filtration Systems division of
Cummins Engine Co., Inc. ("Fleetguard"), the Delphi Automotive Systems division
of General Motors Corp. ("General Motors"), AlliedSignal, Inc. (Fram filters),
Purolator Products, Inc. and Miki Sangyo U.S.A. Inc., a trading company and the
major supplier of filter paper used in filters supplied to the U.S.
manufacturing sites of Nissan Motor Co., Ltd. and Honda Motor Co., Ltd. The
Company's saturated filter paper is used to make filters which are used on
vehicles manufactured by General Motors, Chrysler Corp. and Ford Motor Corp.
Fleetguard is also the Company's primary customer for non-saturated filter
papers. The Company has long-term relationships with its customers and believes
that these relationships with its customers are based on its ability to provide
superior service and technical support.

The Company's major customers for its industrial filter paper products
include National Filters, Inc. and Lubrizol Corp. for commercial manufacturing
applications, Seneca Foods Corp. for food processing applications and the KFC
North America division of PepsiCo Inc. in the hot oil filter market. In
addition, the Company supplies industrial filter papers to various smaller
manufacturers and users.

39
<PAGE>
COMPETITION. The Company's primary competition in solvent-based saturated
filter papers comes from Ahlstrom Filtration, Inc. ("Ahlstrom"), a division of
A. Ahlstrom Corp. In addition, the Hollingsworth & Vose Company is the dominant
manufacturer of water-based saturated filter papers, a market in which the
Company has a smaller presence. To the extent that industry efforts to develop
water-based alternatives to solvent-based filter papers are successful, the
Company's solvent-based filter papers may face increased competition from such
water-based alternatives.

In the markets for non-saturated filter papers and industrial filter papers,
the Company competes primarily with Ahlstrom, Knowlton Specialty Papers, Inc.
and Lydall, Inc. In each of these markets, producers tend to manufacture custom
designed products on an exclusive basis for their customers.

MANUFACTURING

MILLS AND CONVERTING FACILITIES. The Company currently operates nine
facilities of which eight are owned and one is leased. The Company has one
additional converting facility located in Oceanside, New York. The Company is in
the process of closing this leased facility and is moving substantially all of
the production from this facility to its Quakertown facility. The Company
believes that the shut-down of the Oceanside facility will be completed by
December 1997. As part of its strategy to reduce costs and more effectively meet
customer requirements, the Company routinely evaluates and assesses the
operations of and product mix manufactured or processed at each of its
facilities. As a result of these routine evaluations, the Company may shift
production to, or reallocate production among, its facilities and change,
decrease or cease operations at certain facilities. In evaluating its
manufacturing facilities, the Company considers a number of factors including
manufacturing effectiveness, productivity, proximity to key customers, operating
efficiency, strategic contribution to the Company and maintenance and capital
expenditure requirements.

OFFICE PRODUCTS. The Company's main mill for the production of office
products is located in Brattleboro, Vermont. Mills located at Warren Glen, New
Jersey and Hughesville, New Jersey also produce office products materials.
Recent improvements have included an upgrade to the Brattleboro mill that
significantly increased its capacity and its ability to produce a wider range of
lighter weight products. The Company has also recently completed a series of
capital improvements at its Warren Glen mill, which have increased productivity,
reduced costs and waste and increased the ability of the mill to use a wider
range of pulps and recycled materials.

The cylinder paper machines in use at the Brattleboro and Warren Glen mills
are configured to produce a broad range of specialty materials, including
pressboard, filing and cover materials of various weights, colors and finishes.
The machine in the Brattleboro mill features computer-controlled monitoring of
color, weight, thickness and moisture content. The configuration of the cylinder
machine allows the production of multiple-ply products, resulting in greater
strength and stiffness than a comparable one-ply product made on a Fourdrinier
paper machine. In addition, this process enables the Company to use lower-cost
recycled fiber pulp in the interior layers and higher-cost virgin pulp layers on
the exterior of a product, providing greater strength and the surface appearance
desired by consumers. Finishing capabilities at the Brattleboro mill include
glazing, coating, embossing, rewinding, laminating and sheeting.

TECHNICAL SPECIALTIES. The Company manufactures technical specialties at a
number of its facilities, including its Hughesville, Warren Glen, Richmond,
Fitchburg, Owensboro and Beaver Falls facilities. The

40
<PAGE>
Hughesville mill manufactures primarily technical specialty papers, including
photographic packaging, electrical transformer paper and wet-strength tag. The
Company's mill located in Beaver Falls, New York specializes in the production
of proprietary latex-impregnated materials for use as book covers and similar
products. The stock preparation process at the Beaver Falls mill allows blending
of latex, cork, cotton fiber, pulp and other materials into a variety of
products with specific performance characteristics. The mill has a fiber
reclamation system, enabling it to utilize recycled fiber.

DURABLE SPECIALTIES. Durable specialties are manufactured in the Company's
Owensboro mill and its Quakertown converting facility. The Company's main
converting facility for durable specialties is located at Quakertown,
Pennsylvania. A significant portion of the saturating base paper used in this
facility is provided by the Owensboro mill.

FILTER PRODUCTS. The Company's filter products are produced primarily at
its Richmond, Rochester and Fitchburg mills. The Richmond mill uses a
methanol-based resin saturating process that allows the saturation of base paper
off the paper machine. A recent upgrade of the Richmond mill increased
saturation capacity by 50%. The Rochester mill uses an in-line saturating
process. The Company manufactures its non-saturated filter papers at its
Fitchburg mill.

RAW MATERIALS. The Company uses a wide array of raw materials to formulate
its products, including virgin hardwood and softwood pulp, secondary wood fiber
from pre- and post-consumer waste, secondary cotton fiber from the apparel
industry, synthetic fibers (such as nylon and fiberglass), synthetic latex and a
wide variety of chemicals, pigments and dyes. These materials are procured from
numerous suppliers in the United States and Canada. The Company does not produce
pulp. Pulp and secondary fiber prices are subject to substantial cyclical price
fluctuations. The Company experienced a significant increase in raw material
costs during 1994 and 1995, but was able to partially recover these increases
with selling price increases, cost containment efforts and the early benefits
resulting from the paper machine upgrade performed in 1995. There can be no
assurance that the Company will be able to pass any future increases in the
price of pulp through to its customers in the form of price increases.

The Company's sole source of supply of the Tyvek-Registered Trademark- used
in production of certain of its products is DuPont. The Company has a
long-standing relationship with DuPont as an approved converter of
Tyvek-Registered Trademark- and has never experienced a disruption in supply.
Although management believes that it has a good relationship with DuPont, there
can be no assurance that the Company will be able to continually purchase
adequate supplies of Tyvek-Registered Trademark-. Any material interruption in
the Company's supply of Tyvek-Registered Trademark- could have a material
adverse effect on the results of operations and financial condition of the
Company.

USE OF RECYCLED FIBER. The Company believes that materials with recycled
content continue to grow in consumer acceptance. The Company has made
significant capital investments in recycling equipment and systems. The use of
the Company's cylinder paper machines in the manufacturing process for
pressboard products allows the use of recycled fiber in the product interior,
while virgin pulp is used on the product exterior, providing greater strength as
well as the product appearance desired by customers. Recently completed capital
investments to upgrade Warren Glen's fiber processing facility will enable it to
process fiber for company-wide use. The upgrade enhances the Company's ability
to process a wider range of pulps and recycled materials.

The Company's office products are manufactured with up to 100% recycled
fiber, of which up to 50% may be post-consumer waste. Post-consumer waste refers
to paper waste from end-users of paper products, and is generally considered the
standard by which government agencies and environmentally conscious consumers
evaluate recycled content. The Company presently meets and expects to continue
to meet government and consumer recycled content requirements.

RESEARCH AND DEVELOPMENT. The Company's expenditures on research and
development were $1.1 million, $1.2 million, $1.0 million and $1.1 million in
the nine months ended September 30, 1997, and the fiscal years ended December
31, 1996, 1995 and 1994, respectively. The Company has a research and

41
<PAGE>
development staff with expertise in chemistry, papermaking and materials
science. This staff works closely with the Company's customers to develop, test
and produce new product formulations designed to meet customer specifications.

EMPLOYEES

As of August 31, 1997, the Company employed a total of 1,023 employees, of
which 318 were salaried and 705 were hourly. Of the salaried employees, 120 were
in manufacturing, 62 in sales and marketing, 17 in research and development and
119 in professional or administrative support.

The hourly employees at the Quakertown, Pennsylvania location are non-union.
The remaining hourly employees are members of either the United Paperworkers
International Union, the International Brotherhood of Boilermakers, Iron Ship
Builders, Blacksmiths, Forgers and Helpers or the International Brotherhood of
Electrical Workers. The Company believes that, in general, it has good relations
with its employees and their unions. The table below sets out the expiration
dates of the Company's labor contracts by facility:

<TABLE>
<CAPTION>
FACILITY EXPIRATION DATE
- -------------------------------------------------------------------------- ------------------
<S> <C>
Fitchburg, MA............................................................. April 30, 1998
Owensboro, KY(a).......................................................... May 10, 1999
Warren Glen, NJ(b)........................................................ May 23, 1999
May 25, 1999
Hughesville, NJ(b)........................................................ May 23, 1999
May 25, 1999
Rochester, MI............................................................. May 23, 1999
Richmond, VA.............................................................. April 28, 2000
Beaver Falls, NY.......................................................... June 30, 2000
Brattleboro, VT........................................................... August 31, 2002
</TABLE>

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

(a) The Company has decided to cease operations at this facility during the
first quarter of 1998.

(b) Workers at Warren Glen, NJ and Hughesville, NJ are subject to two separate
collective bargaining agreements.

COGENERATION PROJECT

The Company has entered into an agreement with Kamine, pursuant to which the
Company's Beaver Falls facility is the host for a gas-fired, 79-megawatt
combined-cycle cogeneration facility developed by Kamine at the Company's Beaver
Falls mill. Construction of the facility has been completed, although it is not
currently operational. The Company received an initial cash payment of $4.4
million in 1993 and a series of deferred cash payments from Kamine totaling $7.0
million between May 1995 and May 1997. The present value of these deferred cash
payments, in the amount of $6.5 million, was recorded as income in the first
quarter 1995. The payment received in May 1997 was the last payment due under
this agreement.

ENVIRONMENTAL REGULATION AND COMPLIANCE

42
<PAGE>
The Company and its predecessors have made substantial investments in
pollution control facilities to comply with existing Environmental Laws. The
Company made expenditures for environmental purposes of $2.1 million, $1.7
million, $2.5 million and $1.3 million in the nine months ended September 30,
1997, and the fiscal years ended December 1, 1996, 1995 and 1994, respectively.
While the Company believes that it has made sufficient capital expenditures to
maintain compliance with existing Environmental Laws, any failure by the Company
to comply with present and future Environmental Laws could subject it to future
liability or require the suspension of operations. In addition, such
Environmental Laws could restrict the Company's ability to expand its facilities
or could require the Company to acquire costly equipment or incur significant
expenses to comply with environmental regulations.

The Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended ("CERCLA") and similar state laws provide for responses to, and
liability for, releases of certain hazardous substances from a facility into the
environment. These obligations are imposed on the current owner or operator of a
facility from which there has been a release, the owner or operator of a
facility at the time of the disposal of hazardous substances at the facility, on
any person who arranged for the treatment or disposal of hazardous substances at
the facility, and any person who accepted hazardous substances for transport to
a facility selected by such person. Liability under CERCLA can be strict, joint
and several. Pursuant to the Environmental Laws, there are currently pending
investigations at certain of the Company's plants relating to the release of
hazardous substances, materials and/or wastes. In addition, various predecessors
of the Company have been named as potentially responsible parties ("PRPs") by
the United States Environmental Protection Agency ("EPA") for costs incurred and
to be incurred in responding to the investigation and clean-up of various
third-party sites. The Company has not received any notification or inquiry from
EPA or any other agency concerning these sites. Management believes that the
Company will have no liability in connection with the clean-up of these sites.
However, no assurance can be given that such predecessors will perform their
responsibilities in connection with such sites and, in the event of such
nonperformance, the Company may incur material liabilities in connection with
such sites, and no assurance can be given that the Company will not receive PRP
notices in connection with these or other sites in the future.

In connection with the acquisition of CPG, the former owners of CPG have
agreed to indemnify (subject to certain limitations) the Company for certain
identified and potential environmental liabilities arising from the historical
use of the property acquired in the acquisition of CPG or from CPG's conduct
prior to the acquisition of CPG. Management believes that the amount of the
escrow established as security for these and other indemnity obligations of the
former CPG owners will be sufficient to cover environmental liabilities expected
to be incurred in connection with the acquisition of CPG. However, no assurance
can be given that the limited indemnity provided by the former owners of CPG
will be sufficient to cover all material environmental liabilities associated
with the acquisition of CPG.

Based upon its experience to date, the management of the Company believes
that the future cost of compliance with existing Environmental Laws, and
liability for known environmental claims pursuant to such laws, will not have a
material adverse effect on the Company's financial condition and results of
operation. However, future events, such as new information, changes in existing
Environmental Laws or their interpretation, and more vigorous enforcement
policies of regulatory authorities, may give rise to additional expenditures or
liabilities that could be material to the Company's financial condition and
results of operations.

43
<PAGE>
THE GESSNER ACQUISITION

GENERAL

Gessner is a leading European producer of technical and filter paper located
near Munich, Germany. Gessner manufactures crepe masking and specialty tape
materials, wet and dry abrasive papers, filter media for automotive air, oil and
gasoline filters and filter media for automobile cabins and vacuum cleaner bags.
Gessner's products are sold worldwide, serving three distinct markets. Gessner's
net sales for the nine months ended September 30, 1997 were DM108.7 million
(approximatley $62.1 million). Gessner is the leading worldwide producer of
vacuum filter media and the number two European producer of automotive filter
paper. Gessner is also one of two leading European producers of masking tape
base and impregnated abrasive paper. Gessner operates two production facilities
located in Bruckmuhl and Feldkirchen in the State of Bavaria, which include
three paper machines, three saturators, one meltblown production unit and one
methanol recycling unit. Total paper production capacity is approximately 38,500
metric tons per year and total saturation capacity is approximately 24,000
metric tons per year.

Pursuant to the Gessner Stock Purchase Agreement, the Company will purchase
through two German subsidiaries all of the outstanding capital stock of Gessner
for a purchase price of $43.0 million, subject to certain post-closing
adjustments. Pursuant to the Gessner Stock Purchase Agreement, the former
stockholders of Gessner will retain certain long-term liabilities of Gessner as
well as certain parcels of real property (which, in certain cases, will be
subject to various rights of purchase and/or first refusal of Gessner). The
Gessner Stock Purchase Agreement contains customary representations and
warranties, including representations and warranties with respect to the absence
of undisclosed liabilities and environmental liabilities and is conditioned upon
the approval of the transactions contemplated by the Gessner Stock Purchase
Agreement by the Board of Directors of the Company. The former stockholders of
Gessner have agreed to indemnify the Company (subject to certain limitations,
including certain deductibles and caps) and Gessner in respect of certain
liabilities, including certain environmental liabilities.

The Company intends to finance the Gessner Acquisition with a portion of the
proceeds of the Offering, along with borrowings of up to DM54.0 million
(approximately $30.9 million) under a bank facility to be provided by Bayerische
Vereinsbank AG and the Steinbeis Note. The bank facility will bear interest at a
rate equal to the rate of interest paid by banks in the inter-bank market, in
London for one, three or six month deposits of Deutsche Marks ("German LIBOR"),
at the Company's option, plus a margin of between 1.5% and 1.75%, which margin
will vary in relation to the Company's leverage ratio. The Gessner Note will
bear interest at a rate equal to 5.0%. Gessner will be entitled to set off any
indemnity claims it may have under the Gessner Stock Purchase Agreement against
amounts owed pursuant to the Steinbeis Note. In addition, upon closing, Gessner
will enter into two DM15.0 million (approximately $8.6 million) revolving credit
facilities with Bayerische Vereinsbank AG, one of which will be available to
fund certain working capital needs and one of which will be available to fund
incremental capital expenditures, including acquisitions. As of the consummation
date of the Gessner Acquisition, the Company estimates that Gessner will have
availability of DM30.0 million (approximately $17.6 million) under such
facilities, none of which will be drawn. The working capital facility and the
capital expenditures

44
<PAGE>
facility will each bear interest at the rate of German LIBOR plus a margin of
1.5% to 1.75%, which margin will vary in relation to the Company's leverage
ratio.

PRODUCTS

Gessner manufactures specialty fiber-based materials in three product
categories: filter products, masking tape, and abrasive papers. These three
product categories fit into three of the Company's four markets. Sales in these
three markets represented the following percentages of total net sales in the
nine months ended September 30, 1997: technical specialties 10%; durable
specialties 23%; and filter products 67%. Gessner's abrasive paper capabilities
center on wet/dry abrasive products, while the Company currently only produces
dry abrasive backing materials. Vacuum filter materials manufactured by Gessner
represent a new market segment for the Company.

Gessner is the leading producer of vacuum bag filter paper worldwide. In
Europe, Gessner is the second largest supplier of automotive filter paper and
masking tape base. Within the filter market, vacuum filters represent a new
market segment for the Company. Gessner holds a smaller presence in the market
for coffee filters and is a leading supplier of wet/dry abrasives.

The table below sets forth the primary materials produced by Gessner for use
in its various markets:

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
PRODUCT TYPE CHARACTERISTICS TYPICAL END USES
- ----------------------------- ----------------------------- -----------------------------
TECHNICAL SPECIALTIES:
<S> <C> <C>

Abrasives--Wet/Dry Waterproof base paper; Hand sanding (automotive
impregnated and coated; ready repair and manufacture;
for customer application of marine repair; commercial and
abrasive materials home sanding)

Abrasives--Flexible Water resistant saturated Machine sanding (industrial
base paper manufacture--wood/metals)
- -------------------------------------------------------------------------------------------
DURABLE SPECIALTIES:

Masking Tape Base Raw tape base (stretch and Industrial and commercial
smoothness) painting (building, aircraft,
Impregnated tape base: automotive); barrier tapes;
solvent, water or heat pressure sensitive tapes;
resistant; compatible with carrier tapes for electronics
customer adhesive components
formulations
- -------------------------------------------------------------------------------------------
FILTER PRODUCTS:

Filter Media--Automotive Saturated with resins; Automotive fuel, oil and air
controlled porosity; high filters for OEM, OES &
strength aftermarket

Filter Media--Vacuum Bag Controlled porosity; high Home and industrial vacuum
strength; fine particle cleaner bags from standard to
retention; may be laminated micro filters for allergy
with meltblown material for related particle size removal
improved efficiency

Filter Media--Meltblown High efficiency; low pressure Laminated to paper and/or
drop; controlled porosity; non- wovens for passenger car
fine fibers and fine particle cabin filter and vacuum bags
retention
</TABLE>

45
<PAGE>
CUSTOMERS

Gessner sells its products through its own sales representatives and agents
to major European, North American and Asian manufacturers. In the automotive
market, Gessner sells to filter manufacturers for OEM and original equipment
sales, as well as the automotive aftermarket. The material is saturated with
resins for automotive fuel, oil and air filters. Major customers include
Knecht-Filterwerke GmbH, and Filterwerk Mann & Hummel GmbH. In the vacuum bag
filter market, Gessner sells filter media to manufacturers of vacuum cleaner
bags for home and commercial use. Key customers include PVG Papier-Verarbeitungs
Gesellschaft GmbH, Home Care Industries, Inc. and Electrolux, AB.

In the abrasives market, Gessner supplies waterproof base paper (impregnated
and coated) to manufacturers who apply resins and abrasive materials to complete
the manufacture of abrasive products for use in hand and machine sanding
applications. Key customers include 3M and C. Klingspor GmbH.

Masking tape base sales include raw and impregnated tape base. Raw tape base
is designed for further treatment by tape manufacturers, such as impregnation,
coating, and adhesive application, while impregnated tape may only require
adhesive application by tape manufacturers. Typical end uses include barrier
tapes for industrial and commercial painting in the building construction,
aircraft, or automotive industries; pressure sensitive tapes; and carrier tapes
for electronics components. Key customers in these tape segments include 3M and
Sicad S.r.l.

COMPETITION

The Company believes A. Ahlstrom Corp. is the leading filter media
manufacturer worldwide and is the major competitor of Gessner. Other filter
media competitors, comprising automotive, vacuum, and coffee filter, include
Papelera del Besos SA; J.C. Binzer Papierfabrik GmbH & Co.; Devon Valley
Industries (DVI), a division of J. Bibby & Sons plc.; Sorg Paper Co., a division
of Mosinee Paper Corp.; Hollingsworth and Vose Co.; and Melitta
Unternehmensgruppe Bentz KG. In tape base markets, competitors include Binda
S.p.A., Kimberly-Clark, Mosinee Paper Corp., and Bosso, a division of A.
Ahlstrom Corp. Competitors in the abrasives market include Arjo Wiggins Appleton
plc, Kimberly-Clark, and Kammerer, a division of A. Ahlstrom Corp.

MANUFACTURING/TECHNICAL

Gessner owns two production facilities, one in Bruckmuhl/Bavaria consisting
of one paper machine and one converting line with saturation and coating
capabilities. Bruckmuhl's site includes three power generation units and a
sewage disposal plant. The second facility in nearby Feldkirchen includes two
paper machines, two converting lines (saturation units) and one meltblown
non-woven production line.

The Company believes that Gessner's facilities have been well maintained,
with sophisticated equipment and technology. Gessner also holds ISO 9001
certifications.

RAW MATERIALS

Gessner utilizes a wide range of raw materials, including cellulose-based
materials, primarily bleached and unbleached standard and specialty pulps. Other
materials used include polyester, polyethylene, polypropylene,
polybuteneterephtalate and polycarbonate.

LABOR CONTRACTS

As of August 31, 1997, Gessner employed a total of 406 employees of which
146 performed management, administrative and clerical functions, with the
remaining 260 workers performing production and maintenance functions. Pursuant
to the provisions of German labor law, all employees are subject to collective
bargaining and are subject to the collective bargaining agreement for employees
in the paper industry of the Federal Republic of Germany. This agreement became
effective on February 7, 1997 and

46
<PAGE>
cannot be terminated before December 31, 1999. The Company believes that Gessner
has good relations with its employees and the works council for its operations.

ENVIRONMENTAL

Gessner's operations and properties are subject to the environmental laws of
the Federal Republic of Germany and its political subdivisions and the rules and
regulations promulgated thereunder which affect matters similar to those
affected by Environmental Laws in the United States. (collectively "German
Environmental Laws"). As such, the nature of Gessner's operations exposes it to
the risk of claims with respect to environmental protection and health and
safety matters and there can be no assurance that Gessner, and, thus, the
Company, will not incur material costs in connection with such claims. Gessner
has made capital expenditures in relation to environmental matters, the cost of
waste disposal and maintaining environmental facilities. These expenditures
totaled DM1.6 million (approximately $0.89 million), DM2.9 million
(approximately $1.7 million) and DM3.6 million (approximately $2.1 million) for
the nine months ended September 30, 1997 and the fiscal years ended December 31,
1996 and 1995, respectively.

In connection with the acquisition of Gessner, the former owners of Gessner
have agreed to indemnify (subject to certain limitations) the Company for
certain identified and potential environmental liabilities arising from the
historical use of the property acquired in the acquisition of Gessner or from
Gessner's conduct prior to the acquisition of Gessner. The Gessner Stock
Purchase Agreement provides that the former owners of Gessner will loan DM8.0
million (approximately $4.6 million) to Gessner, against which sum, Gessner will
be able to set off any environmental indemnity obligations pursuant to the
Gessner Stock Purchase Agreement. Management believes that the sums available
under this arrangement will be sufficient to cover environmental liabilities
expected to be incurred in connection with the acquisition of Gessner. However,
no assurance can be given that the limited indemnity provided by the former
owners of Gessner will be sufficient to cover all material environmental
liabilities associated with the acquisition of Gessner.

Based upon its experience to date, the management of the Company believes
that the future cost of compliance with existing German Environmental Laws, and
liability for known environmental claims pursuant to such laws, will not have a
material adverse effect on the Company's financial condition and results of
operation. However, future events, such as new information, changes in existing
Environmental Laws or their interpretation, and more vigorous enforcement
policies of regulatory authorities, may give rise to additional expenditures or
liabilities that could be material to the Company's financial condition and
results of operations.

47
<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The Company's Directors and Executive Officers are:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
K. Peter Norrie...................................... 58 Chairman of the Board of Directors

Alex Kwader.......................................... 55 President, Chief Executive Officer and Director

Brian C. Kerester.................................... 38 Director

Marion A. Keyes, IV.................................. 59 Director

George E. McCown..................................... 62 Director

Glenn S. McKenzie.................................... 45 Director

Jon H. Miller........................................ 59 Director

Fred P. Thompson, Jr. ............................... 70 Director

John D. Weil......................................... 50 Director

Bruce P. Moore....................................... 49 Vice President and Chief Financial Officer

Stephen A. Steidle................................... 52 Vice President and General Sales Manager
</TABLE>

K. PETER NORRIE, age 58, has served as Chairman of the Board of Directors of
the Company since June 1989 and as Chief Executive Officer from the Company's
inception in June 1989 to November 1990. He is also a member of the Compensation
Committee of the Board of Directors. Mr. Norrie is currently the President of
Parma Laboratories, Inc. and has served in such capacity since 1992. From 1976
until June 1989, Mr. Norrie was Senior Vice President and General Manager of
Boise Cascade Corporation's Paper Group. From 1964 to 1976, he was employed by
Boise Cascade Corporation ("BCC") in various management positions, including
Vice President and General Sales Manager of the White Paper Division of the
Paper Group. Mr. Norrie received a B.S. in Civil Engineering from Gonzaga
University and an M.B.A. from Harvard University. Mr. Norrie serves as a
director of Tree-Free Fiber Company, LLC, a private pulp and paper concern and
also serves as a member of the Advisory Board of Compensation Resource Group,
Inc., a management compensation advisory concern.

ALEX KWADER, age 55, has been the President and Chief Executive Officer of
the Company since August 1991 and a Director since November 1991. Since 1970,
Mr. Kwader has been employed by the Company and BCC in various management
positions. He served as Senior Vice President of the Company from March 1990 to
August 1991 and as Vice President from the Company's inception in June 1989
until March 1990. Mr. Kwader was also General Manager of the Pressboard Division
from June 1989 until August 1991, serving in the same capacity for the BCC
Pressboard Division from 1986 until June 1989. From 1980 to 1985, he served as
General Manager of the BCC Latex Fiber Products Division. Mr. Kwader holds a
B.S. in Mechanical Engineering from the University of Massachusetts and an M.S.
from Carnegie Mellon University and attended the Harvard Business School
Executive Program.

BRIAN C. KERESTER, age 38, has been a director of the Company since May 1996
and serves as a member of the Compensation Committee. Mr. Kerester is the Chief
Financial Officer of Distribution Dynamics, Inc. ("DDI") a privately held
company controlled by MDC. DDI is a distribution company of "C" class
components, including fasteners and electronic components, to original equipment
manufacturers. Prior to joining DDI on October 1, 1996, Mr. Kerester had been an
operating affiliate and a Partner with MDC. Prior to joining MDC, Mr. Kerester
worked with The First Boston Corporation in the Venture Capital Group from 1984
through 1986, and Bankers Trust Company in the World Corporate Department from

48
<PAGE>
1981 to 1984. Mr. Kerester holds a B.S. in Economics from The Wharton School,
University of Pennsylvania and an M.B.A. from Columbia Business School.

MARION A. KEYES, IV, age 59, has been a director of the Company since August
1997. Mr. Keyes is currently and has served as Senior Vice President of Emerson
Electric Co. and President of Rosemount Analytical, Inc. since December 1993.
Mr. Keyes served as President of Trice Engineering Inc. and Chairman of DCOM
Corporation from 1991 and 1990, respectively, to 1993. From 1989 to 1995, he
served as Senior Vice President, Group Executive and a member of the Executive
Operating Committee of McDermott International Inc. Mr. Keyes also served as
President and Chief Operating Officer of Bailey Controls from 1980 to 1995. Mr.
Keyes received a B.S. in Chemical Engineering from Stanford University, an M.S.
in Electrical Engineering from the University of Illinois and an M.B.A. from
Baldwin Wallace College.

GEORGE E. MCCOWN, age 62, has been a director of the Company since its
inception in June 1989. Mr. McCown was co-founder and has been a Managing
Partner of MDC Management Company ("MDC Management"), the general partner of
McCown De Leeuw & Co., since 1984. Mr. McCown received a B.S. in Mechanical
Engineering from Stanford University and an M.B.A. from Harvard University. He
currently serves as a director of three publicly held companies: Building
Materials Holding Corporation, a building materials retailer, Nimbus CD
International, Inc., a CD audio and CD ROM manufacturer, and Vans, Inc., a
casual shoe manufacturer. Mr. McCown also serves as a director of several other
McCown De Leeuw & Co. portfolio companies.

GLENN S. MCKENZIE, age 45, has been a director of the Company since January
1994. Since October 1991, Mr. McKenzie has been President of Alpha Investments,
Inc., a management consulting firm. Alpha Investments provides consulting
services to McCown De Leeuw & Co., with which Messrs. McCown, Kerester, and Weil
are affiliated. He holds a B.A. in Economics and an M.B.A. from the University
of North Carolina. Mr. McKenzie currently serves as a director of Nimbus CD
International, Inc. and AmeriComm Holdings, Inc.

JON H. MILLER, age 59, has been a director of the Company since its
inception in June 1989. He is also Chairman of the Compensation Committee of the
Board of Directors. Mr. Miller was President and Chief Operating Officer of BCC
from 1978 until his retirement in 1990. In addition to serving on the Board of
the Company, he is a director of Idaho Power Company. Mr. Miller received a B.A.
in Economics and an M.B.A. from Stanford University.

FRED P. THOMPSON, JR., age 70, has been a director of the Company since
April 1994. He also serves as Chairman of the Audit Committee of the Board of
Directors. Mr. Thompson is currently and has served as President and Chief
Executive Officer of Peregrine Industries, Inc., a cabinet manufacturer,
Executive Management, Inc., a management services firm, and Chairman and Chief
Executive Officer of Powder River, Inc., a livestock handling equipment
manufacturer, since 1972, 1985 and 1990, respectively. From 1984 to 1996, when
the company was sold, he served as Chairman and Chief Executive Officer of
Nelson-Ball Paper Products, Inc., a converter of paper products. Mr. Thompson
received a B.S. from the University of Oregon and attended the Harvard Business
School Advanced Management Program.

JOHN D. WEIL, age 50, has been a director of the Company since May 1996. He
also serves as a member of the Audit Committee of the Board of Directors. Mr.
Weil has over 25 years of experience in national manufacturing and service
organizations. From 1982 to 1994, he served as President and Chief Executive
Officer and as a director of American Envelope Company. In 1995, Mr. Weil joined
the venture banking firm of McCown De Leeuw & Co. as an operating affiliate to
assist in portfolio management. He currently serves as Chairman of the Board of
Directors of AmeriComm Holdings, Inc., a full service direct mail marketing
firm, and as a director of International Data Response Corporation, both McCown
De Leeuw & Co. portfolio companies. Additionally, Mr. Weil serves as a director
of Sage Enterprises, Inc., a food service distributor. Mr. Weil received a B.S.
in Economics from the University of Illinois and an M.B.A. from Northwestern
University's Kellogg School of Business.

49
<PAGE>
BRUCE P. MOORE, age 49, has served as Vice President of the Company since
its inception in June 1989 and as Chief Financial Officer since December 1990.
From 1980 to 1989, Mr. Moore was employed by BCC in various management
positions, including Controller and General Manager of the Latex Fiber Products
Division. Mr. Moore holds a B.A. in Business Administration from Siena College
and attended the Stanford University Executive Program.

STEPHEN A. STEIDLE, age 52, has served as Vice President and General Sales
Manager for the office products business since February 1994. He assumed
international sales responsibility for the Company in January 1997. He has held
sales management positions with the Company and BCC for more than 10 years and
has a total of 25 years of service with the Company and BCC. Mr. Steidle
received a B.A. in Psychology from the University of Maine and an M.B.A. from
the University of Maine.

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

There are no family relationships among any of the directors or executive
officers of the Company.

50
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of October 31, 1997, by: (i) each director;
(ii) all executive officers and directors of the Company as a group; and (iii)
all those known by the Company to be beneficial owners of more than 5% of its
Common Stock.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)
--------------------------------------------------
BEFORE GIVING EFFECT AFTER GIVING EFFECT
TO THE OFFERING TO THE OFFERING
------------------------ ------------------------
NUMBER OF PERCENT OF NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES TOTAL(2) SHARES TOTAL(3)
- ----------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
KPM Investment Management, Inc.(4)................... 837,184 13.8% 837,184 11.1%
10250 Regency Circle, Omaha, NE 68114
Heartland Advisors, Inc.(4).......................... 703,650 11.6 703,650 9.3
790 North Milwaukee St., Milwaukee, WI 53202
Dalton, Greiner, Hartman Maher & Co.(4).............. 305,250 5.0 305,250 4.0
630 Fifth Ave., Ste. 3425, New York, NY 10111
Alex Kwader, President, CEO and Director(5).......... 122,005 2.0 122,005 1.5
K. Peter Norrie, Chairman of the Board of 45,537 * 45,537 *
Directors(6).......................................
George E. McCown, Director(7)........................ 95,999 1.6 95,999 1.2
Brian C. Kerester, Director(8)....................... 22,440 * 22,440 *
Marion A. Keyes, IV, Director(9)..................... 16,500 * 16,500 *
Glenn S. McKenzie, Director(10)...................... 25,500 * 25,500 *
Jon H. Miller, Director(11).......................... 21,000 * 21,000 *
Fred P. Thompson, Jr., Director(12).................. 21,150 * 21,150 *
John D. Weil, Director(13)........................... 19,500 * 19,500 *
Bruce P. Moore, Vice President and CFO(14)........... 110,539 1.8 110,539 1.4
Stephen A. Steidle, Vice President and General Sales
Manager(15)........................................ 52,333 * 52,333 *
----------- --- ----------- ---
All executive officers and directors as a group
(11 persons)....................................... 552,503 8.6 552,503 6.8
</TABLE>

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

* Represents holdings of less than 1%.

(1) This table is based upon information supplied by executive officers,
directors, and principal stockholders and Schedules 13D and 13G, if any,
filed with the Commission. Unless otherwise indicated in the footnotes to
this table and subject to community property laws, where applicable, each of
the stockholders named in this table has sole voting and investment power
with respect to the shares indicated as beneficially owned.

(2) Applicable percentages of ownership are based on 6,076,181 outstanding
shares of the Company's Common Stock on October 31, 1997, as adjusted as
required by rules promulgated by the Commission.

(3) Assumes the issuance of 1,725,000 additional shares in the Offering
(including shares which the underwriters have the right to purchase pursuant
to the over-allotment option).

(4) Assumes the number of shares owned, to the knowledge of the Company, as of
October 31, 1997.

(5) Mr. Kwader has vested options of 84,398 shares under the 1992 Stock Option
Plan. Under the 1994 Stock Option Plan he has options for 93,750 shares, of
which 25,238 are vested or will vest within the next 60 days. Under the 1997
Stock Option Plan he has options for 30,000 shares, of which 6,000 are
vested or will vest within the next 60 days.

51
<PAGE>
(6) Mr. Norrie has options for 7,500 shares granted under the 1994 Directors
Stock Option Plan (options vest at a rate of 1,500 shares per year), of
which 6,000 are vested. Under the 1996 Amendment to the 1994 Director Stock
Option Plan (options vest over ten (10) years with accelerated vesting if
stock reaches a certain market price over a period of time), he has options
for 15,000 shares, of which 15,000 are vested.

(7) Mr. McCown has options for 7,500 shares under the 1994 Directors Stock
Option Plan (options vest at a rate of 1,500 shares per year), of which
6,000 are vested. Under the 1996 Amendment to the 1994 Director Stock Option
Plan (options vest over ten (10) years with accelerated vesting if stock
reaches a certain market price over a period of time), he has options for
15,000 shares, of which 15,000 are vested.

(8) Mr. Kerester holds sole investment and voting power over 1,500 shares and
shares investment and voting power over 2,940 shares. Mr. Kerester has
options for 7,500 shares under the 1994 Directors Stock Option Plan (options
vest at a rate of 1,500 shares per year), of which 3,000 are vested. Under
the 1996 Amendment to the 1994 Director Stock Option Plan (options vest over
ten (10) years with accelerated vesting if stock reaches a certain market
price over a period of time), he has options for 15,000 shares, of which
15,000 are vested.

(9) Mr. Keyes has options for 7,500 shares under the 1994 Directors Stock Option
Plan (options vest at a rate of 1,500 shares per year), of which 1,500 are
vested. Under the 1996 Amendment to the 1994 Director Stock Option Plan
(options vest over ten (10) years with accelerated vesting if stock reaches
a certain market price over a period of time), he has options for 15,000
shares, of which 15,000 are vested.

(10) Mr. McKenzie has options for 7,500 shares under the 1994 Directors Stock
Option Plan (options vest at a rate of 1,500 shares per year), of which
6,000 are vested. Under the 1996 Amendment to the 1994 Director Stock Option
Plan (options vest over ten (10) years with accelerated vesting if stock
reaches a certain market price over a period of time), he has options for
15,000 shares, of which 15,000 are vested.

(11) Mr. Miller has options for 7,500 shares under the 1994 Directors Stock
Option Plan (options vest at a rate of 1,500 shares per year), of which
6,000 are vested. Under the 1996 Amendment to the 1994 Director Stock Option
Plan (options vest over ten (10) years with accelerated vesting if stock
reaches a certain market price over a period of time), he has options for
15,000 shares, of which 15,000 are vested.

(12) Mr. Thompson has options for 7,500 shares under the 1994 Directors Stock
Option Plan (options vest at a rate of 1,500 shares per year), of which
6,000 are vested. Under the 1996 Amendment to the 1994 Director Stock Option
Plan (options vest over ten (10) years with accelerated vesting if stock
reaches a certain market price over a period of time), he has options for
15,000 shares, of which 15,000 are vested.

(13) Mr. Weil has options for 7,500 shares under the 1994 Directors Stock Option
Plan (options vest at a rate of 1,500 shares per year), of which 3,000 are
vested. Under the 1996 Amendment to the 1994 Director Stock Option Plan
(options vest over ten (10) years with accelerated vesting if stock reaches
a certain market price over a period of time), he has options for 15,000
shares, of which 15,000 are vested.

(14) Mr. Moore has vested options for 42,200 shares under the 1992 Stock Option
Plan. Under the 1994 Stock Option Plan, he has options for 42,750 shares, of
which 12,963 are vested or will vest within the next 60 days. Under the 1997
Stock Option Plan he has options for 15,000 shares, of which 3,000 are
vested or will vest within the next 60 days.

(15) Mr. Steidle has vested options for 30,143 shares under the 1992 Stock
Option Plan. Under the 1994 Stock Option Plan, he has options for 21,000
shares, of which 7,526 are vested or will vest within the next 60 days.
Under the 1997 Stock Option Plan he has options for 5,000 shares, of which
1,000 are vested or will vest within the next 60 days.

52
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

ADVISORY SERVICES

The Company paid a fee of $187,500, $500,000, $250,000, $250,000 and
$264,000 for the nine months ended September 30, 1997 and the years ended
December 31, 1996, 1995, 1994 and 1993, respectively, to an affiliate, MDC
Management for certain consulting, financial and managerial services. The
Company's contract with MDC Management expires on December 31, 1997. The payment
of fees related to these services was approved by the members of the Board of
Directors of the Company who do not have a direct financial interest in MDC
Management. The Company believes that the fees received for the professional
services rendered are at least as favorable to the Company as those which could
be negotiated with a third party.

CERTAIN OTHER MATTERS

The Company has engaged Compensation Resource Group, Inc. ("CRG"), a
management compensation advisory concern to review the Company's compensation
practices. Mr. Peter Norrie, the Chairman of the Board of Directors of the
Company, serves as a member of the Advisory Board of CRG. It is anticipated that
Mr. Norrie will receive referral fees of approximately $37,000 in the aggregate
in 1997 from CRG in accordance with CRG's standard practice of paying such fees
to Advisory Board members who successfully refer clients to CRG.

53
<PAGE>
DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 20,000,000 shares of
Common Stock, 6,076,181 shares of which were outstanding as of October 31, 1997,
and held beneficially by approximately 2,000 stockholders, and 2,000,000 shares
of Preferred Stock, none of which are outstanding.

COMMON STOCK

The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Subject to
preferences that may be applicable to any then outstanding Preferred Stock,
holders of Common Stock are entitled to receive ratably such dividends as may be
declared by the Board of Directors out of funds legally available therefor. See
"Price Range of Common Stock Dividend Policy." In the event of a liquidation,
dissolution or winding up of the Company, holders of Common Stock are entitled
to share ratably in all assets remaining after payment of liabilities and the
liquidation preference of any then outstanding shares of Preferred Stock.
Holders of Common Stock have no preemptive rights and no right to convert their
Common Stock into any other securities. There are no redemption or sinking fund
provisions applicable to the Common Stock. All outstanding shares of Common
Stock are, and all shares of Common Stock to be outstanding upon completion of
the Offering will be, fully paid and nonassessable.

PREFERRED STOCK

The Board of Directors has the authority, without further action by the
stockholders, to issue up to 2,000,000 shares of Preferred Stock in one or more
series and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences and the number of shares constituting any
series or the designation of such series, any or all of which may be greater
than the rights of the Common Stock. The Board of Directors, without stockholder
approval, can issue Preferred Stock with voting, conversion and other rights
which could adversely affect the voting power and other rights of the holders of
Common Stock. Preferred Stock could thus be issued quickly with terms calculated
to delay or prevent a change in control of the Company or to make removal of
management more difficult. In certain circumstances, such issuance could have
the effect of decreasing the market price of the Common Stock or discouraging
bids for the Common Stock at a premium to its market price. The issuance of
Preferred Stock may have the effect of delaying, deterring or preventing a
change in control of the Company without any further action by the stockholders.

The Company has no present plan to issue any shares of Preferred Stock.

ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER AND BY-LAW PROVISIONS AND DELAWARE LAW

The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law, an anti-takeover law. In general, the statute prohibits
a publicly held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. A "business
combination" includes a merger, asset sale or other transaction resulting in a
financial benefit to such interested stockholder. An "interested stockholder" is
a person who, together with affiliates and associates, owns (or within three
years prior, did own) 15% or more of the corporation's voting stock.

The Company's Certificate of Incorporation (the "Certificate") also requires
that any action required or permitted to be taken by stockholders of the Company
must be effected at a duly called annual or special meeting of stockholders and
may not be effected by any consent in writing. In addition, special meetings of
the stockholders of the Company may be called only by the Board of Directors.
These provisions may have the effect of deterring hostile takeovers or delaying
changes in control or management of the Company.

54
<PAGE>
The Company's Restated By-laws (the "By-laws") provide that the Company will
indemnify its directors and executive officers and may indemnify its other
officers, employees and agents to the fullest extent permitted by Delaware law.
The Company is also empowered under its By-laws to enter into indemnification
agreements with any of such persons and to purchase insurance on behalf of any
person whom it is required or permitted to indemnify. Pursuant to these
provisions, the Company has entered into indemnification agreements with each of
its executive officers and directors and purchased officers and directors
liability insurance.

In addition, the Certificate provides that, pursuant to Delaware law, its
directors shall not be liable for monetary damages for breach of the directors'
fiduciary duty of care to the Company and its stockholders. The provision in the
Certificate does not eliminate the duty of care and, in appropriate
circumstances, equitable remedies such as injunctive or other forms of
non-monetary relief will remain available under Delaware law. In addition, each
director will continue to be subject to liability for breach of the directors'
duty of loyalty to the Company, for acts or omissions not in good faith or
involving intentional misconduct, for knowing violations of law, for actions
leading to improper personal benefit to the director, and for payment of
dividends or approval of stock repurchases or redemptions that are unlawful
under Delaware law. The provision also does not affect the directors'
responsibilities under any other law, such as the federal securities laws or
state or federal environmental laws.

At present, there is no pending litigation or proceeding involving a
director, officer, employee or other agent of the Company as to which
indemnification is being sought nor is the Company aware of any threatened
litigation that may result in claims for indemnification by any director,
officer, employee or other agent.

55
<PAGE>
UNDERWRITING

Subject to the terms and conditions set forth in the underwriting agreement
(the "Underwriting Agreement"), the Company has agreed to sell to the
underwriters named below (the "Underwriters"), and each of the Underwriters, for
whom BT Alex. Brown Incorporated and PaineWebber Incorporated are acting as
representatives (the "Representatives") have severally agreed to purchase from
the Company the aggregate number of shares of Common Stock (the "Shares") set
forth opposite its name below.

<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
- --------------------------------------------------------------------------- -----------------
<S> <C>
BT Alex. Brown Incorporated................................................
PaineWebber Incorporated...................................................
-----------------

Total...................................................................... 1,500,000
-----------------
-----------------
</TABLE>

In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the shares offered by
this Prospectus (other than those subject to the over-allotment option described
below) if any such Shares are purchased. In the event of a default by the
Underwriters, the Underwriting Agreement provides that, in certain
circumstances, the purchase commitments of non-defaulting Underwriters may be
increased or the Underwriting Agreement may be terminated.

The Company has granted to the Underwriters an option, exercisable by the
Representatives during the 30-day period after the date of this Prospectus, to
purchase up to 225,000 shares of Common Stock at the same price per share as the
initial shares of Common Stock to be purchased by the Underwriters. The
Representatives may exercise such option only to cover over-allotments in the
sale of the shares of Common Stock. To the extent that the Representatives
exercise such option, the Underwriters will have a firm commitment, subject to
certain conditions, to purchase the same proportion of such additional shares of
Common Stock as the number of shares of Common Stock to be purchased and offered
by such Underwriters in the above table bears to the total number of shares in
the above table.

The Company has been advised by the Representatives that the Underwriters
propose initially to offer the Shares to the public at the offering price set
forth on the cover page of this Prospectus, and through the Representatives to
certain dealers at such price less a concession not in excess of $ per
share. The Underwriters may allow, and such dealers may reallow, a concession
not in excess of $ per share to certain other dealers. After the
Offering, the public offering price and other selling terms may be changed.

The Company and stockholders holding in the aggregate approximately of
the shares of Common Stock outstanding after completion of this Offering
(including options and warrants of such persons exercisable during the period of
the agreement), have agreed that they will not offer, sell, contract to sell, or
otherwise dispose of, directly or indirectly, any shares of Common Stock, or any
interests therein, or any securities convertible into, or exchangeable for,
shares of Common stock, or rights to acquire the same, for a period of 90 days
from the date of this Prospectus without the prior written consent of the
Representatives, except pursuant to the Underwriting Agreement.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the Underwriters may be required to make in respect thereof.

In connection with the Offering, the Underwriters may purchase and sell the
Common Stock in the open market. These transactions may include over-allotment
and stabilizing transactions and purchases to cover syndicate short positions
created in connection with the Offering. Stabilizing transactions consist of
certain bids or purchases made for the purpose of preventing or retarding a
decline in the market price of the Common Stock. Syndicate short positions
involve the sale by the Underwriters of a greater number of

56
<PAGE>
shares of Common Stock than they are required to purchase from the Company in
the Offering. The Underwriters may also impose a penalty bid, whereby the
syndicate may reclaim selling concessions allowed to syndicate members or other
broker dealers in respect of the Common Stock sold in the Offering for their
account if the syndicate repurchases the shares in stabilizing or covering
transactions. These activities may stabilize, maintain, or otherwise affect the
market price of the Common Stock, which may be higher than the price that might
otherwise prevail in the open market. These activities, if commenced, may be
discontinued at any time. These transactions may be effected on the NYSE, in the
over-the-counter market or otherwise.

No action has been or will be taken in any jurisdiction by the Company or
the Representatives that would permit an offering to the general public of the
shares of Common Stock offered by this Prospectus in any jurisdiction other than
the United States.

57
<PAGE>
VALIDITY OF COMMON STOCK

The validity of the Common Stock will be passed upon for the Company by
White & Case, New York, New York, and for the Underwriters by Cahill Gordon &
Reindel (a partnership including a professional corporation), New York, New
York.

EXPERTS

The Company's consolidated balance sheet as of December 31, 1996 and the
consolidated statements of income, stockholders' equity, and cash flows for the
year then ended included in this Prospectus have been audited by KPMG Peat
Marwick LLP ("KPMG"), independent public accountants, as stated in their report
herein in reliance upon the authority of said firm as experts in accounting and
auditing.

The Gessner consolidated balance sheet as of December 31, 1996 and the
consolidated statements of income and retained earnings and cash flows for the
year then ended included in this Prospectus have been audited by
Wollert-Elmendorff Deutsche Industrie-Treuhand GmbH
Wirtschaftsprufungsgesellschaft, independent public accountants, as indicated in
their report thereon and are included in this Prospectus in reliance upon the
authority of said firm as experts in accounting and auditing.

The Company's balance sheet as of December 31, 1995 and the statements of
operations, stockholder's equity and cash flows for each of the two years in the
period ended December 31, 1995 incorporated herein by reference have been
audited by Coopers & Lybrand L.L.P. ("Coopers & Lybrand"), independent
accountants, as stated in their report herein and are incorporated herein by
reference in reliance upon the authority of said firm as experts in accounting
and auditing.

On March 28, 1996, the Audit Committee of the Board of Directors of the
Company (the "Board of Directors") accepted the resignation of Coopers & Lybrand
as the Company's independent auditors and approved the appointment of KPMG to
audit the Company's financial statements for the fiscal year ending December 31,
1996, in place of Coopers & Lybrand. These decisions were authorized by the
Board of Directors. The independent auditor's report of Coopers & Lybrand on the
consolidated financial statements of the Company for the three years ended
December 31, 1995, dated January 26, 1996, included in the Form 10-K filed with
the Commission on March 27, 1996, contained no adverse opinion or disclaimer of
opinion and was not qualified as to audit scope or accounting principles.

In connection with the Company's audits for the fiscal years ended December
31, 1995, and in the subsequent interim period prior to Coopers & Lybrand's
resignation on March 28, 1996, there were no disagreements with Coopers &
Lybrand on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure which disagreements, if not resolved
to the satisfaction of Coopers & Lybrand, would have caused Coopers & Lybrand to
make reference to the subject matter of the disagreement in connection with
their report.

The CPG consolidated balance sheet as of October 31, 1996 and the
consolidated statements of income and retained earnings, and cash flows for the
ten months then ended incorporated by reference have been audited by KPMG Peat
Marwick LLP, independent public accountants, as indicated in their report
thereon and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing.

The CPG consolidated balance sheets as of December 31, 1994 and 1995, and
the consolidated statements of income and retained earnings, and cash flows for
the period from November 1, 1993 (commencement of operations) to December 31,
1993 and for the years ended December 31, 1994 and 1995, incorporated by
reference, have been included therein in reliance on the report, which includes
an explanatory paragraph regarding a change by CPG in its method of accounting
for inventories in 1994, of Coopers & Lybrand, independent accountants, given on
the authority of that firm as experts in accounting and auditing.

58
<PAGE>
The Arcon consolidated balance sheet as of October 31, 1996 and the
consolidated statements of income and retained earnings, and cash flows for the
year then ended incorporated by reference have been audited by KPMG Peat Marwick
LLP, independent public accountants, as indicated in their report thereon and
are included herein in reliance upon the authority of said firm as experts in
accounting and auditing.

The Arcon consolidated balance sheets as of October 31, 1995 and 1994 and
the related consolidated statements of income and retained earnings (deficit),
equity and cash flows for the year ended October 31, 1995 and the period from
April 14, 1994 (inception) through October 31, 1994 incorporated by reference
have been audited by Price Waterhouse LLP, independent public accountants, as
indicated in their report thereon and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing. The Arcon Coating
Mills, Inc. statements of income and accumulated deficit and cash flows for the
period from November 1, 1993 to April 14, 1994 have been audited by Price
Waterhouse LLP, independent public accountants, as indicated in their report
thereon and are incorporated by reference herein in reliance upon the authority
of said firm as experts in accounting and auditing.

59
<PAGE>
INDEX TO FINANCIAL STATEMENTS

FIBERMARK, INC.

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Independent Auditor's Report.............................................................................. F-2
Consolidated Balance Sheets at December 31, 1996 and 1995 and September 30, 1997 (unaudited).............. F-3
Consolidated Statements of Income for the years ended December 31, 1996, 1995 and 1994 and the nine months
ended September 30, 1997 and 1996 (unaudited)........................................................... F-4
Consolidated Statement of Stockholders' Equity for the years ended December 31, 1996, 1995 and 1994 and
the nine months ended September 30, 1997 (unaudited).................................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994 and the nine
months ended September 30, 1997 and 1996 (unaudited).................................................... F-6
Notes to Financial Statements............................................................................. F-7
</TABLE>

STEINBEIS GESSNER GMBH

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Independent Auditors' Report.............................................................................. F-23
Consolidated Balance Sheets at December 31, 1996 and September 30, 1997 (unaudited)....................... F-24
Consolidated Statements of Income and Retained Earnings for the year ended December 31, 1996 and the nine
months ended September 30, 1997 (unaudited)............................................................. F-26
Consolidated Statements of Cash Flows for the year ended December 31, 1996 and the nine months ended
September 30, 1997 (unaudited).......................................................................... F-27
Notes to Financial Statements............................................................................. F-28
</TABLE>

F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT

Board of Directors

FiberMark, Inc.

We have audited the accompanying consolidated balance sheets of FiberMark,
Inc., as of December 31, 1996 and the related consolidated statements of income,
stockholders' equity, and cash flows for the year then ended. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit. The consolidated financial statements of
FiberMark, Inc. as of December 31, 1995 and 1994 were audited by other auditors
whose report dated January 26, 1996 expressed an unqualified opinion on those
financial statements.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of FiberMark,
Inc. as of December 31, 1996, and the results of their operations and their cash
flows for the year then ended in conformity with generally accepted accounting
principles.

KPMG Peat Marwick LLP

Burlington, Vermont
January 31, 1997

Vt. Reg. No. 92-0000241

F-2
<PAGE>
FIBERMARK, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31,
1996 1995
---------- --------- SEPTEMBER 30,
1997
-------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash...................................................................... $ 14,342 $ 1,518 $ 9,075
Accounts receivable, net of allowances of $333 in 1996 and $253 in 1995... 20,847 9,406 24,645
Cogen receivable (note 3)................................................. 1,785 1,680 --
Inventories (note 4)...................................................... 29,293 16,856 34,358
Other..................................................................... 1,693 2,948 2,862
Deferred income taxes (note 9)............................................ 2,090 162 2,090
---------- --------- -------------
Total current assets.................................................. 70,050 32,570 73,030

Long-term Cogen receivable (note 3)......................................... -- 1,832 --
Property, plant and equipment, net (note 5)................................. 89,696 33,551 95,730
Goodwill, net............................................................... 46,950 500 45,761
Other intangible assets, net................................................ 5,642 2,199 5,614
Deferred income taxes (note 9).............................................. -- 3,966 --
---------- --------- -------------
Total assets (note 6)................................................. $ 212,338 $ 74,618 $ 220,135
---------- --------- -------------
---------- --------- -------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt (note 6)................................ $ -- $ 1,688 $ --
Accounts payable.......................................................... 15,085 7,702 16,315
Accrued liabilities....................................................... 25,047 5,546 23,846
---------- --------- -------------
Total current liabilities............................................. 40,132 14,936 40,161

Long-term debt, less current portion (note 6)............................... 100,000 4,625 100,000
Deferred gain (note 7)...................................................... 12,603 14,322 11,314
Deferred income taxes (note 9).............................................. 11,510 -- 11,510
---------- --------- -------------
Total liabilities..................................................... 164,245 33,883 162,985

Commitments and contingencies (note 18)

Stockholders' Equity (notes 8 and 17):
Preferred stock--par value $.001 per share; 2,000,000 shares authorized
and none issued......................................................... -- -- --
Common stock, par value $.001 per share; 20,000,000 shares authorized
6,058,638 shares issued and outstanding in 1996 and 6,050,148 shares
issued and outstanding in 1995.......................................... 6 6 6
Additional paid-in capital................................................ 44,731 44,711 44,802
Unearned compensation..................................................... -- (121) --
Retained earnings (accumulated deficit)................................... 3,356 (3,861) 12,342
---------- --------- -------------
Total stockholders' equity............................................ 48,093 40,735 57,150
---------- --------- -------------
Total liabilities and stockholders' equity............................ $ 212,338 $ 74,618 $ 220,135
---------- --------- -------------
---------- --------- -------------
</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE>
FIBERMARK, INC.

CONSOLIDATED STATEMENTS OF INCOME

(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------- ---------------------

<S> <C> <C> <C> <C> <C>
1996 1995 1994 1997 1996
---------- ---------- ---------- ---------- ---------

<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales.................................................... $ 124,771 $ 117,516 $ 105,416 $ 176,659 $ 77,734
Cost of sales................................................ 101,981 100,106 88,138 142,559 64,105
---------- ---------- ---------- ---------- ---------
Gross profit............................................... 22,790 17,410 17,278 34,100 13,629
Selling, general and administrative expenses................. 9,908 8,397 8,584 12,234 6,316
---------- ---------- ---------- ---------- ---------
Income from operations..................................... 12,882 9,013 8,694 21,866 7,313
Other (income) expense, net.................................. (1,030) (1,198) (658) 218 (991)
Loss on sale of assets (note 12)............................. -- 8,302 -- -- --
Cogeneration income (note 3)................................. (97) (6,512) -- -- --
Interest expense............................................. 1,798 892 1,356 6,900 310
---------- ---------- ---------- ---------- ---------
Income before income taxes and extraordinary item.......... 12,211 7,529 7,996 14,748 7,994
Income tax (benefit) expense (note 9)........................ 4,697 (424) 2,768 5,762 3,037
---------- ---------- ---------- ---------- ---------
Income before extraordinary item........................... 7,514 7,953 5,228 8,986 4,957
Extraordinary item:
Loss on early extinguishment of debt (net of income tax
benefit of $198 in 1996 and $99 in 1994) (note 6)........ (297) -- (149) -- --
---------- ---------- ---------- ---------- ---------
Net income............................................... $ 7,217 $ 7,953 $ 5,079 $ 8,986 $ 4,957
---------- ---------- ---------- ---------- ---------
---------- ---------- ---------- ---------- ---------
Earnings per common share:
Income before extraordinary item........................... $ 1.24 $ 1.31 $ 0.87 $ 1.43 $ 0.82
Extraordinary item......................................... (0.05) -- (0.03) -- --
---------- ---------- ---------- ---------- ---------
Net income............................................... $ 1.19 $ 1.31 $ 0.84 $ 1.43 $ 0.82
---------- ---------- ---------- ---------- ---------
---------- ---------- ---------- ---------- ---------
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE>
FIBERMARK, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 AND
THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED)

<TABLE>
<CAPTION>
RETAINED
ADDITIONAL EARNINGS TOTAL
COMMON STOCK PAID-IN UNEARNED ---------- STOCKHOLDERS'
SHARES AMOUNT CAPITAL COMPENSATION (DEFICIT) EQUITY
---------- ------------- ----------- ------------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993..... 6,028,446 $ 6 $ 44,639 $ (362) $ (16,893) $ 27,390

Exercise of stock options...... 21,702 -- 72 -- -- 72
Amortization of unearned
compensation................. -- -- -- 121 -- 121
Net Income..................... -- -- -- -- 5,079 5,079
--
---------- ----------- ----- ---------- ------------
Balance at December 31, 1994..... 6,050,148 6 44,711 (241) (11,814) 32,662

Amortization of unearned
compensation................. -- -- -- 120 -- 120
Net income..................... -- -- -- -- 7,953 7,953
--
---------- ----------- ----- ---------- ------------
Balance at December 31, 1995..... 6,050,148 6 44,711 (121) (3,861) 40,735

Exercise of stock options...... 8,490 -- 20 -- -- 20
Amortization of unearned
compensation................. -- -- -- 121 -- 121
Net income..................... -- -- -- -- 7,217 7,217
--
---------- ----------- ----- ---------- ------------
Balance at December 31, 1996..... 6,058,638 6 44,731 -- 3,356 48,093

Exercise of stock options...... 16,500 -- 71 -- -- 71
Issuance of stock.............. 1,043 -- -- -- -- --
Net income..................... -- -- -- -- 8,986 8,986
--
---------- ----------- ----- ---------- ------------
Balance at September 30, 1997.... 6,076,181 $ 6 $ 44,802 $ -- $ 12,342 $ 57,150
--
--
---------- ----------- ----- ---------- ------------
---------- ----------- ----- ---------- ------------
</TABLE>

F-5
<PAGE>
FIBERMARK, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1996 1995 1994 1997 1996
--------- --------- --------- --------- ---------

<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income................................................. $ 7,217 $ 7,953 $ 5,079 $ 8,986 $ 4,957
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................ 3,651 3,342 4,006 5,592 2,401
Amortization of deferred gain............................ (1,719) (1,718) (1,146) (1,289) (1,289)
Write off of deferred debt costs and other deferred
charges................................................ 495 27 248 -- --
Amortization of unearned compensation.................... 121 120 121 -- 80
Loss on sale of assets................................... -- 8,302 -- -- --
Gain on sale of property, plant and equipment............ -- (8) -- -- --
Cogeneration income...................................... (97) (6,512) -- -- --
Changes in operating assets and liabilities:
Accounts receivable.................................... 1,475 1,821 (1,833) (3,798) (1,872)
Inventories............................................ (1,431) (301) (3,192) (5,065) 454
Other.................................................. 1,022 1,983 (2,812) (1,169) 1,932
Accounts payable....................................... 357 (3,262) 3,907 1,230 (547)
Accrued liabilities.................................... 3,577 96 651 (1,201) 2,629
Deferred taxes......................................... 2,406 (3,724) (862) -- --
--------- --------- --------- --------- ---------
Net cash provided by operating activities.............. 17,074 8,119 4,167 3,286 8,745
--------- --------- --------- --------- ---------
Cash flows used for investing activities:
Cogeneration receipt....................................... 2,000 3,000 -- 1,785 2,000
Cogeneration expenses paid................................. -- -- (27) -- --
Additions to property, plant and equipment................. (8,457) (4,865) (1,603) (9,716) (4,298)
Kobayashi payments......................................... -- (5,000) -- -- --
Additions to organization costs............................ -- (741) -- -- --
Net proceeds from sale of property, plant and equipment.... -- 17 -- -- --
Acquisition of Endurs Products Division.................... -- -- (27,400) -- --
Net proceeds from sale of assets........................... -- 12,933 -- -- --
Expenses paid in connection with sale of assets............ -- (1,744) -- -- --
Payments for businesses acquired........................... (87,000) -- -- -- --
--------- --------- --------- --------- ---------
Net cash provided by (used in) investing activities...... (93,457) 3,600 (29,030) (7,931) (2,298)
--------- --------- --------- --------- ---------
Cash flows from financing activities:
Proceeds from sale-leaseback agreement..................... -- 5,000 25,000 -- --
Exercise of stock options.................................. 20 -- 72 71 35
Increase in revolving credit line.......................... 64,159 133,466 97,861 -- 64,092
Payments on revolving credit line.......................... (64,159) (140,759) (97,522) -- (63,530)
Repayment of senior term debt.............................. (6,313) (9,275) (15,038) -- (5,030)
Borrowing of senior term debt.............................. -- -- 17,000 -- --
Refinancing of expenses paid............................... -- -- (1,581) (693) (358)
Proceeds from issuance of Series B Senior Notes............ 100,000 -- -- -- --
Debt issue costs........................................... (4,500) -- -- -- --
--------- --------- --------- --------- ---------
Net cash provided by (used in) financing activities...... 89,207 (11,568) 25,792 (622) (4,791)
--------- --------- --------- --------- ---------
Net increase (decrease) in cash.......................... 12,824 151 929 (5,267) 1,656
Cash at beginning of year.................................... 1,518 1,367 438 14,342 1,518
--------- --------- --------- --------- ---------
Cash at end of year.......................................... $ 14,342 $ 1,518 $ 1,367 $ 9,075 $ 3,174
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE>
FIBERMARK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) DESCRIPTION OF BUSINESS

Specialty Paperboard, Inc. changed its name to FiberMark, Inc.
("FiberMark"). FiberMark operates in a single segment as a manufacturer and
converter of specialty fiber-based products. The Company's market focus is in
four core product areas: office products, technical specialties, durable
specialties and filter products. FiberMark is headquartered in Brattleboro,
Vermont and operates nine paper mills and converting facilities located in the
eastern and midwestern regions of the United States.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include FiberMark, Inc. and its wholly
owned subsidiaries, Endura Products Division ("Endura") beginning July 1994 and
Arcon Holdings Corporation ("Arcon") and CPG Investors Inc. ("CPG") beginning
November 1996. All significant intercompany transactions and accounts have been
eliminated in consolidation.

CASH EQUIVALENTS

For purposes of the statement of cash flows, the Company considers all
highly liquid investments with original maturities of three months or less to be
cash equivalents.

INVENTORIES

Inventories are stated at the lower of cost or market. Cost is determined
using the average cost method at FiberMark and Endura and the first-in,
first-out ("FIFO") method at Arcon and CPG.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are carried at cost. Depreciation for
financial reporting purposes is provided using the straight-line method based
upon the useful lives of the assets, generally estimated at 3 to 40 years. When
assets are sold or retired, the cost and accumulated depreciation are removed
from the accounts and any gain or loss is included in income. Improvements are
capitalized and included in property, plant and equipment while expenditures for
maintenance and repairs are charged to expense. Leasehold improvements are
amortized over the shorter of the life of the improvement or the lease term.

OTHER INTANGIBLE ASSETS AND GOODWILL

Intangible assets include organization and debt issue costs and goodwill.
Organization costs of $593,801 and $725,754, net of accumulated amortization of
$310,168 and $178,213 as of December 31, 1996 and 1995, respectively, arose in
conjunction with the acquisition of the Endura Products Division and are
amortized on a straight-line basis over seven years. Debt issue costs of
$4,500,000, net of accumulated amortization of $33,000 as of December 31, 1996
are related to the issuance of the Series B Senior Notes and are amortized using
the interest method over the life of those notes.

Goodwill of $46,950,000 and $500,000, net of accumulated amortization of
$244,000 and $26,000 as of December 31, 1996 and 1995, respectively, represents
the cost in excess of net assets of acquired companies and is amortized on a
straight-line basis over thirty years. Amortization of intangibles, including
goodwill, amounted to $812,000, $576,000 and $712,000 as of December 31, 1996,
1995 and 1994, respectively. The Company periodically evaluates the
recoverability of intangibles resulting from business acquisitions and

F-7
<PAGE>
FIBERMARK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
measures the amount of impairment, if any, by assessing current and future
levels of income and cash flows as well as other factors, such as business
trends and prospects and market and economic conditions.

DEFERRED GAIN

The deferred gain incurred in connection with the sale-leaseback transaction
is being amortized on a straight-line basis over the life of the lease (see note
7).

RESEARCH AND DEVELOPMENT

The Company expenses research and development costs as incurred. The costs
amounted to $1.2 million, $1.0 million and $1.1 million for the years ended
December 31, 1996, 1995 and 1994, respectively.

INCOME TAXES

Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.

STOCK-BASED COMPENSATION

Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation", encourages, but does not require companies to record
compensation cost for stock-based employee compensation plans at fair value. The
Company has chosen to continue to account for stock-based compensation using the
intrinsic value method prescribed in Account Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees", and related interpretations.
Accordingly, compensation cost for stock options is measured as the excess, if
any, of the quoted market price of the Company's stock at the date of the grant
over the amount an employee must pay to acquire the stock.

NET EARNINGS PER SHARE

The net earnings per share is computed by dividing earnings available for
common shares by the weighted average number of common shares outstanding during
the year. Common stock equivalents are not included in this calculation as their
inclusion dilutes the computation by less than 3%. Weighted average common stock
outstanding and net income per common share have been restated to give effect to
a 3-for-2 stock split effective May 13, 1997.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
data of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.

F-8
<PAGE>
FIBERMARK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF

The Company adopted the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", on
January 1, 1996. This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount of fair value loss costs to
sell. Adoption of the Statement did not have a material impact on the Company's
financial position, results of operations, or liquidity.

RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform to the current
year's presentation.

(3) COGENERATION PROJECT

In 1993, the Company entered into agreements with Kamine/Basicorp Beaver
Falls L.P. ("Kamine") pursuant to which the Company's Latex Fiber Products
Division would host a gas-fired, 79-megawatt combined-cycle cogeneration
facility developed by Kamine in Beaver Falls, New York. Construction of the
facility has been completed. The Company received $4.4 million in cash in 1993.
The Company has a firm contract with Kamine to receive a series of cash payments
totaling $7.0 million between May 1995 and May 1997. The present value of these
cash payments, in the amount of $6.5 million, was recorded as income in the
first quarter of 1995. Cash payments of $2 million and $3 million were received
in May 1996 and 1995, respectively.

(4) INVENTORIES

Inventories consists of the following at December 31, 1996 and 1995 (dollars
in thousands):

<TABLE>
<CAPTION>
1996 1995
---------- ---------
<S> <C> <C>
Raw materials.......................................................... $ 11,356 $ 5,248
Work in process........................................................ 6,667 5,788
Finished goods......................................................... 8,783 4,937
Stores inventory....................................................... 1,568 636
Operating supplies..................................................... 919 247
---------- ---------
Total inventories...................................................... $ 29,293 $ 16,856
---------- ---------
---------- ---------
</TABLE>

F-9
<PAGE>
FIBERMARK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(5) PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following at December 31, 1996
and 1995 (dollars in thousands):

<TABLE>
<CAPTION>
1996 1995
---------- ---------
<S> <C> <C>
Land................................................................... $ 6,816 $ 1,694
Buildings and improvements............................................. 16,666 9,245
Machinery and equipments............................................... 65,995 28,208
Construction in progress............................................... 11,234 2,620
---------- ---------
100,711 41,767

Less accumulation depreciation
and amortization..................................................... (11,015) (8,216)
---------- ---------
Net property, plant and equipment...................................... $ 89,696 $ 33,551
---------- ---------
---------- ---------
</TABLE>

Depreciation expense was $2,839,000, $2,766,000 and $3,294,000 for the years
ended December 31, 1996, 1995 and 1994, respectively.

(6) DEBT

The Company's long-term debt is summarized as follows at December 31, 1996
and 1995 (dollars in thousands):

<TABLE>
<CAPTION>
1996 1995
---------- ---------
<S> <C> <C>
Senior term debt from the CIT Group, Inc., ("CIT"), interest at prime plus 1.25% or LIBOR
plus 3.0% (9.0% at December 31, 1995), secured by all tangible and intangible assets of
the Company, due from 1996-2000........................................................... $ -- $ 6,313
Series B senior notes--interest at 9- 3/8%, interest payable semi-annually in arrears on
April 15 and October 15, unsecured, due October 15, 2006.................................. 100,000 --
---------- ---------
100,000 6,313
Less current portion........................................................................ -- 1,688
---------- ---------
Long-term debt, excluding current portion................................................... $ 100,000 $ 4,625
---------- ---------
---------- ---------
</TABLE>

The Series B Senior notes are redeemable at the Company's option in whole or
in part, on or after October 15, 2001 at redemption prices ranging from 100% to
104.688% of face value. Up to 35% of the notes are redeemable at the Company's
option on or prior to October 15, 1999 using the net proceeds of a public equity
offering at a redemption price equal to 109.375% of the principal amount plus
accrued and unpaid interest thereon subject to certain other conditions as
described in the agreement.

In conjunction with the issuance of the Series B Senior Notes, (see note
11), the Company repaid the senior term debt from CIT then outstanding. As a
result, the Company expensed $297,000 of deferred financing costs, net of income
tax expense of $198,000. The loss has been reflected in the consolidated
statements of income as an extraordinary item.

Approximately, $1,796,807, $1,362,000 and $1,060,000 of interest was paid
during the years ended December 31, 1996, 1995 and 1994, respectively.

F-10
<PAGE>
FIBERMARK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(6) DEBT (CONTINUED)
The Company has $15,000,000 in available funds through a revolving credit
line with the CIT Group, Inc., at December 31, 1996 and 1995. The revolving
credit line is subject to a commitment fee payable at the rate of 1/2 of 1% per
annum on the daily average unused portion of this line. This fee is payable on a
quarterly basis. In addition, the Company is required to pay an annual
Collateral Management Fee of $35,000 in connection with periodic examinations,
analyzing and evaluating the collateral.

In April 1994, the Company expensed $248,000 or deferred debt financing
costs, upon early retirement of the Senior term debt. This amount has been
treated as an extraordinary item in the consolidated statement of income for the
year ended December 31, 1994.

(7) LEASES

DEFERRED GAIN AND SALE-LEASEBACK

In April 1994, FiberMark entered into a sale-leaseback agreement with the
CIT Group, Inc. ("CIT"), FiberMark sold CIT $7,813,000 in fixed assets for a
purchase price of $25,000,000. As a result FiberMark recorded a deferred gain of
$17,187,000 which is amortized on a straight-line over the life of the ten year
lease. In 1996, 1995 and 1994 the Company amortized $1,719,000, $1,718,000 and
$1,146,000, respectively, of the deferred gain into income. At December 31,
1996, accumulated amortization of deferred gain totaled $4,583,000.

In connection with the sale-leaseback transaction, CIT leased back the fixed
assets to FiberMark utilizing a ten-year operating lease. The lease requires
quarterly payments of $843,000 for the first five years and quarterly payments
of $690,000 for this remaining five years of the lease. Rental expense was
$4,426,189, $3,066,585 and $2,044,930 for the years ending December 31, 1996,
1995 and 1994, respectively.

In December 1995, FiberMark amended the sale-leaseback agreement whereby
FiberMark, sold a newly constructed wet and machine ("Kobayashi") for $10
million. No gain or loss was recorded on the transaction. FiberMark received
$5.0 million of the purchase price from CIT in December 1995, the remaining $5.0
million was placed in escrow and paid during the 1996 when all specifications
were met. CIT leased back the Kobayashi machine to FiberMark using the remaining
8.5 years of the operating lease discussed above. The amended lease required
additional payments including a first quarter payment of $113,000 and quarterly
payments of $339,901 for the next 33 quarters.

F-11
<PAGE>
FIBERMARK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(7) LEASES (CONTINUED)
OTHER LEASES

The Company assumed obligations under operating leases for certain
machinery, equipment and facilities purchased from CPG on October 31, 1996.
Rental expense was $150,000 for the two months ended December 31, 1996. As of
December 31, 1996, obligations to make future minimum lease payments were as
follows.

Payments to be made in the years ending December 31 (dollars in thousands):

<TABLE>
<S> <C>
1997................................................................ $ 990
1998................................................................ 735
1999................................................................ 700
2000................................................................ 500
2001................................................................ 1,020
Thereafter.......................................................... 4,245
</TABLE>

(8) PREFERRED STOCK

At December 31, 1996 and 1995, the Company has 2,000,000 shares of preferred
stock authorized with none issued. The Company, without stockholder approval,
can issue preferred stock with voting, conversion and other rights.

(9) INCOME TAXES

The components of the provision for income taxes before extraordinary items
for the years ended December 31, 1996, 1995 and 1994 are as follows (dollars in
thousands):

<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal....................................................... $ 2,548 $ 2,557 $ 2,742
State......................................................... 1,090 743 890
--------- --------- ---------
3,638 3,300 3,632
Deferred........................................................ 1,059 (3,724) (864)
--------- --------- ---------
Provision (benefit) for income taxes............................ $ 4,697 $ (424) $ 2,768
--------- --------- ---------
--------- --------- ---------
</TABLE>

F-12
<PAGE>
FIBERMARK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(9) INCOME TAXES (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1996 and
1995 are presented below (dollars in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------------
DEFERRED TAX DEFERRED TAX
ASSETS LIABILITIES
------------- ------------
<S> <C> <C>
Accounts receivable............................................... $ 308 $ --
Inventory......................................................... 758 --
Property, plant and equipment..................................... -- 17,684
Payroll related accruals.......................................... 1,672 --
Intangible assets................................................. 282 --
Miscellaneous reserves............................................ 808 --
Deferred gain..................................................... 5,041 --
Cogeneration income............................................... -- 605
------ ------------
$ 8,869 $ 18,289
------ ------------
------ ------------
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1995
----------------------------
DEFERRED TAX DEFERRED TAX
ASSETS LIABILITIES
------------- -------------
<S> <C> <C>
Inventory......................................................... $ 214 $ --
Depreciation...................................................... -- 1,180
Vacation accrual.................................................. 306 --
Reserves.......................................................... 234 --
Organization costs................................................ -- 185
Miscellaneous..................................................... 80 --
Net operating loss carryforwards.................................. 335 --
Deferred gain..................................................... 5,729 --
Cogeneration income............................................... -- 1,405
------ ------
$ 6,898 $ 2,770
------ ------
------ ------
</TABLE>

SFAS No. 109 requires a valuation allowance against deferred tax assets if,
based on the weight of available evidence, it is more likely than not that some
or all of the deferred tax assets will not be realized. For the year ended
December 31, 1995, the Company reduced the valuation allowance to $0. Although
realization is not assured, management believes it is more likely than not that
the deferred tax assets will be realized through future taxable earnings.

F-13
<PAGE>
FIBERMARK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(9) INCOME TAXES (CONTINUED)
A reconciliation of income taxes from continuing operations at the United
States statutory rate to the effective rate for the years ended December 31,
1996, 1995 and 1994 are as follows:

<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
U.S. federal rate.................................................. 34.0% 34.0% 34.0%
Decrease in valuation allowance.................................... 0.0% (49.9%) (7.2%)
State taxes net of federal benefit................................. 5.8% 5.9% 6.9%
Other.............................................................. (1.4%) 4.4% 0.9%
--- --------- ---
Effective tax rate................................................. 38.4% (5.6%) 34.6%
--- --------- ---
--- --------- ---
</TABLE>

Income taxes paid during 1996, 1995 and 1994 were $3,698,000, $3,130,000 and
$1,728,000, respectively.

(10) FAIR VALUES OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107, "Disclosures About the
Fair Value of Financial Instruments", requires disclosure of information about
the fair value of certain financial instruments for which it is practicable to
estimate that value. For purposes of the following disclosure the fair value of
a financial instrument is the amount at which the instrument could be exchanged
in a current transaction between willing parties other than in a forced sale or
liquidation. Management has determined that the carrying values of its financial
assets and liabilities approximate fair value at December 31, 1996.

F-14
<PAGE>
FIBERMARK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(11) ACQUISITIONS

1996 ACQUISITIONS

The Company purchased all of the outstanding stock of Arcon Holdings
("Arcon") as of October 31, 1996. Concurrently with the transfer of the purchase
price to the stockholders of Arcon, the stockholders agreed to repay all amounts
owed under Arcon's revolver and term loans and repurchase and cancel warrants
then outstanding.

The Company also purchased all of the issued and outstanding common stock of
CPG Investors Inc. ("CPG") on October 31, 1996. Concurrently with the transfer
of the purchase price to the stockholders of CPG, the stockholders agreed to
repay all amounts owed under CPG's revolving and term loans.

The aggregate purchase price of CPG and Arcon was approximately $91,500,000
which includes costs of the acquisitions. The acquisitions were financed through
the issuance of senior notes in the amount $100,000,000 and were accounted for
using the purchase method. Accordingly, the purchase price was allocated to the
assets acquired and liabilities assumed based upon their respective fair values.
This treatment result in approximately $46,668,000 of cost in excess of net
assets acquired. Such excess, or goodwill, is being amortized on a straight-line
basis over thirty years. The 1996 consolidated results include Arcon and CPG's
results of operations from the date of the acquisitions through the end of the
year.

The following summarized unaudited proforma results of operations for the
years ended December 31, 1996 and 1995, assumes the Arcon and CPG acquisitions
occurred as of the beginning of the respective periods (dollars in thousands,
except per share amounts):

<TABLE>
<CAPTION>
UNAUDITED
----------------------
<S> <C> <C>
1996 1995
---------- ----------
Net sales............................................................. $ 227,822 $ 239,464
Net income............................................................ 10,709 10,716
Net income per common share........................................... 1.77 1.77
</TABLE>

The unaudited pro forma results are not necessarily indicative of actual
results of operations that would have occurred had the acquisitions been
consummated as of the above dates, nor are they necessarily indicative of future
operating results.

1994 ACQUISITION

On June 30, 1994, the Company acquired through its wholly owned
subsidiaries, substantially all of the assets and liabilities of the Endura
Products Division of W.R. Grace ("Endura"). Endura is engaged in the
manufacture, conversion, saturation and coating of specialty papers at
facilities located in Quakerstown, Pennsylvania and Owensboro, Kentucky. The
results of operations for Endura have been included in the consolidated results
of operations since the acquisition date. Under the terms of the purchase
agreement, the total purchases price was approximately $26,400,000 plus
$1,000,000 of acquisition expenses paid. A portion of the purchase price was
financed by CIT pursuant to a $17,000,000 term loan. The balance of the purchase
price was paid using $3,000,000 provided by CIT to the Company under a revolving
line of credit and using cash reserves of the Company.

The acquisition was accounted for using the purchase method. Accordingly,
the purchase price was allocated to the net assets acquired based on the fair
values resulting in goodwill of approximately $526,000 which is being amortized
over 30 years.

F-15
<PAGE>
FIBERMARK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(11) ACQUISITIONS (CONTINUED)
The following summarized unaudited pro forma results of operations for the
year ended December 31, 1994, assumes the Endura acquisition occurred as of the
beginning of the respective period (dollars in thousands, except per share
amounts):

<TABLE>
<CAPTION>
UNAUDITED
----------
<S> <C>
Net sales......................................................................... $ 124,656
Net income........................................................................ 5,510
Net income per common share....................................................... 0.91
</TABLE>

The unaudited pro forma results are not necessarily indicative of actual
results of operations that would have occurred had the acquisition been
consummated as of the above dates, nor are they necessarily indicative of future
operating results.

(12) SALE OF ASSETS

On March 22, 1995, the Company sold the assets of its Lewis Mill and the
Company's gasket business to Armstrong World Industries Inc. ("Armstrong") for
$12,933,000 (the "Sale"). As part of the sale, inventory in the amount of
$1,080,000 was sold at book value to Armstrong. The net book value of the assets
sold was $19,311,000 and total expenses relating to sale are estimated at
$1,924,000. At December 31, 1995, $1,744,000 of these expenses had been paid;
the remaining expenses were accrued in 1995 and paid in 1996. This transaction
resulted in a loss of $8,302,000 before taxes. Approximately $160,000 of the
purchase price was held by Armstrong pending in receipt of a New York State tax
clearance certificate. This payment was received by the Company in May 1995. The
Lewis mill was part of a two-mill division located at the Company's Latex Fiber
Products Division in Beaver Falls, New York.

(13) RELATED PARTY TRANSACTIONS

The Company paid a management fee of $250,000 for the years ended December
31, 1996, 1995 and 1994, to an equity owner, MDC Management Company ("MDC"). The
Company has a management agreement with MDC which calls for an annual fee of
$250,000 through 1997. In 1996 the Company also paid MDC $250,000 in conjunction
with the CPG and Arcon acquisitions.

(14) RETIREMENT PLANS

The Company has a defined contribution plan (salaried and hourly) and a
defined benefit (hourly) retirement plan for FiberMark employees (excluding
Arcon and CPG employees).

DEFINED CONTRIBUTION PLAN

The defined contribution plan is a 401(k) ERISA and IRS-qualified plan
covering substantially all employees that permits employee salary deferrals up
to 16% of salary with the Company matching 50% of the first 6%. Defined
contribution expenses for the Company was $229,000, $193,000 and $163,000 for
the years ended December 31, 1996, 1995 and 1994, respectively.

DEFINED BENEFIT PLAN

The defined benefit plan is an ERISA and IRS-qualified plan based upon the
negotiated benefit and years of service in the collective bargaining agreement
between the Unions and the Company. Plan assets

F-16
<PAGE>
FIBERMARK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(14) RETIREMENT PLANS (CONTINUED)
are invested in an insurance company general account. The Company usually
contributes at least the minimum amount as required by ERISA.

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
(DOLLARS IN
THOUSANDS)

Actuarial present value of accumulated and projected benefit obligations:
Vested................................................................. $ (1,411) $ (1,127)
Nonvested.............................................................. (134) (219)
--------- ---------
(1,545) (1,346)
Plan assets at fair value................................................ 1,360 869
--------- ---------
Projected benefit obligations in excess of plan assets................... (185) (477)
Unrecognized net loss.................................................... -- 49
Unrecognized transition obligation....................................... 21 24
Unrecognized prior service costs......................................... 90 96
Adjustment required to recognize minimum liability....................... (111) (169)
--------- ---------
Accrued pension cost................................................. $ (185) $ (477)
--------- ---------
--------- ---------
</TABLE>

Total pension expense includes the following components:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
(DOLLARS IN
THOUSANDS)

Service cost--benefits earned during the period.............................. $ 126 $ 111
Interest cost on projected benefit obligation................................ 101 86
Actual return on plan assets................................................. (133) (103)
Net amortization and deferral................................................ 69 40
--------- ---------
Net periodic pension expense............................................. $ 163 $ 134
--------- ---------
--------- ---------
</TABLE>

Pension expense was approximately $116,000 for the year ended December 31,
1994. The benefit obligations as of December 31, 1996 and 1995 were calculated
using an average discount rate of 7.5% and 7.0%, respectively. A long-term rate
of return of 9% was used to calculate the 1996 and 1995 net periodic pension
expense.

CPG employees are covered by a noncontributory defined benefit plan. This is
an ERISA and IRS-qualified plan which has benefits based on stated amounts for
each year of credited service. The plan's assets consist principally of equity
securities, government and corporate debt securities and other fixed income
obligations.

F-17
<PAGE>
FIBERMARK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(14) RETIREMENT PLANS (CONTINUED)
The following table presents the funded status of the Company's pension plan
and the net pension liability included in the consolidated balance sheet
(dollars in thousands):

<TABLE>
<S> <C>
Actuarial present value of benefit obligations:
Vested benefits.................................................. $ (6,827)
Nonvested benefits............................................... (517)
---------
Projected benefit obligation................................... (7,344)
Fair value of plan assets.......................................... 5,651
---------
Funded status.................................................. (1,693)
Unrecognized net gain.............................................. 102
Additional minimum liability....................................... (102)
---------
Net pension liability.......................................... $ (1,693)
---------
---------
</TABLE>

Net periodic pension expense for the two months ended December 31, 1996
included the following components (dollars in thousands):

<TABLE>
<S> <C>
Service cost........................................................ $ 42
Interest cost on projected benefit obligation....................... 83
Actual return on plan assets........................................ (80)
Net amortization and deferral....................................... (7)
---------
Net periodic pension expense.................................... $ 38
---------
---------
</TABLE>

The benefit obligation as of December 31, 1996 was calculated using a
discount rate of 7.5%. A long-term rate of return of 9% was used to calculate
the net periodic pension expense.

(15) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

CPG has benefit plans which provide certain health care and life insurance
benefits to eligible employees when they retire. Salaried employees generally
become eligible for retiree medical benefits after reaching age 62 and with 15
years of service or after reaching age 65. The medical plan for salaried
employees provides for an allowance, which must be used towards the purchase of
a Medicare supplemental insurance policy, based on a retiree's length of
service. The allowance may be adjusted to reflect annual changes in the Consumer
Price Index ("CPI"); however, once the initial allowance has doubled, there will
be no further increases. Salaried employees hired after January 1, 1993 are not
eligible to participate in this retiree medical plan. Upon satisfying certain
eligibility requirements, approximately 45% of the hourly employees are eligible
upon retirement to receive a medical benefit, which is an allowance to be used
toward the purchase of a Medicare supplemental insurance policy and cannot
exceed a specified annual amount. The postretirement benefit obligations related
to employees who retired prior to the Acquisition were not assumed by the
Company and remain the responsibility of prior owners.

F-18
<PAGE>
FIBERMARK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(15) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (CONTINUED)
Net periodic postretirement benefits cost for the two months ended December
31, 1996 included the following components (dollars in thousands):

<TABLE>
<S> <C>
Service cost.......................................................... $ 14
Interest cost on accumulated postretirement benefit obligation........ 23
Net amortizations and deferral........................................ (1)
---
Postretirement benefits cost.......................................... $ 36
---
---
</TABLE>

The following table sets forth the accumulated postretirement benefit
obligation included in other liabilities on the Company's consolidated balance
sheet (dollars in thousands):

<TABLE>
<S> <C>
Accumulated postretirement benefit obligation:
Fully eligible participants........................................ $ (181)
Retirees........................................................... (208)
Other active plan participants..................................... (938)
---------
Accumulated postretirement benefit obligation...................... (1,327)
Unrecognized net loss.............................................. 74
---------
Accrued postretirement benefit liability........................... $ (1,253)
---------
---------
</TABLE>

The assumed health care cost trend rate used in measuring future benefit
costs was 9%, gradually declining to 6% by 1999 and remaining at that level
thereafter. A 1% increase in this annual trend rate would increase the
accumulated postretirement benefit obligation at December 31, 1996 by $81,368
and the postretirement benefits expense for the two months ended December 31,
1996 by less than $11,000. The assumed discount rate used in determining the
accumulated postretirement benefit obligation was 7.5%. The assumed annual
increase in the CPI was 3%.

(16) SIGNIFICANT BUSINESS CONCENTRATIONS

Approximately 41%, 47% and 47% of the Company's total 1996, 1995 and 1994
sales, respectively, were concentrated in five customers. In 1996, 1995 and 1994
revenue from a single customer was $15,425,000 (12% of total sales), $18,933,000
(16% of total sales) and $18,905,000 (18% of total sales), respectively. Sales
to a second customer accounted for 10%, 10% and 11% of total sales in 1996, 1995
and 1994, respectively.

Approximately 12%, 13% and 11% of the Company's products were sold to
foreign customers (excluding Canada) in 1996, 1995 and 1994, respectively. The
principal international markets served by the Company include Asia/Pacific Rim,
Latin America, Mexico and Europe.

(17) STOCK OPTION AND BONUS PLANS

The Company has three stock option plans which provide for grants of
nonqualified or incentive stock options. The 1992 Amended and Restated Stock
Option Plan ("1992 Plan") is fully granted at 301,422 shares of common stock to
management of the Company. Options granted under the 1992 Plan typically vest at
a rate of 20% per year and are exercisable for a period of ten years from the
grant date.

F-19
<PAGE>
FIBERMARK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(17) STOCK OPTION AND BONUS PLANS (CONTINUED)
The 1994 Stock Option Plan ("1994 Plan") is fully granted at 300,000 shares
of common stock to selected officers and employees of the Company. Options
granted under the Plan vest at a rate of 20% per year commencing on the one year
anniversary of the grant date and 1.66% at the end of each month thereafter. The
options are exercisable for a period of ten years from the grant date.

The 1994 Director Stock Option Plan ("Directors' Plan") authorizes the grant
of up to 225,000 shares of common stock to directors who are not otherwise
full-time employees of the Company. The Plan was amended in 1996 to increase the
authorized shares from 75,000 to 225,000 shares and to allow for an accelerated
vesting schedule not to exceed five years. Options will vest and become
exercisable based upon target levels set for the fair market value of the common
stock or in the event of a merger or asset sale. The options are exercisable for
a period of eight years from the date of grant.

The following table sets forth the stock option transactions for the three
years ended December 31, 1996.

<TABLE>
<CAPTION>
1992 PLAN 1994 PLAN DIRECTORS' PLAN
----------------------- ----------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
NUMBER EXERCISE NUMBER EXERCISE NUMBER EXERCISE
OF SHARES PRICE OF SHARES PRICE OF SHARES PRICE
---------- ----------- ---------- ----------- ---------- -----------
Outstanding, December 31, 1993...................... 301,422 $ 3.33 -- $ -- -- $ --
Granted......................................... -- -- 60,000 14.25 52,500 13.50
Exercised....................................... (21,702) 3.33 -- -- -- --
---------- ---------- ----------
Outstanding, December 31, 1994...................... 279,720 3.33 60,000 14.25 52,500 13.50
Granted......................................... -- -- 66,150 17.63 -- --
Forfeited....................................... (37,377) 3.33 (8,100) 14.25 -- --
---------- ---------- ----------
Outstanding, December 31, 1995...................... 242,343 3.33 118,050 16.14 52,500 13.50
Granted......................................... 37,377 13.50 208,725 26.01 135,000 21.18
Exercised....................................... (6,465) 3.33 (2,025) 14.25 -- --
Forfeited....................................... -- -- (26,775) 16.28 (4,500) 13.50
---------- ---------- ----------
Outstanding, December 31, 1996.................. 273,255 4.73 297,975 23.10 183,000 19.17
---------- ---------- ----------
---------- ---------- ----------
Exercisable, December 31, 1996.................. 235,878 3.33 33,969 15.66 93,000 18.71
---------- ---------- ----------
---------- ---------- ----------
Weighted average remaining contractual life..... 5.7 years 9.3 years 8.7 years
</TABLE>

The Corporation has adopted the disclosure-only provisions of Statement of
Financial Standards No. 123, "Accounting for Stock-Based Compensation."
Accordingly, no compensation cost has been recognized for stock options granted
under the plans during 1996 and 1995 as the options were all granted at exercise
prices which equaled the market value at the date of the grant. Compensation for
the options granted prior to December 31, 1992 at $7.50 per share was measured
as of the grant date based upon a fair market value of $12.00 per share as
determined by the Board of Directors and is being recognized as expense over the
vesting period. Had compensation cost for the Company's stock option plans been
determined based on

F-20
<PAGE>
FIBERMARK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(17) STOCK OPTION AND BONUS PLANS (CONTINUED)
the fair value at the grant date for awards during 1996 and 1995 consistent with
the provisions of SFAS No. 123, the Company's net income would have been reduced
to the proforma amounts indicated below:

<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Net income, as reported.................................................... $ 7,217 $ 7,953
Net income, pro forma...................................................... 7,075 7,918
Earnings per share, as reported............................................ $ 1.19 $ 1.31
Earnings per share, pro forma.............................................. 1.19 1.31
</TABLE>

Pro forma net income reflects only options granted in 1996 and 1995.
Therefore, the full impact of calculating compensation cost for stock options
under SFAS No. 123 is not reflected in the pro forma net income amounts
presented above because compensation cost is reflected over the options' vesting
periods and compensation cost for options granted prior to January 1, 1995 is
not considered.

The fair value of each option grant is estimated on the date of the grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1996 and 1995: risk-free interest rate of 6%;
dividend yield of $0; expected volatility of 45; and expected lives of ten (10)
years.

Effective January 1, 1994, the Compensation Committee adopted the Executive
Bonus Plan, which provides for bonus payments of a percentage of base salary
based upon achievement by the Company of certain levels of earnings per share.
The Executive Bonus Plan utilizes a sliding scale so that the percentage of base
salary paid as bonus compensation increases as the earnings per share of the
Company increase. The Executive Bonus Plan is designed to directly align the
interests of the executive officers and the stockholders. Although the Executive
Bonus Plan is subject to annual review by the Committee, the Committee expects
it to remain in place for a five-year term.

(18) COMMITMENTS AND CONTINGENCIES

ENVIRONMENTAL MATTERS

The Company is subject to various federal, state and local environmental
requirements, particularly relating to air and water quality. The Company and
its predecessors have spent substantial sums for pollution control facilities to
comply with existing regulations. While the Company believes it has made
sufficient capital expenditures to maintain compliance with existing laws and
regulations, any failure by the Company to comply with present and future
regulations could subject it to future liability or require the suspension of
operations.

OTHER MATTERS

The Company is involved in various legal proceedings in the ordinary course
of business. Management believes that the outcome of these proceedings will not
have a material adverse effect on the Company's financial condition, results of
operations or cash flows.

F-21
<PAGE>
FIBERMARK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(19) UNAUDITED QUARTERLY SUMMARY INFORMATION

The following is a summary of unaudited quarterly summary information for
the years ended December 31, 1996 and 1995 (in thousands, except per share
data).

<TABLE>
<CAPTION>
NET EARNINGS
GROSS ----------------------
NET SALES PROFIT INCOME PER SHARE
----------- --------- --------- -----------
<S> <C> <C> <C> <C>
1996 QUARTERS
First............................................................. $ 24,859 $ 3,503 $ 1,048 $ 0.17
Second............................................................ 26,086 5,011 1,816 0.30
Third............................................................. 26,789 5,115 2,093 0.35
Fourth(2)......................................................... 47,037 9,161 2,260 0.37
----------- --------- --------- -----
Total............................................................... $ 124,771 $ 22,790 $ 7,217 $ 1.19
----------- --------- --------- -----
----------- --------- --------- -----

1995 QUARTERS
First(2).......................................................... $ 35,198 $ 4,837 $ 465 $ 0.08
Second............................................................ 31,879 4,369 1,572 0.26
Third(3).......................................................... 24,480 3,750 4,418 0.73
Fourth............................................................ 25,959 4,454 1,498 0.24
----------- --------- --------- -----
Total............................................................... $ 117,516 $ 17,410 $ 7,953 $ 1.31
----------- --------- --------- -----
----------- --------- --------- -----
</TABLE>

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

(1) In the fourth quarter of 1996 the Company acquired Arcon and CPG. Net income
before extraordinary items for the fourth quarter of 1996 was $2,557,000;
per share net income before extraordinary items was $0.42.

(2) The first quarter of 1995 includes the present value of the Cogeneration
receivable of $6,512,000 booked as other income and a net book loss of
$8,159,000 resulting from the sale of the Lewis mill. An additional loss of
$143,000 was booked in the fourth quarter of 1995.

(3) In the third quarter of 1995, the Company recognized a tax benefit related
to the release of tax valuation allowances.

F-22
<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Board of Directors

We have audited the accompanying consolidated balance sheet of Steinbeis
Gessner GmbH and subsidiaries as of December 31, 1996, and the related
consolidated statement of income and retained earnings, and of cash flows for
the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally
accepted in Germany and the United States of America. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Steinbeis
Gessner GmbH and subsidiaries as of December 31, 1996, and the results of their
operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America.

Wollert-Elmendorff
Deutsche Industrie-Treuhand GmbH
Wirtschaftsprufundsgesellschaft

November 4, 1997

F-23
<PAGE>
STEINBEIS GESSNER GMBH
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
SEPTEMBER 30,
DECEMBER 31, 1997
1996 (UNAUDITED)
------------- ---------------
<S> <C> <C> <C>
(DM 000) (DM 000)
ASSETS

Current assets
Cash..................................................... 475 453
Trade accounts receivable................................ 18,854 20,285
Less allowance for doubtful accounts..................... (2,011) (934)
------ ------
16,843 19,351

Accounts receivable from affiliates...................... 303 0
Other receivables........................................
474 46
Inventories.............................................. (Note 3) 14,141 16,143
Prepaid expenses......................................... 53 0
------ ------
Total current assets................................... 32,289 35,993

Non-current assets
Property, plant and equipment-net........................ (Note 4) 55,087 56,029
Intangible assets-net...................................... (Note 5) 885 606
------ ------
Total assets............................................... 88,261 92,628
------ ------
------ ------
</TABLE>

See Notes to Financial Statements

F-24
<PAGE>
STEINBEIS GESSNER GMBH

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
SEPTEMBER 30,
DECEMBER 31, 1997
1996 (UNAUDITED)
------------- -------------
<S> <C> <C> <C>
(DM 000) (DM 000)

LIABILITIES AND SHAREHOLDER'S EQUITY

Current liabilities:
Deferred income taxes.................................................... 357 28
Short-term bank debt..................................................... 621 0
Current portion of long-term debt........................................ (Note 6) 4,990 2,746
Trade accounts payable................................................... 2,374 4,101
Due to parent company.................................................... 12,371 12,154
Accrued payroll and employee benefits.................................... 5,099 5,556
Other accrued liabilities................................................ 2,776 3,745
------ ------
Total current liabilities.............................................. 28,588 28,330
Deferred income taxes...................................................... (Note 6) 17,450 16,457
Other non-current liabilities.............................................. 724 418
Accrued pensions........................................................... (Note 11) 15,267 15,730
Long-term debt............................................................. (Note 6) 3,000 3,000
------ ------
Total liabilities...................................................... 65,029 63,935

Minority interest.......................................................... 109 100

Commitments and Contingencies.............................................. (Note 15)

Shareholder's equity
Registered capital......................................................... 6,145 6,145
Retained earnings.......................................................... 16,978 22,448
------ ------
Total shareholder's equity............................................. 23,123 28,593
------ ------
Total liabilities and shareholder's equity................................. 88,261 92,628
------ ------
------ ------
</TABLE>

See notes to Financial Statements

F-25
<PAGE>
STEINBEIS GESSNER GMBH

CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS

<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30, 1997
1996 (UNAUDITED)
------------ ------------------
<S> <C> <C> <C>
(DM 000) (DM 000)
Net sales........................................................ (Note 12) 128,740 108,654
Costs of sales................................................... 98,069 80,478
------------ -------
Gross profit..................................................... 30,671 28,176
Operating Expenses
Selling........................................................ 10,139 8,521
General administrative and other............................... 10,970 8,560
Research and development....................................... 2,940 2,071
Restructuring charges.......................................... (Note 13) 2,416 --
------------ -------
Operating income................................................. 4,206 9,024
Interest income.................................................. 16 14
Interest expense................................................. 1,065 566
Other income..................................................... (Note 14) 1,352 806
Other expenses................................................... 303 391
------------ -------
Income before income taxes and minority interest................. 4,206 8,887
Provision for income taxes....................................... (Note 8) 1,487 3,343
------------ -------
Income before minority interest.................................. 2,719 5,544
Minority interest................................................ 99 74
------------ -------
Net income....................................................... 2,620 5,470

Retained earnings, beginning of period........................... 17,884 16,978
Dividends declared............................................... 3,526 --
------------ -------
Retained earnings, end of period................................. 16,978 22,448
------------ -------
------------ -------
</TABLE>

See Notes to Financial Statements

F-26
<PAGE>
STEINBEIS GESSNER GMBH
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30, 1997
1996 (UNAUDITED)
------------- -------------------
<S> <C> <C>
(DM 000) (DM 000)
OPERATING ACTIVITIES:
Net income..................................................................... 2,620 5,470
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization................................................ 7,328 5,613
Gain (loss) on disposal of property plant and equipment...................... (308) 90
Changes in assets and liabilities:
Accounts receivable........................................................ (2,345) (2,205)
Inventories................................................................ 1,918 (2,002)
Prepaid expenses and other current assets.................................. (90) 481
Deferred income taxes...................................................... (1,110) (1,322)
Accounts payable, due to parent and other current liabilities.............. (2,990) 2,928
Accrued pensions and other non-current liabilities......................... 1,151 157
------ ------
Net cash provided by operating activities...................................... 6,174 9,210
------ ------
INVESTING ACTIVITIES:
Proceeds from sales of fixed assets............................................ 317 67
Additions to property, plant and equipment..................................... (3,784) (6,433)
------ ------
Net cash used in investing activities.......................................... (3,467) (6,366)
------ ------
FINANCING ACTIVITIES:
Increase in short-term debt.................................................... 621 (621)
Repayment of long-term debt.................................................... (3,513) (2,245)
------ ------
Net cash used in financing activities.......................................... (2,892) (2,866)
------ ------
Decrease in cash............................................................... (185) (22)
Cash, beginning of period...................................................... 660 475
------ ------
Cash, end of period............................................................ 475 453
------ ------
------ ------
</TABLE>

See Notes to Financial Statements

F-27
<PAGE>
STEINBEIS GESSNER GMBH

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(IN DM THOUSANDS)

1 DESCRIPTION OF BUSINESS

Steinbeis Gessner GmbH operates in a single segment as a manufacturer of
technical and filter paper and tape. Steinbeis Gessner is headquartered in
Brannenburg, Germany and operates two paper mills in the state of Bavaria.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a) Principles of Consolidation

The accompanying consolidated financial statements include the accounts of
Steinbeis Gessner GmbH and its subsidiaries, Leiss-GmbH & Co.-(55.6%) and
Steinbeis GmbH & Co. Grundstucksverwaltungs KG (100%). All significant
intercompany transactions and accounts have been eliminated in consolidation.

b) Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.

c) Inventories

Inventories are stated at the lower of cost or market. Cost is determined
primarily using the average cost method.

d) Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation is recorded
using the straight-line method based upon the useful lives of the assets, which
are primarily 20 to 50 years for buildings and 3 to 20 years for machinery and
equipment. When assets are sold or retired, the cost and accumulated
depreciation are removed from the accounts and any gain or loss is included in
income. Improvements are capitalized and included in property, plant and
equipment while expenditures for maintenance and repairs are charged to expense.

e) Intangible Assets

Intangible assets include certain rights and licenses. Management
periodically evaluates the recoverability of intangibles and measures the amount
of impairment, if any, by assessing current and future levels of income and cash
flows as well as other factors, such as market and economic conditions.
Intangibles are amortized over three to forty years.

f) Research and Development

Research and development costs are expensed as incurred. The costs amounted
to DM 3 million for the year ended December 31, 1996.

g) Income Taxes

The company has a profit pooling management with its parent, Steinbeis
Holding GmbH. The company's statutory pretax profits are transferred to
Steinbeis Holding GmbH. The Company provides for current and deferred taxes as
if it were a separate taxpayer. Deferred income taxes are provided to reflect

F-28
<PAGE>
STEINBEIS GESSNER GMBH

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(IN DM THOUSANDS)

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
future tax consequences attributable to temporary differences between the
financial reporting and tax bases of assets and liabilities using presently
enacted tax rates and laws.

h) Impairment of Long-Lived Assets

Management periodically evaluates the recoverability of long-term assets,
based upon current and anticipated net income and undiscounted future cash
flows.

i) Revenue Recognition

Revenue from sales is recognized when goods are shipped.

j) New Accounting Pronouncements

In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information", which will be effective for the Company
beginning January 1, 1998. SFAS No. 131 redefines how operating segments are
determined and requires quantitative disclosures of certain financial and
descriptive information about a company's operating segments. The Company has
not yet completed an analysis of whether it will be required to report operating
segments.

k) Interim Financial Statements

The consolidated financial statements as of September 30, 1997 and for the
nine month periods ended September 30, 1996 and 1997 are unaudited, but in the
opinion of the Company all adjustments necessary for a fair presentation of
consolidated results of operations, consolidated financial position, and
consolidated cash flows at the date and for the periods indicated have been
included. The results of such interim periods are not necessarily indicative of
the results for the full year.

Certain information and footnote disclosures included in the consolidated
financial statements normally included in consolidated financial statements
prepared in accordance with generally accepted accounting principles in the
United States of America have been condensed or omitted. These unaudited
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements as of December 31, 1996 and notes thereto.

3 INVENTORIES

<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
<S> <C>
Raw materials and supplies..................................................................... 6,876
Work in process................................................................................ 486
Finished goods................................................................................. 6,779
------
Total inventories.............................................................................. 14,141
------
------
</TABLE>

F-29
<PAGE>
STEINBEIS GESSNER GMBH

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(IN DM THOUSANDS)

4 PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
<S> <C>
Land........................................................................................... 4,755
Buildings...................................................................................... 35,459
Machinery and equipment........................................................................ 97,006
Construction in progress....................................................................... 278
-------
Total property, plant and equipment............................................................ 137,498
Less accumulated deprectiation................................................................. 82,411
-------
Net property plant and equipment............................................................... 55,087
-------
-------
</TABLE>

Depreciation expense was DM 6,798 for the year ended December 31, 1996.

5 INTANGIBLE ASSETS

Intangible assets consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------
<S> <C>
Intangible assets-at cost...................................................................... 2,393
Less accumulated amortization.................................................................. 1,508
-----
Intangible assets-net.......................................................................... 885
-----
-----
</TABLE>

Amortization expense was DM 530 for the year ended December 31, 1996.

F-30
<PAGE>
STEINBEIS GESSNER GMBH

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(IN DM THOUSANDS)

6 LONG-TERM DEBT

Long-term debt is summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------
<S> <C>
Bayerische Vereinsbank, 4.5%-8.95%, due 1997................................................... 4,500
Allianz Lebensversicherungs-AG, 6.2%, due 2000................................................. 3,000
Other.......................................................................................... 490
-----
Total long-term debt......................................................................... 7,990
Less current portion........................................................................... 4,990
-----
Long-term debt, excluding current portion...................................................... 3,000
-----
-----
</TABLE>

The Bayerische Vereinsbank and Allianz Lebensversicherungs-AG debt is
secured by the land and buildings of Steinbeis Gessner GmbH. Interest paid
during 1996 was DM 974.

Payments to be made in the years ending December 31:

7 LEASES

The Company has non-cancellable operating leases, primarily with a related
party, for certain machinery, equipment and facilities. Rental expense was DM
284 for the year ended December 31, 1996. As of December 31, 1996, obligations
to make future minimum lease payments in the years ending December 31 were as
follows:

F-31
<PAGE>
STEINBEIS GESSNER GMBH

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(IN DM THOUSANDS)

8 INCOME TAXES

All income and income taxes are domestic. The components of the provision
for income taxes are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------
<S> <C>
Current:
Federal.................................................................. 1,710
Trade.................................................................... 887
-----
Total.................................................................... 2,597
-----
Deferred:
Federal.................................................................. 834
Trade.................................................................... 276
-----
Total.................................................................... 1,110
-----
Provision for income taxes................................................. 1,487
-----
-----
</TABLE>

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities are presented below:

<TABLE>
<CAPTION>
DECEMBER 31, 1996
------------------------------------
ASSET LIABILITY NET
----- ----------- ----------
<S> <C> <C> <C>
Current deferred income taxes:
Accounts receivable............................................................... 0 250 -250
Inventory reserves................................................................ 0 162 -162
Accrued payroll and employee benefits............................................. 55 0 55
--- ----------- ----------
Total............................................................................. 55 412 -357
--- ----------- ----------
Non-current deferred income taxes:
Special reserve................................................................... 0 1,234 -1,234
Intangible assets................................................................. 64 0 64
Property, plant and equipment..................................................... 0 16,579 -16,579
Pensions.......................................................................... 299 0 299
--- ----------- ----------
Total............................................................................. 363 17,813 -17,450
--- ----------- ----------
Total deferred income taxes......................................................... 418 18,225 -17,807
--- ----------- ----------
--- ----------- ----------
</TABLE>

F-32
<PAGE>
STEINBEIS GESSNER GMBH

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(IN DM THOUSANDS)

8 INCOME TAXES (CONTINUED)
The provision for income taxes at the German federal corporation tax rate of
45% differed from the Company's provision for income taxes for the year ended
December 31, 1996 as follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
<S> <C>
Expected tax at statutory rate................................................................. 1,893
Corporation tax surcharge...................................................................... 142
Municipal trade taxes on income, net of corporation tax benefit................................ 298
Credit for dividend distribution............................................................... -812
Other.......................................................................................... -34
------
Provision for income taxes..................................................................... 1,487
------
------

Effective income tax rate...................................................................... 35.4%
</TABLE>

Income taxes paid during 1996 were DM 4.

9 FAIR VALUE OF FINANCIAL INSTRUMENTS

Management has determined that the carrying values of cash, accounts
receivable, accounts payable and short-term bank debt approximate fair value at
December 31, 1996 because of immediate or short-term maturities. The carrying
amount reported for long-term debt approximates fair value because the interest
rate of the debt approximates the market rate.

10 RELATED PARTY TRANSACTIONS

The Company paid a management fee of DM 514 for the year ended December 31,
1996. The Company has a management agreement with Steinbeis Verwaltungs-GmbH
which calls for the provision of property administration, legal, taxation and
certain personnel related services. The Company's parent provides financing at
rates which are in accordance with market indicators (interest rate 1996 at
3.25%-5.5%). Interest expense on related party borrowings amounted to DM 392 in
1996. Certain equipment and facilities are leased from Mangfall Kraftwerke AG, a
subsidiary of the Company's parent. 1996 lease expense on such equipment and
facilities were DM 255.

11 RETIREMENT PLANS

The Company maintains non-contributory, defined-benefit pension plans
covering substantially all employees. Benefits for certain salaried employees
are based on salary and years of service, while benefits

F-33
<PAGE>
STEINBEIS GESSNER GMBH

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(IN DM THOUSANDS)

11 RETIREMENT PLANS (CONTINUED)
for other employees are based on a fixed benefit rate and years of service. The
plan is unfunded and the Company accrues for the pension obligation in the
financial statements.

<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
<S> <C>
Actuarial present value of accumulated benefit obligations
Vested................................................................. 14,398
Nonvested.............................................................. 979
------
Accumulated benefit obligation........................................... 15,377
Effect of projected future salary increase............................... 305
------
Projected benefit obligation............................................. 15,682
Unrecognized net loss.................................................... -415
------
Accrued pension cost..................................................... 15,267
------
------
Total pension expense includes the following components:
1996
-------
Service cost............................................................. 356
Interest cost............................................................ 931
------
Net periodic pension expanse............................................. 1,287
------
------
</TABLE>

The benefit obligations as of December 31, 1996 were calculated using a
discount rate of 6.5%. Salary increases, where applicable, were calculated at
3%.

12 SIGNIFICANT BUSINESS CONCENTRATIONS

No customer accounted for more than 10% of its 1996 sales. Approximately 53%
of the Company's total 1996 sales were concentrated in its 10 largest customers.

The Company's sales in 1996 were made to customers located in the following
regions:

Germany 32%
Europe 48%
Rest of world 20%

13 RESTRUCTURING CHARGES

Restructuring charges in 1998 relate primarily to personnel related costs,
including severance benefits and notice period compensation.

F-34
<PAGE>
STEINBEIS GESSNER GMBH

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(IN DM THOUSANDS)

14 OTHER INCOME

Other income consists of the following components:

<TABLE>
<CAPTION>
1996
---------
<S> <C>
Foreign exchange gains, net........................................................... 428
Gain on disposal of property, plant and equipment..................................... 239
Rental income......................................................................... 233
Other................................................................................. 452
---------
Total............................................................................... 1,352
---------
</TABLE>

15 COMMITMENTS AND CONTINGENCIES

A) ENVIRONMENTAL MATTERS

The Company is subject to various federal, state and local environmental
requirements, particularly relating to air and water quality. The Company has
spent substantial sums for pollution control facilities to comply with existing
regulations. While the Company believes it has made sufficient capital
expenditures to maintain compliance with existing laws and regulations, any
failure by the Company to comply with present and future regulations could
subject it to future liability or require the suspension of operations.

B) OTHER MATTERS

F-35
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY AGENT, DEALER OR UNDERWRITER. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATES AS OF WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY, TO ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL OR IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Available Information........................... 2
Incorporation of Certain Documents by
Reference..................................... 3
Forward Looking Statements...................... 3
Prospectus Summary.............................. 4
Risk Factors.................................... 10
Use of Proceeds................................. 14
Price Range of Common Stock and Dividend
Policy........................................ 14
Capitalization.................................. 15
Unaudited Pro Forma Consolidated Financial
Data.......................................... 16
Selected Historical Consolidated Financial
Data.......................................... 24
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 25
Business of the Company......................... 30
The Gessner Acquisition......................... 44
Management...................................... 48
Security Ownership of Certain Beneficial Owners
and Management................................ 51
Certain Relationships and Related
Transactions.................................. 53
Description of Capital Stock.................... 54
Underwriting.................................... 56
Validity of Common Stock........................ 58
Experts......................................... 58
Index to Financial Statements................... F-1
</TABLE>

1,500,000 SHARES

[LOGO]

COMMON STOCK
BT ALEX. BROWN
PAINEWEBBER INCORPORATED

PROSPECTUS DATED , 1997

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*

<TABLE>
<S> <C>
SEC filing fee........................................................

NASD filing fee.......................................................

Accounting fees and expenses..........................................

Legal fees and expenses...............................................

Blue Sky and Legal Investment fees and expenses.......................

Transfer Agent's fees.................................................

Printing and engraving expenses.......................................

Miscellaneous.........................................................

Total.................................................................
</TABLE>

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

* All estimates except for filing fee.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Certificate of Incorporation of the Company provides that directors of
the Company shall, to the full extent not prohibited by the General Corporation
Law of the State of Delaware (the "DGCL"), not be liable to the Company or its
stockholders for monetary damages for breach of such director's fiduciary duty
as a director.

Section 145 of the DGCL provides that a corporation may indemnify directors
and officers as well as other employees and individuals against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with specified actions, suits or proceedings, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation, a "derivative action") if they acted in good faith and
in a manner they reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, if they had no reasonable cause to believe their conduct was
unlawful. A similar standard is applicable in the case of derivative actions,
except that indemnification only extends to expenses (including attorneys' fees)
incurred in connection with the defense or settlement of such actions, and the
statute requires court approval before there can be any indemnification where
the person seeking indemnification has been found liable to the corporation. The
statute provides that it is not exclusive of other indemnification that may be
granted by a corporation's bylaws, disinterested director vote, stockholder
vote, agreement or otherwise.

II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<S> <C>
1.1(11) Form of Underwriting Agreement.
2.1(11) Share Purchase Agreement dated as of November 18, 1997, among Steinbeis Holding GmbH ("Steinbeis"),
Zetaphoenicis Beteiligungs GmbH and Thetaphoenicis Beteiligungs GmbH.
2.2(9) Merger Agreement dated as of August 28, 1996 by and among the Company, CPG Acquisition Co. ("CPG
Co.") and CPG Investors Inc. ("Investors").
2.3(9) Stock Purchase Agreement dated as of August 28, 1996 by and among the Company, Arcon Coating Mills,
Inc. ("Arcon Mills"), Arcon Holdings Corp. ("Holdings"), the stockholders of Holdings and various
other parties.
2.4(9) Certificate of Merger merging CPG Co. with and into Investors filed with the Secretary of State of
Delaware on October 31, 1996.
3.1(1) Restated Certificate of Incorporation of the Company as amended through March 25, 1997.
3.2(10) Certificate of Ownership and Merger of FiberMark, Inc. with and into Specialty Paperboard, Inc. filed
with the Secretary of State of Delaware on March 26, 1997.
3.3(1) Restated By-laws.
4.1(1) Reference is made to Exhibits 3.1, 3.2 and 3.3.
4.2(1) Specimen stock certificate.
4.3(9) Indenture dated as of October 15, 1996 (the "Indenture") among the Company, CPG Co., Specialty
Paperboard/Endura, Inc. ("Endura") and the Wilmington Trust Company ("Wilmington").
4.4(9) Specimen Certificate of 9 3/8% Series A Senior Note due 2006 (included in Exhibit 4.3 hereof).
4.5(9) Specimen Certificate of 9 3/8% Series B Senior Note due 2006 (included in Exhibit 4.3 hereof).
4.6(9) Form of Guarantee of Senior Notes issued pursuant to the Indenture (included in Exhibit 4.3 hereof).
4.7(9) Registration Rights Agreement dated as of October 16, 1996 among the Company, Endura, CPG Co. and BT
Securities Corporation.
5.1 Opinion of White & Case re legality of the Common Stock.
10.1(5) Lease Agreement dated April 29, 1994, between CIT Group/Equipment Financing Inc. ("CIT/Financing")
and the Company.
10.2(5) Security Agreement dated April 29, 1994, between CIT/Financing and the Company.
10.3(5) Grant of Security Interest in Patents, Trademarks and Leases dated April 29, 1994, between the
Company and CIT/Financing.
10.4(5) Bill of Sale dated April 29, 1994, to CIT/Financing.
10.5(9) Amended and Restated Financing Agreement dated December 31, 1996, between The CIT Group/Business
Credit, Inc. ("CIT/Credit") and the Company.
10.6(1)(3) Form of Indemnity Agreement entered into between the Company and its directors and executive
officers.
10.7(1)(3) The Company's 1992 Amended and Restated Stock Option Plan and related form of Option Agreement.
10.8(1) Paper Procurement Agreement, between the Company and Acco-U.S.A.
10.9(8) Paper Procurement Agreement, between the Company and Pajco/Holliston, dated
</TABLE>

II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
February 23, 1995.
<S> <C>
10.10(1) Energy Service Agreement (Latex mill), dated as of November 19, 1992, between Kamine and the Company.
10.11(2) Amendment No. 1 to the Energy Service Agreement (Latex mill), dated as of May 7, 1993, between Kamine
and the Company.
10.12(1) Energy Service Agreement (Lewis mill), dated as of November 19, 1992, between Kamine and the Company.
10.13(2) Amendment No. 1 to the Energy Service Agreement (Lewis mill), dated as of May 7, 1993, between Kamine
and the Company.
10.14(1) Restated Ground Lease, dated as of November 19, 1992, between Kamine and the Company.
10.15(1) Beaver Falls Cogeneration Buyout Agreement, dated as of November 20, 1992, between Kamine, Kamine
Beaver Falls Cogen. Co., Inc. and the Company.
10.16(2) Consent and Agreement (Energy Services Agreement), dated as of May 7, 1993, by the Company.
10.17(2) First Amendment of Restated Ground Lease, dated as of May 7, 1993, between Kamine and the Company.
10.18(2) Memorandum of Lease, dated as of May 7, 1993, between Kamine and the Company.
10.19(2) Lessor Consent and Estoppel Certificate, dated as of May 7, 1993, between the Company and Deutsche
Bank AG, New York Branch, Ansaldo Industria of America, Inc. and SV Beavers Falls, Inc.
10.20(7)(3) The Company's 1994 Stock Option Plan and related forms of Option Agreements.
10.21(7)(3) The Company's 1994 Directors Stock Option Plan and related form of Option Agreement.
10.22(9)(3) Amendment to the Company's 1994 Directors Stock Option Plan.
10.23(4)(3) The Company's Executive Bonus Plan.
10.24(9) Deed of Lease between James River Paper Company, Inc. and CPG-Virginia Inc. dated as of October 31,
1993.
10.25(9) Amended and Restated Agreement of Lease, between Arnold Barsky doing business as A&C Realty and Arcon
Mills Inc., dated June 1, 1988.
10.26(9) Lease Agreement dated November 15, 1995, between IFA Incorporated and Custom Papers Group Inc.
("Custom Papers Group").
10.27(9) Master Lease Agreement dated January 1, 1994, between Meridian Leasing Corp. and Custom Papers Group.
10.28(9) Master Equipment Lease Agreement dated February 3, 1995, between Siemens Credit Corp. and CPG
Holdings Inc.
10.29(11) Loan Agreement dated as of November 18, 1997, between Steinbeis and Gessner.
10.30(11) Expansion Land Option and Preemption Right Agreement dated as of November 18, 1997, between Steinbeis
and Gessner.
10.31(11) Pension Transfer Agreement dated as of November 18, 1997, between Steinbeis and Gessner.
10.32(6) Endura Sale Agreement, by and among W.R. Grace & Co. Conn., W.R. Grace (Hong Kong) Limited, Grace
Japan Kabushiki Kaisha (collectively, the "Sellers"), the Company, Spatulate Paperboard (Hong Kong
Limited) and Specialty Paperboard Japan Kabushiki Kaisha (collectively the "Buyers"), dated May 10,
1994.
10.33(6) Amendment No.1 to the Endura Sale Agreement, by and among the Buyers, Endura and the Sellers, dated
June 30, 1994.
23.1 Consent of KPMG Peat Marwick LLP.
</TABLE>

II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<S> <C>
23.2 Consent of KPMG Peat Marwick LLP.
23.3 Consent of KPMG Peat Marwick LLP.
23.4 Consent of Coopers & Lybrand L.L.P.
23.5 Consent of Coopers & Lybrand L.L.P.
23.6 Consent of Price Waterhouse LLP.
23.7 Consent of Wollert-Elmendorff Deutsche Industrie-Treuhand GmbH Wirtschaftsprufungsgesellschaft.
23.8 Consent of White & Case (included in Exhibit 5.1 hereof).
24.1 Power of Attorney (included on page II-5).
</TABLE>

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

(1) Incorporated by reference to exhibits filed with the Company's Registration
Statement on Form S-1 (No. 33-47954), as amended, which became effective
March 10, 1993.

(2) Incorporated by reference to exhibits filed with the Company's report on
Form 10-Q for the quarter ended June 30, 1993, filed August 13, 1993.

(3) Indicates management contracts or compensatory arrangements filed pursuant
to Item 601(b)(10) of Regulation S-K.

(4) Incorporated by reference to exhibits filed with the Company's report on
Form 10-K for the year ended December 31, 1993 (No. 0-20231).

(5) Incorporated by reference to exhibits filed with the Company's report on
Form 10-Q for the quarter ended March 31, 1994, filed May 14, 1994.

(6) Incorporated by reference to exhibits filed with the Company's report on
Form 8-K, filed July 14, 1994.

(7) Incorporated by reference to exhibits filed with the Company's Registration
Statement on Form S-8 filed, July 18, 1994.

(8) Incorporated by reference to exhibits filed with the Company's report on
Form 10-K for the year ended December 13, 1994 (No. 0-20231).

(9) Incorporated by reference to exhibits filed with the Company's Registration
Statement on Form S-4 (No. 333-17471), which became effective on February
11, 1997.

(10) Incorporated by reference to exhibits filed with the Company's report on
Form 10-K for the year ended December 31, 1996, filed April 1, 1997.

(11) To be filed by amendment.

II-4
<PAGE>
ITEM 17. UNDERTAKINGS

The undersigned registrant hereby undertakes that:

(a) for purposes of determining any liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial BONA FIDE offering thereof;

(b) insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described under Item 15 above, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in such Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in such Act and
will be governed by the final adjudication of such issue;

(c) for purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective; and

(d) for purposes of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.

II-5
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Brattleboro, State of Vermont, on the day of
November, 1997.

FIBERMARK, INC.

BY
-----------------------------------------
Alex Kwader
PRESIDENT AND CHIEF EXECUTIVE OFFICER

POWER OF ATTORNEY

Each person whose signature appears below constitutes and appoints and
hereby authorizes Alex Kwader and Bruce P. Moore, and each of them, as
attorney-in-fact, to sign on such person's behalf, individually and in each
capacity stated below, and to file any amendments, including post-effective
amendments to this registration statement.

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on November , 1997.

SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------

Director, President and
Chief Executive Officer
- ------------------------------ (Principal Executive
Alex Kwader Officer)

Vice President and Chief
Financial Officer
- ------------------------------ (Principal Financial and
Bruce P. Moore Accounting Officer)

Chairman of the Board of
- ------------------------------ Directors
K. Peter Norrie

Director
- ------------------------------
Brian C. Kerester

Director
- ------------------------------
Marion A. Keyes, IV

Director
- ------------------------------
George E. McCown

Director
- ------------------------------
Glenn S. McKenzie

Director
- ------------------------------
Jon H. Miller

Director
- ------------------------------
Fred P. Thompson, Jr.

Director
- ------------------------------
John D. Weil

II-6

<PAGE>

EXHIBIT 5.1

[LETTERHEAD OF WHITE & CASE]

November 19, 1996

FiberMark, Inc.
161 Wellington Road
P.O. Box 498
Brattleboro, VT 15302

Dear Sirs:

We refer to the Registration Statement on Form S-3 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
in the form in which it is to be filed today by FiberMark, Inc., a Delaware
corporation ("FiberMark"), with the Securities and Exchange Commission (the
"Commission"), relating to the issuance by FiberMark of up to 1,725,000 shares
of common stock, par value $0.001 per share, of FiberMark (the "Securities").

We have examined the originals, or photostatic or certified copies, of such
records of FiberMark, certificates of officers of FiberMark and of public
officials and such other documents as we have deemed relevant and necessary as
the basis for the opinion set forth below. We have relied upon such
certificates of public officials and such certificates of officers of FiberMark
and statements and information furnished by officers of FiberMark with respect
to the accuracy of material factual matters contained therein which were not
independently established. In such examination we have assumed the genuineness
of all signatures, the authenticity of all documents submitted to us as
originals, the conformity to original documents of all documents submitted to us
as photostatic or certified copies, and the authenticity of the originals of
such copies.

Based upon our examination mentioned above, subject to the assumptions
stated, it is our opinion that the Securities, upon issuance by FiberMark as
contemplated in the Registration Statement and any amendments thereto, will have
been duly authorized by FiberMark, will be legally issued, fully paid and
nonassessable.

We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to our firm appearing under the caption "Validity
of Common Stock" in the Prospectus forming part of the Registration Statement.
In giving this consent, we do

<PAGE>

not thereby admit that we are within the category of persons whose consent is
required under Section 7 of the Securities Act or the Rules and Regulations of
the Commission.

Very truly yours,

White & Case

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

The Board of Directors
FiberMark, Inc.:

We consent to the use of our report on the consolidated financial statements
of CPG Investors Inc. and subsidiaries as of and for the ten-month period
ended October 31, 1996 incorporated herein by reference and to the reference
to our firm under the heading "Experts" in the registration statement.

/s/ KPMG Peat Marwick LLP

Richmond Virginia
November 17, 1997

<PAGE>

EXHIBIT 23.2

The Board of Directors
FiberMark, Inc.:

We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the prospectus.

KPMG PEAT MARWICK LLP

Burlington, Vt.
November 17, 1997

<PAGE>

EXHIBIT 23.3

The Board of Directors
FiberMark, Inc.:

We consent to the incorporation by reference in this registration statement
of FiberMark, Inc. on Form S-3 of our report dated December 20, 1996 on our
audit of the financial statements of Arcon Holdings Corp. and subsidiary as
of October 31, 1996 and for the year then ended. We also consent to the
reference to our firm under the caption "Experts".

KPMG PEAT MARWICK LLP

Jericho, New York
November 17, 1997

<PAGE>

EXHIBIT 23.4

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in this registration statement
of FiberMark, Inc. on Form S-3, to be filed on or about November 17, 1997, of
our report dated January 26, 1996, on our audits of the financial statements
of FiberMark, Inc. (formerly Specialty Paper Board, Inc.) as of December 31,
1995 and for the years ended December 31, 1995 and 1994. We also consent to
the reference to our firm under the caption "Experts."

/s/ Coopers & Lybrand L.L.P.
----------------------------
Coopers & Lybrand L.L.P.

Boston, Massachusetts
November 17, 1997

<PAGE>

EXHIBIT 23.5

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in this registration statement
of FiberMark, Inc. on Form S-3 of our report dated February 29, 1996 (August
28, 1996 as to Note 13) on our audits of the financial statements of CPG
Investors Inc. as of December 31, 1994 and 1995, and for the years then ended.

/s/ Coopers & Lybrand L.L.P.

Richmond, Virginia
November 17, 1997

<PAGE>

EXHIBIT 23.6

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 of FiberMark,
Inc. of our report dated November 28, 1995, except as to Note 14, which is as
of August 28, 1996, relating to the consolidated financial statements of
Arcon Holdings Corp. and Subsidiary appearing in FiberMark, Inc.'s (formerly
Specialty Paperboard, Inc.) Registration Statement on Form S-4 (No.
333-17471), dated February 11, 1997.

/s/ PRICE WATERHOUSE LLP

PRICE WATERHOUSE LLP
Melville, New York
November 18, 1997

<PAGE>

[Wollert-Elmendorff Letterhead]

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Registration Statement of FiberMark, Inc. on
Form S-3 of our report dated November 4, 1997 (relating to the financial
statements of Steinbeis Gessner GmbH as of and for the year ended December 31,
1996 presented separately herein) appearing in the Prospectus, which is part
of this Registration Statement, and to the reference to us under the heading
"Experts" in such Prospectus.

WOLLERT-ELMENDORFF
DEUTSCHE INDUSTRIE-TREUHAND GmbH
Wirtschaftsprufungsgesellschaft

/s/ Hamada /s/ Pickelmann
- ---------------- -------------------
(Hamada) (Pickelmann)

Munich, Germany
November 18, 1997