Crown Paper Liquidating Trust

Status Reports and Notices

CROWN PAPER LIQUIDATING TRUST

OCTOBER 22, 2007

STATUS OF ADMINISTRATIVE AND PRIORITY CLAIMS RESOLUTIONS, INDUSTRIAL REVENUE BONDS CLAIM AND PRE-PETITION LENDERS CLAIM, GENERAL CLAIMS RESOLUTIONS, TIMING OF DISTRIBUTION TO TRUST BENEFICIARIES, PROFIT ISLAND ROYALTIES, CASH ON HAND, REMAINING ASSETS

Recent Developments on Assets February 27, 2007

            There have been recent developments concerning the remaining Crown Paper Liquidating Trust assets on which the Trust believes it is appropriate to provide information to all Trust Beneficiaries.  Crown Paper Liquidating Trust (which will be referred to here as the “Trust”) is successor to Crown Vantage, Inc. and Crown Vantage’s wholly owned subsidiary, Crown Paper Company (which will be referred to here collectively as “Crown”) under the confirmed chapter 11 plan of Crown.  As of February 14, 2007, aside from cash, the remaining Trust assets consist of:  a claim to certain excess funds in a retirement plan; a potential claim against the Crown former fiduciary insurance carrier regarding the fees, expenses and potential losses arising from the litigation regarding the excess funds in that retirement plan; settlement proceeds from settlement of a matter with The Hartford Life Insurance Company (which will be referred to here as “Hartford”); mineral rights on a property in Louisiana; and claims which have been in litigation commenced on behalf of Crown entities and the Trust by special litigation counsel Beus Gilbert.  This report will inform Trust Beneficiaries of recent developments concerning these assets. 

Reversion Interest in Retirement Plan  

            Crown terminated a retirement plan covering some of its hourly and salaried workers at approximately the time of confirmation of the Crown chapter 11 plan in late fall 2001.  The termination was accomplished by purchase of an annuity from Hartford to fund in full the retirement plan’s obligation to present and future retirees.  The retirement plan’s cash and investments exceeded the cost of the annuity.  As a result, after the purchase of the annuity, funds remained in the retirement plan in the amount of approximately $3.0 million, after subsequent adjustments approved by the Court.  In the absence of any legal impediment, Crown would have been entitled to receive a reversion of these funds, subject to the requirement of the filing of a Federal excise tax return and payment of required excise tax on the reversion at the rate of 50%. 

            However, prior to the termination of this plan, the union representing most hourly workers of Crown, PACE International Union (which will be referred to here as “PACE”), had urged Crown to terminate this plan by merging it into a multi-employer plan maintained by PACE.  When Crown purchased the annuity as the means of terminating this plan, PACE brought suit in the court with jurisdiction over the Crown bankruptcy cases, the United States Bankruptcy Court for the Northern District of California (which will be referred to here as “Court”) to claim that Crown had breached its duty by failing to give proper consideration to PACE’s suggestion of the merger of the plan into PACE’s multi-employer plan.  Crown asserted that such merger was not a permitted means of termination under the documents of the plan or applicable law.  The Court ruled in favor of PACE and imposed a remedy on Crown in which Crown would be required to restate the terms of the retirement plan to redistribute the excess funds among the beneficiaries of the retirement plan. 

            Crown’s chapter 11 plans had just been confirmed at this time and ultimately became effective on March 1, 2002 at which time the Trust succeeded to the interests and legal position of Crown in respect of this retirement plan and the Court’s rulings.  The Trust appealed the ruling of the Court to the United States District Court for the Northern District of California and thereafter to the United States Court of Appeals for the Ninth Circuit, both of which affirmed the decision of the Court requiring redistribution of the excess funds to retirement plan beneficiaries (with court directed mediation having not succeeded).  PACE has filed significant requests for fees and other alleged administrative claims which remain pending.  The Trust filed a Petition for Certiorari to the United States Supreme Court, seeking review of the lower courts’ decisions.  The United States Supreme Court has granted the Trust’s Petition and will consider the matter on the merits with oral argument set for April 24, 2007. 

            Were the Trust to be successful in the litigation, the receipt of the reversion of these funds would remain subject to the filing of a Federal excise tax return and payment of the excise tax at a rate of 50% and, of course, the distribution provisions of Section 8.3 of Crown’s confirmed chapter 11 plan as discussed below in the last section on allocation and distribution of proceeds.  Because of the uncertainties of litigation at this time, the Trust is not able to suggest a value of this asset. 

Claim on Fiduciary Insurance

            The Trust has asserted a claim against its former fiduciary insurance carrier concerning the fees and costs and potential losses associated with the PACE claim and litigation described above concerning the excess funds in a retirement plan.  The carrier has denied coverage.  Upon the conclusion of the litigation or before, the Trust will pursue this claim further.  Because of the uncertainties about this claim at this time, the Trust is not able to suggest a value of this asset.  

Settlement with Hartford

            Several months ago, the Trust was notified by Hartford that Crown, as a sponsor of a retirement plan which had purchased an annuity from Hartford through insurance brokers, was entitled to participate in a settlement fund Hartford had agreed to establish following investigations and legal proceedings initiated by the Attorneys General of New York and Connecticut.  The nature of the claims asserted by the Attorneys General had to do with the expense reimbursement agreements Hartford had with brokers in annuity purchases such as that for the retirement plan for which Crown was the sponsor.  The settlement amount offered Crown as the retirement plan sponsor was approximately $1.7 million.  As the Trust had succeeded to Crown’s rights, the Trust accepted the settlement.  The Trust gave notice to the notice list in the Crown cases, including PACE and the Internal Revenue Service of the receipt of the settlement funds in the bankruptcy cases of Crown and of the Trust’s belief that the funds were the property of the Trust directly, not of the retirement plan. 

            PACE has objected and has challenged the position of the Trust regarding these settlement funds and has asserted that the sums received from Hartford in this settlement should be deposited into the retirement plan.  The Trust holds these sums in a separate account.  This matter remains pending.  The Trust believes that judicial economy would be achieved by deferring consideration of this matter until the outcome of the other pending litigation with PACE and thus has not set the PACE objection on the proceeds of the Hartford settlement for hearing.  Because of the uncertainties at this time, the Trust is not able to suggest a value of this asset. 

Mineral Rights at Profit Island

            Crown had owned Profit Island, an approximately 2485 acre island in the Mississippi River north of Baton Rouge, Louisiana (which will be referred to here as “Profit Island”).  In October 1997, Crown sold the surface rights and 22.22% of the mineral rights of Profit Island, retaining 77.78% of the mineral rights and 100% of the executive rights (rights to control the minerals and leasing thereof).  At one time BP Amoco had leased mineral rights to a portion of Profit Island and had a producing natural gas well, but had allowed the lease to expire.  Crown had engaged an appraiser to value the mineral rights held by it in 1997 and the rights were valued at approximately $290,000.  Under the laws of Louisiana, the mineral rights of Crown would revert to the owner of the surface if exploration was not begun before ten years from the severance of the mineral rights which occurred in the 1997 sale.

            As successor to the rights of Crown, the Trust initiated efforts to determine the viability of exploration of minerals on Profit Island.  Lacking the significant resources needed to engage in acquisition and analysis of geological data and thereafter the engaging in drilling operations, the Trust embarked upon two simultaneous efforts to realize the value, if any, of such mineral rights.  First, the Trust cooperated with the owner of the surface rights and remaining mineral rights to provide information and data available from BP Amoco to this co-owner who made effort to solicit interest by exploration companies in the possible lease of mineral rights on Profit Island.  Second, the Trust embarked upon its own effort to locate a suitable exploration and drilling organization to engage in such exploration of Profit Island. 

            Through the latter direct efforts of the Trust, a qualified lessee was located and negotiations for the lease of mineral rights at Profit Island were concluded leading to a option to lease for the entire of Profit Island.  Importantly, if the option was exercised, the lease required exploration and drilling to commence and be concluded in sufficient time to avoid the reversion of the mineral rights to the surface owner.  Under the lease if the option were exercised, the royalties from minerals derived from Profit Island would be 25% with the Trust to receive 77.78% of such royalties or slightly under 19.5% of total production.  The lessee exercised the option for a portion of Profit Island and effectuated the lease for that portion, retaining an option on the balance.  Drilling operations commenced in June 2006.  The lessee extended its rights to the option of the balance of Profit Island.  Total payments received by the Trust from the lessee have been $320,175. 

            On January 29, 2007, the lessee notified the Trust that the drilling operations had been successful in reaching a commercially viable reserve of natural gas, that pipeline construction would be completed and production would begin in May of 2007.  Further drilling operations may be commenced in coming months by the lessee to complete additional producing wells.  The Trust does not yet know the likely production from this lease and, therefore, the Trust is not yet able to suggest a value for this asset.  The Trust will be working with counsel and consultants to monitor the continuing operations and to evaluate the Trust’s options for realizing maximum value of this asset. 

Litigation Claims Prosecuted by Beus Gilbert

            In August 2001, with Court authorization, Crown engaged special litigation counsel, Beus Gilbert PLLC of Scottsdale, Arizona (which shall be referred to here as “Beus Gilbert”) to review the propriety of commencing litigation claims in respect of various events which occurred prior to the commencement of the chapter 11 cases of Crown.  One such litigation claim was commenced in September 2001 relating to the Spin off of Crown as separate companies and some later events (which shall be referred to here as the “Spin Claim”).  The Spin Claim had a number of separate counts within the complaint filed, all of which named Crown’s former parent company and affiliates of Crown’s former parent company as defendants.  After the confirmation of the chapter 11 plan of Crown, the Trust was formed and became effective on March 1, 2002.  Beus Gilbert was engaged to continue to provide special litigation representation on the same terms and conditions for the Trust on which Crown had employed Beus Gilbert.  

            In March of 2002, Beus Gilbert commenced another litigation claim on behalf of the Trust relating to the Spin off and later operations of the Crown companies (which shall be referred to here as the “Liquidating Trust Case”).  Various former officers and/or directors of Crown and of Crown’s former parent company as well as various advisors, consultants, accountants, investment bankers and a law firm associated with Crown and/or its former parent were named as defendants in the Liquidating Trust Case.  The Liquidating Trust Case also had a number of separate counts within the complaint filed.  Ultimately, the Spin Claim and the Liquidating Trust Case were consolidated for pretrial prosecution before the United States District Court for the Northern District of California (which will be referred to here as the “District Court”).

            Pretrial preparations and discovery commenced as soon as these cases were filed.  The Trust vigorously prosecuted and prepared both cases.  The defendants likewise denied the allegations and vigorously defended and prepared defenses in both cases.  In addition, over the course of the years from September of 2001 in respect of the Spin Claim and from March of 2002 in respect of the Liquidating Trust Case, the defendants filed a succession of motions to dismiss and motions for summary judgment as to all counts in both the Spin Claim and the Liquidating Trust Case and motions to strike the jury demands by the Trust in the Spin Case. 

            Ultimately, the District Court entered a series of orders dismissing all counts of the Liquidating Trust Case.  The Trust unsuccessfully prosecuted an appeal of those dismissals to the United States Court of Appeals for the Ninth Circuit.  In December 2006, the Trust filed a Petition for Certiorari to the United States Supreme Court (which will be referred to here as the “Supreme Court”) seeking to have the Supreme Court review and overturn the decisions below dismissing all of the counts of the Liquidating Trust Case.  An Amicus Brief was filed by the National Association of Bankruptcy Trustees supporting the Trust’s Petition and the defendants filed their response brief.  On February 26, 2007, the Supreme Court denied the Trust’s Petition for Certiorari. 

            Ultimately, the District Court entered a series of orders dismissing all but one count of the Spin Claim and striking the Trust’s claim for trial by jury of that remaining count.  The Trust, reserving its rights to appeal those dismissals and the striking of the jury demand, prepared to go to trial on the remaining claim in February 2007.  The Court had ordered that the defendants in the Spin Claim and the Trust engage in mediation with a Settlement Judge, a Magistrate Judge of the United States District Court for the Northern District of California.  A number of settlement meetings were conducted by the Settlement Judge over the months prior to February 2007.  The last of these settlement meetings occurred on January 22, 2007, the day prior to the pretrial conference for the trial which was to commence on February 5, 2007.  Significant progress was made toward settlement at the session on January 22, 2007. 

            In the days following the last formal settlement meeting, further settlement discussions ensued.  Those discussions lead to an agreement in principal reached on February 2, 2007 to engage in a global settlement of the Spin Claim providing for a dismissal with prejudice of the Spin Claim and an exchange of mutual releases between the Trust and the defendants in the Spin Claim.  The terms of settlement will provide that the defendants deny any liability and that the settlement is intended to avoid the expense and distraction of the continuing litigation.  Such settlement also requires that the Trust agree to settlement of the Liquidating Trust Case, providing that the Trust agree to exchange mutual releases with those defendants in the Liquidating Trust Case who/which are willing to exchange such mutual releases with the Trust.  In consideration of such agreement to settle by the Trust, the Trust will be paid the sum of $55 million by the defendants in the Spin Claim upon required approvals and consummation of the settlement.  The Trust is currently negotiating the form of settlement agreement with the defendants in both cases.  Court approval will be required which will be sought upon execution of the settlement agreements. 

Allocation and Distribution of Proceeds of Settlement and Other Assets

            The determination of the allocation and distribution of proceeds of settlement and other assets will require significant analysis of Trust obligations, sharing formulas with certain lenders and, ultimately, significant work toward resolution of claims.  The chapter 11 plan of Crown appropriately deferred the process of general pre-bankruptcy unsecured claims objection until at least $1 million of funds would be available to be distributed to Trust beneficiaries after satisfaction of Trust obligations.  As the Trust has not yet had such available funds, these general unsecured claims have not been resolved. 

            In addition, there are significant Trust obligations which, pursuant to the chapter 11 plan, take priority over and, therefore, must be satisfied prior to distributions to Trust beneficiaries (these obligations which must be satisfied prior to distributions to Trust beneficiaries will be referred to here as “Administrative Expenses”).  The Trust has inherited significant Administrative Expenses carried over from the administration of the chapter 11 cases.  Further, the Trust has incurred significant additional Administrative Expenses which remain unpaid.  In addition, there are undetermined additional claims for Administrative Expenses by PACE as indicated above.  Further, to the extent that some of the defendants in the Liquidating Trust Case do not agree to settle and exchange mutual releases, or for an unforeseen reason, such settlement is not approved, there are undetermined potential claims for Administrative Expenses for the fees and costs of some of such defendants.  Further, the fees and costs of Beus Gilbert are Administrative Expenses and must be paid from the settlement proceeds.  Beus Gilbert is entitled to reimbursement of costs in an amount which is estimated to be between $5 million and $6 million and fees in excess of $18 million. 

            In addition to the Administrative Expenses which must be paid prior to distributions being made to Trust beneficiaries, under the chapter 11 plan, the former secured lenders and industrial development revenue bondholders of Crown (which shall collectively be referred to here as the “Secured Lenders”) are entitled to a formula share of all funds received from almost all sources (not including, however, those from Profit Island mineral rights).  The Secured Lenders’ entitlement is also prior to any distribution to Trust beneficiaries.  The formula is complicated and will require further analysis based upon proceeds already shared by the Trust with the Secured Lenders.  The formula is set forth in Section 8.3[*] of the Crown confirmed plan as modified by the confirmation order of the Bankruptcy Court. 

                        To summarize the foregoing discussion regarding determination of the potential distribution to Trust beneficiaries, it will not be possible to make such determination with accuracy until a final resolution is made of the amount of all Administrative Expenses of the Trust and the formula share of the Secured Lenders is determined, both of which have priority over distributions to Trust beneficiaries and until general unsecured pre-chapter 11 claims against Crown are analyzed and Court action taken on any objectionable claims.  Some of those obligations which are entitled to priority over distributions to Trust Beneficiaries are known and have been disclosed in Status Reports posted on the Trust’s web-site, www.crownpapertrust.com.  However, substantial potential obligations will not be subject to determination until the PACE litigation, Spin Claim and Liquidating Trust Case are fully resolved.  While the Trust believes that there will be an amount available for distribution to Trust beneficiaries when all of these determinations are final, it is not possible at this time to assure that or to accurately determine the precise amount or timing of such potential distribution. 

The Trust appreciates the patience of all parties while it continues to diligently administer the Trust and its assets as expeditiously as possible.  The Trust will supply more definite information as it becomes available and as further developments warrant and/or allow.    

April 18, 2006 STATUS REPORT OF CROWN PAPER LIQUIDATING TRUST

FINANCIAL MATTERS:

            At the beginning of 2005, the Trust had a cash balance of approximately $2,300,400. Aside from a $1,328,900 Court authorized advance from Trust counsel as discussed below for payment of fees to Houlihan, Lokey and Credit Suisse First Boston, receipts during the year amounted to $844,600. Such receipts consisted of: final preferential payment litigation recoveries of $435,000; interest of $57,000; payments received in respect of the lease of Profit Island mineral rights of $253,400; partial return of funds escrowed during Crown operations in respect of requirements of the New Hampshire Dept. of Labor regarding workman’s compensation of $94,833.40; and miscellaneous receipts of $4,400.

            Aside from the $1,328,900 advance from counsel, the Trust disbursed approximately $860,100. Of that amount, payments required by the Reorganization Plan to the Secured Lenders were $219,700; payments to administrative and priority claimants were $242,600; payments of costs awarded by the district court to defendants who/which were dismissed from litigation, as described below, were $195,400; payments of other Trust operating expenses were $96,000, including salaries, record storage and US Bankruptcy Court fees; and payments of fees and expenses to professionals serving the Trust and who/which were not parties to the MOUs were $106,400.

            The MOUs refers to agreements referred to in a previous status report regarding: a) allocation of proceeds among the unpaid chapter 11 professionals, other chapter 11 administrative claimants and trust professionals and b) an advance from the Secured Lenders to the Trust and represented by a deferral by the Secured Lenders of $1.5 million of proceeds to which they were otherwise entitled. There were no payments during 2005 to the Trust Professionals or Estate Professionals covered under the MOUs.

            The cash balance at the end of 2005 was $2,284,900. The use of all but $202,300 of such funds is restricted by the Reorganization Plan, the MOU and/or other agreements. Amounts billed but unpaid to professionals and others at the end of 2005 include: $1,691,400 due to the unpaid chapter 11 professionals and other administrative claimants who deferred fees at the effective date of the chapter 11 plan and $5,101,600 for post effective date fees and costs to the Trustee and Trust professionals. Pursuant to the MOU referred to above with the Secured Lenders, $1,500,000 remained owing to these lenders at the end of 2005. Costs incurred and due to the firm prosecuting the Fort James and Spin litigation issues amounted to $1,935,800 as of December 31. In addition, this law firm, pursuant to approval of the Bankruptcy Court, advanced to the Trust $1,328,900 to pay the fees awarded to Credit Suisse and Houlihan Lokey by the United States District Court as described below. Interest on the amounts due the firm amounted to $424,100 at the end of 2005.

            The sources of additional cash for the Trust are: any recoveries from the litigation described below; and any royalties and/or future lease payments from the Profit Island mineral rights.

CLAIMS ACTIVITIES:

            The Trust has reached agreement with several state governments to settle priority and administrative tax claims. Payments under these agreements are made out of the reserve accounts established at the reorganization plan Effective Date of the Crown Plan.

            • Commonwealth of Pennsylvania: Paid $86,569.68 in February 2006 to settle all priority claims filed by Pennsylvania.

            • State of New Jersey: Agreed Order signed under which the Trust will pay $154,627.14 in full payment of all New Jersey priority and administrative tax claims.

            • State of Michigan: Agreed Order signed under which the Trust will pay $105,759.89 in full payment of all Michigan priority and administrative tax claims.

            In addition, during 2005 various administrative claimants withdrew claims or agreed to reclassification of their claims to general unsecured pre-petition claims. These claims totaled $107,250.06. The Trust continues to resolve the relatively few remaining unresolved priority and administrative tax claims.

LITIGATION ACTIVITIES:

            The action entitled Crown Vantage, Inc. v. Fort James Corp., et al, pending in the United States District Court for the Northern District of California, is proceeding. A jury trial is scheduled to commence on February 5, 2007 and is estimated to last between six and ten weeks. In that case, the parties have been assigned to the Honorable Joseph C. Spero, a Federal Magistrate Judge, for settlement conference purposes. A Joint Settlement Conference is scheduled for June 21, 2006.

            In the litigation, the Liquidating Trust, as Plaintiff, has sued the Fort James Corporation under the bankruptcy laws to recover fraudulent conveyances totaling over one-half billion dollars. The Trust had also brought a variety of state law claims against Fort James. Those state law claims were dismissed by a District Court ruling. Because the fraudulent transfer claim against Fort James was not dismissed, it is not yet appropriate for the Trust to appeal the dismissal of the state law claims against Fort James.

            A companion case filed by the Trust against various financial advisors, attorneys and insiders, entitled Crown Paper Liquidating Trust v. PricewaterhouseCoopers, et al, was also dismissed by the District Court. The Trust is hopeful that the Ninth Circuit Court of Appeals will reinstate all of the claims against the Defendants which were dismissed. However, in such a case, it is possible that a consolidated trial against all Defendants would be ordered and that the trial would be continued from its February, 2007 date.

            As a result of the District Court’s dismissal of the PricewaterhouseCoopers’ litigation, several Defendants filed motions for an award of attorneys’ fees. Although the Trust was successful in defeating some of the motions, two Defendants, Credit Suisse and Houlihan Lokey, were awarded attorneys’ fees and additional costs resulting from their defense in the litigation. The awards totaled approximately $1.3 million. Although the      Trust attempted to have the Court reduce the amount of the awards, it declined to do so. Credit Suisse and Houlihan Lokey thereafter immediately attempted to freeze the Trust’s bank accounts which would have interfered with its business operations. In order to resolve this matter, litigation counsel for the Trust advanced the $1.3 million to pay these attorneys’ fees awards. The Trust has appealed the award of attorneys’ fees to the Ninth Circuit Court of Appeals (a separate appeal from that referred to above). The Trust has not yet been informed of the date on which oral argument will be scheduled for this appeal.

            In a related matter, the Trust was successful in having the Delaware Court of Chancery dismiss a complaint filed in that Court against it by Fort James and McGuireWoods. This lawsuit alleged that the Northern District of California litigation instituted by Crown violated the provisions of an Option and Settlement Agreement executed by the Crown Entities prior to bankruptcy. The District Court for the Northern District of California has allowed Fort James to replead in the District Court its breach of contract claim arising out of the Option & Settlement Agreement ("OSA") and a claim for Declaratory Relief regarding rights and obligations of Crown and Fort James vis-a-vis the OSA. The District Court did not permit Fort James to replead in the District Court a claim for Declaratory Relief as to the effects of the OSA on the Defendants in the PriceWaterhouse case. McGuireWoods did not seek leave to replead in the District Court any of the dismissed Delaware Court of Chancery claims and has made no efforts to do so.

            At the date of the creation of the trust, litigation was pending involving reversion of funds from one of the Crown Entities several retirement plans. This particular plan had funds in excess of those needed when Crown made a determination to terminate the plan and purchase a commercial annuity policy to provide required benefits to the retirement plan beneficiaries. The Bankruptcy Court had determined that Crown officials had breached their fiduciary duties in connection with the determination to terminate and purchase the annuity. As a result, the Court ordered that the retirement plan be amended to distribute any excess funds to beneficiaries of the retirement plan, rather than allow such funds to revert to Crown.

            The Trust has prosecuted and has lost appeals of this order to the United States District Court for the Northern District of California and the United States Court of Appeals for the Ninth Circuit. The United States Department of Labor as well as the Pension Benefit Guaranty Corporation filed amicus briefs in the United States Court of Appeals for the Ninth Circuit in support of the Trust’s position. Nevertheless, the United States Court of Appeals for the Ninth Circuit affirmed the District Court’s order affirming the Bankruptcy Court’s order. The Trust will, in all likelihood, file a writ of certiorari with the United States Supreme Court seeking review and, hopefully, an overturning of the affirmance by the United States Court of Appeals for the Ninth Circuit.

            In addition to the litigation described above, over 650 adversary proceedings were commenced by the Trust to recover on avoidable transfers and otherwise recover funds for the Trust. All such proceedings now have been concluded. The settlement proceeds of such proceedings total $9,131,904.02. In addition to that amount, $94,833.40 was recovered by the Trust as part of settlement of litigation brought by the Trust with respect to escrow funds for the State of New Hampshire workers compensation program.

REPLACEMENT OF MEMBER OF THE TRUST COMMITTEE:

            Kevin J. Hiniker of RiverSource Investments, f/k/a American Express Financial Corporation, resigned as a member of the Liquidating Trust Committee of the Crown Paper Liquidating Trust, effective November 2005. As a result, in March 2006, the remaining two members of the Trust Committee, as provided for in the Trust Agreement of the liquidating trust, appointed John Motulsky of Stonehill Capital Management LLC as the replacement member of the Trust Committee. Thus, the Liquidating Trust Committee now consists of Mr. Tom Thompson, Mr. John McDonagh of JPMorgan Chase and Mr. John Motulsky of Stonehill Capital Management LLC.

Dated April 18, 2006

Jeffrey H. Beck, Trustee

Crown Paper Liquidating Trust

FEBRUARY 11, 2005 CROWN PAPER LIQUIDATING TRUST UPDATE AND NOTICE OF NOMINATION OF TRUST COMMITTEE MEMBERS

Financial Matters

            At the beginning of 2004 the Trust had a cash balance of $2,786,800. Receipts during the year amounted to $4,187,600, consisting of preferential payment litigation recoveries of $3,737,200; interest of $83,200; tax refunds of $344,300; and All Other of $22,900. The Trust disbursed $4,674,000. Of that amount, payments required by the Reorganization Plan were $765,300 to the Secured Lenders and $229,100 for administrative, priority and other claims. The professionals serving the trust and the trustee received $2,218,800 in partial payment for services rendered from the inception of the Trust. Cash paid to professionals and other administrative claimants who deferred payment at the effective date was $1,016,000. All other Trust operating expenses were $444,800, including a compensation of $115,600 paid in connection with the securing of tax refunds. The cash balance at the end of 2004 is $2,300,600, all but $140,000 of which is restricted by the Reorganization Plan and subsequent agreements.

            Amounts billed but unpaid at the end of 2004 included $1,691,400 due to the professionals who deferred fees at the effective date; $1,130,600 to the trustee and trust professionals for pre-May 1 2003 billings and $2,273,900 for post May 1 billings. Pursuant to the Memorandum of Understanding with the secured lenders, the lenders agreed to defer payment of $1,500,000 to permit continued operation of the Trust. This amount was owed the lenders at the end of 2004. In addition, the firm prosecuting the various Spin Litigation issues has agreed to defer payment of costs, amounting to $1,400,100 as of December 31.

            At this time the main potential sources of additional cash include the Pension Reversion litigation, the insurance claim, the sale/lease of the Profit Island mineral rights, reductions, if any, in funds currently reserved for claims, the remaining preference avoidance action and the Fort James and Pricewaterhouse litigation (The Fort James and Pricewaterhouse litigation is discussed below). In addition, there are deposits made by the Debtors in connection with workman’s compensation obligations in New Hampshire and in connection with environmental obligations in New Jersey. With respect to the workman’s compensation deposit, an action has recently been filed seeking the return of the approximately $120,000 deposited in escrow against the State of New Hampshire Department of Labor, which controls the Trust’s ability to obtain the return of such funds. The Trust continues to monitor the environmental remediation situation in New Jersey to determine if the deposit there may become refundable. The potential for further realization of cash from these matters cannot be predicted.

Preference and Avoidance Actions

            As of February 8, 2005, the Trust has concluded through settlement, dismissal or otherwise, approximately 648 of the 649 Preference Claims and Avoidance actions commenced in March of 2002. Net proceeds of approximately $8,695,904.02 have been received in settlement of the Preference Claims, and approximately $297,718.80 remains uncollected pending execution of written settlement agreements and/or disbursements of proceeds. The one remaining Preference Claim, against Imery's Pigments and Additives, is currently on appeal to the Court of Appeals for the 9th Circuit. In the Imery's action, a briefing schedule was recently issued by the 9th Circuit, and a mediation assessment conference has been scheduled.

The Fort James and Pricewaterhouse Litigation

            The various litigations continue between the Crown Paper Liquidating Trust and Fort James Corp. and Crown’s former financial advisors and auditors. The so-called “Fort James Case,” pending in the United States District Court for the Northern District of California, San Francisco Division, is proceeding against Fort James. In July 2004, the District Court dismissed several of the claims asserted by the Trust against Fort James. However, the Trust is proceeding against Fort James based upon two claims for fraudulent conveyance. On January 12, 2005, the District Court granted a motion for judgment on the pleadings brought by the Trustee rendering judgment to the Trustee on Fort James' affirmative defenses to the fraudulent conveyance claims brought on behalf of creditors, to the extent those affirmative defenses are based on the release provisions in the Option and Settlement Agreement.

            In related litigation against Crown’s former auditors, officers, directors and financial advisors, the so-called “Crown Vantage Case,” also pending in the Northern District, the Court dismissed all of the Trust’s claims against all Defendants based upon the doctrines of imputation and in pari delicto. The Trust has appealed the District Court’s Order in the Crown Vantage Case to the Ninth Circuit Court of Appeals, filing its opening brief in December, 2004. The Crown Vantage Case is not expected to be fully briefed and argued for approximately nine to twelve months.

            In another related case, the Trust initiated an action in the United States Bankruptcy Court for the Northern District of California against Fort James, seeking a preliminary injunction against Fort James’ prosecution of an action in the Delaware Chancery Court. The Trust asserted that the Delaware Action should be enjoined based upon the Barton Doctrine, which provides that a bankruptcy trustee may not be sued without the permission of the court which appointed him. Although the Bankruptcy Court granted the Trust’s preliminary injunction, Defendants Fort James and McGuireWoods, LLP successfully appealed to the District Court to vacate the Bankruptcy Court’s injunction. Following the District Court’s decision, both parties filed appeals to the Ninth Circuit Court of Appeals. Oral argument in the Ninth Circuit Court of Appeals is scheduled for March 17, 2005. Regardless of the Ninth Circuit’s decision, the case will be remanded to the Bankruptcy Court for further proceedings in connection with the Trust’s request for an injunction.

            The aforementioned Delaware Chancery Court action is pending in New Castle County, Delaware. In that action, Fort James and McGuireWoods seek to enforce the release provision of an Option and Settlement Agreement which had been entered in 1998 between the Crown entities and Fort James. Despite the Trust’s challenges to the Delaware action’s propriety, the judge in Delaware has ordered that discovery should proceed and, accordingly, the parties are taking discovery in connection with the Delaware action.

            Finally, in 2004, the Trust filed another adversary action against Fort James and McGuireWoods in the Bankruptcy Court for the Northern District of California, seeking a declaration that the Option and Settlement Agreement is an executory contract which was rejected by Crown’s Confirmed Plan of Reorganization. That case has been stayed by the Bankruptcy Court judge until after the Ninth Circuit Court of Appeals rules on the “Barton Doctrine” issues.

Nomination of Successor Members of Trust Committee Follows Below:

David W. Trench, Esq. (SBN 202975)

BILZIN, SUMBERG, BAENA, PRICE & AXELROD LLP

2500 Wachovia Financial Center

200 South Biscayne Boulevard

Miami FL 33131

Telephone: (305) 374-7580

Facsimile: (305) 374-7593

Lawrence M. Schwab, Esq. (SBN 085600)

Kenneth T. Law (SBN 111779)

BIALSON, BERGEN & SCHWAB

300 Stanford Financial Square,

2600 El Camino Real,

Palo Alto, CA 94306

Telephone: (650) 857-9500

Facsimile: (650) 494-2738

Attorneys for the Liquidating Trustee

of the Crown Paper Liquidating Trust

United States Bankruptcy Court

Northern District of California

OAKLAND DIVISION

In re )

)

CROWN VANTAGE, INC., ) Jointly Administered

CROWN PAPER, INC., ) Case No. 00-41584 N

) Chapter 11

Debtors, )

______________________________ ) The Honorable Randall J. Newsome

NOTICE OF RENOMINATION OF THE CROWN PAPER LIQUIDATING

TRUST COMMITTEE

NOTICE IS HEREBY GIVEN THAT:

1. Pursuant to § 1.8 of the Crown Paper Liquidating Trust Agreement ("Trust Agreement") approved as part of the Second Amended Liquidating Plan of Reorganization ("Plan") of Crown Vantage, Inc. and Crown Paper Co. (hereinafter collectively referred to as the "Debtors") which was confirmed by Order dated November 19, 2001 (the "Confirmation Order"), the Liquidating Trust Committee ("Trust Committee") hereby nominates Thomas Thompson of Chanin Capital Partners, John McDonagh of JPMorgan Chase, and Kevin Hiniker of American Express Financial Corporation, as members of the Trust Committee.

2. Beneficiaries of Liquidating Trust Interests may object to such nomination by sending an objection in writing to the Liquidating Trustee or Liquidating Trust Committee within 30 days of the posting of this Notice on the Crown Paper Liquidating Trust web site.

Dated: February 11, 2005

Jeffrey H. Beck, Trustee

Crown Paper Liquidating Trust

Status Report on Crown Paper Liquidating Trust as Successor to Crown Vantage, Inc. and Crown Paper Company as of February 10, 2004

            This report is intended to update the previous information made available to creditors, holders of Beneficial Interests and others concerning the status of the various matters with respect to the Crown Paper Liquidating Trust as of February 10, 2004. All capitalized terms have the meanings defined on page 1 of this site (i.e. in the Background and Status of January 31, 2003).

            As of February 10, 2004, the Trust has concluded to finality through settlement, dismissal or otherwise, approximately 626 of the 649 Preference Claims commenced in March of 2002, and net proceeds of approximately $5,396,735 has been received from settlements. A portion of such Preference Claims, in the amount of $2,160,955, remains uncollected pending execution of written settlement agreements and/or disbursements of proceeds. 20 of the 23 remaining Preference Claims are scheduled for trial within the next two months and will be concluded through trial, settlement, dismissal or otherwise. The remaining 3 cases are expected to be set for trial shortly.

            As of February 10, 2004, the Trust has liquidated certain of its Miscellaneous Assets and has realized net proceeds from such Miscellaneous Assets totaling $1,045,962. Several Miscellaneous Assets remain. It is impossible to predict when and if realizations can be achieved on such remaining Miscellaneous Assets. The Spin-off Claims remain pending and continue to be prosecuted. It is impossible to predict the timing of any conclusion of the Spin-off Claims.

            The above mentioned proceeds have been used to partially satisfy Deferred Administrative Claims, Trust Expenses and Tax Claims, and to meet the Trust’s obligation to remit the Lenders’ Share of such proceeds. The Trust has negotiated with the parties entitled to the Lenders’ Share to receive an advance from the Lenders’ Share to fund continued operations of the Trust.

            Based on the amount of the remaining Preference Claims and the potential value of the remaining Miscellaneous Assets, it is highly unlikely that there will be Available Cash in excess of the various existing obligations of the Trust as described in the Background, page 1 of this site, unless and until there is some settlement or other disposition of one or more of the Spin-off Claims. Therefore, the prospects for a distribution to holders of Beneficial Interests in the Trust appear to remain dependent upon such settlement or other disposition of one or more of the Spin-off Claims.

            Finally, Wells Fargo, as Trust Registrar, has been engaging in the process of implementing the Plan provisions for registration of Trust Beneficial Interests. I ask for your cooperation in their effort. Please provide complete and accurate information and comply with any related requests the Trust Registrar may make, so that the Trust Registrar will be able to register your Trust Beneficial Interests, as contemplated under the Plan. In order for your interests and rights to be given proper and timely recognition, your cooperation is needed.

Dated February 10, 2004

Jeffrey H. Beck, Trustee

Crown Paper Liquidating Trust