EXHIBIT 10.1


 


 


AMENDMENT TO


 


PULP SUPPLY AGREEMENT


 


 


between


 


KIMBERLY-CLARK GLOBAL SALES, INC.


 


and


 


NEENAH PAPER, INC.


 


 


Made as of the 17th day of January 2006


 





















 


AMENDMENT TO PULP SUPPLY
AGREEMENT


 


This Amendment to Pulp Supply Agreement (this “Amendment”),
is entered into as of the 17th day of January 2006, by and
between Neenah Paper, Inc., a Delaware corporation (“Seller”) and
Kimberly-Clark Global Sales, Inc., a Delaware corporation (“K-C”).
Capitalized terms used, but not specifically defined, in this Amendment shall
have the meanings ascribed to them in that certain Pulp Supply Agreement, dated
as of November 30, 2004 (the “Supply Agreement”).


 


WITNESSETH


 


WHEREAS, Seller and K-C are parties to the Supply
Agreement pursuant to which Seller agreed to sell and K-C agreed to purchase
Pulp in the amounts and upon the terms and conditions set forth in the Supply
Agreement; and


 


WHEREAS, Seller and K-C desire to amend the terms
and conditions of the Supply Agreement as set forth herein.


 


AGREEMENT


 


NOW THEREFORE, in consideration of the foregoing
premises and the mutual covenants set forth herein, Seller and K-C agree to
amend the Supply Agreement as follows:


 


ARTICLE ONE


 


AMENDMENTS TO SUPPLY AGREEMENT


 


1.01      2006 Obligations.


 


(a)   At K-C’s option, it may elect to reduce the
Annual Supply Obligation and Annual Purchase Obligation for North American
Softwood Pulp during the 2006 Contract Year, as set forth on Exhibit A of
the Supply Agreement, from 360,000 ADMT to some lower amount but not less than
310,000 ADMT subject to the following limitations:


 


(i)            Prior to the execution of this Amendment, K-C
shall deliver to Seller a written forecast (the “Initial Forecast”) which shall
include the ADMT quantity of Pulp by which K-C has elected to reduce its 2006
Annual Purchase Obligation, an identification of each month in 2006 that K-C
has elected to exercise its reduction option, and the ADMT quantity so reduced
in each such month. The Initial Forecast shall be K-C’s best estimate of its
Pulp needs, and shall be non-binding (and therefore, in the nature of a
forecast under Sections 2.03 and 2.04 of the Supply Agreement); and


 


(ii)           Such Initial Forecast shall also include K-C’s
good faith, non-binding estimate, for each month during 2006, of the quantity
of K-C’s remaining 2006 Annual Purchase Obligation and the anticipated
deliveries from each of Seller’s Pulp mills during each such month.


 





















 


(b)   It is expressly understood and agreed by the
parties that this reduction right is intended to assist the parties for planning
purposes and is not to be utilized to leverage price changes in the
marketplace.


 


1.02      Definitions.  Article 1 of the Supply
Agreement is hereby amended to add the definitions contained in Sections 1.16 –
1.21 set forth below:


 


1.16         Force Majeure Event.  Any
cause or event that is beyond the affected party’s immediate or reasonable
control and which arises without its fault or negligence, including an act of
God, war or threat of war, strike or other form of labor disturbances (but
excluding a lock-out by the employer), fire, explosion, or other casualty, any
law, restraint, rule, regulation or other governmental restriction, or by any
Environmental/Safety Laws.


 


1.17         Force Majeure Period.  The
period of time beginning on the first day that a Force Majeure Event prevents a
party from performing its obligations hereunder and ending on the date that
such event no longer prevents the applicable party from performing its
obligation hereunder.  In the event of a
Force Majeure Event affecting Seller’s ability to perform its obligations,
hereunder, the commencement date of such Force Majeure Period shall be the day
of the month on which Seller is no longer able to ship Pulp to K-C in
accordance with the K-C forecast in effect on the date of Seller’s Force Majeure
Notice.


 


1.18         Force Majeure Notice.  A
written notice given by one party to the other pursuant to Section 9.01
that (a) specifies the Force Majeure Event that prevents the affected party
from timely performing its obligations under this Agreement, (b) quantifies,
to the extent practicable, the quantities of Pulp that the affected party
expects to be able to deliver or purchase during the Force Majeure Period, and (c) provides
the affected party’s best estimate under the circumstances of when the Force Majeure
Period commenced or will commence and when the Force Majeure Period will end,
each to the best knowledge of the party providing the Force Majeure Notice.


 


1.19         Resumption Notice.  A
written notice given by a party who has previously given a Force Majeure Notice
stating that the Force Majeure Event has ended and that such party is no longer
prevented from performing its obligations under this Agreement because of the
Force Majeure Event. The Resumption Notice shall specify the quantities of Pulp
and the date on which purchases and sales of such quantities of Pulp previously
affected by the Force Majeure Event will be available for purchase and sale,
and the amount of the Annual Supply Obligation and the Annual Purchase
Obligation for the remainder of the Contract Year in which the resumption date
occurs.


 


1.20         Step-down Notice.  A
written notice given by K-C pursuant to Section 9.01(e).


 


1.21         Reduction Notice.  A
written notice given by Seller pursuant to Section 6.05.


 





















 


1.03      Force Majeure. 
Section 9.01 of the Supply Agreement is hereby superseded and
replaced with the following:


 


9.01         Force Majeure.


 


(a)           If
either party is prevented or delayed in the performance of its obligations
under this Agreement because of a Force Majeure Event, then the obligations of
the parties to sell and deliver or to purchase and receive Pulp shall be
reduced or canceled during the Force Majeure Period with regard to the quantity
of Pulp which cannot be delivered or purchased as a direct consequence of such
event.


 


(b)           During
the continuance of any one or more Force Majeure Event(s) impairing Seller’s
ability to perform, Seller shall offer available supplies first to its long
term contract customers, including K-C, and shall allocate to K-C quantities
not less than that quantity determined by multiplying K-C’s percentage of such
total long term contract amounts by the total available supply. During the
continuance of any one or more Force Majeure Event(s) impairing K-C’s ability
to accept or utilize Pulp, K-C’s obligations to purchase Pulp shall be reduced
by such quantity as K-C shall be unable to accept or utilize.


 


(c)           Quantities
which Seller is unable to deliver by reason of a Force Majeure Event shall be deducted from K-C’s Annual Purchase Obligation and
Seller’s Annual Supply Obligation. If a Force Majeure Event shall
prevent a party from performing its obligations under this Agreement for more
than twelve (12) months, the other party may, upon written notice, terminate
this Agreement as to that portion affected by the Force Majeure Event.


 


(d)           The party affected by a Force Majeure Event
shall promptly provide the other party with a Force Majeure Notice. During the
Force Majeure Period, the parties will regularly communicate with each other
about the progress, if any, that has been made in resolving the Force Majeure
Event. Subject to Section 9.01(e) below, the parties shall cooperate
to the extent commercially reasonable for the orderly resumption of the
purchase and sale of Pulp following the end of the Force Majeure Period. Upon
receipt of a Resumption Notice, the parties shall, subject to the provisions of
Section 9.01(e) hereof, promptly endeavor to agree as appropriate
upon quarterly estimates pursuant to Section 2.03 and K-C shall provide
Seller with Delivery Schedules pursuant to Section 2.06.


 


(e)           If Seller provides K-C with a Force Majeure
Notice, then, until such time as Seller provides K-C with a Resumption Notice,
K-C may at its option seek alternative sources of Pulp, including entering into
supply and purchase agreements for such Pulp with third party producers.  The parties recognize that because the date
on which a Force Majeure Event is concluded is not predictable, it is possible
that Seller will be able to begin manufacturing and shipping Pulp to K-C at a time
when K-C has outstanding commitments to purchase Pulp from other producers (“Third
Party Pulp”) and, accordingly, may not immediately need the additional Pulp
that Seller is then able to produce. Accordingly, if Seller provides K-C with a
Force Majeure Notice with respect to its Terrace Bay, Ontario pulp operations (“Terrace
Bay”), then at K-C’s option, it may elect, on one occasion only, to reduce its
Annual Purchase Obligation(s) from Seller’s Terrace Bay mill by up to 80,000
ADMT (the “Resumption Reduction Quantity”)


 





















 


for the year or years in which it takes delivery of
such Third Party Pulp.  K-C may exercise
this option by giving Seller a Step-down Notice within ten (10) days
following its receipt of the Resumption Notice. The Step-down Notice shall
identify the aggregate amount of Pulp to be reduced from the applicable Annual
Supply Obligation(s), the months when K-C expects to take delivery of the Third
Party Pulp, and the resulting amount of Pulp during such months that K-C
expects to take delivery from Seller under this Agreement; provided, however,
in order to ensure a orderly and efficient resumption of production at Seller’s
Terrace Bay mill, any such Step-down Notice (and the obligations of K-C to
purchase and receive Pulp and the obligations of Seller to sell and deliver
Pulp from Seller’s Terrace Bay mill) shall, unless the parties otherwise agree
in writing, be in accordance with the periods and quantities set forth in the
following table (provided in all events that the aggregate reduction may not
exceed 80,000 ADMT):


 


	
  Months After the Date

  of Resumption Notice 

  	
   

  	
  Required Purchases/Sales Per

  Month of Terrace Bay Pulp

  
	
   

  	
   

  	
   

  
	
  1

  	
   

  	
  0 ADMT

  
	
   

  	
   

  	
   

  
	
  2

  	
   

  	
  0 ADMT

  
	
   

  	
   

  	
   

  
	
  3

  	
   

  	
  0 ADMT

  
	
   

  	
   

  	
   

  
	
  4

  	
   

  	
  up to 5,000 ADMT

  
	
   

  	
   

  	
   

  
	
  5

  	
   

  	
  not less than 10,000 ADMT

  
	
   

  	
   

  	
   

  
	
  6

  	
   

  	
  not less than 15,000 ADMT

  
	
   

  	
   

  	
   

  
	
  Succeeding Months

  	
   

  	
   

  	
  not less
  than the average monthly

  ADMT purchase quantity needed to

  fulfill K-C’s Annual Purchase Obligation(s)

  



 


Any reduction in the Annual Purchase Obligation
pursuant to this Section 9.01(e) shall reduce the Annual Supply
Obligation by an equal amount.


 


(f)            If a Force Majeure Event occurs involving
Seller’s Terrace Bay pulp operations but not its Pictou, Nova Scotia pulp
operations (“Pictou”) and to the extent that during the Force Majeure Period,
K-C requests that Seller supply Pulp from Pictou to delivery points that are
customarily supplied from Terrace Bay, the parties acknowledge that the freight
and other shipping costs to be incurred by Seller under Section 4.03 could
be higher because Pictou is further from some delivery points than is Terrace
Bay.  In order to create an incentive for
K-C to plan purchases of Third Party Pulp in a manner that will result in lower
freight and shipping costs under Section 4.03, Seller will make a payment
to K-C and K-C will make a payment to Seller, in the amounts and on the terms
and conditions set forth below:


 





















 


(i)            Definitions.


 


A.    Group I Delivery Points means Chester, Pennsylvania; Mobile,
Alabama; Huntsville, Ontario; and New Milford, Connecticut;


 


B.    Group II Delivery Points means Beech Island, South Carolina; Jenks,
Oklahoma; Corinth, Mississippi; and All European Delivery Points;


 


C.    Group I Base Line means 40% of Pictou Pulp tonnage shipped to
all K-C delivery points during a Freight Agreement Period;


 


D.    Group II Base Line means 46% of Pictou Pulp tonnage shipped to
all K-C delivery points during a Freight Agreement Period; and


 


E.     Freight Agreement Period means each period following a Force Majeure
Event that begins on the first day of a Force Majeure Period with respect to
Seller’s Terrace Bay mill and ends six (6) months after the end of such
Force Majeure Period, unless the parties otherwise agree in writing.  If, as a result of a Reduction Notice,
Terrace Bay ceases supplying Pulp to K-C delivery points and Pictou resumes the
delivery of Pulp to K-C delivery points formerly supplied by Terrace Bay, the
Freight Agreement Period shall begin again on the date that Terrace Bay ceases
supplying Pulp to K-C delivery points and shall continue in effect during the
remaining term of the Supply Agreement.


 


(ii)           During any Freight Agreement Period:


 


A.    If Seller’s Pictou mill ships more tons to
Group I Delivery Points than the Group I Base Line, then Seller will pay K-C
$8.00/ADMT for each ton in excess of the Group I Base Line;


 


B.    If Seller’s Pictou mill ships less tons to
Group I Delivery Points than the Group I Base Line, then K-C will pay Seller
$8.00/ADMT for each ton less than the Group I Base Line;


 


C.    If Seller’s Pictou mill ships more tons to
Group II Delivery Points than the Group II Base Line, then K-C will pay Seller
$8.00/ADMT for each ton in excess of the Group II Base Line; and


 


D.    If Seller’s Pictou mill ships less tons to
Group II Delivery Points than the Group II Base Line, then Seller will pay K-C
$8.00/ADMT for each ton less than the Group II Base Line.


 


(iii)          Such amounts shall be due and payable within
thirty (30) days after the end of each calendar quarter (i.e., March 31, June 30,
September 30 and December 31) during a Freight Agreement Period.


 





















 


(iv)          In no event will any payments made under this
Section 9.01(f) by either party to the other party exceed $1,300,000
in any four (4) consecutive calendar quarters.


 


1.04         Bale Finishing.  The
first sentence of Section 5.04 of the Supply Agreement is amended to read
as follows:


 


“For North America, Seller will use commercially
reasonable best efforts to work with K-C to develop and supply wireless bales
meeting K-C technical and transportation requirements no later than June 1,
2006 at Seller’s Pictou mill and no later than June 1, 2007 at Seller’s
Terrace Bay mill”.


 


1.05         Partial Termination.  A
new Section 6.05 is hereby added to read as follows:


 


6.05         Partial Termination. Seller may at any time prior to June 30,
2007 elect to permanently reduce its Annual Supply Obligation by giving K-C a
Reduction Notice. The Reduction Notice shall specify the Effective Date of the
reduction, the amount of the reduced Annual Supply Obligation for softwood
Pulp, and shall reduce the Annual Supply Obligation for hardwood Pulp to zero.
The Reduction Notice shall be subject to the following limitations:


 


(a)           Without K-C’s written consent, the Annual
Supply Obligation for softwood Pulp may not be reduced below the amounts set
forth on the attached Schedule A.


 


(b)           Without the prior written consent of K-C, the
Effective Date of the reduction may not be less than one hundred and eighty
(180) days after the date of the Reduction Notice. Notwithstanding such one
hundred and eighty (180) day period, at the request of Seller, K-C shall exercise
commercially reasonable efforts to purchase Pulp from third party producers as
promptly as possible so as to enable the Effective Date to occur earlier than
stated in the Reduction Notice. To this end, K-C shall regularly communicate
with Seller regarding its efforts to purchase Pulp from third party producers
and will provide Seller with such other information regarding such efforts as
the parties may reasonably agree upon. Nothing herein shall obligate K-C to
disclose to Seller any information that K-C deems to be confidential or
proprietary in the exercise of K-C’s reasonable commercial judgment, or that is
subject to a confidentiality agreement with a third party.


 


Any reduction in the Annual Supply Obligation
pursuant to this Section 6.05(b) shall reduce the Annual Purchase
Obligation by an equal amount.


 


(c)           To
the extent permitted by applicable law, rule, regulation or disclosure
obligation, as determined in the sole discretion of Seller, the Reduction
Notice will be provided to K-C no less than thirty (30) days prior to any
public disclosure of the event, circumstance or reason for the giving of the
Reduction Notice.


 





















 


(d)           Without
the prior written consent of K-C, no Reduction Notice may be sent prior to December 1,
2006 unless accompanied by (i) a legal opinion in form and substance, from
McDermott, Will & Emery or another law firm with a national reputation
for a federal tax practice, acceptable to K-C in its sole discretion who will
act as counsel to K-C for the purposes of such opinion, to the effect that any
actions to be taken by Seller with respect to its Terrace Bay pulp mill in
connection with the submission of the Reduction Notice will not adversely
affect the tax-free nature of the transactions described in the private letter
ruling issued by the Internal Revenue Service (“IRS”) to Kimberly-Clark
Corporation and dated September 15, 2004 (the “Private Letter Ruling”); (ii) a
private letter ruling from the IRS that (A) approves a change in the “active
trade or business” under the existing Private Letter Ruling from Seller’s
Terrace Bay mill to another entity or business of Seller and (B) does not
otherwise adversely affect the tax-free nature of the transactions described in
the Private Letter Ruling, or (iii) a private letter ruling from the IRS
which would otherwise establish that the actions to be conducted by Seller in
connection with the submission of the Reduction Notice will not adversely
affect the tax-free nature of the transactions described in the Private Letter
Ruling. At the request of Seller, K-C will cooperate with and support Seller’s
reasonable efforts (and K-C agrees to undertake to engage the support and
cooperation of Kimberly-Clark Corporation), on a timely basis, to obtain the
legal opinion or the private letter rulings described in subparagraphs (i), (ii) and
(iii) above; provided that Seller shall be responsible for, and shall
promptly reimburse K-C for, all reasonable fees and expenses of K-C and/or
Kimberly-Clark Corporation incurred by them in connection with any such
requested cooperation.


 


(e)           It is expressly understood and agreed between
the parties that during the period of time between the delivery date and the
Effective Date of the Reduction Notice, Seller may satisfy its obligation to
supply Pulp under the Supply Agreement by supplying Pulp purchased from third
parties that meets the Specifications and the provisions of Sections 9.02 and
9.03 and Articles 3 and 11 of the Supply Agreement.


 


ARTICLE TWO


 


MISCELLANEOUS


 


2.01         No
Other Amendments. Except as expressly
amended pursuant to this Amendment, the Supply Agreement remains in full force
and effect.


 


2.02         Waiver of Breach. No waiver of breach or non-performance of any
of the provisions of this Agreement shall be construed as a waiver of any
succeeding breach or non-performance of the same or any other provision.


 


2.03         Severability of Provisions. If any provision of this Agreement
shall be determined to be invalid, illegal or unenforceable under law, the
validity and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.


 





















 


2.04         Headings.  Article and
section headings used in this Amendment are for the purpose of reference
only and shall not be considered in construing this Agreement.


 


2.05         Entire Agreement.  The
Supply Agreement, as amended by this Amendment, constitutes the entire
agreement between the parties related to the subject matter hereof, and cancels
and supersedes all prior or contemporaneous agreements, whether oral or
written, relating to the subject matter of the Supply Agreement.


 


2.06         Counterparts.  This
Amendment may be executed by the parties in two or more counterparts, each of
which shall be deemed an original, but which together shall constitute one and
the same agreement.


 


2.07         Tax Sharing Agreement. Nothing in this Amendment, and no
actions taken by any party pursuant to the terms of or as contemplated by this
Amendment, is intended to alter in any way the respective obligations of Seller
and Kimberly-Clark Corporation under that certain Tax Sharing Agreement, dated
as of November 30, 2004 (the “Tax Agreement”). Without limiting the
foregoing, Seller acknowledges that K-C’s entering into this Amendment, its and
Kimberly-Clark Corporation’s cooperation with Seller as may be requested or
mandated by the terms of this Amendment, and any other actions taken by K-C or
Kimberly-Clark Corporation in connection with the terms of this Amendment shall
not constitute a consent to any action by Seller that is contrary to the terms
of Section 8(b) of the Tax Agreement or a waiver of any of
Kimberly-Clark Corporation’s rights under the Tax Agreement including, without
limitation, the provisions of Section 8(b) thereof.


 


*****


 


Remainder of Page Intentionally
Left Blank


 


*****


 





















 


IN WITNESS WHEREOF, this Agreement has been executed in
multiple counterparts by the duly authorized representatives of the parties as
of the date first written above.


 


 


	
  NEENAH
  PAPER, INC.

  	
  KIMBERLY-CLARK
  GLOBAL SALES, INC.

  
	
   

  	
   

  
	
  By:

  	
  /s/
  SEAN T. ERWIN

  	
   

  	
  By:

  	
  /s/
  DANNY M. SMITH

  	
   

  
	
   

  	
  Sean
  T. Erwin, Chairman of the Board,

  	
   

  	
  Danny
  M. Smith, Vice President

  
	
   

  	
  President
  and Chief Executive Officer

  	
   

  
						



 





















 


SCHEDULE A


 


to


 


Amendment to Pulp Supply
Agreement


between Kimberly-Clark Global
Sales, Inc. and Neenah Paper, Inc.


 


NORTH AMERICAN AND EUROPEAN ANNUAL SOFTWOOD PULP PURCHASE

OBLIGATIONS, SUPPLY OBLIGATIONS, DELIVERY POINTS AND TRANSPORTATION

TERMS FOLLOWING THE EFFECTIVE DATE OF A REDUCTION NOTICE


 


 


NORTHERN BLEACH SOFTWOOD KRAFT
(NBSK)


 


	
  Contract Year*

  	
   

  	
  Annual Purchase Obligation (K-C)

  	
   

  	
  Annual Supply

  Obligation (Seller)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2006

  	
   

  	
  235,000 ADMT

  	
   

  	
  235,000 ADMT

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2007†

  	
   

  	
  235,000 ADMT

  	
   

  	
  235,000 ADMT

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2008

  	
   

  	
  215,000 ADMT

  	
   

  	
  215,000 ADMT

  
	
  and all subsequent Contract Years

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Phase Down Year 1

  	
   

  	
  165,000 ADMT

  	
   

  	
  165,000 ADMT

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Phase Down Year 2

  	
   

  	
  101,000 ADMT

  	
   

  	
  101,000 ADMT

  



 










*The prorated tonnage
for any Contract Year during which a Reduction Notice becomes effective shall
be determined by multiplying the applicable Annual Purchase/Supply tonnage for
such Contract Year by a fraction the numerator of which is the number of days
from and including the Effective Date through the last day of such Contract
Year and the denominator of which is 365.


 


† Seller shall use its
commercially reasonable best efforts so that, as of January 1, 2007, each
K-C mill shall receive pulp solely from one Seller mill; provided, however,
following the Effective Date of a Reduction Notice, each K-C mill shall receive
Pulp solely from Seller’s Pictou mill.


 


Delivery Points and Transportation Terms for K-C
North America


 


Beech
Island, SC


Huntsville,
Ontario


Mobile,
AL


Jenks, OK


Chester,
PA


Loudon,
TN


Corinth,
MS


New Milford, CT


Owensboro,
KY


Marinette,
WI


Cellu-Tissue
Mills*


Schweitzer-Mauduit Lee, MA*


 


All transportation costs to above delivery points
to be paid by Seller.


 










*Solely for fiber needs related to K-C
products.


 





















 


Delivery Points and Transportation Terms for K-C
Europe


 


	
  Europe
  (can only be supplied by Seller’s Pictou Mill)

  	
   

  	
   

  
	
  Duffel

  	
   

  	
  CIF*
  Flushing

  
	
  Northfleet

  	
   

  	
  CIF*
  Northfleet

  
	
  Barrow

  	
   

  	
  CIF*
  Northfleet/Barrow

  
	
  Rouen

  	
   

  	
  CIF*
  Rouen

  
	
  Salamanca

  	
   

  	
  CIF*
  Santander

  
	
  VSE

  	
   

  	
  CIF*
  Rouen

  



 










*
As defined according to INCOTERMS 2001(or applicable latest edition).


 


 


END OF SCHEDULE A