Exhibit
10.1


SECOND AMENDMENT AND
WAIVER, dated as of May 9, 2006 (this “Amendment”), to the Credit Agreement dated as of November
30, 2004 (as heretofore amended, supplemented, or otherwise modified, the “Credit Agreement”)
among NEENAH PAPER, INC., a Delaware corporation (the “Parent”), each subsidiary of the
Parent listed as a “Borrower” on the signature pages thereto (together with the
Parent, each a “Borrower” and collectively, the “Borrowers”),
each subsidiary of the Parent listed as a “Guarantor” on the signature pages
thereto, the lenders party thereto (the “Lenders”), JPMORGAN CHASE BANK,
N.A., as agent for the Lenders (in such capacity, the “Agent”), and JPMorgan Chase Bank,
N.A., Toronto Branch, as Canadian collateral agent for the Lenders (in such
capacity, the “Canadian Collateral Agent”).


The Credit Parties have
requested that the Lenders (i) agree to amend certain provisions of the
Credit Agreement and (ii) grant a limited waiver of compliance by the
Credit Parties of certain provisions of the Credit Agreement.  The Lenders party hereto are willing to amend
the Credit Agreement as set forth herein and to grant the limited waivers set
forth herein on the terms and subject to the conditions set forth herein.  Capitalized terms used but not defined herein
have the meanings assigned to them in the Credit Agreement.


Accordingly, in
consideration of the mutual agreements herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:


SECTION 1.  Amendments
to Section 1.1 of the Credit Agreement.  Upon effectiveness of this Amendment in
accordance with Section 15 hereof, Section 1.1 of the Credit
Agreement is hereby amended as follows:


(a)           by deleting the definition of “Borrowing
Base” set forth therein and by inserting the following text in lieu thereof
as the new definition of “Borrowing Base”:


“Borrowing
Base shall mean shall mean, as of any date, the amount of the then most
recent computation of the Borrowing Base, determined by calculating the amount
equal to the following:


(a)           85% of Eligible Receivables; plus


(b)           the lesser of (i) 75% of the
value of Eligible Inventory (valued at the lower of cost or fair market value),
and (ii) 85% of the applicable Net Recovery Value Percentage of Eligible
Inventory; plus


(c)           the lesser of:


(i)            $60,000,000; and



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(ii)           prior to consummation of the sale of
the Offered Timberland Properties (the “Offered Timberland Properties Sale
Date”) or, at the Agent’s or Required Lenders’ election (evidenced by
written notice thereof to Parent), at any time after the occurrence and during
the continuation of an Event of Default (and without limiting any other remedy
available to the Agent or the Lenders following an Event of Default), the sum
of (1) 75% of the Net Recovery Value Percentage of Eligible Equipment, plus
(2) 65% of the applicable Net Recovery Value Percentage of Eligible Real
Estate, and


(iii)          on and after the Offered Timberland
Properties Sale Date (but subject to the Agent’s and the Required Lenders’
option to invoke clause (ii) preceding, following the occurrence and during the
continuation of an Event of Default), the sum of (1) $32,452,571 in respect of
Eligible Equipment and Eligible Real Estate consisting of the Mill Properties, plus
(2) 65% of the value of the Timberland Properties owned on the Offered
Timberland Properties Sale Date (after giving effect to the sale of the Offered
Timberland Properties) (for purposes of this clause (2) “value” shall mean the
value per acre equal to the average net proceeds per acre received by Neenah
Paper Company of Canada from the sale of the Offered Timberland Properties
multiplied by the number of acres retained and comprising the Timberland
Properties owned on the Offered Timberland Properties Sale Date (after giving
effect to the sale of the Offered Timberland Properties)), minus (3) the
Equipment Amortization Amount, minus (4) the Mill Properties
Amortization Amount, minus (5) the Timberland Properties Amortization
Amount, minus (6) the dollar amount of any Eligible Equipment and
Eligible Real Estate comprising a portion of the Borrowing Base components in
clauses (1) and (2) above which is the subject of a Casualty Event or
Disposition after the Offered Timberland Properties Sale Date, less the
amortization amount previously allocated to such Eligible Equipment and
Eligible Real Estate, in each case as determined by the Agent in its reasonable
discretion, minus (7) to the extent the Credit Parties elect to not maintain
property insurance with respect to the Mill Property and Equipment of Neenah
Paper Company of Canada in Terrace Bay, Ontario pursuant to Section 6.7(b)
hereof, the Stipulated Terrace Bay Reduction Amount;


Notwithstanding anything to the contrary set forth in
the immediately preceding sentence, if the average dilution percentage for all
Receivables of the Borrowers and the Guarantors ever exceeds five
percent (5%), based upon any field examination hereafter conducted by the
Agent, the Agent reserves the right to establish a Reserve, as determined by
the Agent in its discretion, in the amount of such excess multiplied by the
amount of Eligible Receivables.  For
purposes hereof, “average dilution percentage” shall mean for each dollar of
gross sales by the Credit Parties, the average percentage of such dollar of
gross sales that is or should be written off as not collectible in accordance
with customary credit policies by the Credit Parties for any reason, including
without limitation, any



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credits, rebates, refunds, returns, discounts or any
other reason.  The Borrowing Base may be
computed by the Agent on as frequent as a daily basis (based on all information
reasonably available to the Agent, including without limitation, the periodic
reports and listings delivered to the Agent in accordance with Sections 6.3(f),
6.3(g) and 6.3(h) hereof).  The portion
of the Borrowing Base referred to in clause (c)(ii) is subject to the Agent’s
satisfaction with periodic reappraisals of Eligible Equipment and Eligible Real
Estate, to be conducted at the Agent’s discretion (subject to the proviso at
the end of Section 6.4(b)).”


(b)           by deleting the definition of “Fixed
Charge Coverage Ratio” set forth therein and by inserting the following
text in lieu thereof as the new definition of “Fixed Charge Coverage Ratio”:


“Fixed Charge Coverage Ratio shall mean, with respect to any
Person for any period, the ratio of (a) EBITDA less
(i) Capital Expenditures not funded by Indebtedness permitted by Section 7.1(c)
or Section 7.1(m), less (ii) cash payments of federal,
state, provincial and local income or franchise taxes, to (b) the
sum of (i) cash Interest Expense, plus (ii) Scheduled Principal
Payments plus (iii) Cash Dividends, in each case of such Person for
the applicable period, computed and calculated on a Consolidated basis in
accordance with GAAP, consistently applied and without duplication plus
(iv) the amount of all expenses, charges and liabilities related to the
restructuring, closure or Disposition of Neenah Paper Company of Canada’s Terrace
Bay facility and projected to be paid or payable in cash during the period of
four (4) consecutive fiscal quarters immediately following the date of
calculation of the Fixed Charge Coverage Ratio (the “Projected Terrace Bay
Cash Closure Costs”).  All components
of the Fixed Charge Coverage Ratio shall be determined (1) on a
Consolidated basis for the four (4) most recent consecutive fiscal
quarters of the applicable Person ending on or prior to the date of
determination (with the exception of the Projected Terrace Bay Cash Closure
Costs which shall be calculated on a projected basis) and (2) in
accordance with GAAP, consistently applied.


(c)           by deleting clauses (g) and (k) from
the definition of “Net Income” set forth therein and by inserting the
following text in lieu thereof as new clauses (g) and (k):


“(g) with respect to the Credit Parties and their Subsidiaries, the
following anticipated one-time non-cash impairment charges of approximately (i)
$110,000,000 in the fiscal year ended December 31, 2004 and referred to in the
Offering Memorandum with respect to a writedown of the carrying amount of the
Consolidated assets of the Credit Parties and their Subsidiaries following the
Spin-off Transaction, and any benefits (including tax benefits) resulting from
such writedown or charge, and (ii) $59,800,000 in the fiscal year ended
December 31, 2005 and referred to in the Parent and its Subsidiaries Annual
Audited Financial Statements for such fiscal year with respect to a writedown
of the carrying amount of the Consolidated assets of the Credit Parties and
their Subsidiaries based on asset impairment , and any benefits (including tax
benefits) resulting from such writedown or charge,”



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***


“(k) with respect to the Credit Parties, any non-recurring charges or other
expenses (determined in accordance with GAAP and as reflected in the Company’s
financial statements produced from time to time pursuant to Section 6.3(a)
and (b)) related to the restructuring, closure or Disposition of Neenah
Paper Company of Canada’s Terrace Bay facility, not to exceed $120,000,000 in
the aggregate, but excluding any cash charges or payments made in connection
with the Disposition of the Terrace Bay facility, and”


(d)           by adding the following new
definitions in their appropriate alphabetical order:


“Casualty Event shall mean the destruction or condemnation, as
the case may be, of Property of any Credit Party or any of its Subsidiaries.”


“Disposition shall mean the sale, transfer, lease or other
disposition (including pursuant to a merger resulting in the subject Property
no longer being owned by a Credit Party) of any Property.”


“Equipment Amortization Amount shall mean, with respect to any
Eligible Equipment, an amount determined by multiplying $826,379 by the number
of full fiscal quarters which have elapsed since the Offered Timberland
Properties Sale Date; provided, that if the Terrace Bay Sale Date occurs
after the Offered Timberland Properties Sale Date, the Equipment Amortization
Amount shall be adjusted on the Terrace Bay Sale Date and shall thereafter be
(a) the Equipment Amortization Amount as of the Terrace Bay Sale Date as
calculated above, plus (b) an amount determined by multiplying $710,129
by the number of fiscal quarters which have elapsed since the Terrace Bay Sale
Date; provided, further, to the extent the Credit Parties elect to not maintain
property insurance with respect to the Equipment of Neenah Paper Company of
Canada in Terrace Bay, Ontario pursuant to Section 6.7(b) hereof, the
amount of $826,379 set forth above shall be reduced by $116,250.”


“Mill Properties Amortization Amount shall mean, with respect to
any Eligible Real Estate consisting of Mill Properties, an amount determined by
multiplying $568,750 by the number of full fiscal quarters which have elapsed
since the Offered Timberland Properties Sale Date; provided, that if the
Terrace Bay Sale Date occurs after the Offered Timberland Properties Sale Date,
the Mill Properties Amortization Amount shall be adjusted on the Terrace Bay
Sale Date and shall thereafter be (a) the Mill Properties Amortization Amount
as of the Terrace Bay Sale Date as calculated above, plus (b) an amount
determined by multiplying $524,643 by the number of fiscal quarters which have
elapsed since the Terrace Bay Sale Date; provided, further, to the extent the
Credit Parties elect to not maintain property insurance with respect to the
Mill Properties pursuant to Section 6.7(b) hereof, the amount of $568,750
set forth above shall be reduced by $44,107.”



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“Stipulated Terrace Bay Reduction Amount shall mean $3,560,000.”


“Terrace Bay Sale Date shall mean the date as of which all or
substantially all of the Eligible Real Estate comprising the Mill Property
located in Terrace Bay, Ontario and all or substantially all of the Eligible
Equipment located at the Mill Property located in Terrace Bay, Ontario shall
have been sold by Neenah Paper Company of Canada to one or more third parties,
whether in a single transaction or a series of transactions, related or
unrelated.”


“Timberland Properties Amortization Amount shall mean an amount
determined by multiplying (a) 1.625% of the value of the Timberland Properties
owned on the Offered Timberland Properties Sale Date (after giving effect to
the sale of the Offered Timberland Properties) (as used in this definition, “value”
shall mean the value per acre equal to the average net proceeds per acre
received by the Borrower from the sale of the Offered Timberland Properties
multiplied by the number of acres retained and comprising the Timberland
Properties owned on the Offered Timberland Properties Sale Date (after giving
effect to the sale of the Offered Timberland Properties)) by (b) the number of
full fiscal quarters which have elapsed since the Offered Timberland Properties
Sale Date.”


“Offered Timberland Properties shall mean the approximately
500,000 acres of Timberland Properties owned by Neenah Paper Company of Canada
in the Province of Nova Scotia and described as the “offered lands” in that
certain letter dated April 25, 2006 from James W. Sewall Company to Chase
Business Credit, J.P. Morgan Chase Bank, and on file with the Agent.”


“Ontario Pension Obligation Reserve shall mean a Reserve
established by the Agent, in its reasonable credit judgment, in the amount
equal to the unfunded liability (being the greater of the solvency deficiency
and the going concern deficiency) (without regard to whether any unfunded
amounts are then due and payable) of the Credit Parties’ Canadian Pension Plans
regulated by the Financial Services
Commission of Ontario; provided, that the Ontario Pension Obligation
Reserve shall be reduced on a dollar-to-dollar basis by the amount of cash at
any time on deposit in a Controlled Account, which cash shall not be encumbered
by any Liens other than the Liens in favor of the Agent.”


(e)           by deleting the definition of “Reserves”
set forth therein and by inserting the following text in lieu thereof as the
new definition of “Reserves”:


“Reserves shall mean any and all reserves established by the
Agent, in its reasonable credit judgment and without duplication, with respect
to the Borrowing Base or in accordance with any express provision of this
Agreement or any other Loan Document (including, without limitation the
Canadian Priming Lien Reserve, the Corporate Services Agreement Reserve and the
Ontario Pension Obligation Reserve) for purposes of reducing the Borrowers’
ability to utilize any portion of the Borrowing Base.”



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SECTION 2.  Amendment
of Section 5.10 of the Credit Agreement.  Upon the effectiveness of this Amendment in
accordance with Section 15 hereof, the first sentence of
Section 5.10 of the Credit Agreement is hereby deleted in its entirety and
the following new sentence is substituted in lieu thereof:


“(a) Neenah Paper Company
of Canada owns, possesses or has the benefit of the Canadian Licenses listed in
clauses (i) through (vi) of the definition thereof, and (b) each Credit
Party owns, possesses or has the benefit of all other material permits,
licenses (including intellectual property licenses) and intellectual property
rights which are required (i) to conduct its respective business or (ii) for
the operation and use of each Real Property Asset owned in fee and each
Material Leasehold Property; provided, that so long as the Neenah Paper
Company of Canada is not operating the Mill Property in Terrace Bay, Ontario,
it shall not be required to own, possess or have the benefit of the Canadian
Licenses listed in clauses (iv) and (v) of the definition of Canadian Licenses,
nor shall it be required to own, possess or have the benefit of any other
permits, licenses and intellectual property rights which would otherwise be
required to operate such facility; provided, further that the Credit
Parties shall be required to comply in all material respects with all Legal
Requirements (including, without limitation, Environmental Laws) related to the
continued ownership (but not the operation) of the Mill Property located in
Terrace Bay, Ontario so long as such property is owned a Credit Party.”


SECTION 3.  Amendment
of Section 6.1 of the Credit Agreement.  Upon the effectiveness of this Amendment in
accordance with Section 15 hereof, Section 6.1 of the Credit
Agreement is hereby deleted in its entirety and the following new
Section 6.1 is substituted in lieu thereof:


“6.1         Businesses and Properties.  At all times: 
(a) do or cause to be done all things reasonably necessary to
obtain, preserve, renew and keep in full force and effect the rights, licenses,
permits, franchises, and Intellectual Property material to the conduct of its
businesses; provided, that so long as the Credit Parties are not
operating the processing facility at the Mill Property located at Terrace Bay,
Ontario, they shall not be required to obtain, preserve, renew and keep in full
force and effect the rights, licenses, permits, franchises, and Intellectual
Property material to the conduct of such facility; (b) maintain and
operate such businesses in the same general manner in which they are presently
conducted and operated, with such changes as such Credit Party deems prudent; provided,
that the Credit Parties shall not be required to continue the operation of the
Mill Property located at Terrace Bay, Ontario; (c) comply in all material
respects with all material Legal Requirements applicable to such businesses and
the operation thereof, whether now in effect or hereafter enacted (including
without limitation, all material Legal Requirements relating to public and
employee health and safety and all Environmental Laws); and (d) maintain,
preserve and protect all Property material to the conduct of such businesses
and keep such Property in good repair, working order and condition, and from
time to time make, or cause to be made, all needful and proper repairs,
renewals, 



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additions, improvements and replacements thereto
reasonably necessary in order that the business carried on in connection
therewith may be properly conducted at all times; provided, that so long
as the Credit Parties are not operating the processing facility at the Mill
Property located at Terrace Bay, Ontario, (i) such facility (including
apartment buildings, golf courses and other real property or personal property
owned by Neenah Paper Company of Canada in or near Terrace Bay, Ontario and
previously used in connection with the operation of such facility) shall not be
considered material to the conduct of the business, and (ii) the Credit Parties
will take customary and prudent steps to secure the Mill Property at Terrace
Bay, Ontario from unauthorized Persons and to make or cause to be made repairs
and replacements necessary to prevent the development of hazardous safety
conditions at such Property.”


SECTION 4.  Amendment
of Section 6.3 of the Credit Agreement.  Upon the effectiveness of this Amendment in
accordance with Section 15 hereof, (a) clauses (d) and (i) of Section 6.3
of the Credit Agreement are hereby deleted in their entirety and the new
clauses (d) and (as set forth below ) are substituted in lieu thereof, and (b)
a new clause (l) is hereby inserted in Section 6.3 of the Credit Agreement
which shall read as set forth below:


“(d)         (i) concurrently with the financial
statements provided for in Subsections 6.3(a), 6.3(b) and 6.3(c)
hereof, (1) a Compliance Certificate, signed by a Responsible Officer of
the Borrowers’ Agent, and (2) a written certificate in Proper Form,
identifying each Subsidiary which is otherwise required by the provisions of Section 6.10
hereof to become a Guarantor at the request of the Agent, but which has not yet
done so as of the date of such certificate, and providing an explanation of the
reasons why each such Subsidiary is not a Guarantor, signed by a Responsible
Officer of the Borrowers’ Agent, and (ii) concurrently with the financial
statements provided for in Subsections 6.3(a) and 6.3(b)
hereof, a written certificate in Proper Form, setting forth the Projected
Terrace Bay Cash Closure Costs for the immediately following four (4)
consecutive fiscal quarter period;”


***


“(i)          as soon as available and in any event
within fifteen (15) Business Days after the end of each calendar month, a
Borrowing Base Compliance Certificate;”


***


(1)           promptly notify Lender in the event,
on any date, the representation and warranty contained in Section 14(e) of
the Second Amendment would not be accurate if remade on such date.


SECTION 5.  Upon
the effectiveness of this Amendment in accordance with Section 15
hereof, the proviso at the end of clause (b) of Section 6.4 of the Credit
Agreement is hereby deleted in its entirety and the following new proviso is
substituted in lieu thereof:



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“provided, however, that so long as no
Default or Event of Default is continuing, (i) the Borrowers shall only be
obligated to pay for (x) two (2) field examinations per each 12-month
period following the Closing Date, and (z) one (1) appraisal of Inventory,
Equipment and Real Property Assets during each 12-month period after the
Closing Date, and (ii) after the Offered Timberlands Sale Date, the Borrowers
shall not be obligated to pay for any appraisal of Equipment or Real Property
Assets; provided, further that, notwithstanding the foregoing
proviso, the Borrowers shall be required to pay for any and all initial field
examinations and appraisals for any Receivables and/or Inventory acquired
through an acquisition or other Investment permitted under the terms of this
agreement.”


SECTION 6.  Upon
the effectiveness of this Amendment in accordance with Section 15
hereof, the following proviso shall be added to the end of clause (b) of
Section 6.7 of the Credit Agreement:


“provided, further, that from and after
the closure of Neenah Paper Company of Canada’s Terrace Bay facility, the
Credit Parties will not be required to maintain property insurance with respect
to the fixed assets comprising such facility (the Credit Parties agreeing to
provide not less than 5 Business Days’ advance notice to Administrative Agent
prior to the effective date of any cancellation or non-renewal of such
insurance).”


SECTION 7.  Amendment
of Section 7.1 of the Credit Agreement. 
Upon the effectiveness of this Amendment in accordance with Section 15
hereof, clause (k) of Section 7.1 of the Credit Agreement is hereby
deleted in its entirety and the following new clause (k) is substituted in lieu
thereof:


“(k) Indebtedness incurred in connection with the financing of
environmental remediation or capital expenditures made to acquire, develop,
construct, install, equip or replace existing equipment, in each case only to
the extent (i) such equipment is primarily intended to establish, maintain or
improve the compliance by such Credit Party with applicable Environmental Law
(including, as is necessary to maintain certain licenses or permits held by the
Credit Parties and required in the conduct of their businesses), (ii) such
Indebtedness does not exceed $30,000,000 in the aggregate at any time
outstanding, (iii) such Indebtedness (A) is loaned by or guaranteed by a
Governmental Authority or government-sponsored entity and is interest-free or
at a below-market interest rate, (B) is subject to customary intercreditor
arrangements acceptable to the Agent in its sole discretion, and (C) is
secured only by Liens permitted by Section 7.2(k);”


SECTION 8.  Amendment
of Section 7.2 of the Credit Agreement. 
Upon the effectiveness of this Amendment in accordance with Section 15
hereof, clause (k) of Section 7.2 of the Credit Agreement is hereby
deleted in its entirety and the following new clause (k) is substituted in lieu
thereof:



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“(k)         Liens upon Property (i) acquired by the
Credit Parties after May 9, 2006, (ii) purchased in whole or in substantial
part (in no event less than 75% of the aggregate purchase price) with proceeds
of Indebtedness permitted pursuant to Section 7.1(k) hereof, which Liens
secure only such Indebtedness, and (iii) which Property, in the reasonable
discretion of the Agent, can be readily removed from the facility on which it
is located at a commercially reasonable cost and without any damage (other than
de minimus damage) or impairment (other than de minimus impairment) of the use,
functionality or value of such facility;”


SECTION 9.  Amendment
of Section 7.4(4) of the Credit Agreement. 
Upon the effectiveness of this Amendment in accordance with Section 15
hereof, clause (v) of Section 7.4(4) of the Credit Agreement is
hereby deleted in its entirety, clause (vi) of Section 7.4(4) of the
Credit Agreement is hereby re-designated as clause (ix), and the following
language is hereby inserted as new clauses (v), (vi), (vii) and (viii) of
Section 7.4(4) of the Credit Agreement:


“(v) sell the Offered Timberland Properties for an aggregate amount of
not less than $75,000,000 in cash consideration in a single or related series of
transactions occurring substantially simultaneously on or prior to July 31,
2006; (vi) sell, exchange, lease, transfer or otherwise dispose of, in one or
more transactions, the Property comprising, located at or used solely in
connection with the Terrace Bay facility, as well as any or all of the
apartment buildings, golf courses and other real property or personal property
owned by Neenah Paper Company of Canada in or near Terrace Bay, Ontario (in
each case for fair market value, giving due consideration to any diminution in
value that may result from the closure of the Terrace Bay facility); (vii)
terminate, assign or subcontract the rights and obligations of Parent relating
solely to the Terrace Bay facility under the Pulp Supply Agreement (provided
that the rights and obligations retained shall not be less favorable in any
material respect to the Credit Parties than the rights and obligations which
have historically benefited and been satisfied by the operations of the Credit
Parties other than the operations of such Terrace Bay facility); (viii) sell,
exchange, lease, transfer or otherwise dispose of (in each case for reasonably
equivalent value) Timberland Properties in the Province of Nova Scotia, other
than the Offered Timberland Properties and/or other real Property, (wherever
located) having a fair market value not to exceed the sum of
(A) $2,000,000 for all such transactions in the aggregate in any calendar
year; plus (B) the excess (if any) of $2,000,000 over the amount of
dispositions pursuant to this clause (viii) consummated in the immediately
preceding calendar year;”


SECTION 10.  Amendment
of Section 7.4(5) of the Credit Agreement. 
Upon the effectiveness of this Amendment in accordance with Section 15
hereof, Section 7.4(5) of the Credit Agreement is hereby deleted in its
entirety, and the following new Section 7.4(5) is substituted in lieu
thereof:


“(5)         (i) to the extent any Collateral is
sold or otherwise permanently disposed of as permitted by this Section 7.4,
such Collateral shall be sold or otherwise disposed of free and clear of the
Liens of the Security Documents and 



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the Agent (or the Canadian Collateral Agent, as
applicable) shall take such actions, including executing and filing appropriate
releases, as are appropriate in connection therewith, and no approval of any of
Lenders shall be required therefor, and (ii) to the extent any Collateral is
leased as permitted by this Section 7.4, (A) the Parent or the applicable
Credit Party may request that the Agent (or the Canadian Collateral Agent, as
applicable) enter into a subordination, non-disturbance and attornment
agreement in form and substance acceptable to the related lessee and to the
Agent or the Canadian Collateral Agent, as applicable (and no approval of any
of the Lenders shall be required therefor) and (B) the Agent or the
Canadian Collateral Agent may require the delivery of Security Documents,
including without limitation, a collateral assignment of lease, in form and
substance reasonably acceptable to it; and”


SECTION 11.  Amendment
of Section 7.11(b) of the Credit Agreement. 
Upon the effectiveness of this Amendment in accordance with Section 15
hereof, Section 7.11(b) of the Credit Agreement is hereby deleted in its
entirety, and the following new Section 7.11(b) is substituted in lieu
thereof:


“(b)         Declare or pay, directly or
indirectly,  any dividend, except (i)
dividends paid to a Credit Party which is a direct parent of the Credit Party
paying a dividend, (ii) non-cash dividends paid to the holders of any Stock of
the Parent in the form of additional Stock of the Parent, and (iii) Cash
Dividends to the holders of any Stock of the Parent, so long as (1) no Default
or Event of Default exists on the date that the applicable Cash Dividend is
declared or paid, or would result from the payment thereof, (2) the aggregate
amount of such Cash Dividends paid during any twelve-month period does not
exceed $10,000,000 in the aggregate, (3) such Cash Dividend is legally declared
and payable, (4) the Borrowers shall have pro forma Availability of at least
$35,000,000 on the date of such payment and, on an average basis, for the
60-day period before the payment of such dividends, in each case after giving
effect to such payment, and (5) Borrower’s Agent shall have (x) given the Agent
at least five (5) Business Days prior written notice specifying the amount and
date of such proposed Cash Dividend and, (y) if required by the Agent,
submitted a certificate of a Responsible Officer setting forth reasonably
detailed calculations demonstrating compliance with the required Availability
test described above and certifying that the other conditions set forth in this
clause (b) have been satisfied;”


SECTION 12.  Amendment
to Address for Notices.  The
Addresses for Notices for each of the Agent and the Canadian Collateral Agent
are hereby deleted in their entirety from the signature pages of the Credit
Agreement, and replaced, in each case, with the following:


“Address for Notices:


2200 Ross Avenue, 6th
Floor


Dallas, Texas 75201


Attention: J. Richard
Hawk


Facsimile: 214-965-2594



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With a copy to:


Vinson & Elkins,
L.L.P.


2001 Ross Avenue, Suite
3700


Dallas, Texas 75201


Attention: William D.
Young


Facsimile: 214-999-7994”


SECTION 13.  Limited
Waivers relating to Terrace Bay Facility. 
In reliance on the representations, warranties, covenants and agreements
contained in this Amendment, but subject to the satisfaction of each condition
precedent set forth in Section 15
hereof, the Lenders hereby agree as follows:


(a)           The Lenders hereby waive any Events
of Default resulting from the Credit Parties’ failure to comply with the
conditions set forth in (i) Section 6.1(b) of the Credit Agreement solely as a
result of closure of the processing facility at the Mill Property located at
Terrace Bay, Ontario, (ii) Section 6.16 of the Credit Agreement solely as a
result of the Credit Parties failure to notify the Agent of the material affect
on the value of the Mill Property located at Terrace Bay, Ontario resulting
solely from the closure of the processing facility located thereon, and (iii)
Section 7.15 of the Credit Agreement solely as a result of the Credit Parties
failure to notify the Agent and the Canadian Collateral Agent of the relocation
of material books and records related to the Mill Property located at Terrace
Bay, Ontario to another existing Credit Party location.


(b)           In addition to the other terms and conditions
set forth herein, the Borrowers acknowledge that (a) the limited waivers set
forth in this Section 13 are limited solely to the matters and
the time periods expressly set forth in this Section 13, and (b) nothing
contained herein shall obligate the Agent or any Lender to grant any waiver of
any other obligation of any Borrower under the Credit Agreement or any other
Loan Document or to grant any future waiver of Sections 6.1, 6.16, or 7.15 of
the Credit Agreement.


SECTION 14.  Representations
and Warranties.  To induce the other
parties hereto to enter into this Amendment, the Credit Parties represent and
warrant to the Agent and each of the other Lender Parties that, as of the
Effective Date:


(a)           after
giving effect to this Amendment, the representations and warranties of the
Credit Parties set forth in Section 5 of the Credit Agreement are true and
correct in all material respects on and as of the Effective Date with the same
effect as if made on and as of the Effective Date, except to the extent such
representations and warranties expressly relate to an earlier date, in which case
such representations and warranties were true and correct as of such earlier
date, and except for any change of facts permitted under the provisions of the
Credit Agreement and the other Documents;


(b)           after
giving effect to this Amendment, no Default has occurred and is continuing
under the Credit Agreement;


(c)           this
Amendment has been duly executed and delivered by the Credit Parties and the
Credit Agreement, as amended hereby, constitutes a legal, valid and binding 



 11
 






 



obligation of the Credit Parties, enforceable
against the Credit Parties in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors’ rights generally and subject to general principles of
equity, regardless of whether considered in a proceeding in equity or at law;


(d)           the
solvency deficiency (without regard to whether any unfunded amounts are then
due and payable) of the Credit Parties’ Canadian Pension Plans regulated by the
Financial Services Commission of
Ontario on the date hereof is approximately $31,000,000; and


(e)           the
Credit Parties have made reasonable and prudent investigations into the
expected costs and liabilities anticipated to be incurred in connection with
potential restructuring, closure and Disposition of Neenah Paper Company of
Canada’s Terrace Bay facility (including consultation with legal, pension,
environmental and other advisors), and based on such investigations, the
reasonable best estimate of the aggregate charges, expenses and liabilities
related to the restructuring, closure or Disposition of Neenah Paper Company of
Canada’s Terrace Bay facility is not greater than $120,000,000.


SECTION 15.  Conditions
to Effectiveness. This Amendment shall become effective as of the
date (the “Effective Date”) on which each of the following conditions
has been satisfied:


(a)           the
Agent shall have received counterparts of this Amendment that, when taken
together, bear the signatures of the Credit Parties and all the Lenders; and


(b)           to
the extent invoiced, the Agent shall have received payment or reimbursement of
its out-of-pocket expenses in connection with this Amendment and any other
out-of-pocket expenses of the Agent required to be paid or reimbursed pursuant
to the Credit Agreement, including the reasonable fees, charges and
disbursements of counsel for the Agent.


SECTION 16.  Effect
of Amendment.  Except as expressly
set forth herein, this Amendment shall not by implication or otherwise limit,
impair, constitute a waiver of, amend, or otherwise affect the rights and
remedies of the Agent or the other Lender Parties under the Credit Agreement or
any other Loan Document and shall not alter, modify, amend or in any way affect
any of the terms, conditions, obligations, covenants or agreements contained in
the Credit Agreement or any other Loan Document, all of which are ratified and
affirmed in all respects and shall continue in full force and effect.  This Amendment shall apply and be effective
with respect only to the matters expressly referred to herein, and nothing
herein shall be deemed to entitle the Borrower to a consent to, or a waiver,
amendment, modification or other change of, any of the terms, conditions,
obligations, covenants or agreements contained in the Credit Agreement or any
other Loan Document in similar or different circumstances.  This Amendment shall constitute a “Loan
Document” for all purposes of the Credit Agreement.


SECTION 17.  APPLICABLE LAW.  THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.


SECTION 18.  Counterparts.  This Amendment may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so 



 12
 






 



executed and
delivered shall be deemed an original but all of which when taken together
shall constitute but one and the same instrument.  Delivery of an executed signature page of
this Amendment by facsimile transmission shall be effective as delivery of a
manually executed counterpart hereof.


SECTION 19.  Costs
and Expenses.  The Borrowers agree to
reimburse the Agent for its reasonable out-of-pocket expenses in connection
with this Amendment, including the reasonable fees, charges and disbursements
of counsel for the Agent actually incurred.


SECTION 20.  Headings.  The headings of this Amendment are for
purposes of reference only and shall not limit or otherwise affect the meaning
hereof.


SECTION 21.  Severability.  Any provision of this Amendment which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.


SECTION 22.  No
Party Deemed Drafter.  Each of the
parties hereto agrees that no party hereto shall be deemed to be the drafter of
this Amendment.


SECTION 23.  Ratification
of Guaranty.  Each Guarantor hereby consents to this Amendment and hereby
confirms and agrees that (a) notwithstanding the effectiveness of this
Amendment, the Guaranty is, and shall continue to be, in full force and effect
and is hereby ratified and confirmed in all respects, except that, on and after
the effectiveness of this Amendment, each reference in the Guaranty to the “Agreement”, “thereunder”, “thereof” or words of
like import referring to the Credit Agreement shall mean and be a reference to
the Credit Agreement as amended by this Amendment, and (b) the Loan Documents
to which it is a party and all of the Collateral described therein do, and
shall continue to, secure the payment of all of the Obligations secured
thereby.


 


 


[SIGNATURE PAGES FOLLOW]



 13














 


IN WITNESS WHEREOF, the
parties hereto have caused this Amendment to be duly executed by their
authorized officers as of the day and year first written above.


	
   

  	
  NEENAH PAPER, INC.,

  
	
   

  	
  as a Borrower

  
	
   

  	
   

  
	
   

  	
   

  	
  by:

  	
  s/s/ Bonnie C. Lind

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
  Bonnie C. Lind

  
	
   

  	
   

  	
  Title:

  	
   

  	
  Senior Vice President, Chief

  
	
   

  	
   

  	
   

  	
   

  	
  Financial Officer and Treasurer

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  NEENAH PAPER MICHIGAN, INC.,

  
	
   

  	
  as a Borrower

  
	
   

  	
   

  
	
   

  	
   

  	
  by:

  	
  s/s/ Bonnie C. Lind

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
  Bonnie C. Lind

  
	
   

  	
   

  	
  Title:

  	
   

  	
  Senior Vice President, Chief

  
	
   

  	
   

  	
   

  	
   

  	
  Financial Officer and Treasurer

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  NEENAH PAPER SALES, INC.,

  
	
   

  	
  as a Borrower

  
	
   

  	
   

  
	
   

  	
   

  	
  by:

  	
  s/s/ Bonnie C. Lind

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
  Bonnie C. Lind

  
	
   

  	
   

  	
  Title:

  	
   

  	
  Senior Vice President, Chief

  
	
   

  	
   

  	
   

  	
   

  	
  Financial Officer and Treasurer

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  NEENAH PAPER COMPANY OF 

  
	
   

  	
  CANADA, as a Guarantor

  
	
   

  	
   

  
	
   

  	
   

  	
  by:

  	
  s/s/ Bonnie C. Lind

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
  Bonnie C. Lind

  
	
   

  	
   

  	
  Title:

  	
   

  	
  Senior Vice President, Chief

  
	
   

  	
   

  	
   

  	
   

  	
  Financial Officer and Treasurer

  
						



 









 



 


	
   

  	
  JPMORGAN CHASE BANK, N.A.,

  
	
   

  	
  individually and
  as Agent,

  
	
   

  	
   

  
	
   

  	
   

  	
  by:

  	
  s/s/ J. Richard Hawk

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
  J. Richard Hawk

  
	
   

  	
   

  	
  Title:

  	
   

  	
  Vice President

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  JPMORGAN CHASE
  BANK, N.A.,

  
	
   

  	
  TORONTO BRANCH,

  
	
   

  	
  as Canadian
  Collateral Agent,

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by:

  	
  s/s/ Steven Voigt

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
  Steven Voigt

  
	
   

  	
   

  	
  Title:

  	
   

  	
  Vice President

  
							



 









 



 


 


	
  

  	
  SIGNATURE PAGE TO SECOND

  AMENDMENT DATED AS OF MAY 9, 2006 TO

  THE NEENAH PAPER CREDIT AGREEMENT

  DATED AS OF NOVEMBER 30, 2004

  
	
   

  	
   

  
	
   

  	
  To approve this Amendment:

  
	
   

  	
   

  
	
   

  	
  Name of

  
	
   

  	
  Institution: 
  CITICORP USA, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  by:

  	
  s/s/ David Jaffe

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
  David Jaffe

  
	
   

  	
   

  	
  Title:

  	
   

  	
  Director and Vice President

  
						



 









 



 


	
  

  	
  SIGNATURE PAGE TO SECOND

  AMENDMENT DATED AS OF MAY 9, 2006 TO

  THE NEENAH PAPER CREDIT AGREEMENT

  DATED AS OF NOVEMBER 30, 2004

  
	
   

  	
   

  
	
   

  	
  To approve this Amendment:

  
	
   

  	
   

  
	
   

  	
  Name of

  Institution:  WELLS FARGO FOOTHILL,
  L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  by:

  	
  s/s/ Patrick McCormack

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
  Patrick McCormack

  
	
   

  	
   

  	
  Title:

  	
   

  	
  Assistant Vice President

  
						



 









 



 


	
  

  	
  SIGNATURE PAGE TO SECOND

  AMENDMENT DATED AS OF MAY 9, 2006 TO

  THE NEENAH PAPER CREDIT AGREEMENT

  DATED AS OF NOVEMBER 30, 2004

  
	
   

  	
   

  
	
   

  	
  To approve this Amendment:

  
	
   

  	
   

  
	
   

  	
  Name of

  Institution:  BANK OF AMERICA, N.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  by:

  	
  s/s/ H. Michael Wills

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
  H. Michael Wills

  
	
   

  	
   

  	
  Title:

  	
   

  	
  Senior Vice President

  
						



 









 



 


	
  

  	
  SIGNATURE PAGE TO SECOND 

  AMENDMENT DATED AS OF MAY 9, 2006 TO 

  THE NEENAH PAPER CREDIT AGREEMENT 

  DATED AS OF NOVEMBER 30, 2004

  
	
   

  	
   

  
	
   

  	
  To approve this Amendment:

  
	
   

  	
   

  
	
   

  	
  Name of

  Institution:  THE CIT GROUP/BUSINESS
  CREDIT, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  by:

  	
  s/s/ Jang S. Kim

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
  Jang S. Kim

  
	
   

  	
   

  	
  Title:

  	
   

  	
  Vice President

  
						



 









 



 


	
  

  	
  SIGNATURE PAGE TO SECOND 

  AMENDMENT DATED AS OF MAY 9, 2006 TO 

  THE NEENAH PAPER CREDIT AGREEMENT 

  DATED AS OF NOVEMBER 30, 2004

  
	
   

  	
   

  
	
   

  	
  To approve this Amendment:

  
	
   

  	
   

  
	
   

  	
  Name of

  Institution:  CITIZENS BUSINESS CREDIT

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  by:

  	
  s/s/ Susan K. Gadrix

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
  Susan K. Gadrix

  
	
   

  	
   

  	
  Title:

  	
   

  	
  Vice President

  
						



 









 



 


	
  

  	
  SIGNATURE PAGE TO SECOND 

  AMENDMENT DATED AS OF MAY 9, 2006 TO 

  THE NEENAH PAPER CREDIT AGREEMENT 

  DATED AS OF NOVEMBER 30, 2004

  
	
   

  	
   

  
	
   

  	
  To approve this Amendment:

  
	
   

  	
   

  
	
   

  	
  Name of

  Institution:  UBS AG, STAMIORD BRANCH

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  by:

  	
  s/s/ Richard L. Tavrow

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
  Richard L. Tavrow

  
	
   

  	
   

  	
  Title:

  	
   

  	
  Director

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by:

  	
  s/s/ Irja R. Otsa

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
  Irja R. Otsa

  
	
   

  	
   

  	
  Title:

  	
   

  	
  Associate Director

  
							



 









 



 


	
  

  	
  SIGNATURE PAGE TO SECOND 

  AMENDMENT DATED AS OF MAY 9, 2006 TO 

  THE NEENAH PAPER CREDIT AGREEMENT 

  DATED AS OF NOVEMBER 30, 2004

  
	
   

  	
   

  
	
   

  	
  To approve this Amendment:

  
	
   

  	
   

  
	
   

  	
  Name of

  Institution:  GOLDMAN SACHS CREDIT 

  
	
   

  	
  PARTNERS L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  by:

  	
  s/s/ Bruce H. Mendelsohn

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
  Bruce H. Mendelsohn

  
	
   

  	
   

  	
  Title:

  	
   

  	
  Authorized Signatory