Document:

exv10w3

 

Exhibit 10.3

CORPORATE SERVICES AGREEMENT

     THIS AGREEMENT for the performance of corporate services is dated as of
November 30, 2004, between Kimberly-Clark Corporation, a Delaware corporation
(“Kimberly-Clark”), and Neenah Paper, Inc., a Delaware corporation (“Neenah”),
and, as of the date hereof, a wholly-owned subsidiary of Kimberly-Clark.

     WHEREAS, Kimberly-Clark, through its pulp and paper division and certain
subsidiaries and affiliates, is engaged in the business of (i) manufacturing
and selling fine paper and technical paper and (ii) producing pulp (the “Neenah
Business”);

     WHEREAS, the Board of Directors of Kimberly-Clark has determined that it
would be advisable and in the best interests of Kimberly-Clark and its
stockholders for Kimberly-Clark to transfer and assign, or cause to be
transferred or assigned, to Neenah the business, operations, assets and
liabilities related to the Neenah Business;

     WHEREAS, Kimberly-Clark has agreed to transfer and assign to Neenah
substantially all of the assets and properties of the Neenah Business and
Neenah has agreed to the transfer and assignment of such assets and to assume,
or cause to be assumed, substantially all of the liabilities and obligations
arising out of or relating to the Neenah Business;

     WHEREAS, the date on which the above transaction is to become effective is
referred to as the “Distribution Date” as defined in that certain Distribution
Agreement between Kimberly-Clark and Neenah, dated as of the date hereof; and

     WHEREAS, the parties hereto deem it to be appropriate and in the best
interests of Neenah and Kimberly-Clark that Kimberly-Clark provide certain
services to Neenah to facilitate the transaction described above on the terms
and conditions set forth herein;

     NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties hereto agree as follows:

     1. Description of Kimberly-Clark Services. Kimberly-Clark shall, subject to
the terms and provisions of this Agreement:

     (a) provide Neenah with general services of a financial, technical,
commercial, administrative and/or advisory nature, with respect to the
Business, as set forth on Exhibit A hereto; and

     (b) assist Neenah in the efficient transfer of each of the services
provided by Kimberly-Clark under this Agreement to Neenah, including training
of the Neenah personnel primarily responsible for each of the services going
forward, or to a third party designated by Neenah; and

     (c) render such other specific services as Neenah may from time to time
reasonably request, subject to Kimberly-Clark’s discretion and its being in a
position to supply such additional services at the time of such request.

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Unless otherwise specifically provided on Exhibit A, Kimberly-Clark will
provide each of the services until December 31, 2005. Neenah may, at its
option, upon no less than thirty (30) days prior written notice (or such other
period as the parties may mutually agree in writing), direct Kimberly-Clark to
provide no longer all or any category of such services.

     2. Consideration for Kimberly-Clark Services. Neenah shall pay Kimberly-Clark
in accordance with this Section 2 and Kimberly-Clark shall accept as
consideration for the services rendered to Neenah hereunder the following
service charges:

     (a) for the services rendered by Kimberly-Clark for or on behalf of Neenah
pursuant to Section 1(a), Neenah will be charged the fees set forth on Exhibit
A;

     (b) for the services rendered by Kimberly-Clark for or on behalf of Neenah
pursuant to Section 1(b), Neenah will be charged certain fees to be negotiated
and agreed to by the parties at the time such services are requested.

     3. Terms of Payment. Kimberly-Clark shall submit in writing an invoice
covering its charges to Neenah for services rendered hereunder. Such invoice
shall be submitted on a monthly basis and shall contain a summary description
of the charges and services rendered. Payment shall be made no later than
thirty (30) days after the invoice date.

     4. Method of Payment. All amounts payable by Neenah for the services described
on Exhibit A shall be remitted to Kimberly-Clark in United States dollars to a
bank to be designated in the invoice or otherwise in writing by Kimberly-Clark,
unless otherwise provided for and agreed upon in writing by the parties.
Detailed billing information will be provided upon request.

     5. WARRANTIES. THIS IS A SERVICE AGREEMENT. EXCEPT AS EXPRESSLY STATED IN
THIS AGREEMENT, THERE ARE NO EXPRESS WARRANTIES OR GUARANTIES AND THERE ARE NO
IMPLIED WARRANTIES OR GUARANTIES, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED
WARRANTIES OF MERCHANTABILITY, TITLE AND FITNESS FOR A PARTICULAR PURPOSE.

     6. Limitation on Liability.

     (a) In no event shall either party have any liability, whether based on
contract, tort (including, without limitation, negligence), warranty or any
other legal or equitable grounds, for any punitive, consequential, special,
indirect or incidental loss or damage suffered by the other party arising from
or related to this Agreement, including without limitation, loss of data,
profits (excluding profits under this Agreement), interest or revenue, or use
or interruption of business, even if such party is advised of the possibility
of such losses or damages.

     (b) The limitations set forth in Section 6(a) above shall not apply to
liabilities which may arise as the result of (i) willful misconduct or gross
negligence of Kimberly-Clark or its subsidiaries or Neenah or its subsidiaries,
(ii) amounts inadvertently overpaid by either party, or (iii) amounts for
charges otherwise due and payable under this Agreement.

     (c) In no event will Kimberly-Clark’s liability, whether based on
contract, tort

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(including without limitation, negligence), warranty or any other legal or
equitable grounds, exceed in the aggregate the amount of fees paid to
Kimberly-Clark under this Agreement.

     7. Termination. This Agreement shall terminate on January 31, 2006, but may be
terminated earlier in accordance with the following:

     (a) upon the mutual written agreement of the parties;

     (b) by either Neenah or Kimberly-Clark for material breach of any of the
terms hereof by Kimberly-Clark or Neenah, as the case may be, if the breach is
not corrected within thirty (30) calendar days after written notice of breach
is delivered to the defaulting party;

     (c) by either Neenah or Kimberly-Clark forthwith, upon written notice to
Kimberly-Clark or Neenah, as the case may be, if Kimberly-Clark or Neenah, as
the case may be, shall become insolvent or shall make an assignment for the
benefit of creditors, or shall be placed in receivership, reorganization,
liquidation or bankruptcy;

     (d) by Kimberly-Clark forthwith, upon written notice to Neenah, if, for
any reason, the ownership or control of Neenah or any of Neenah’s operations,
becomes vested in, or is made subject to the control or direction of, any
direct competitor of Kimberly-Clark’s consumer products, service and industrial
or health care businesses, or any governmental or regulatory authority; or

     (e) by Neenah forthwith, upon written notice to Kimberly-Clark, if for any
reason, the ownership or control of Kimberly-Clark or any of Kimberly-Clark ‘s
operations becomes vested in, or is made subject to the control or direction
of, any direct competitor of Neenah, or any governmental or regulatory
authority.

     Upon any such termination, each party shall be compensated for all services
performed to the date of termination in accordance with the provisions of this
Agreement.

     8. Performance. The services rendered by Kimberly-Clark hereunder shall be
performed in the same manner and with the same skill and care as Kimberly-Clark
employs in service of its own business.

     9. Independent Contractor. Kimberly-Clark is providing the services pursuant
to this Agreement as an independent contractor and the parties hereby
acknowledge that they do not intend to create a joint venture, partnership or
any other type of agency between them.

     10. Confidentiality. The specific terms and conditions of this Agreement and
any information conveyed or otherwise received by or on behalf of a party in
conjunction herewith are confidential and are subject to the terms of the
Confidentiality provisions of the Distribution Agreement.

     11. Ownership of Information . Any information owned by one party or any of
its subsidiaries that is provided to the other party or any of its subsidiaries
pursuant to this Agreement shall remain the property of the providing party.
Unless specifically set forth herein, nothing contained in this Agreement shall
be construed as granting or conferring rights of license or otherwise in any
such information.

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     12. Records. Kimberly-Clark shall maintain and retain records related to the
provision of the services under this Agreement consistent with Kimberly-Clark’s
historical policies regarding its own retention of records. As needed from time
to time during the period in which services are provided, and upon termination
of the provision of any service, the parties agree to provide each other with
records related to the provision of the services under this Agreement to the
extent that (i) such records exist in the ordinary course of business, (ii)
such records do not involve the incurrence of any material expense to the party
providing such records, and (iii) such records are reasonably necessary for
such party to comply with its obligations under this Agreement or applicable
law.

     13. Amendment. This Agreement may be modified or amended only by the agreement
of the parties hereto in writing, duly executed by the authorized
representatives of each party.

     14. Force Majeure. Any delays in or failure of performance by any party
hereto, other than the payment of money, shall not constitute a default
hereunder if and to the extent such delays or failures of performance are
caused by occurrences beyond the reasonable control of such party, including,
but not limited to: acts of God or the public enemy; expropriation or
confiscation of facilities; compliance with any order or request of any
governmental authority; acts of war; riots or strikes or other concerted acts
of personnel; or any causes, whether or not of the same class or kind as those
specifically named above, which are not within the reasonable control of such
party, and which by the exercise of reasonable diligence, such party is unable
to prevent.

     15. Assignment. This Agreement shall not be assignable by either party hereto
without the prior written consent of the other party hereto. When duly
assigned in accordance with the foregoing, this Agreement shall be binding upon
and shall inure to the benefit of the assignee.

     16. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by facsimile
transmission or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):

	 	 	 	 	 
	

	 	If to Kimberly-Clark:
	 	Kimberly-Clark Corporation

351 Phelps Drive

Irving, Texas 75038

Attn: General Counsel

Facsimile: (214) 281-1492
	

	 	 	 	 
	

	 	If to Neenah:
	 	Neenah Paper, Inc.

Preston Ridge III

3460 Preston Ridge Road

Alpharetta, Georgia 50005

Attn: General Counsel

Fax: (678) 518-3283

     17. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA, U.S.A.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date and year first above written.

	 	 	 	 	 
	 	KIMBERLY-CLARK CORPORATION

 	 
	 	By:  	 	 
	 	 	Mark A. Buthman, Senior Vice 	 
	 	 	President and Chief Financial Officer 	 
	 
	 	NEENAH PAPER, INC.

 	 
	 	By:  	 	 
	 	 	Sean Erwin, President and 	 
	 	 	Chief Executive Officer 	 
	 

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EXHIBIT A

SERVICES TO BE RENDERED BY KIMBERLY-CLARK

Management Information Services

Kimberly-Clark will provide support and services for Neenah business systems
applications and Neenah computer operations at the same service levels and
subject to the same priority ranking system as were provided to the businesses
of Neenah prior to the date of this Agreement (“MIS Services”). Kimberly-Clark
shall provide those services until January 31, 2006, subject to Neenah’s right
to terminate categories of services pursuant to Section 1 of the Agreement.
Should Neenah require services beyond January 31, 2006, a new agreement
defining, cost structure and remaining services to be provided must be
negotiated.

Each of Kimberly-Clark and Neenah shall from time to time designate an
individual as the authorized representative for all communications with respect
to MIS Services.

The categories of MIS Services and monthly fee schedule for normal and routine
operating assistance, minor maintenance and computer operations are set forth
below. The monthly charge for Computer Services Support will be reduced when
software and/or hardware licensing fees are charged directly to Neenah rather
than to Kimberly-Clark. The charge will be reduced by the amount that
Kimberly-Clark is currently allocating to the Neenah businesses.

     Business Systems Project Charges

	 	 	 	 	 	 	 
	 	 	 	$/Month	 
	Fine Paper
	 	 	 
	 
	 	PIMS Maintenance	 	 	2,800	 
	 
	 	PIMS O/A	 	 	1,500	 
	 
	 	Payroll/Benefit Support	 	 	10,400	 
	 
	 	Training & Doc Consulting	 	 	1,000	 
	 
	 	Legacy Systems Support	 	 	9,900	 
	 
	 	Purchasing/Stores Support	 	 	3,800	 
	 
	 	Legacy Stores Operating Assistance	 	 	100	 
	Technical Paper
	 	 	 	 
	 
	 	General Mfg and Order Entry Support	 	 	13,600	 
	 
	 	PIMS Support & Identified Projects	 	 	4,500	 
	 
	 	General Maintenance and Staff Support	 	 	2,100	 
	 
	 	General O/A	 	 	3,900	 
	 
	 	Payroll/Benefit Support	 	 	8,000	 
	 
	 	Training & Doc Consulting	 	 	600	 
	 
	 	Legacy Systems Support	 	 	6,500	 
	 
	 	Purchasing/Stores Support	 	 	1,900	 
	 
	 	Legacy Stores Operating Assistance	 	 	100	 

 

 

	 	 	 
	Computer Services Support Charges
	 	 
	Desktop Services and Messaging
	 	97,400
	Connectivity Services
	 	67,500
	Voice
	 	41,800
	SAP R/3
	 	30,400
	SAP B/W
	 	13,000
	Mainframe Services
	 	52,400
	UNIX Services
	 	23,000
	Windows Services
	 	43,100
	AS/400 Services
	 	25,900
	e-Business
	 	11,900

Notwithstanding Section 1 of the Agreement, Neenah shall give Kimberly Clark no
less than ninety (90) days written notice of any such termination of any of the
above services; provided that K-C will accommodate a shorter notice period and
terminate the service sooner to the extent a particular service so permits at
the time of termination.

For all additional services (other than normal operating assistance and minor
maintenance) including without limitation, additional project work, systems or
application enhancements, maintenance and changes to systems or applications,
support or services to separate the systems of Neenah and Kimberly-Clark and
creation or generation of current or historical data (“Additional MIS
Services”), Neenah will submit to Kimberly-Clark a written request for the
Additional MIS Services, together with reasonable documentation and
specifications to allow Kimberly-Clark to determine the estimated cost and
priority for such Additional MIS Services. To the extent that Kimberly-Clark
agrees in its sole discretion to provide the Additional MIS Services, it will
provide to Neenah a written estimate of the cost and priority for such
Additional MIS Services and Neenah shall inform Kimberly-Clark in writing if
Neenah desires to have Kimberly-Clark provide the Additional MIS Services.

Hourly labor rates for K-C staff will be $90 per hour. Hourly rates for K-C
obtained consultants, contractors or other third parties utilized on Additional
Special Projects will be charged at actual hourly rates, plus any reasonable
travel and living expenses, plus applicable administrative charges.

Neenah shall be solely liable for (i) all license fees, charges or other
amounts from any third parties (“Vendor Fees”), including consultants,
contractors, vendors or licensors, incurred as a result of Kimberly-Clark
providing MIS Services or otherwise as a result of utilizing products or
software licensed to Kimberly-Clark and utilized by or on behalf of Neenah,
regardless of whether such products or services are utilized on the systems or
equipment of Kimberly-Clark or Neenah and (ii) all legal or administrative fees
and expenses incurred by Kimberly-Clark in responding to requests for Vendor
Fees. Kimberly-Clark will notify Neenah promptly of any Vendor Fees.

Notwithstanding anything to the contrary herein (i) all support and services
relating to Kimberly-Clark systems applications or IT infrastructure shall be
performed only by Kimberly-Clark personnel or contractors or consultants either
retained by Kimberly-Clark or approved in advance in writing by Kimberly-Clark;
(ii) MIS Services shall only be provided for hardware or

 

 

other IT infrastructure that is a part of Kimberly-Clark’s infrastructure road
map or technology standards on the date of this Agreement or that is added by
Kimberly-Clark to its infrastructure roadmap or technology standards after the
date of this Agreement; (iii) Kimberly-Clark shall have no obligation to incur
additional expenditures or investments relating to additional features or
functionality for existing systems or applications, it being understood that in
the near future many of the systems or applications in connection with the
delivery of MIS Services may become obsolete or may not be used or improved by
Kimberly-Clark; and (iv) Neenah shall not attach to, install or otherwise
incorporate into the Kimberly-Clark Enterprise Network any equipment, software,
product, infrastructure or other device (A) without the prior written consent
of Kimberly-Clark and (B) that is not fully compatible with the then existing
Kimberly-Clark systems, infrastructure and standards roadmap.

At all times during the term of this Agreement, Neenah shall comply with
Kimberly-Clark’s Corporate Security, Computer Security and Global Information
Technology Standards, as they may be amended or modified by Kimberly-Clark from
time to time during the term of this Agreement. Neenah acknowledges that it
has received a copy of such Standards as they exist on the date of this
Agreement.

Kimberly-Clark’s Enterprise Network, systems and other intellectual property,
including any applications, software code, technology, trade secret,
infrastructure, hardware and other products or devices used by Kimberly-Clark
and any enhancements, modifications or additions thereto (whether as a result
of or in connection with this Agreement or otherwise) shall be and remain the
sole and exclusive property of Kimberly-Clark and shall not be deemed works for
hire, and Neenah shall have no right, title or interest therein. If Neenah
desires to have Kimberly-Clark license or transfer to Neenah any of the same,
Kimberly-Clark, in its sole discretion, may license or transfer the same to
Neenah on terms agreed to by Neenah and Kimberly-Clark, provided that Neenah
shall be liable for all costs and expenses incurred in connection therewith,
including any third party license, transfer and other fees, and all costs and
expenses incurred to “uninstall” and “re-install” the same. Excluded from the
requirements of this paragraph are systems that were built for and used
primarily by Neenah.

Employee Benefits Administration and Payroll Services

Payroll Administration: Kimberly-Clark will provide payroll administration
services to Neenah with respect to Neenah’s U.S. employees, and such employees
will continue to report attendance and absence information using the system
maintained by Kimberly-Clark for such purpose, until the earlier of (i) the
date Neenah arranges for its own payroll administration services and
establishes its own employee and time collection processes and (ii) December
31, 2005, at a cost to Neenah of $20,000 per month. These costs do include (i)
all E-memos, mass wage changes, job title set ups, relocation gross-ups and
other personnel administrative actions needed by Neenah for the benefit of
Transferred Employees, (ii) the preparation of personnel or management reports
through HR Browser, consistent with those previously provided, as requested by
Neenah with turnaround times consistent with those normally provided by the K-C
Payroll Center, and (iii) the preparation and submission of personnel records
to outside providers such as Cendant Mobility, EquiServe, EAP vendors, or other
3rd party providers as required by Neenah. These costs do not include the
systems costs associated with these

 

 

activities. Systems costs will be billed according to the Management
Information Services portion of this agreement.

Canadian Payroll Bank Account: Kimberly-Clark will continue to use its bank
account at Royal Bank of Canada (RBC) on behalf of Neenah to facilitate the
electronic transfer of paychecks to Neenah’s employees. Neenah will be
responsible for funding the amount to be transferred prior to the distribution
of the electronic paychecks. Neenah is responsible for communicating to RBC
the correct distribution of the payroll. This service will be provided at no
additional cost until December 31, 2004.

Data Conversions: Kimberly-Clark shall assist in the conversion of employee
and payroll data to benefit providers, a payroll administrator and an
enterprise system engaged or established by Neenah, including any related
analysis, design and development of interfaces and reports. The cost to Neenah
for these conversion services shall be $36,000 for payroll team support.
Systems cost related to the development of interfaces and reports will be
billed according to the Management Information Services portion of this
agreement.

Group Health and Welfare Plans Administration: Neenah shall use reasonable
commercial efforts to contract with Hewitt & Associates (“Hewitt”) to provide
group health and welfare benefits (“GH&WB”) administrative services to Neenah
through December 31, 2004, at a cost to Neenah equal to the actual cost of such
services. Provided that Neenah enters into such a contract with Hewitt,
Kimberly-Clark will provide services related to the administration of GH&WB
through December 31, 2004 at a cost to Neenah of $5,000 per month. These
services will include enrollment activities, customer service, and deduction
processing. To facilitate these transition services, Kimberly-Clark and Neenah
agree to enter into mutual business associate agreements under the privacy
provisions of HIPAA.

US Pension Plan. Neenah shall use reasonable commercial efforts to contract
with Hewitt & Associates (“Hewitt”) to provide defined benefit administrative
services through a date not later than June 30, 2005, at a cost to Neenah equal
to the actual cost of such services. Neenah will pay Kimberly-Clark from its
assets, and not out of any pension plan assets, a fee in the amount of $500 per
month for services to be provided by Kimberly-Clark relating to the management
of the investment structure for the Kimberly-Clark Corporation Pension Plan for
the period beginning with the Distribution and ending on the date the assets
and liabilities of the Kimberly-Clark Corporation Pension Plan attributable to
current employees of Neenah’s U.S. operations (the “Transferred Employees”) are
transferred to the trustee of the corresponding pension plan established by
Neenah (the “Transfer Date”).

Kimberly-Clark will be available to provide consulting services requested by
Neenah which relate to (i) the administration of the defined benefit and
defined contribution plans maintained by Neenah for the benefit of Transferred
Employees, at a cost to Neenah of $125 per hour and (ii) after the Transfer
Date, the investment of assets in the defined benefit and defined contribution
plans maintained by Neenah for the benefit of Transferred Employees, at a cost
to Neenah of $200 per hour; provided, however, that Kimberly-Clark shall have
the sole discretion to decline to provide any such services so requested.

Canadian Pension Plans. Neenah will pay Kimberly-Clark from its assets, and
not out of any

 

 

pension plan assets, a fee in the amount of $1,500 per month for services to be
provided by Kimberly-Clark relating to the management of the investment
structure for the Canadian pension plans for the period beginning with the
Distribution and ending on the date the assets and liabilities are transferred
to the trustee of the corresponding pension plan established by Neenah (the
“Transfer Date”).

Kimberly-Clark will be available to provide consulting services requested by
Neenah which relate to the administration of, and investment of assets in, the
defined benefit and defined contribution plans maintained by Neenah for the
benefit of current and former employees of the Canadian pulp and woodlands
operations (the “Canadian Employees”), at a cost to Neenah of $200 per hour.

Compensation: Kimberly-Clark will be available to provide consulting services
requested by Neenah until March 31, 2005 which relate to the administration of
various compensation plans and stock programs maintained by Neenah for the
benefit of current transferred employees at a cost to Neenah of $100 per hour.

Relocation: Kimberly-Clark will provide relocation and global assignment
program administrative services to Neenah until January 31, 2005 consistent
with the services provided prior to the distribution date. K-C will provide
advice and counsel on special requests and on arrangements to set up new
relocation providers. The cost of such special services will be $70 per hour.

General:
Neenah will reimburse Kimberly-Clark for any out-of-pocket costs incurred by
Kimberly-Clark while providing the employee benefits administration services,
but not the payroll administration services, described in this section,
including but not limited to, costs incurred for postage, printing and
supplies.

International Employee Services: Kimberly-Clark agrees to retain Keith Johnson
on the payroll of Kimberly-Clark International Services Corp. through December
31, 2004. For the period from the Distribution Date until January 1, 2005 (the
“Lease Period”), Neenah agrees to lease Keith Johnson from Kimberly-Clark for
the performance of management duties in Canada. During the Lease Period,
Neenah agrees to pay Kimberly-Clark a monthly amount equal to the cost of Mr.
Johnson’s monthly salary, benefits, other fees and other income paid to him by
Kimberly-Clark (except any bonus or other amounts paid to him that are
attributable to a period prior to the Lease Period). As of January 1, 2005,
Neenah intends to hire Mr. Johnson as an employee.

Kimberly-Clark agrees to retain Peter VanDerBogt on the payroll of
Kimberly-Clark Benelux through December 31, 2004. For the period from the
Distribution Date until January 1, 2005 (the “Lease Period”), Neenah agrees to
lease Mr. VanDerBogt from Kimberly-Clark for the performance of duties in
Europe. During the Lease Period, Neenah agrees to pay Kimberly-Clark a monthly
amount equal to the cost of Mr. Peter VanDerBogt’s monthly salary, benefits
other fees, and other income paid to him by Kimberly-Clark (except any bonus or
other amounts paid to him that are attributable to a period prior to the Lease
Period). As of January 1, 2005, Neenah intends to make other arrangements to
compensate Mr. VanDerBogt for his services.

 

 

Transportation Services

Kimberly-Clark will provide advice, counsel on freight rate contract renewal
negotiation and assistance during periods of transportation disruption related
to inclement weather, major strike, terror attack, etc., only as may be
necessary to maintain operations at Kimberly-Clark consuming mills. Such
services will cost $2,100 per month. Notwithstanding Section 1 of the
Agreement, Neenah shall give Kimberly Clark no less than sixty (60) days
written notice of any such termination.

Environment and Energy Services

Kimberly-Clark will provide the following environmental and energy related
services:

	 	•	 	Boiler and related equipment inspections and operational advice;
	 
	 	•	 	Energy (electrical and natural gas) rate/purchase assistance, hedging and contract negotiation;
	 
	 	•	 	Fuel and energy cost and consumption report data management;
	 
	 	•	 	Thermographic electric surveys;
	 
	 	•	 	Performance of Corporate Environmental Inspections at Neenah mills;
	 
	 	•	 	Environmental regulatory/technical advice and assistance;
	 
	 	•	 	Forestry audits and certification advice and assistance; and
	 
	 	•	 	Wastewater testing (tickler, product formulation toxicity and permit compliance bioassays)

All services will be provided on an as requested basis at a cost of $90 per
professional hour spent plus travel expenses.

Treasurer’s Office Services

Kimberly-Clark’s Treasurer’s Office will provide services to Neenah relating to
Cash Management, Hedging, Debt Management and other treasury-related functions.
The fee for advice and counsel relating to cash management services will be
$200 per hour. These services will be available for six months after the
Distribution Date.

Purchasing Services

Kimberly-Clark will provide those support services of the type that have been
traditionally provided by it to the Business and which are related to
purchasing chemicals, research materials, trial support, capital projects and
the maintenance of the Purchasing System Information Center and Purchasing
Systems. Fees for these services will be as follows:

	 	 	 	 	 
	Transaction processing for Purchasing System
	 	$6,100 per month
	Systems support for Purchasing System
	 	$2,000 per month

These services do not include the renegotiation of and related transactional
activity associated with establishing contracts for Neenah that were
previously part of Kimberly-Clark’s multiple
facility contracts.

 

 

Kimberly-Clark shall endeavor, whenever possible, to arrange for the purchase
of goods or services in the name of Neenah, which shall provide Kimberly-Clark
with written authorizations or such other documents as Kimberly-Clark may
reasonably require from time to time in order to provide evidence of
Kimberly-Clark’s authority to act on behalf of Neenah pursuant to this
provision.

Risk Management

Kimberly-Clark’s Risk Management Department will provide advice as requested on
whether Neenah’s insurance brokers are properly following through on and
assisting with administration of Neenah insurance coverages. The cost of such
services will be $200 per month. Such services will be available until
December 31, 2004.

Tax Services

Kimberly-Clark will provide advice and counsel on tax planning issues relating
to the preparation of U.S. federal income and excise tax, and state and local
income, franchise, property and sales tax return. Such tax planning services
will be provided at a cost of $250 per hour and will be available for 6 months
after the Distribution Date.

Activities required by the Tax Sharing Agreement are specifically excluded from
this hourly charge and will be provided free of charge under the terms set
forth in the Tax Sharing Agreement.

Accounting Services

Kimberly-Clark will provide the following accounting services to Neenah -US at
the identified costs to Neenah:

	 	 	 	 	 
	Service
	 	Cost per Month

	Centralized Mill Accounting — Fine Paper
	 	$	11,900	 
	Centralized Mill Accounting — Technical Paper
	 	$	4,700	 
	Cost Accounting
	 	$	7,300	 
	Knoxville AP
	 	$	10,700	 
	SYZYGY
	 	$	16,500	 
	Property Accounting
	 	$	4,000	 
	Accounts Receivable/Credit
	 	$	7,900	*
	Financial Reporting
	 	$	10,900	 
	Corporate Accounting Support
	 	$	500	 

*K-C will also bill for the cost of a temporary employee if required to handle
manual accounts receivable transactions for the first 90 days after the
Distribution Date.

In order to simplify the transition of Accounts Payable balances, K-C will pay
from its bank account any outstanding invoices as of the distribution date on
Neenah Paper’s behalf. These

 

 

invoices will be paid when payments are due. Neenah will then reimburse K-C
for the payments that K-C makes on their behalf.

Kimberly-Clark will provide Neenah access to those accounting practices and
procedures relevant to the Sarbanes-Oxley Act for the Accounting Services
activities that are performed by Kimberly-Clark on Neenah’s behalf.
Kimberly-Clark will provide Neenah and/or Neenah’s auditor access to
transactions in order to perform testing of the systems. Transaction testing
will be conducted by Neenah at their expense.

Additional accounting project work requested by Neenah will be provided at a
cost of $200 per hour.

These costs do not include the systems costs associated with these activities.
Systems costs are addressed in the MIS section of this Agreement.

Patent Services

Kimberly-Clark will provide patent support services to Neenah consistent with
the services provided prior to the Distribution Date. Such services of
Kimberly-Clark attorneys and paralegals as requested by Neenah and agreed to by
Kimberly-Clark will be provided until March 31, 2005 at $250 per hour for
attorney time and $150 per hour for paralegal time. If Kimberly-Clark deems it
necessary to outsource patent support during this period, Neenah will pay the
costs associated with the outsourcing. All costs of maintaining patents and
patent applications, as requested by Neenah, anywhere in the world, will be
charged directly to Neenah.

Trademark Services

Kimberly-Clark will provide trademark services to Neenah, consistent with
services provided prior to the Distribution Date, related to searching,
prosecution and maintenance of trademarks. Such services of Kimberly-Clark
attorneys and paralegals will be provided as requested by Neenah at $250 per
hour for attorney time and $150 per hour for paralegal time. Neenah will be
directly responsible for trademark conflicts and litigation. All outside fees,
such as search fees, counsel fees and trademark maintenance and prosecution
fees as requested by Neenah, anywhere in the world, will be charged directly to
Neenah.

Roswell Technical Support

Kimberly-Clark will provide Analytical Lab support and Product Safety support
to Neenah on an as requested basis at a cost of $225 per hour spent plus the
cost of any outside services required. Such services will be provided until
December 31, 2004.

Tenancy

Neenah will be provided a month-to-month tenancy in the space which is occupied
by the Business, as of the date hereof, at Kimberly-Clark’s Roswell, Georgia
Operations Headquarters complex. Rent and related tenancy charges for the
space occupied by the Technical Papers research team will be $13,600 per month.
Neenah will provide Kimberly-Clark with at least thirty (30) days’ prior
written notice of the specific day in such month that Neenah will vacate

 

 

such premises. The related tenancy charges include charges for all taxes,
utilities, and tenant services that are currently being provided by K-C or
third parties on behalf of K-C (primarily Site Administration and the Health
Center), including, but are not limited to, electricity, maintenance, security,
groundskeeping, mail service, warehouse service and access to cafeteria and
health services. Neenah will make a good faith effort to vacate such premises
and terminate the tenancy no later than December 31, 2005.

Corporate Security

KC will provide corporate security services to Neenah consistent with those
services provided prior to the distribution date. The cost of such services
will be $150 per hour plus direct expenses associated with pre-employment
background reviews and special investigations.exv10w4

 

EXHIBIT 10.4

CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT WAS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH RULE 24b-2, PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, OMITTED INFORMATION WAS REPLACED WITH ASTERISKS.

PULP SUPPLY AGREEMENT

between

KIMBERLY-CLARK GLOBAL SALES, INC.

and

NEENAH PAPER, INC.

Made as of the
30th day of November, 2004

 

 

CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT WAS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH RULE 24b-2, PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, OMITTED INFORMATION WAS REPLACED WITH ASTERISKS.

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page
	ARTICLE 1
	 	DEFINITIONS	 	 	1	 
	1.01
	 	Airdry Metric Ton (“ADMT”)	 	 	1	 
	1.02
	 	Annual Supply Obligation or ASO	 	 	1	 
	1.03
	 	Annual Purchase Obligation or APO	 	 	1	 
	1.04
	 	Contract Year	 	 	1	 
	1.05
	 	Delivery Point	 	 	1	 
	1.06
	 	Distribution Date	 	 	1	 
	1.07
	 	Environmental/Safety Laws	 	 	2	 
	1.08
	 	Invoice Price	 	 	2	 
	1.09
	 	Phase Down Period	 	 	2	 
	1.10
	 	Pulp	 	 	2	 
	1.11
	 	Regions	 	 	2	 
	1.12
	 	Shipping Points	 	 	2	 
	1.13
	 	Specifications	 	 	2	 
	1.14
	 	Transaction Price	 	 	2	 
	1.15
	 	2004 Supply Period	 	 	2	 
	ARTICLE 2
	 	ANNUAL PURCHASE AND SUPPLY OBLIGATIONS; ANNUAL FORECASTS AND QUARTERLY ESTIMATES; SAFETY STOCKS	 	 	2	 
	2.01
	 	Annual Purchase and Supply Obligations	 	 	2	 
	2.02
	 	Regional Terms	 	 	4	 
	2.03
	 	Quarterly Estimates	 	 	4	 
	2.04
	 	Annual Forecasts	 	 	4	 
	2.05
	 	Safety Stocks	 	 	5	 
	2.06
	 	Ordering	 	 	5	 
	ARTICLE 3
	 	QUALITY AND SPECIFICATIONS; SPECIFICATION CHANGES;  WARRANTIES; PRODUCT SAFETY CERTIFICATIONS; REPORTS, RECORDKEEPING, AND ACCESS	 	 	6	 
	3.01
	 	Quality and Specifications	 	 	6	 
	3.02
	 	Specifications Change	 	 	6	 
	3.03
	 	Forestry	 	 	6	 
	3.04
	 	Warranties; Product Safety Certification	 	 	7	 
	3.05
	 	Reports, Recordkeeping, and Access	 	 	7	 
	ARTICLE 4
	 	PRICE AND PAYMENT TERMS	 	 	8	 
	4.01
	 	Price	 	 	8	 
	4.02
	 	Discounts	 	 	9	 

-i- 

 

CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT WAS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH RULE 24b-2, PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, OMITTED INFORMATION WAS REPLACED WITH ASTERISKS.

TABLE OF CONTENTS

(continued)

	 	 	 	 	 	 	 
	 	 	 	 	Page
	4.03
	 	Freight and Other Shipping Costs	 	 	9	 
	4.04
	 	Payment Terms	 	 	9	 
	ARTICLE 5
	 	SHIPMENT AND DELIVERY	 	 	9	 
	5.01
	 	Shipment Method/Shipping and Delivery Points	 	 	9	 
	5.02
	 	Arrearage	 	 	9	 
	5.03
	 	Title and Risk of Loss	 	 	10	 
	5.04
	 	Bale Finishing	 	 	10	 
	ARTICLE 6
	 	TERM AND TERMINATION	 	 	10	 
	6.01
	 	Term	 	 	10	 
	6.02
	 	Termination	 	 	10	 
	6.03
	 	Termination Without Cause	 	 	11	 
	6.04
	 	Effect of Termination	 	 	11	 
	ARTICLE 7
	 	CLAIMS: DISPUTE RESOLUTION	 	 	11	 
	7.01
	 	Claims	 	 	11	 
	7.02
	 	Dispute Resolution	 	 	12	 
	7.03
	 	Litigation	 	 	12	 
	7.04
	 	Governing Law	 	 	12	 
	ARTICLE 8
	 	INDEMNIFICATION	 	 	12	 
	ARTICLE 9
	 	CONTINGENCIES	 	 	12	 
	9.01
	 	Force Majeure	 	 	12	 
	9.02
	 	Environmental/Safety Laws	 	 	13	 
	9.03
	 	Forestry Considerations	 	 	13	 
	9.04
	 	Notice	 	 	13	 
	ARTICLE 10
	 	CONFIDENTIALITY	 	 	13	 
	ARTICLE 11
	 	CUSTOMS	 	 	14	 
	ARTICLE 12
	 	GENERAL	 	 	14	 
	12.01
	 	Parties Bound/Assignment	 	 	14	 
	12.02
	 	Right of Offset	 	 	14	 
	12.03
	 	Compliance With Law	 	 	14	 
	12.04
	 	Independent Contractor Status	 	 	14	 
	12.05
	 	Waiver of Breach	 	 	14	 
	12.06
	 	Notices	 	 	15	 
	12.07
	 	Severability of Provisions	 	 	15	 

-ii- 

 

CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT WAS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH RULE 24b-2, PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, OMITTED INFORMATION WAS REPLACED WITH ASTERISKS.

TABLE OF CONTENTS

(continued)

	 	 	 	 	 	 	 
	 	 	 	 	Page
	12.08
	 	Headings	 	 	15	 
	12.09
	 	Entire Agreement	 	 	16	 
	12.10
	 	Counterparts	 	 	16	 

	 	 	 
	EXHIBIT A

	 	PULP PURCHASE OBLIGATIONS, SUPPLY OBLIGATIONS, DELIVERY POINTS AND TRANSPORTATION TERMS
	 
	 	 
	EXHIBIT B

	 	SPECIFICATIONS
	 
	 	 
	EXHIBIT C

	 	DISCOUNT SCHEDULE
	 
	 	 
	EXHIBIT D

	 	CERTIFICATE

-iii- 

 

CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT WAS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH RULE 24b-2, PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, OMITTED INFORMATION WAS REPLACED WITH ASTERISKS.

PULP SUPPLY AGREEMENT

     THIS
PULP SUPPLY AGREEMENT (“Agreement”), entered into as of the
30th day
of November 2004, is by and between NEENAH PAPER, INC., a Delaware corporation
(“Seller”), and KIMBERLY-CLARK GLOBAL SALES, INC., a Delaware corporation
(“K-C”).

WITNESSETH

     WHEREAS, Seller pursuant to a Distribution Agreement (the “Distribution
Agreement”) dated as of November 30, 2004, Kimberly-Clark Corporation, a
Delaware corporation (“Parent”), will transfer certain assets and businesses to
Seller and its subsidiaries in connection with a tax free spin-off of Parent’s
United States paper and Canadian pulp businesses to the stockholders of Parent
(the “Spin-off Transaction”); and

     WHEREAS, following the Spin-off Transaction, Seller and its subsidiaries
will own and operate pulp mills and related woodlands operations in Terrace
Bay, Ontario and Pictou, Nova Scotia; and

     WHEREAS, from and after the Spin-off Transaction, K-C wishes to purchase
from Seller, and Seller wishes to sell to K-C, Pulp, as defined herein, upon
the terms and conditions hereinafter set forth.

     NOW THEREFORE, in consideration of the foregoing premises, which are
incorporated herein, and the mutual covenants recited hereinafter, it is hereby
agreed as follows.

ARTICLE 1

DEFINITIONS

     The following terms shall have the meanings set forth below when used in
this Agreement and when used in any Purchase Order issued pursuant to this
Agreement.

     1.01 Airdry Metric Ton (“ADMT”). One Thousand (1,000) kilograms of
air-dry Pulp, containing ninety percent (90%) bone-dry fiber and ten percent
(10%) moisture.

     1.02 Annual Supply Obligation or ASO. The maximum tonnage of Pulp, as
set forth in Exhibit A hereto and as amended from time to time, which Seller
must make available to K-C for purchase in any one Contract Year.

     1.03 Annual Purchase Obligation or APO. The maximum tonnage of Pulp, as
set forth in Exhibit A hereto and as amended from time to time, which K-C must
purchase from Seller in any one Contract Year.

     1.04 Contract Year. Any of the consecutive calendar years in the term of
this Agreement, with the first year beginning on January 1, 2005 and ending
December 31, 2005.

     1.05 Delivery Point. The facilities or ports set forth in Exhibit A, or
as otherwise mutually agreed to by the parties in writing from time to time.

1

 

CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT WAS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH RULE 24b-2, PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, OMITTED INFORMATION WAS REPLACED WITH ASTERISKS.

     1.06 Distribution Date. As such term is defined in the Distribution
Agreement.

     1.07 Environmental/Safety Laws. Any foreign or domestic law, regulation,
rule, order or directive related to a concern for human health, safety, welfare
or the natural environment, which in any way affects Seller’s ability to sell
Pulp to K-C or K-C’s ability to purchase and utilize Pulp, all pursuant to the
terms hereof.

     1.08 Invoice Price. Transaction Price less discounts as set forth in
Exhibit C.

     1.09 Phase Down Period. The two (2) year phase down period, invoked by
either party pursuant to Section 3.02 or Section 6.03.

     1.10 Pulp. Prime bleached Elemental Chlorine Free (“ECF”) grade northern
bleached softwood kraft (NBSK) or hardwood kraft (NBHK, which is either
High-Maple or Aspen as requested by K-C) pulp grades meeting the Specifications
and the provisions of Section 9.02 hereof.

     1.11 Regions. K-C’s global locations referred to regionally as: North
America (US and Canada), and Europe.

     1.12 Shipping Points. Seller’s existing stocking terminals from which
Pulp purchased by K-C is to be shipped, or such other locations as the parties
mutually agree in writing.

     1.13 Specifications. Any or all of K-C’s Pulp specifications listed in
Exhibit B hereto, as amended from time to time by mutual agreement of the
parties.

     1.14 Transaction Price. The price, in USD, per ADMT of Pulp from which
discounts are to be taken as set forth in Article 4.

     1.15 2004 Supply Period. The period from the day after the Distribution
Date to December 31, 2004, inclusive.

ARTICLE 2

ANNUAL PURCHASE AND SUPPLY OBLIGATIONS; ANNUAL FORECASTS

AND QUARTERLY ESTIMATES; SAFETY STOCKS

     2.01 Annual Purchase and Supply Obligations.

      (a) Subject to the terms and conditions herein:

         (i) For the 2004 Supply Period, Seller shall make available to
K-C for purchase, and K-C shall purchase from Seller, Pulp in each
Region as set forth in Exhibit A; and

         (ii) Beginning January 1, 2005, Seller shall make the Annual
Supply Obligations available to K-C for purchase, and K-C shall
purchase from Seller, the Annual Purchase Obligations.

2

 

CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT WAS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH RULE 24b-2, PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, OMITTED INFORMATION WAS REPLACED WITH ASTERISKS.

      (b) Failure of K-C to Satisfy its Annual Purchase Obligations. If
K-C fails to purchase the Annual Purchase Obligation for any Contract
Year, and such failure is not excused pursuant to this Agreement, then in
lieu of any other direct, indirect, incidental, special, or consequential
damages arising from K-C’s failure to purchase, Seller shall be entitled
to receive from K-C the Purchase Shortfall Amount (as defined below).
Upon notification that K-C will be unable to meet the Annual Purchase
Obligation, Seller will diligently attempt to procure an alternate
purchaser for that quantity of Pulp which, when added to the quantity of
Pulp actually purchased by K-C during the applicable Contract Year, would
equal the Annual Purchase Obligation for such year (the “Purchase
Shortfall Quantity”).

The Purchase Shortfall Amount shall be equal to the amount Seller would
have received from K-C had K-C purchased the Purchase Shortfall Quantity
in accordance with the price and payment terms in Article 4 of this
Agreement (the “Purchase Shortfall Price”), reduced by the amount of
payments made to Seller for the Purchase Shortfall Quantity by alternate
purchasers (the “Purchase Shortfall Mitigation Amount”), and increased by
ten percent (10%) of the difference between the Purchase Shortfall Price
and the Purchase Shortfall Mitigation Amount. If the Purchase Shortfall
Mitigation Amount is greater than the Purchase Shortfall Price, then the
Purchase Shortfall Amount will be zero.

Any tonnage for which payment is made by K-C as a result of the
circumstances described in this subparagraph (b) shall be deducted from
K-C’s Annual Purchase Obligation and Seller’s Annual Supply Obligation
for such Contract Year.

      (c) Failure of Seller to Satisfy its Annual Supply Obligations. If
Seller fails to make available for purchase by K-C the Annual Supply
Obligation for any Contract Year, and such failure is not excused
pursuant to this Agreement, then in lieu of any other direct, indirect,
incidental, special, or consequential damages arising from Seller’s
failure to sell, K-C shall be entitled to receive from Seller the Supply
Shortfall Amount (as defined below). The quantity of Pulp which, when
added to the quantity of Pulp actually supplied by Seller during the
applicable Contract Year, would equal the Annual Supply Obligation for
such year is referred to below as the “Supply Shortfall Quantity”).

The Supply Shortfall Amount shall be equal to the price paid by K-C for
the Supply Shortfall Quantity on the open market (the “Supply Shortfall
Cover Amount”), reduced by the price K-C would have paid Seller for the
Supply Shortfall Quantity if Seller had supplied such Pulp as required by
this Agreement (the “Supply Shortfall Price”) and increased by ten
percent (10%) of the difference between the Supply Shortfall Cover Amount
and the Supply Shortfall Price. If the Supply Shortfall Cover Amount is
less than the Supply Shortfall Price, then the Supply Shortfall Amount
will be zero.

Any tonnage purchased elsewhere by K-C as a result of the circumstances
described in this subparagraph (c) shall be deducted from K-C’s Annual
Purchase Obligation and Seller’s Annual Supply Obligation for such
Contract Year.

      (d) Shortfall Payments; Exclusive Remedy. In the event that a
shortfall occurs in the Annual Purchase Obligation, or in the Annual
Supply Obligation, the

3

 

CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT WAS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH RULE 24b-2, PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, OMITTED INFORMATION WAS REPLACED WITH ASTERISKS.

Purchase Shortfall Amount or the Supply Shortfall Amount, as the
case may be, shall be payable within forty-five (45) days of the date
that a written claim is made, provided that such claim shall not be made
until the amount of the shortfall can be determined with reasonable
certainty. Seller’s sole remedy for K-C’s unexcused failure to satisfy
its Annual Purchase Obligation shall be as set forth in paragraph
2.01(b). K-C’s sole remedy for Seller’s unexcused failure to satisfy its
Annual Supply Obligation shall be as set forth in paragraph 2.01(c).

     2.02 Regional Terms. Both parties agree that the terms and conditions of
this Agreement adequately reflect differences in market Regions for Pulp
specifications, transaction price, delivery, and payment terms.

     2.03 Quarterly Estimates. Beginning with the calendar quarter commencing
January 1, 2005, the parties shall communicate thirty (30) days prior to the
commencement of each quarter to forecast: 1) proposed quarterly purchases to
be made by K-C for each of K-C’s mills listed in Exhibit A; and 2) the month
within the calendar quarter upon which Seller shall make such quantities
available to K-C.

     2.04 Annual Forecasts. By October 15 of each preceding Contract Year, for
general guidance, K-C shall provide Seller with K-C’s preliminary non-binding
forecast of purchases for the subsequent Contract Year. K-C shall provide
Seller with its final non-binding forecast of purchases for each subsequent
Contract Year by November 15. Additionally, on an annual basis Seller and K-C
may agree to start discussions on or before October 15, without binding
obligation unless so mutually agreed, to increase the volume of Pulp to be
supplied and purchased above the volumes required by this Agreement, and such
discussions will conclude by November 15 (regardless whether mutual agreement
is reached or not). If mutually agreed upon, the additional volume of Pulp to
be supplied and purchased will be according to the terms and conditions of this
Agreement.

     2.05 Safety Stocks. Seller shall maintain safety stocks which are
adequate to assure the continuous supply of Pulp to K-C set forth in Exhibit A,
taking into account K-C’s forecasts, Seller’s production schedule, normal
shipping times for vessel and inland shipments and other pertinent factors. In
the event that K-C believes that additional safety stock is required, K-C shall
discuss in good faith the safety-stock levels with Seller. If after the
discussions, K-C reasonably determines that additional safety stock is needed,
it shall so notify Seller and, at Seller’s election either (i) Seller may bring
the safety-stock level to the required level within 30 days of receipt of K-C’s
notice or (ii) K-C may purchase Pulp from other suppliers and Seller shall pay
K-C the difference between the higher price paid by K-C for safety stock on the
open market and the price K-C would have paid Seller if Seller had supplied
Pulp as required by this Agreement, plus liquidated damages equal to ten
percent (10%) of such difference in lieu of any other direct, indirect,
incidental, special or consequential damages arising from such failure to
deliver. Any tonnage purchased by K-C from other suppliers pursuant to this
Section 2.05 shall be deducted from K-C’s Annual Purchase Obligation and
Seller’s Annual Supply Obligation.

     2.06 Ordering. Periodic scheduling instructions for Pulp shall be placed
by K-C and followed by Seller as follows, or as the parties may otherwise
mutually agree in writing from time to time:

4

 

CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT WAS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH RULE 24b-2, PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, OMITTED INFORMATION WAS REPLACED WITH ASTERISKS.

      (a) K-C shall advise Seller of K-C’s particular need for Pulp under
this Agreement (a “Delivery Schedule”). The Delivery Schedule shall be
communicated to Seller, at least 30 days prior to the date on which the
shipment would be scheduled to leave the mill, by e-mail, or other means
mutually agreed upon in writing by K-C and Seller. The Delivery Schedule
shall set forth:

         (i) the specific quantity and grade of Pulp needed;

         (ii) the requested shipping date(s) and delivery date(s); and

         (iii) shipping instructions and Delivery Points.

      (b) Subject to K-C’s obligations pursuant to Section 2.01, K-C may
cancel any specific quantity of Pulp specified in the Delivery Schedule
by providing a revised Delivery Schedule to Seller for such quantity, by
e-mail, or other means mutually agreed upon in writing by K-C and Seller.
If the revised Delivery Schedule for such quantity is received by Seller
prior to Seller delivering such quantity to a carrier for shipment, then
K-C will be responsible for any out-of-pocket demurrage or other costs
incurred by Seller as a result of such cancellation, provided that Seller
uses commercially reasonable efforts to mitigate any such additional
costs. If the revised Delivery Schedule for such quantity is received by
Seller after such quantity has been delivered to a carrier for shipment,
then K-C will be responsible for any additional costs incurred by Seller
in complying with the revised Delivery Schedule for such quantity,
provided that Seller uses commercially reasonable efforts to mitigate any
such additional costs.

      (c) Upon Seller’s receipt of a Delivery Schedule, Seller shall
promptly notify K-C of any proposed deviations from K-C’s instructions.

ARTICLE 3

QUALITY AND SPECIFICATIONS; SPECIFICATION CHANGES;

WARRANTIES; PRODUCT SAFETY CERTIFICATIONS;

REPORTS, RECORDKEEPING, AND ACCESS

     3.01 Quality and Specifications. The Pulp to be sold and purchased
hereunder shall be consistent with the quality of prime pulp grades used
throughout the world and shall be produced in accordance with and shall meet
all of K-C’s requirements and Specifications as set forth in this Agreement and
K-C’s shipping instructions under Article 5. In the event of any conflict or
inconsistency between or among requirements, standards or conditions and unless
otherwise herein specifically provided otherwise, the higher or more detailed
requirement, standard or condition shall control. The parties agree to work
together to make any necessary changes to the Specifications to ensure that the
Pulp meets the performance, processing and other requirements in the
manufacture of products into which the Pulp is incorporated and that the
requirements of such products are met.

     3.02 Specifications Change. K-C shall have the right to propose
reasonable changes to Specifications at any time during the term of this
Agreement, and Seller agrees to use its commercially reasonable efforts to meet
such changes within a reasonable period of time (not to exceed 90 days) after
K-C’s written request has been received. For purposes of this paragraph,

5

 

CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT WAS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH RULE 24b-2, PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, OMITTED INFORMATION WAS REPLACED WITH ASTERISKS.

a reasonable change to Specifications shall mean that the Specifications
requested could be met by third-party pulp suppliers in the commercial pulp
market. If Seller is unable to meet such changes within such reasonable
period, K-C may purchase Pulp meeting changed Specifications elsewhere, and
K-C’s Annual Purchase Obligations shall be reduced accordingly. If Seller is
able to make such changes, but Seller’s costs are increased or decreased as a
direct result of such revised Specifications, Seller and K-C agree to negotiate
in good faith to establish, within thirty (30) days of Seller’s knowledge that
price changes shall result, any commercially reasonable revisions in price and
terms. If the parties are unable to agree on a price adjustment within such 30
day period and K-C elects not to forego the Specifications change, irrespective
of any other provision hereof, either party shall have the right to commence
the Phase Down Period immediately with respect to the quantity of Pulp for
which the change to Specifications was requested.

     Seller understands that the introduction of process changes in its Pulp
manufacturing can potentially affect K-C’s manufacturing process and/or final
product attributes. Therefore, Seller will provide K-C with Pulp samples for
evaluation at least one hundred twenty (120) days in advance of making any such
changes. If, in the sole, reasonable opinion of K-C, a process change by
Seller will negatively affect K-C’s manufacturing process and/or final product
attributes, then K-C agrees to give Seller an additional ninety (90) days
written notice of such negative effects. At the end of such ninety (90) day
notice period Seller shall either revoke such process change or immediately and
permanently release K-C from its purchase obligations under this Agreement as
to the Pulp in question.

     3.03 Forestry. Seller shall, by December 31, 2005, cause its wholly-owned
wood fiber suppliers to be formally certified in one of the
internationally-recognized forest certification programs, such as the American
Forest and Paper Association’s (AF&PA) Sustainable Forestry
Initiative® (SFI)
program. In addition, Seller will use its commercially reasonable efforts to
work with and encourage its industrial contract wood fiber suppliers to be so
certified by December 31, 2005 and shall encourage its non-industrial contract
wood suppliers to adopt the principles of sustainable forestry and to seek
independent certification of their woodlands in an appropriate program such as
the American Tree Farm System’s Standards of Sustainability for Forest
Certification.

     3.04 Warranties; Product Safety Certification.

      (a) Each party represents and warrants to the other party that:

         (i) it is a corporation duly organized, existing and in good
standing under the laws of the state of Delaware and its execution
and performance of this Agreement is within its corporate powers,
has been duly authorized, and is not in contravention or violation
of its charter, by-laws or any corporate resolution or of law or of
any indenture, agreement, undertaking or other obligation to which
it is bound;

         (ii) it has obtained all governmental licenses, approvals and
registrations necessary to perform and fulfill its obligations
under this Agreement;

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         (iii) the individual signing this Agreement on its behalf is
duly authorized to do so and this Agreement is legally valid,
binding and enforceable in accord with its terms; and

         (iv) it shall take all steps necessary to assure that all
delivery dates and other obligations established in this Agreement
by it to be performed are met in a timely fashion.

      (b) Seller agrees that the Pulp shall be, at the time of delivery to
K-C, free from contamination or other defects and shall conform in all
respects with the Specifications and other requirements hereof.

      (c) Seller agrees that, in addition to the other requirements of
this Agreement, each shipment of the Pulp:

         (i) shall conform to the U.S. Food and Drug Administration
requirement for pulp as defined in 21 C.F.R. Section 186.1673, and
requirements for Indirect Food Additives: Pulp and Paperboard
Components as defined in 21 C.F.R. Part 176; and

         (ii) will be sufficiently tested to certify that it meets the
Council of Northeast Governors (“CONEG”) heavy metal requirements
for levels of lead, mercury, cadmium and chromium.

Upon execution of this Agreement, Seller shall provide to K-C a certificate
attesting to the foregoing in the form attached hereto as Exhibit D.

     3.05 Reports, Recordkeeping, and Access. Seller shall maintain a quality
assurance program that meets the sampling process, test methods and technical
attributes set forth in the Specifications in Exhibit B. Seller understands
that K-C relies on Seller’s quality assurance program to assure that Pulp
delivered is in compliance with the Specifications and other provisions set
forth herein. During the term of this Agreement, Seller shall collect and for
five (5) years after termination hereof, shall maintain: (i) process control
data and property data typical in the industry for the production of Pulp, (ii)
all data required to document compliance with the Specifications and other
terms hereof, and (iii) any other process control or property data related to
the production of Pulp as K-C may from time to time reasonably request. Seller
shall provide K-C, upon its request, with access, at reasonable times, to
Seller’s facilities for purposes of reviewing such operations and Seller’s
compliance with the terms hereof, including Seller’s records required to be
kept pursuant to this Section 3.05.

ARTICLE 4

PRICE AND PAYMENT TERMS

     4.01 Price.

      (a) The parties acknowledge that the price for Pulp fluctuates with
market conditions and agree that the price at which Seller shall sell and
K-C shall purchase Pulp hereunder shall be determined as set forth in
this Article 4. In order to determine the

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price for Pulp invoiced in any given month, the parties shall first
establish the Transaction Price which shall be based on the prevailing
price per ADMT of Pulp for the preceding month as quoted by one or more
major, regular market producers of prime bleached Pulp for contract or
regular, long-term customers for any given month. Based upon such
quote(s), Seller and K-C shall attempt to mutually agree on the
applicable Transaction Price for any given month’s shipments. If the
parties cannot agree on the Transaction Price, then the Transaction Price
shall be determined by reference to published market data as follows:

For Softwood (NBSK) Shipped to North American Delivery Points:

      The Transaction Price shall be the average of:

            1) Pulp and Paper Week’s posted price in the “Price
Watch: Market Pulp” table for the preceding month. In the
case of a range of prices, the range average; and

            2) The posted price in RISI World Pulp Monthly’s “Table
5 Market Pulp Price Summary” Delivered to United States for
the preceding month.

In the event that the next issue of the subject publications
adjusts or corrects previously published prices, such resulting
adjustments shall be credited to the proper party and incorporated
into the methodology on a going-forward basis.

For Hardwood (NBHK):

The Transaction Price shall be the posted Aspen and Maple price in
RISI World Pulp Monthly’s “Table 5 Market Pulp Price Summary”
Delivered to United States for the preceding month.

For Softwood (NBSK) Shipped to European Delivery Points:

The Transaction Price shall be the average of:

            1) The Hawkins Wright PulpWatch posted price in the
“Price Indication” table for the preceding month. In the
case of a range of prices, the range average; and

            2) The posted price in RISI World Pulp Monthly’s “Table
5 Market Pulp Price Summary” Delivered to Europe for the
preceding month.

In the event that the next issue of the subject publications
adjusts or corrects previously published prices, such resulting
adjustments shall be credited to the proper party and incorporated
into the methodology on a going-forward basis.

Discontinuation of a Publication

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In the event that one or more of the subject publications cease to
exist, then the parties agree to negotiate in good faith to
determine a commercially reasonable alternative to that publication
for use in this Section 4.01.

      (b) Notwithstanding anything in Section 4.01(a) to the contrary, in
no event shall the Transaction Price for NBSK shipped during the period
from the Distribution Date to and including December 31, 2007 to North
American Delivery Points be less than $*** per ADMT or more than $*** per
ADMT.

     4.02 Discounts. The price to be paid by K-C for Pulp purchased pursuant
to this Agreement shall be the Transaction Price established pursuant to
Section 4.01 (including, if applicable Section 4.01(b)) less the discounts set
forth in Exhibit C.

     4.03 Freight and Other Shipping Costs. Except as otherwise set forth
herein, Seller shall pay shipping costs for, and insure deliveries of Pulp to
the Delivery Points set forth in Exhibit A. K-C may request accelerated
deliveries or designate other Delivery Points, in which event the parties shall
review costs associated with such accelerated deliveries or other Delivery
Points and establish appropriate shipping costs therefor.

     4.04 Payment Terms. Seller shall invoice K-C on a per load basis for all
Pulp sold under this Agreement. K-C North America’s payment term is forty-five
(45) days from date of shipment of Pulp. Seller shall invoice K-C Europe and
K-C Europe shall pay Seller sixty (60) days from vessel arrival.

ARTICLE 5

SHIPMENT AND DELIVERY

     5.01 Shipment Method/Shipping and Delivery Points. All purchases of Pulp
made hereunder shall be shipped from Seller’s Terrace Bay and Pictou pulp mills
to K-C Delivery Points consistent with the parties’ 2004 shipping history or as
mutually agreed. Seller shall deliver all Pulp to K-C at the Delivery Points
set forth in Exhibit A, or as otherwise mutually agreed from time to time, in
accordance with K-C’s shipping instructions. All pulp received by K-C’s
European locations shall be supplied solely by Seller’s Pictou, Nova Scotia
mill.

     5.02 Arrearage. Seller shall make and monitor all shipments and
deliveries in accordance with the shipment schedules specified in K-C’s
shipping instructions. When Seller becomes aware that it may be unable to ship
any quantity of Pulp hereunder in accordance with K-C’s specified delivery
schedule, Seller shall immediately notify K-C both orally and in writing of
this possibility, and the parties shall determine whether Seller can effect
delivery to meet K-C’s requirements. If, after discussion with Seller, K-C
reasonably determines, in its sole good faith judgment, that Seller will not be
able to make a delivery in time to meet K-C’s requirements, K-C shall have the
right to obtain delivery of the required quantities of Pulp from an alternate
supplier. In the event that K-C is required to purchase Pulp from another
supplier pursuant to this Section 5.02, Seller shall pay K-C the difference
between the higher price paid by K-C for Pulp on the open market and the price
K-C would have paid to Seller if Seller had supplied Pulp as required by this
Agreement, plus liquidated damages equal to ten percent (10%) of such
difference, in lieu of any other direct, indirect, incidental, special or
consequential damages arising from such failure to deliver. Purchases by K-C of
Pulp from another supplier pursuant to

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this Section 5.02 shall be deducted from K-C’s Annual Purchase Obligation
and Seller’s Annual Supply Obligation.

     5.03 Title and Risk of Loss. All shipments to North American Delivery
Points shall be made FOB Delivery Point at which point risk of loss or damage
shall pass to K-C. All shipments to European Delivery shall be made CIF
European Delivery Point and risk of loss or damage shall pass in accordance
with such CIF terms. Legal title to the Pulp shall pass to K-C at the Delivery
Point designated by K-C.

     5.04 Bale Finishing. 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. For Europe, Seller will continue to provide wired bales, unless and
until the parties mutually agree otherwise. Additionally, Seller will use
commercially reasonable efforts to work with K-C to create uniform bale shape,
dimensions, weights, and wrap requirements that will be implemented by June 1,
2006, but the parties acknowledge that transitioning to uniform bale shape,
dimensions, weights, and wrap requirements is capital intensive and that there
is not currently a provision in the budget of Seller for such an outlay and
operational priorities may delay the implementation of uniform bale shape,
dimensions, weights, and wrap requirements.

ARTICLE 6

TERM AND TERMINATION

     6.01 Term. The term of this Agreement shall commence on the Distribution
Date, and shall continue until terminated in accordance with the terms of this
Agreement.

     6.02 Termination. This Agreement may be terminated:

      (a) Upon the mutual written agreement of the parties; or

      (b) By either party for material breach of any of the terms hereof
by the other party if the breach is not corrected (or remedied) within
thirty (30) calendar days after written notice of breach is delivered to
the defaulting party; or

      (c) By either party, upon thirty (30) days written notice to the
other party, for three or more material breaches of the terms of this
Agreement by the other party within a Contract Year, whether or not such
breaches have been cured; or

      (d) By either party, forthwith, upon written notice to the other
party, if such other party shall become insolvent, or shall be placed in
receivership, reorganization, liquidation or bankruptcy, by the other
party, immediately, upon written notice; or

      (e) By K-C, forthwith, upon written notice to Seller, if for any
reason, the ownership or control of Seller or any of Seller’s production
facilities becomes vested in, or is made subject to the control or
direction of, any direct competitor of K-C or any governmental or
regulatory authority or any other third party, who in K-C’s reasonable
judgment may not be able to reliably perform the obligations of Seller
hereunder; or

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      (f) By either party, upon no less than ninety (90) days written
notice to the other party, in the event of a fundamental change in the
nature of the business of either party that may substantially affect its
ability to sell or to purchase and utilize Pulp hereunder; or

      (g) As otherwise provided for in this Agreement in Article 6,
Sections 9.01, Section 9.02, Section 9.03, or Article 11.

     6.03 Termination Without Cause.

      (a) As to the Entire Agreement, at any time on or after December 31,
2007, either party may provide written notice to the other party of its
intent to commence the Phase Down Period. The notice shall specify the
commencement date of such Phase Down Period. The earliest that the
twenty-four month Phase Down Period can start is January 1, 2009. The
Annual Purchase Obligation and Annual Supply Obligation under the Phase
Down Period are set forth at Exhibit A.

      (b) As to that portion of the Agreement concerning NBHK Pulp only,
Seller may give a three month written notice, consistent with timing of
the Quarterly Estimate process per Section 2.03, to terminate the
Purchase and Supply Obligations for either or both of the hardwood Pulp
grades. The notice shall specify the effective termination date and must
be acknowledged by K-C in writing.

     6.04 Effect of Termination. Upon termination of this Agreement:

      (a) The parties shall meet and discuss which outstanding and not yet
fulfilled orders should be filled and which shall be cancelled.

      (b) Each party shall immediately return to the other (or destroy)
all items of Confidential Information delivered hereunder and all copies
thereof.

      (c) Seller shall continue to fulfill its warranty obligations with
respect to any Pulp sold by Seller to K-C pursuant to this Agreement.

      (d) All requirements of warranties, reports, recording, access,
indemnification, payment terms, obligations related to use or protection
of Confidential Information, and provisions related to venue and choice
of laws, shall survive termination or expiration of this Agreement
according to their terms.

ARTICLE 7

CLAIMS: DISPUTE RESOLUTION

     7.01 Claims. Claims by K-C relative to its inability to utilize the Pulp
as a result of the failure of the Pulp to meet the Specifications must be made
within thirty (30) calendar days after receipt and acceptance of the shipment
by K-C at one of the Delivery Points. K-C shall retain fifty percent (50%) of
the Pulp shipment in dispute, when practical, pending examination by Seller or
its nominee. Seller shall examine the Pulp held by K-C or its consignee within
ten (10)

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calendar days of notification by K-C, and Seller shall immediately notify
K-C regarding how to dispose of any Pulp which is nonconforming.

     7.02 Dispute Resolution. The parties shall attempt to resolve claims or
other disputes arising with respect to this Agreement within ninety (90)
calendar days of the time a claim or other dispute arises by presenting the
major issues for resolution to appropriate level managers in the normal chain
of command of the affected business units.

     7.03 Litigation. Nothing herein, including the provisions of Section 7.02
above, shall prohibit either party from at any time pursuing or exercising any
or all of its remedies at law or equity.

     7.04 Governing Law. The interpretation, validity and enforcement of this
Agreement shall be governed by and construed in accordance with the laws of the
State of Wisconsin, without regard to choice of law provisions, and shall not
be governed by the Convention on Contracts for the International Sale of Goods.

ARTICLE 8

INDEMNIFICATION

     Each party hereto agrees to defend, indemnify and hold harmless the other
party, its officers, directors, agents and employees, from and against any and
all claims, demands, judgments, costs, expenses and damages for personal injury
or property damage caused by the indemnifying party’s negligent act or omission
or willful misconduct.

     The foregoing indemnifications are subject to and conditioned upon:

      (a) prompt written notice being given to the indemnifying party by
the indemnified party of any threatened or pending claim or other
liability;

      (b) the indemnified party fully cooperating with the indemnifying
party in the investigation and/or defense of any such claim or other
liability; and

      (c) the indemnifying party having the absolute right to direct the
defense and/or settlement of any such claim or other liability and to
select counsel to represent it and the indemnified party.

ARTICLE 9

CONTINGENCIES

     9.01 Force Majeure. If either party is prevented or delayed in the
performance of this Agreement by any cause 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, fire, explosion, or other casualty, any law, restraint,
rule, regulation or other governmental restriction, or by any
Environmental/Safety Laws, then the obligations of the parties to sell and
deliver or to purchase and receive Pulp shall be reduced or canceled during the
continuance of such event with regard to the quantity of Pulp which cannot be
delivered or purchased as a direct consequence of such event. Specifically,
during the

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continuance of any one or more of the above events impairing Seller’s
performance, 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 of the above events 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. Quantities which
Seller is unable to deliver by reason of force majeure shall be deducted from
K-C’s Annual Purchase Obligation and Seller’s Annual Supply Obligation. If a
force majeure shall prevent a party from performing its obligations under this
Agreement for more than one year, the other party may, upon written notice,
terminate this Agreement as to that portion affected by the force majeure.

     9.02 Environmental/Safety Laws. Irrespective of any provision herein to
the contrary, if Seller is unable to supply K-C with Pulp or K-C is unable to
purchase and/or receive Pulp hereunder which complies with all applicable
Environmental/Safety Laws, K-C may reduce the quantity of Pulp to be purchased
hereunder in accordance with Section 9.01 during the period of non-compliance.
Notwithstanding any such reductions, K-C and Seller shall work together for a
reasonable period of time (not to exceed ninety (90) days) to determine whether
Seller can provide any Pulp not affected by Environmental/Safety Laws. In the
event Seller is unable to provide Pulp meeting Environmental/Safety Laws by the
end of such ninety (90) day period, K-C may terminate this Agreement, in whole
or in part, immediately upon written notice to Seller.

     9.03 Forestry Considerations.

      (a) In the event that as a result of Seller’s forestry activities,
continued use of Seller’s Pulp by K-C does, or in the reasonable judgment
of K-C is likely to, result in a substantial loss of sales of K-C
products or to otherwise materially and adversely affect the reputation
of K-C or its products, K-C shall give Seller written notice of the facts
or allegations upon which it relies to base its conclusion that continued
use of Seller’s Pulp will likely cause such consequences (such notice is
referred to herein as the “Section 9.03 Notice”). Within a reasonable
time (not to exceed 90 days from the receipt of K-C’s Section 9.03
Notice), Seller and K-C shall discuss such facts or allegations and work
together in good faith to arrive at a mutually agreeable solution to
reasonably address such facts or allegations.

      (b) If Seller and K-C are able to agree on a mutually acceptable
solution, that agreement will be reduced to writing and will set forth
the respective obligations of the parties under the agreed solution. If
Seller and K-C are unable to agree on a solution, then K-C shall have the
right to terminate this Agreement upon written notice effective not
earlier than one year following the date of such written notice.

     9.04 Notice. If either party is prevented or delayed in performance by
any of the events specified in Section 9.01 or Section 9.02, the party affected
shall give immediate written notice to the other party of the cause, the date
of commencement and other relevant details of any such nonperformance, and to
the best of its knowledge, the extent of such nonperformance and when
deliveries, acceptance or utilization may be anticipated to resume. The
parties agree to cooperate with each other and to use all commercially
reasonable efforts to resolve any such situation in good faith and in a timely
manner. Such resolution may include, but shall not be

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limited to, reapportioning or otherwise adjusting the Annual Purchase
Obligation to be purchased by K-C during the term hereof and/or the Annual
Supply Obligation.

ARTICLE 10

CONFIDENTIALITY

     The specific terms and conditions of this Agreement and any information
conveyed or otherwise received by or on behalf of a party in conjunction
herewith are confidential and are subject to the terms of the Confidentiality
provisions of the Distribution Agreement.

ARTICLE 11

CUSTOMS

     K-C is certified by the U.S. Customs Service as compliant with the
Customs-Trade Partnership Against Terrorism program (“C-TPAT”). Seller agrees
to familiarize itself with the applicable standards of the C-TPAT program
(i.e., see www.customs.gov/xp/cgov/import/ commercial_enforcement/ctpat/). To
the extent Seller deals with K-C in the supply chain of products to be imported
into the U.S., Seller shall implement a verifiable, documented program that
complies with C-TPAT standards and K-C’s requests that K-C reasonably believes
are necessary to maintain K-C’s C-TPAT certification. If K-C has received
notice of non-compliance with C-TPAT from the U.S. Customs Service or a court
or federal agency of competent jurisdiction or if K-C reasonably believes that
Seller has failed to comply with the preceding sentence, K-C shall give Seller
written notice stating in reasonable detail the factual basis for K-C’s claim
of non-compliance, including a copy (if any) of the notice of non-compliance
with C-TPAT from the U.S. Customs Service or a court or federal agency of
competent jurisdiction. The parties shall attempt to resolve K-C’s claim in
accordance with the Dispute Resolution procedure stated in §7.02 hereof and in
good faith discussions among K-C, Seller and the U.S. Customs Service or court
or federal agency of competent jurisdiction. If the parties have not resolved
K-C’s claim to the reasonable satisfaction of K-C or within the time period the
U.S. Customs Service provides to K-C for remedying the non-compliance, then K-C
shall have the right to terminate this Agreement, in whole or in part, without
penalty by giving 180 days written notice to Seller.

ARTICLE 12

GENERAL

     12.01 Parties Bound/Assignment. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective legal
representatives, successors, and permitted assigns. Neither party shall assign
or transfer any right, obligation or interest under this Agreement without the
prior written consent of the other, provided that either party may assign this
Agreement to a wholly owned subsidiary and, except for the situation described
in Section 6.02(e), either party may assign to a successor company by merger or
corporate reorganization but only upon assumption by such successor of the
assignor’s obligations under this Agreement.

     12.02 Right of Offset. Upon written notice to the other party, each party
has the right to deduct from amounts owed to the other party undisputed amounts
due and owing to it by the other party if those amounts go unpaid more than 60
days after they are due and owing.

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     12.03 Compliance With Law. Each party shall comply with all applicable
laws, rules, regulations or other requirements of any governmental entity that
affect such party’s obligations and other responsibilities hereunder in
performing this Agreement.

     12.04 Independent Contractor Status. Each party shall be an independent
contractor in its performance of this Agreement and shall not be deemed,
expressly or by implication, to be an agent, employee, representative or
servant of the other for any purpose whatsoever.

     12.05 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.

     12.06 Notices. Other than routine communications in the ordinary course
of performing any obligations under this Agreement, all notices and
communications in connection with this Agreement shall be in writing and shall
be deemed complete upon transmittal by a recognized international courier or by
facsimile, with a confirmation of receipt, addressed to the parties hereto at
their respective addresses or facsimile numbers set forth below:

IF TO SELLER:

Neenah Paper, Inc.

Preston Ridge III, Suite 600

3460 Preston Ridge Road

Alpharetta, Georgia 30005

Attn: Chief Executive Officer

Phone: (678) 566-6500

Fax: (678) 518-3283

with copy to:

Neenah Paper, Inc.

Preston Ridge III, Suite 600

3460 Preston Ridge Road

Alpharetta, Georgia 30005

Attn: General Counsel

Phone: (678) 566-6500

Fax: (678) 518-3283

IF TO K-C:

Kimberly-Clark Global Sales, Inc.

2300 Winchester Road

Neenah, WI 54956

Attn: Director Virgin Fiber Procurement

Phone: (920) 721-4116

Fax: (920) 721-4976

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with copy to:

Chief Counsel, Neenah Operations

Kimberly-Clark Corporation

401 N. Lake Street

Neenah, WI 54957 –0349

Phone: (920) 721-2000

Fax: (920) 721-8446

or any other address or fax number and to the attention of any other person as
either of the parties may specify hereafter by written notice to the other.

     12.07 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.

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

     12.09 Entire Agreement. This Agreement, including its Exhibits and
documents referenced herein, 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 this Agreement and all prior agreements, negotiations,
dealings and understandings, whether written or oral, regarding the subject
matter hereof are hereby superseded and merged into this Agreement. No
conditions, usage of trade, course of dealing or performance, understanding or
agreement purporting to modify, vary, explain or supplement the terms or
conditions of this Agreement shall be binding unless hereafter made in writing
and signed by the party to be bound, and no modification shall be effected by
the acknowledgement or acceptance of purchase order or shipping instruction,
invoice or other forms containing terms or conditions at variance with or in
addition to those set forth in this Agreement.

     12.10 Counterparts. This Agreement 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.

     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:

	 	 	 	BY:	 	 
	

	 	
 
	 	 	 	
 
	

	 	Sean T. Erwin

Chief Executive Officer
	 	 	 	Mark A. Buthman, President

16

 

CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT WAS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH RULE 24b-2, PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, OMITTED INFORMATION WAS REPLACED WITH ASTERISKS.

EXHIBIT A

To

Pulp Supply Agreement Between Kimberly-Clark Global Sales, Inc. and Neenah

Paper, Inc.

NORTH AMERICAN ANNUAL SOFTWOOD PULP PURCHASE OBLIGATIONS,

SUPPLY OBLIGATIONS, DELIVERY POINTS AND TRANSPORTATION TERMS

Northern Bleach Softwood Kraft (NBSK)

	 	 	 	 	 
	 	 	Annual Purchase Obligation	 	 
	Contract Year	 	(K-C)	 	Annual Supply Obligation (Seller)
	2004 [Fourth
Quarter Only]

	 	93,000 ADMT (less tonnage
transferred to K-C during
the Fourth Quarter of
2004 prior to the
Distribution Date)
	 	93,000 ADMT (less
tonnage transferred
to K-C during the
Fourth Quarter of
2004 prior to the
Distribution Date)
	 	 	 	 	 
	2005 & 2006

	 	360,000 ADMT
	 	360,000 ADMT
	 	 	 	 	 
	2007†

	 	320,000 ADMT
	 	320,000 ADMT
	 	 	 	 	 
	2008 and all
subsequent Contract
	 	 	 	 
	Years

	 	275,000 ADMT
	 	275,000 ADMT
	 	 	 	 	 
	Phase Down Year 1

	 	225,000 ADMT
	 	225,000 ADMT
	 	 	 	 	 
	Phase Down Year 2

	 	150,000 ADMT
	 	150,000 ADMT

† 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.

Delivery Points and Transportation Terms for K-C North America

	 	 	 	 	 
	Beech Island, SC

	 	Chester, PA
	 	Owensboro, KY
	Huntsville, Ontario

	 	Loudon, TN
	 	Marinette, WI
	Mobile, AL

	 	Corinth, MS
	 	*Celu-Tissue Mills
	Jenks, OK

	 	New Milford, CT
	 	*Schweitzer-Maudit’s Lee, MA Mill

Delivery during the Phase Down Period to be consistent with tonnages across
Delivery Points during the two contract years prior to the start of the Phase
Down Period.

All transportation costs to be paid by Seller.

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

1

 

CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT WAS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH RULE 24b-2, PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, OMITTED INFORMATION WAS REPLACED WITH ASTERISKS.

NORTH AMERICAN ANNUAL HARDWOOD PULP PURCHASE OBLIGATIONS, SUPPLY OBLIGATIONS,

DELIVERY POINTS AND TRANSPORTATION TERMS

Northern Bleached Hardwood Kraft (NBHK)

	 	 	 	 	 
	Contract Year	 	Annual Purchase Obligation (K-C)	 	Annual Supply Obligation (Seller)
	 
	2004 [Fourth Quarter Only]

	 	High-Maple 10,000 ADMT*
	 	High-Maple 10,000 ADMT*
	 	 	 	 	 
	

	 	Aspen 12,500 ADMT*
	 	Aspen 12,500 ADMT*
	 	 	 	 	 
	2005

	 	High-Maple 40,000 ADMT
	 	High-Maple 40,000 ADMT
	 	 	 	 	 
	

	 	Aspen 40,000 ADMT
	 	Aspen 40,000 ADMT
	 	 	 	 	 
	2006

	 	High-Maple 30,000 ADMT
	 	High-Maple 30,000 ADMT
	 	 	 	 	 
	

	 	Aspen 30,000 ADMT
	 	Aspen 30,000 ADMT
	 	 	 	 	 
	2007†

	 	High-Maple 20,000 ADMT
	 	High-Maple 20,000 ADMT
	 	 	 	 	 
	

	 	Aspen 20,000 ADMT
	 	Aspen 20,000 ADMT
	 	 	 	 	 
	2008

	 	High-Maple 10,000 ADMT
	 	High-Maple 10,000 ADMT
	 	 	 	 	 
	

	 	Aspen 10,000 ADMT
	 	Aspen 10,000 ADMT
	 	 	 	 	 
	2009 and all
subsequent contract
years

	 	No obligation
	 	No obligation

* These amounts shall be reduced by any tonnage transferred to K-C during the
Fourth Quarter of 2004 prior to the Distribution Date.

† Seller will 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.

2

 

CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT WAS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH RULE 24b-2, PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, OMITTED INFORMATION WAS REPLACED WITH ASTERISKS.

Delivery Points and Transportation Terms for K-C North America

	 	 	 	 	 
	Beech Island, SC

	 	Chester, PA
	 	Marinette, WI
	Owensboro, KY

	 	Huntsville, Ontario
	 	Loudon, TN
	*Fullerton, CA

	 	Mobile, AL
	 	Corinth, MS
	Jenks, OK

	 	New Milford, CT
	 	**Celu-Tissue Mills

	*	 	Seller will not be required to deliver to Fullerton, CA after December 31,
2004.
	 	 	 	 
	**Solely for fiber needs related to K-C
products.
	 	 	 	 
	All transportation costs to be paid by Seller.

EUROPE ANNUAL SOFTWOOD PULP PURCHASE OBLIGATIONS, SUPPLY OBLIGATIONS, DELIVERY

POINTS AND TRANSPORTATION TERMS

Northern Bleached Softwood Kraft (NBSK)

	 	 	 	 	 
	Contract Year	 	Annual Purchase Obligation (K-C)	 	Annual Supply Obligation (Seller)
	2004 [Fourth

Quarter Only]

	 	21,250 ADMT (less tonnage
transferred to K-C during the
Fourth Quarter of 2004 prior to
the Distribution Date)
	 	21,250 ADMT (less
tonnage transferred
to K-C during the
Fourth Quarter of
2004 prior to the
Distribution Date)
	 	 	 	 	 
	2005 & 2006

	 	80,000 ADMT
	 	80,000 ADMT
	 	 	 	 	 
	2007†

	 	75,000 ADMT
	 	75,000 ADMT
	 	 	 	 	 
	2008 and all
subsequent Contract
Years

	 	70,000 ADMT
	 	70,000 ADMT
	 	 	 	 	 
	Phase Down Year 1

	 	52,500 ADMT
	 	52,500 ADMT
	 	 	 	 	 
	Phase Down Year 2

	 	35,000 ADMT
	 	35,000 ADMT

3

 

CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT WAS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH RULE 24b-2, PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, OMITTED INFORMATION WAS REPLACED WITH ASTERISKS.

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

† Seller will 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.

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

END OF EXHIBIT A

4

 

CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT WAS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH RULE 24b-2, PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, OMITTED INFORMATION WAS REPLACED WITH ASTERISKS.

EXHIBIT B

To

Pulp Supply Agreement Between Kimberly-Clark Global

Sales, Inc. and Neenah Paper, Inc.

Kimberly-Clark Raw Material Specifications

K-C Raw Material Specification (RMS) documents listed below are incorporated
herein by reference. These documents are controlled by the K-C Corporate
Quality Systems & Compliance team in Neenah, Wisconsin. Copies of RMS
documents are forwarded directly to Seller’s Sales Department and are otherwise
available upon request. These documents are the primary source of information
necessary to specify pulp for K-C pursuant to this Agreement.

	 	 	 	 	 
	Pulp Grade Specifications

	K-C RMS Department
	 	Material

	RM 2763
	 	LL-19 ECF
	RM 3061
	 	LL-16 ECF
	RM 3082
	 	Pictou Harmony
	RM 3087
	 	Hi-Mape Pictou

The RMS documents listed above contain Quality Parameters and summarize key
aspects of pulp quality mutually agreed to by K-C and Seller. As used therein,
Quality Parameters have the following definitions:

     ACCEPTANCE Characteristics: used to determine suitability of pulp for
shipment to K-C.

     TRACKING Characteristics: not for ACCEPTANCE, but run-to-target is
expected, per vendor test results.

     OTHER Instructions: additional features of the material and packaging
details for shipping.

The RMS documents listed above shall govern purchases by all K-C locations.
Should any K-C location seek different specifications for pulp to be delivered
to a specific mill(s), such requirements shall be detailed in a K-C regional
Purchase Order, and shall be accommodated in accordance with Section 3.02 of
this Agreement.

In order to continually and accurately specify the pulp materials being
purchased by K-C, the RMS documents listed above, any exceptions thereto, and
the information shown in this EXHIBIT B, may be modified from time to time
upon mutual written agreement between K-C and Seller. All mutually approved
modifications will be communicated in writing and on a timely basis to all
concerned parties.

END OF EXHIBIT B

5

 

CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT WAS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH RULE 24b-2, PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, OMITTED INFORMATION WAS REPLACED WITH ASTERISKS.

EXHIBIT C

To

Pulp Supply Agreement Between Kimberly-Clark Global Sales, Inc. and Neenah

Paper, Inc.

DISCOUNT SCHEDULE

Northern Bleached Softwood Kraft (NBSK)

     NORTH AMERICA: ***% off of the North American Transaction Price for the
prior month.

     EUROPE: ***% off of the European Transaction Price for the prior month.

Northern Bleached Hardwood Kraft (NBHK) (North America only)

     Aspen: ***% off the North American Transaction Price for the prior month.

     Maple: ***% off the North American Transaction Price for the prior month.

END OF EXHIBIT C

6

 

CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT WAS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH RULE 24b-2, PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, OMITTED INFORMATION WAS REPLACED WITH ASTERISKS.

EXHIBIT D

To

Pulp Supply Agreement Between Kimberly-Clark Global Sales, Inc. and Neenah

Paper, Inc.

CERTIFICATE

Seller will provide the following information for all bleached kraft Pulp
grades manufactured by Seller and supplied to Kimberly-Clark Global Sales, Inc.

	1.	 	The Pulp has been sampled in the past year and found to be
non-detectable for 2,3,7,8 -TCDD (dioxin). We use elemental chlorine
free bleaching for all Pulp delivered to Kimberly-Clark Global
Sales, Inc.
	 
	2.	 	The Pulp has been sampled for CONEG heavy metals in the past
year. All metals were non-detectable in all samples and, therefore,
easily meet the 100 ppm CONEG requirement.
	 
	3.	 	All wood Pulp produced by Seller is manufactured with
conventional processes and is considered Generally Recognized As
Safe (GRAS) as an indirect food additive under 21 CFR 186.1673.
Based on this listing, a complete survey of our raw material
suppliers and an independent review by technical and legal
consultants, our products and raw materials also conform to 21 CFR
176.170 – Indirect Food Additives: Paper and Paperboard Components.
	 
	4.	 	In addition, Seller does not use ozone depleting substances
(ODS) in the manufacture of its bleached kraft Pulp.

Contact us if you require additional information.

DATE & Location

Signature

Title

END OF EXHIBIT D

7

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