10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

[ü]	Annual report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
	For the fiscal year ended December 31, 2007
	or
[ ]	Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
	For the transition period from          to

Commission file number 1-03560

P. H. Glatfelter Company

(Exact name of registrant as specified in its charter)

Pennsylvania	23-0628360
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
96 South George Street, Suite 500 York, Pennsylvania 17401	(717) 225-4711
(Address of principal executive offices)	(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Class	Name of Exchange on which registered
Common Stock, par value $.01 per share	New York Stock Exchange

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes    No  ü .

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes    No  ü .

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for at least the past 90 days. Yes  ü  No   .

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of registrant’s knowledge, in definitive proxy of information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	ü  Accelerated filer	Non-accelerated filer	Smaller reporting company
	(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes    No  ü .

Based on the closing price as of June 30, 2007, the aggregate market value of Common Stock of the Registrant held by non-affiliates was $539.8 million.

Common Stock outstanding on March 6, 2008 totaled 45,167,030 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the following documents are incorporated by reference in this Annual Report on Form 10-K:
 Proxy Statement to be dated on or about March 21, 2008 (Part III).

P. H. GLATFELTER COMPANY
ANNUAL REPORT ON FORM 10-K
For the Year Ended

DECEMBER 31, 2007

Table of Contents

		Page
PART I
Item 1	Business		1
Item 1A.	Risk Factors		6
Item 2	Properties		8
Item 3	Legal Proceedings		9
Item 4	Submission of Matters to a Vote of Security Holders		9
	Executive Officers		9
PART II
Item 5	Market for the Registrant’s Common Stock and   Related Stockholder Matters and Issuer   Purchases of Equity Securities		10
Item 6	Selected Financial Data		12
Item 7	Management’s Discussion and Analysis of Financial   Condition and Results of Operations		13
Item 7A.	Quantitative and Qualitative Disclosures about   Market Risk		22
Item 8	Financial Statements and Supplementary Data		23
Item 9A.	Controls and Procedures		55
PART III
Item 10	Directors, Executive Officers and Corporate Governance		56
Item 11	Executive Compensation		56
Item 12	Security Ownership of Certain Beneficial Owners   and Management and Related Stockholder   Matters		56
Item 13	Certain Relationships and Related Transactions, and Director   Independence		56
Item 14	Principal Accountant Fees and Services		56
PART IV
Item 15	Exhibits, Financial Statement Schedules		57
SIGNATURES			59
CERTIFICATIONS			60
SCHEDULE II			62

ITEM 1.   BUSINESS

Overview Glatfelter began operations in 1864 and today we believe we are one of the world’s leading manufacturers of specialty papers and engineered products. Headquartered in York, Pennsylvania, we own and operate paper mills located in Pennsylvania, Ohio, Germany, the United Kingdom and France, as well as an abaca pulp mill in the Philippines.

We serve customers in numerous markets, including book publishing, carbonless and forms, envelope and converting, engineered products, food and beverage, composite laminates and other highly technical niche markets. Many of the markets in which we operate are characterized by higher-value-added products and, in some cases, by higher growth prospects and lower cyclicality than commodity paper markets. Examples of some of our key product offerings include papers for:

•  trade book publishing;

•  carbonless products;

•  tea bags and coffee filters;

•  specialized envelopes;

•  playing cards;

•  pressure-sensitive postage stamps;

•  metallized papers for labels and packaging; and

•  digital imaging applications.

Recent Developments On November 30, 2007, we completed the acquisition of Metallised Products Limited (“MPL”), a privately owned company that manufactures a variety of metallized paper products for consumer and industrial applications. MPL is based in Caerphilly, Wales.

Under terms of the agreement, we purchased the stock of MPL for $7.2 million cash and extinguished $5.8 million of MPL debt at the closing. The purchase price is subject to adjustments based on working capital and other factors.

This facility employs about 165 people and had 2007 revenues of approximately $53.4 million.

During 2006, the following events occurred that affected the operations of our business units:

Specialty Papers

•	On April 3, 2006, we completed the acquisition of the carbonless business operations of NewPage Corporation, located in Chillicothe, Ohio, for $83.3 million in cash. At the time of the acquisition, this business had annual revenue of approximately $440 million.
	As part of our integration plan for Chillicothe, we transferred the production of products manufactured at our former Neenah, WI facility to Chillicothe and permanently shut down our Neenah facility on June 30, 2006.

Composite Fibers

•  On March 13, 2006, we acquired JR Crompton’s Lydney mill, located in Gloucestershire (Lydney), England, for approximately $65 million. At the time of the acquisition, the mill had annual revenue of approximately $75 million. The Lydney mill produces a broad portfolio of wet laid non-woven products, including tea bags and coffee filter papers, double-sided adhesive tape substrates and battery grid pasting tissue.

Our Business Units  We manage our business as two distinct units: the North America-based Specialty Papers business unit and the Europe-based Composite Fibers business unit. The following table summarizes consolidated net sales and the relative net sales contribution of each of our business units for the past three years:

Dollars in thousands	2007			2006			2005
Net sales	$	1,148,323		$	986,411		$	579,121
Business unit composition
Specialty Papers		69.9	%		70.3	%		65.8	%
Composite Fibers		30.1			29.7			34.2
Total		100.0	%		100.0	%		100.0	%

Net tons sold by each business unit for the past three years were as follows:

	2007		2006		2005
Specialty Papers		726,657		653,734		450,900
Composite Fibers		72,855		68,148		47,669
Other		–		10		24
Total		799,512		721,892		498,593

Specialty Papers  Our North America-based Specialty Papers business unit focuses on producing papers for the following markets:

•  Book publishing papers for the production of high quality hardbound books and other book publishing needs;

•  Carbonless and forms papers for credit card receipts, multi-part forms, security papers and other end-user applications;

•  Envelope and converting papers for the direct mail market, shopping bags, and other converting applications; and

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•  Engineered products for digital imaging, transfer, casting, release, postal, playing card and other niche specialty applications.

Specialty Papers’ revenue composition by market consisted of the following for the years indicated:

In thousands	2007		2006		2005
Book publishing	$	185,343	$	166,605	$	157,269
Carbonless & forms		345,785		266,647		–
Envelope & converting		116,797		103,042		91,751
Engineered products		136,785		137,007		129,936
Other		17,583		20,359		1,967
Total	$	802,293	$	693,660	$	380,923

We believe we are one of the leading suppliers of book publishing papers in the United States and the second leading carbonless paper producer. Specialty Papers also produces paper that is converted into specialized envelopes in a wide array of colors, finishes and capabilities. These markets are generally more mature and, therefore, opportunities are generally market-share based. The market for carbonless papers is declining approximately 8% to 10% per year. However, we have been successful in executing our strategy to replace this lost volume with book publishing, forms and other products with more stable or growing demand.

Specialty Papers’ highly technical engineered products include those designed for multiple end uses, such as papers for pressure-sensitive postage stamps, greeting and playing cards, digital imaging applications and for release paper applications. Such products comprise an array of distinct business niches that are in a continuous state of evolution. Many of these products are utilized by demanding, specialized customer and end-user applications. Some of our products are new and high growth while others are more mature and further along in the product life cycle. Because many of these products are technically complex and involve substantial customer-supplier development collaboration, they typically command higher per ton values and generally exhibit greater pricing stability relative to commodity grade paper products.

Composite Fibers  Our Composite Fibers business unit, based in Gernsbach, Germany, serves customers globally and focuses on higher-value-added products in the following markets:

•  Food & Beverage paper used for tea bags and coffee pods/pads and filters;

•  Composite Laminates papers used in production of decorative laminates used for furniture and flooring;

•  Metallized products used in the labeling of beer bottles, innerliners and other consumer products applications; and

•  Technical Specialties is a diverse line of paper products used in medical masks, batteries and other highly engineered applications.

Composite Fibers’ revenue composition by market consisted of the following for the years indicated:

In thousands	2007		2006		2005
Food & beverage	$	218,961	$	180,258	$	103,070
Composite laminates		52,972		50,734		42,948
Metallized		45,426		40,078		35,541
Technical specialties and other		28,671		21,681		16,578
Total	$	346,030	$	292,751	$	198,137

Our focus on products made from abaca pulp has made us the world’s largest producer of tea bag and coffee pods/pads and filter papers. The balance of this unit’s sales are comprised of overlay and technical specialty products, which include flooring and furniture overlay papers, metallized products, and papers for adhesive tapes, vacuum bags, holographic labels and gift wrap. Many of this unit’s papers are technically sophisticated. The acquisition of MPL is designed to leverage our technical capabilities to serve the attractive metallized products market. All of the papers produced in the Composite Fibers business unit, except for metallized papers, are extremely lightweight and require very specialized fibers. Our engineering capabilities, specifically designed papermaking equipment and customer orientation position us well to compete in these global markets.

Additional financial information for each of our business units is included in Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Item 8 – Financial Statements, Note 21.

Our Competitive Strengths  Since commencing operations over 140 years ago, we believe that Glatfelter has developed into one of the world’s leading manufacturers of specialty papers and engineered products. We believe that the following competitive strengths have contributed to our success:

• Leading market positions in higher-value, niche segments.  We have focused our resources to achieve market-leading positions in certain higher-value, niche segments. Our products include various highly specialized paper products designed for technically demanding end uses. Consequently, many of our products achieve premium pricing relative to that of commodity paper grades. In 2007, approximately 81%

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of our sales were derived from these higher-value, niche products as compared to 82% in 2006. The specialized nature of these products generally provides greater pricing stability relative to commodity paper products.

• Customer-centric business focus.  We offer a unique and diverse product line that can be customized to serve the individual needs of our customers. Our customer focus allows us to develop close relationships with our key customers and to be adaptable in our product development, manufacturing, sales and marketing practices. We believe that this approach has led to the development of excellent customer relationships, defensible market positions, and increased pricing stability relative to commodity paper producers. Additionally, our customer-centric focus has been a key driver to our success in new product development.

• Significant investment in product development.  In order to keep up with our customers’ ever-changing needs, we continually enhance our product offerings through significant investment in product development. During 2007, 2006 and 2005, we invested approximately $8.7 million, $8.0 million and $4.9 million, respectively, in product development activities. We derive a significant portion of our revenue from products developed, enhanced or improved as a result of these activities. Revenue generated from products developed, enhanced or improved within the five previous years as a result of these activities represented approximately 53% of net sales in each of the past three years ended December 31, 2007.

• Integrated production.  As a nearly fully integrated producer, we are able to mitigate changes in the costs of certain raw materials and energy. In Specialty Papers, our Spring Grove and Chillicothe facilities are vertically integrated operations producing in excess of 85% of the annual pulp required for their paper production. The principal raw material used to produce this pulp is pulpwood, consisting of both hardwoods and softwoods. Our Spring Grove and Chillicothe facilities also generate 100% of the steam and substantially all of the electricity required for their operations. In Composite Fibers, our Philippine mill processes abaca fiber to produce abaca pulp, a key raw material used by this business unit. The Philippine mill produces approximately 70% of the annual abaca pulp required for Composite Fibers’ production.

Our Business Strategy  Our vision is to become the global supplier of choice in specialty papers and engineered products. We are continuously developing and refining strategies to strengthen our business and position it for the future. Execution of these strategies is intended to capitalize on our customer relationships, technology and people, as well as our leadership positions in certain product lines. Components include:

Specialty Papers  The North American uncoated free sheet market has been challenged by a supply and demand imbalance, particularly for commodity-like products. While the industry has narrowed the supply-demand gap by eliminating capacity, the imbalance continues. To be successful in the current market environment, our strategy is focused on:

•  employing a low-cost approach to our manufacturing activities and implementing cost reduction initiatives including the Chillicothe profit improvement initiatives;

•  improving business processes and deploying continuous improvement capabilities to maintain market leadership positions in customer service; and

•  optimizing our products mix by growing book publishing, envelope, forms and engineered products and utilizing new product development capabilities to replace declining carbonless volumes.

Composite Fibers  A core component of this business unit’s long-term strategy is to capture world-wide growth in its core markets of food & beverage, composite laminates and metallized papers. Composite Fibers strategy also includes enhancing product mix across all of its markets by utilizing new product development capabilities. In addition, the Composite Fibers business unit is focused on cost reduction initiatives including, among others, work-force efficiencies and supply chain management.

Balance Sheet  We are focused on prudent financial management and the maintenance of a conservative capital structure. We are committed to maintaining a strong balance sheet and preserving our flexibility so that we may pursue strategic opportunities, including strategic acquisitions that will benefit our shareholders.

Timberland Strategy  In 2006, we initiated a strategy to sell substantially all of our timberlands. At the time the strategy was announced, we expected proceeds from the sales to generate approximately $150 million to $200 million by the end of 2010. Through the end of 2007, we have sold approximately 43,400 acres of timberland for an aggregate price of

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$104.4 million. Although proceeds have been used to reduce debt obligations, the sale of timberland will require us to replace company owned timberland as a source of fiber with more costly purchased woods. We believe the interest expense reduction and the financial flexibility for investment offer a greater return than the additional higher cost for raw fiber.

Raw Material and Energy  The following table provides an overview of the estimated amount of principal raw materials (“PRM”) expected to be used in 2008 by each of our manufacturing facilities:

	Estimated
	Annual		Percent of
	Quantity		PRM
	(short tons)		Purchased
Specialty Papers
Spring Grove
Pulpwood		1,051,000		86
Wood – and other pulps		37,000		100
Chillicothe
Pulpwood		1,207,000		100
Wood – and other pulps		58,000		100
Composite Fibers
Wood – and other pulps		37,600		100
Abaca pulp		18,000		30
Synthetic fiber		9,400		100
Metallized base stock		30,400		100
Abaca fiber		17,000		100

Our Spring Grove, Pennsylvania and Chillicothe, Ohio mills are vertically integrated operations producing in excess of 85% of the combined annual pulp required for paper production. The principal raw material used to produce this pulp is pulpwood, of which both hardwoods and softwoods are used. Hardwoods are available within a relatively short distance of our mills. Softwoods are obtained from a variety of locations in relatively close proximity to the location of the respective mill and includes the states of Pennsylvania, Maryland, Delaware, Virginia, Kentucky, Tennessee and South Carolina. To protect our sources of pulpwood, we actively promote conservation and forest management among suppliers and woodland owners. In addition to sourcing the pulpwood in the open market, we have long-term supply contracts that provide access to timber at market prices.

In addition to integrated pulp making, both the Spring Grove and Chillicothe facilities generate 100% of the steam and 100% and 80%, respectively, of their electricity needs. Principal fuel sources vary by facility and include over 600,000 tons of coal, 870,000 MMBTUs of natural gas, as well as recycled pulping chemicals, bark, wood waste, and oil. Spring Grove’s coal needs are met under a contract that expires at the end of 2009 and Chillicothe’s contract expires in November 2008.

The Spring Grove facility produces more electricity than it requires. Excess electricity is sold to the local power company under a long-term co-generation contract expiring in 2010. Energy sales, net of costs to produce, were $9.4 million in 2007, $10.7 million in 2006 and $10.1 million in 2005. The continuation of this revenue stream at these levels is dependent on our ability to negotiate a contract for periods beyond 2010.

The Gernsbach, Scaër and Lydney facilities generate all of the steam required for their operations. The Gernsbach facility generated approximately 19% of its 2007 electricity needs and purchased the balance. The Scaër and Lydney facilities purchased 100% of their 2007 electric power requirements. Natural gas was used to produce substantially all internally generated energy at the Gernsbach, Scaër and Lydney facilities during 2007.

Our Philippines mill processes abaca fiber to produce a specialized pulp. This abaca pulp production provides a unique advantage by supplying a key raw material used by our Composite Fibers business unit. The supply of abaca fiber has been constrained due to severe weather related damage to the source crop as well as selection by land owners of alternative uses of land in lieu of fiber producing activities. In addition, events may arise from the relatively unstable political and economic environment in which the Philippine facility operates that could interrupt the production of abaca pulp. Management periodically evaluates the availability of abaca pulp for our Composite Fibers business unit. Any extended interruption of the Philippine operation could have a material impact on our consolidated financial position and/or results of operations. We target to have approximately one month of fiber supply in stock and one month of fiber supply at sea available to us. In addition, we have established contingency plans for alternative sources of abaca pulp. However, the cost of obtaining abaca pulp from such alternative sources, if available, would likely be higher.

Based on information currently available, we believe that we will continue to have ready access, for the foreseeable future, to all principal raw materials used in the production of our products. However, as discussed in the preceding paragraph, the supply of abaca fiber has been constrained and has adversely impacted pricing. The cost of our raw materials is subject to change, including, but not limited to, costs of wood, pulp products and energy.

Concentration of Customers  In past three years, no single customer represented more than 10% of our consolidated net sales.

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Competition  Our industry is highly competitive. We compete on the basis of product quality, customer service, product development, price and distribution. We offer our products throughout the United States and globally in approximately 85 countries. Competition in the markets in which we participate comes from companies of various sizes, some of which have greater financial and other resources than we do.

There are a number of companies in the United States that manufacture printing and converting papers. We believe we are one of the leading producers of book publishing papers and compete in these markets with, among others, Domtar and Fraser. In the envelope sector we compete with, among others, International Paper, Domtar and Blue Ridge. In the carbonless paper and forms market, we compete with Appleton Papers and, to a lesser extent, Nekoosa Papers, Inc. In our Specialty Papers’ engineered products markets and for the Composite Fibers business unit’s markets, competition is product line specific as the necessity for technical expertise and specialized manufacturing equipment limits the number of companies offering multiple product lines. We compete with specialty divisions of large companies such as, among others, Ahlstrom, International Paper, MeadWestvaco, Sappi and Stora Enso. Service, product performance, technological advances and product pricing are important competitive factors with respect to all our products. We believe our reputation in these areas continues to be excellent.

Capital Expenditures  Our business is capital intensive and requires extensive expenditures for new and enhanced equipment. These capital investments are necessary for environmental compliance, normal upgrades or replacements, business strategy and research and development. In 2008, we expect capital expenditures to total $52 million to $57 million, including a $10 million investment to upgrade the capabilities of one of our inclined wire paper machines in Germany.

Environmental Matters  We are subject to loss contingencies resulting from regulation by various federal, state, local and foreign governmental authorities with respect to the environmental impact of our mills. To comply with environmental laws and regulations, we have incurred substantial capital and operating expenditures in past years. For a discussion of environmental matters, see Item 8 – Financial Statements and Supplementary Data – Note 20.

Employees  The following table summarizes our workforce as of December 31, 2007:

								Contract Period
Location	Hourly		Salaried		Total		Union	Start	End
U.S.
Corporate/Spring Grove		605		360		965	United Steelworkers of America (USW) & Office and Professional	February 2008	January 2011
Chillicothe/Fremont		1,293		410		1,703	Employees International Union	August 2006	August 2009
International
Gernsbach, Germany & Scaër		436		234		670	Various	May 2007	Sept 2008
Lydney		206		67		273	Unite	n/a	n/a
Caerphilly		127		32		159	General Maintenance & Boiler’s
Philippines		55		29		84	N/A	Dec 2002	Dec 2008
Total		2,722		1,132		3,854

We consider the overall relationship with our employees to be satisfactory.

Available Information  On our investor relations website at www.glatfelter.com we make available free of charge our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and other related information as soon as reasonably practical after they are filed with the Securities and Exchange Commission. In addition, our website includes a Corporate Governance page consisting of, among others, our Governance Principles and Code of Business Conduct, Board of Directors and Executive Officers, Audit, Compensation, Finance and Nominating Committees of the Board of Directors and their respective Charters, Code of Business Ethics for the CEO and Senior Financial Officers of Glatfelter, our “whistle-blower” policy and other related material. We intend to satisfy the disclosure requirement for any future amendments to, or waivers from, our Code of Business Conduct or Code of Business Ethics for the CEO and Senior Financial Officers by posting such information on our website. We will provide a copy of the Code of Business Conduct or Code of Business Ethics for the CEO and Senior Financial Officers, without charge, to any person who requests one, by calling (717) 225-2724.

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ITEM 1A.   RISK FACTORS

Risks Related to Our Business

The cost of raw materials and energy used to manufacture our products could increase and the availability of certain raw materials could become more constrained.

We require access to sufficient and reasonably priced quantities of pulpwood, purchased pulps, pulp substitutes, abaca fiber and certain other raw materials. Our Spring Grove and Chillicothe locations are vertically integrated manufacturing facilities that generate in excess of 85% of their annual pulp requirements. However, as a result of selling timberlands over the past two years, purchased timber will represent a larger source of the total pulpwood used in our operations.

Our Philippine mill purchases abaca fiber to make pulp, which we use to manufacture our composite fiber products at our Gernsbach, Scaër and Lydney facilities. However, the supply of abaca fiber has been constrained due to severe weather related damage to the source crop as well as selection by land owners of alternative uses of land in lieu of fiber producing activities. As a result of supply constraints, pricing pressure persists.

The cost of many of our production materials and costs, including petroleum based chemicals and freight charges, are influenced by the cost of oil. In addition, coal is a principal source fuel for both the Spring Grove and Chillicothe facilities. Natural gas is the principal source of fuel for our Chillicothe and Composite Fibers’ business unit facilities. Natural gas prices have increased significantly in the United States since 2000.

We may not be able to pass increased raw materials or energy costs on to our customers if the market will not bear the higher price or where existing agreements with our customers limit price increases. If price adjustments significantly trail increases in raw materials or energy prices our operating results could be adversely affected.

Our business and financial performance may be adversely affected by downturns in the target markets that we serve.

Demand for our products in the markets we serve is primarily driven by consumption of the products we produce, which is most often affected by general economic conditions. Downturns in our target markets could result in decreased demand for our products. In particular, our business may be adversely affected during periods of economic weakness by the general softness in these target markets. Our results could be adversely affected if economic conditions weaken or fail to improve. Also, there may be periods during which demand for our products is insufficient to enable us to operate our production facilities in an economical manner. These conditions are beyond our ability to control and may have a significant impact on our sales and results of operations.

In addition to fluctuations in demand for our products in the markets we serve, the markets for our paper products are also significantly affected by changes in industry capacity and output levels. There have been periods of supply/demand imbalance in the pulp and paper industry, which have caused pulp and paper prices to be volatile. The timing and magnitude of price increases or decreases in the pulp and paper market have generally varied by region and by product type. A sustained period of weak demand or excess supply would likely adversely affect pulp and paper prices. This could have a material adverse affect on our operating and financial results.

Our industry is highly competitive and increased competition could reduce our sales and profitability.

In recent years, the global paper industry in which we compete has been adversely affected by paper producing capacity exceeding the demand for products. As a result, the uncoated free sheet industry has taken steps to reduce underperforming capacity. However, slowing demand or increased competition could force us to lower our prices or to offer additional services at a higher cost to us, which could reduce our gross margins and net income. The greater financial resources of certain of our competitors may enable them to commit larger amounts of capital in response to changing market conditions. Certain competitors may also have the ability to develop product or service innovations that could put us at a competitive disadvantage.

Some of the factors that may adversely affect our ability to compete in the markets in which we participate include:

•  the entry of new competitors into the markets we serve, including foreign producers;

•  the willingness of commodity-based paper producers to enter our specialty markets when they are unable to compete or when demand softens in their traditional markets;

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•  the aggressiveness of our competitors’ pricing strategies, which could force us to decrease prices in order to maintain market share;

•  our failure to anticipate and respond to changing customer preferences;

•  our inability to develop new, improved or enhanced products; and

•  our inability to maintain the cost efficiency of our facilities.

If we cannot effectively compete in the markets in which we operate, our sales and operating results would be adversely affected.

We may not be able to develop new products acceptable to our customers.

Our business strategy is market focused and includes investments in developing new products to meet the changing needs of our customers and to maintain our market share. Our success will depend in large part on our ability to develop and introduce new and enhanced products that keep pace with introductions by our competitors and changing customer preferences. If we fail to anticipate or respond adequately to these factors, we may lose opportunities for business with both current and potential customers. The success of our new product offerings will depend on several factors, including our ability to,

•  anticipate and properly identify our customers’ needs and industry trends;

•  price our products competitively;

•  develop and commercialize new products and applications in a timely manner;

•  differentiate our products from our competitors’ products; and

•  invest in research and development activities efficiently.

Our inability to develop new products could adversely impact our business and ultimately harm our profitability.

We are subject to substantial costs and potential liability for environmental matters.

We are subject to various environmental laws and regulations that govern our operations, including discharges into the environment, and the handling and disposal of hazardous substances and wastes. We are also subject to laws and regulations that impose liability and clean-up responsibility for releases of hazardous substances into the environment. To comply with environmental laws and regulations, we have incurred, and will continue to incur, substantial capital and operating expenditures. We anticipate that environmental regulation of our operations will continue to become more burdensome and that capital and operating expenditures necessary to comply with environmental regulations will continue, and perhaps increase, in the future. Because environmental regulations are not consistent worldwide, our ability to compete in the world marketplace may be adversely affected by capital and operating expenditures required for environmental compliance. In addition, we may incur obligations to remove or mitigate any adverse effects on the environment, such as air and water quality, resulting from mills we operate or have operated. Potential obligations include compensation for the restoration of natural resources, personal injury and property damages.

We are liable for remediation on costs related to the presence of polychlorinated biphenyls, or PCBs, in the lower Fox River on which our former Neenah, Wisconsin mill was located. We have financial reserves for environmental matters but we cannot be certain that those reserves will be adequate to provide for future obligations related to these matters, that our share of costs and/or damages for these matters will not exceed our available resources, or that such obligations will not have a long-term, material adverse effect on our consolidated financial position, liquidity or results of operations.

Our environmental issues are complicated and should be reviewed in context; please see a more detailed discussion of these matters in Item 8 – Financial Statements, Note 20

We have operations in a potentially politically and economically unstable location.

We own and operate a pulp mill in the Philippines where the operating environment is unstable and subject to political unrest. Our Philippine pulp mill produces abaca pulp, a significant raw material used by our Composite Fibers business unit. Our Philippine pulp mill is currently our main provider of abaca pulp. There are limited suitable alternative sources of readily available abaca pulp in the world. In the event of a disruption in supply from our Philippine mill, there is no guarantee that we could obtain adequate amounts of abaca pulp from alternative sources at a reasonable price or at all. As a consequence, any civil disturbance, unrest, political instability or other event that causes a disruption in supply could limit the availability of abaca pulp and would increase our cost of obtaining

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abaca pulp. Such occurrences could adversely impact our sales volumes, revenues and operating results.

Our international operations pose certain risks that may adversely impact sales and earnings.

We have significant operations and assets located in Germany, France, the United Kingdom, and the Philippines. Our international sales and operations are subject to a number of special risks, in addition to the risks in our domestic sales and operations, including differing protections of intellectual property, trade barriers, labor unrest, exchange controls, regional economic uncertainty, differing (and possibly more stringent) labor regulation, risk of governmental expropriation, domestic and foreign customs and tariffs, differing regulatory environments, difficulty in managing widespread operations and political instability. These factors may adversely affect our future profits. Also, in some foreign jurisdictions, we may be subject to laws limiting the right and ability of entities organized or operating therein to pay dividends or remit earnings to affiliated companies unless specified conditions are met. Any such limitations would restrict our flexibility in using funds generated in those jurisdictions.

Foreign currency exchange rate fluctuations could adversely affect our results of operations.

We own and operate paper and pulp mills in Germany, France, the United Kingdom and the Philippines. The local currency in Germany and France is the Euro, in the UK the British Pound Sterling, and in the Philippines the Peso. During 2007, Euro functional currency operations generated approximately 19.9% of our sales and 18.8% of operating expenses and British Pound Sterling operations represented 7.6% of net sales and 7.8% of operating expenses. The translation of the results from these international operations into U.S. dollars is subject to changes in foreign currency exchange rates.

Our ability to maintain our products’ price competitiveness is reliant, in part, on the relative strength of the currency in which the product is denominated compared to the currency of the market into which it is sold and the functional currency of our competitors. Changes in the rate of exchange of foreign currencies in relation to the U.S. dollar, and other currencies, may adversely impact our results of operations and our ability to offer products in certain markets at acceptable prices.

In the event any of the above risk factors impact our business in a material way or in combination during the same period, we may be unable to generate sufficient cash flow to simultaneously fund our operations, finance capital expenditures, satisfy obligations and make dividend payments on our common stock.

In addition to debt service obligations, our business is capital intensive and requires significant expenditures for equipment maintenance, new or enhanced equipment, environmental compliance, and research and development to support our business strategies. We expect to meet all of our near and long-term cash needs from a combination of operating cash flow, cash and cash equivalents, our existing credit facility and other long-term debt. If we are unable to generate sufficient cash flow from these sources, we could be unable to meet our near and long-term cash needs or make dividend payments.

ITEM 2.   PROPERTIES

Our leased corporate offices are located in York, Pennsylvania. We own and operate paper mills located in Pennsylvania; Ohio; the United Kingdom; Germany; and France. Our metallized paper production facility located in Caerphilly, Wales leases the building and land associated with its operations. We also own and operate a pulp mill in the Philippines. Substantially all of the equipment used in our papermaking and related operations, is also owned. All of our properties, other than those that are leased, are free from any material liens or encumbrances. We consider all of our buildings to be in good structural condition and well maintained and our properties to be suitable and adequate for present operations.

The following table summarizes the estimated production capacity of each of our facilities:

Estimated Annual Production
Capacity (short tons)
Specialty Papers
Spring Grove	332,000	Uncoated
	68,000	Coated
Chillicothe	400,000	Uncoated
	7,500	Coated
Composite Fibers
Gernsbach	38,000	Lightweight
	12,500	Metallized
Scaër	6,000	Lightweight
Lydney	16,700	Lightweight
Caerphilly	15,000	Metallized
Philippines	11,000	Abaca pulp

The Spring Grove facility includes five uncoated paper machines that have been rebuilt and modernized from time to time with the capacity to produce 332,000 tons. It has an off-line combi-blade coater and a Specialty Coater (“S-Coater”), which together yield a potential annual production capacity for coated paper of approximately 68,000 tons. Since uncoated

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paper is used in producing coated paper, this is not additional capacity. We view the S-Coater as an important asset that allows us to expand our more profitable engineered paper products business.

The Spring Grove facility also includes a pulpmill that has a production capacity of approximately 650 tons of bleached pulp per day. We have a precipitated calcium carbonate (“PCC”) plant at our Spring Grove facility that produces PCC at a lower cost than could be purchased from others and lowers the need for higher-priced raw material typically used for increasing the opacity and brightness of certain papers.

The Chillicothe facility operates four paper machines which together yield a potential annual production capacity of uncoated and carbonless paper of approximately 400,000 tons. In addition, this location produces 7,500 tons per year of other coated paper. This facility also includes a pulpmill that has a production capacity of approximately 955 tons of bleached pulp per day.

The Composite Fibers business unit’s four facilities operate a combined ten papermaking machines with the capacity to produce approximately 60,700 tons of lightweight paper on an annual basis. In addition, the business unit has the capacity to produce an aggregate of 27,500 tons of metallized papers from its lacquering and metallizing operations in Gernsbach, Germany and Caerphilly, Wales.

Our Philippines facility consists of a pulpmill that supplies a majority of the abaca pulp requirements of the Composite Fibers paper mills.

ITEM 3.   LEGAL PROCEEDINGS

We are involved in various lawsuits that we consider to be ordinary and incidental to our business. The ultimate outcome of these lawsuits cannot be predicted with certainty; however, we do not expect such lawsuits individually or in the aggregate, will have a material adverse effect on our consolidated financial position, liquidity or results of operations.

For a discussion of commitments, legal proceedings and related contingencies, see Item 8 – Financial Statements and Supplementary Data – Note 20.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Not Applicable – no matters were submitted to a vote of security holders during the fourth quarter of 2007.

EXECUTIVE OFFICERS

The following table sets forth certain information with respect to our executive officers as of March 1, 2008.

Name	Age		Office with the Company
George H. Glatfelter II		56	Chairman and Chief Executive Officer
Dante C. Parrini		43	Executive Vice President and Chief Operating Officer
John P. Jacunski		42	Senior Vice President and Chief Financial Officer
Timothy R. Hess		41	Vice President and General Manager, Specialty Papers Business Unit
Jeffrey J. Norton		49	Vice President, General Counsel and Secretary
Martin Rapp		48	Vice President and General Manager, Composite Fibers Business Unit
Mark A. Sullivan		53	Vice President Global Supply Chain
William T. Yanavitch II		47	Vice President Human Resources and Administration
David C. Elder		39	Corporate Controller and Chief Accounting Officer

Officers are elected to serve at the pleasure of the Board of Directors. Except in the case of officers elected to fill a new position or a vacancy occurring at some other date, officers are generally elected at the organizational meeting of the Board of Directors held immediately after the annual meeting of shareholders.

George H. Glatfelter II is our Chairman and Chief Executive Officer. From April 2000 to February 2001, Mr. Glatfelter was Chairman, President and Chief Executive Officer. From June 1998 to April 2000, he was Chief Executive Officer and President.

Mr. Glatfelter serves as a director of Met-Pro Corporation.

Dante C. Parrini became Executive Vice President and Chief Operating Officer in February 2005. Prior to this, Mr. Parrini was Senior Vice President and General Manager, a position he held since January 2003. From December 2000 until January 2003, Mr. Parrini was Vice President – Sales and Marketing. From July 2000 to December 2000, he was Vice President – Sales and Marketing, Glatfelter Division and Corporate Strategic Marketing.

John P. Jacunski became Senior Vice President & Chief Financial Officer in July 2006. From October 2003 until July 2006, he was Vice President and Corporate Controller. Mr. Jacunski was previously Vice President and Chief Financial Officer at WCI Steel, Inc. from June 1999 to October 2003. Prior to joining WCI, Mr. Jacunski was with KPMG, an international accounting and consulting firm, where he served in various capacities.

Timothy R. Hess has been Vice President and General Manager – Specialty Papers Business Unit since February 2006. Prior to this he was the Company’s Director of Specialty Papers Business Unit, a position he held since January 2004. From 1994

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until January 2004, Mr. Hess held various technical, manufacturing, sales and business development positions with Glatfelter.

Jeffrey J. Norton joined us in May 2005 and serves as Vice President, General Counsel and Secretary. Prior to joining Glatfelter, Mr. Norton was with Exelon Corporation, for 14 years where he was Assistant General Counsel.

Martin Rapp joined Glatfelter in August 2006 and serves as Vice President and General Manager – Composite Fibers Business Unit. Prior to this, Mr. Rapp was Vice President and General Manager of Avery Dennison’s Roll Materials Business in Central and Eastern Europe since August 2002. From May 2000 until July 2002 Mr. Rapp was Partner and Managing Director of BonnConsult.

Mark A. Sullivan was appointed Vice President, Global Supply Chain in February 2005. Mr. Sullivan joined our company in December 2003, as Chief Procurement Officer. His experience includes a broad array of operations and supply chain management responsibilities during 20 years with the DuPont Company. He served with T-Mobile USA as an independent contractor during 2003, and Concur Technologies from 1999 until 2002.

William T. Yanavitch II rejoined the Company in May 2005 as Vice President Human Resources and Administration. Mr. Yanavitch served as Vice President Human Resources from July 2000 until his resignation in January 2005 at which time he became Corporate Human Resources Manager of Constellation Energy.

David C. Elder became Corporate Controller and Chief Accounting Officer in July 2006 after joining the company in January 2006. Prior to joining the company, Mr. Elder was Corporate Controller for YORK International Corporation, a position he held since December 2003. Prior thereto, he was the Director, Financial Planning and Analysis for YORK International Corporation from August 2000 to December 2003.

PART II

ITEM 5.   MARKET FOR THE REGISTRANT’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Common Stock Prices and Dividends Declared Information

The following table shows the high and low prices of our common stock traded on the New York Stock Exchange under the symbol “GLT” and the dividend declared per share for each quarter during the past two years.

Quarter	High		Low		Dividend
2007
Fourth	$	17.23	$	14.00	$	0.09
Third		15.59		12.47		0.09
Second		16.30		12.92		0.09
First		18.05		14.86		0.09
2006
Fourth	$	15.95	$	13.26	$	0.09
Third		16.23		12.98		0.09
Second		19.84		14.45		0.09
First		18.65		13.12		0.09

As of March 6, 2008, we had 1,627 shareholders of record. A number of the shareholders of record are nominees.

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STOCK PERFORMANCE GRAPH

The graph below compares the cumulative 5-year total return of our common stock with the cumulative total returns of both a peer group and a broad market index. In 2007, we changed the comparative peer group and the broad market index. In previous years, the peer group consisted of Bowater, Inc. (which merged with Abitibi-Consolidated to form AbitibiBowater Inc), Chesapeake Corp., MeadWestvaco Corp., Pope & Talbot, Potlatch Corp., Schweitzer-Mauduit International and Wausau Paper Corp. For the 2007 peer group comparison, we modified the companies included to reflect changes in the industry in which we compete, to give effect to mergers and/or divestitures and other considerations. The new peer group retains AbitibiBowater Inc, Schweitzer-Mauduit International and Wausau Paper Corp., and now includes Neenah Paper Inc.

Prior to 2007, Glatfelter common stock was included in the S&P MidCap 400. During 2007, our stock is no longer a part of this index. Accordingly, we are comparing our stock to the Russell 2000, which we believe is an appropriate comparable for stocks such as Glatfelter.

The graph assumes that the value of the investment in our common stock, in each index, and in each of the peer groups (including reinvestment of dividends) was $100 on December 31, 2002 and charts it through December 31, 2007.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
Among Glatfelter, The S&P Midcap 400 Index,
The Russell 2000 Index, A New Peer Group and an Old Peer Group

Copyright^© 2008, Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. All rights reserved. www.researchdatagroup.com/S&P.htm

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ITEM 6.   SELECTED FINANCIAL DATA

Summary of Selected Consolidated Financial Data

As of or for the year ended December 31
In thousands, except per share	2007			2006			2005			2004			2003
Net sales	$	1,148,323		$	986,411		$	579,121		$	543,524		$	533,193
Energy sales, net		9,445			10,726			10,078			9,953			10,040
Total revenue		1,157,768			997,137			589,199			553,477			543,233
Shutdown and restructuring charges and unusual items		(35	)		(30,318	)		(1,564	)		(20,375	)		(24,995	)
Gains on dispositions of plant, equipment and timberlands		78,685			17,394			22,053			58,509			32,334
Gains from insurance recoveries		–			205			20,151			32,785			–
Income (loss) from continuing operations		63,472			(12,236	)		38,609			56,102			12,986
Income (loss) per share from continuing operations
Basic		1.41			(0.27	)		0.88			1.28			0.30
Diluted		1.40			(0.27	)		0.87			1.27			0.30
Total assets		1,287,067			1,225,643			1,044,977			1,052,270			1,027,019
Total debt		313,185			397,613			207,073			211,227			254,275
Shareholders’ equity		476,068			388,368			432,312			420,370			371,431
Cash dividends declared per common share		0.36			0.36			0.36			0.36			0.53
Shares outstanding		45,141			44,821			44,132			43,950			43,782
Capital expenditures		28,960			44,460			31,024			18,587			66,758
Depreciation and amortization		56,001			50,021			50,647			51,598			56,029
Tons sold		799,512			721,892			498,593			470,422			495,566
Number of employees		3,854			3,704			1,958			1,988			2,331

The above Summary of Selected Consolidated Financial Data, and the comparability thereof, includes the impact of certain charges and gains from asset dispositions and insurance recoveries. For a discussion of these items that affect the comparability of this information, see Item 8 – Financial Statements and Supplemental Data Notes 4 to 7.

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ITEM 7.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements  This Annual Report on Form 10-K includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact, including statements regarding industry prospects and future consolidated financial position or results of operations, made in this Report on Form 10-K are forward looking. We use words such as “anticipates”, “believes”, “expects”, “future”, “intends” and similar expressions to identify forward-looking statements. Forward-looking statements reflect management’s current expectations and are inherently uncertain. Our actual results may differ significantly from such expectations. The following discussion includes forward-looking statements regarding expectations of, among others, net sales, costs of products sold, non-cash pension income, environmental costs, capital expenditures and liquidity, all of which are inherently difficult to predict. Although we make such statements based on assumptions that we believe to be reasonable, there can be no assurance that actual results will not differ materially from our expectations. Accordingly, we identify the following important factors, among others, which could cause our results to differ from any results that might be projected, forecasted or estimated in any such forward-looking statements:

i.	changes in the cost or availability of raw materials we use, in particular pulpwood, market pulp, pulp substitutes, and abaca fiber;
ii.	changes in energy-related costs and commodity raw materials with an energy component;
iii.	variations in demand for, or pricing of, our products;
iv.	our ability to develop new, high value-added Specialty Papers and Composite Fibers products;
v.	the impact of competition, changes in industry paper production capacity, including the construction of new mills, the closing of mills and incremental changes due to capital expenditures or productivity increases;
vi.	the gain or loss of significant customers and/or on-going viability of such customers;
vii.	cost and other effects of environmental compliance, cleanup, damages, remediation or restoration, or personal injury or property damages related thereto, such as the costs of natural resource restoration or damages related to the presence of polychlorinated biphenyls (“PCBs”) in the lower Fox River on which our former Neenah mill was located;
viii.	risks associated with our international operations, including local economic and political environments and fluctuations in currency exchange rates;
ix.	geopolitical events, including war and terrorism;
x.	enactment of adverse state, federal or foreign tax or other legislation or changes in government policy or regulation;
xi.	adverse results in litigation;
xii.	our ability to successfully execute our timberland strategy to realize the value of our timberlands; and
xiii.	our ability to finance, consummate and integrate future acquisitions.

Introduction  We manufacture, both domestically and internationally, a wide array of specialty papers and engineered products. Substantially all of our revenue is earned from the sale of our products to customers in numerous markets, including book publishing, envelope & converting, carbonless papers and forms, food and beverage, decorative laminates for furniture and flooring, and other highly technical niche markets.

Overview  Our results of operations in 2007, when compared to 2006, reflect stronger performance from each of our business units. Domestically, the Specialty Papers business unit’s results are positively influenced by the improved productivity of the Chillicothe and Spring Grove facilities and by additional volumes associated with the April 2006 Chillicothe acquisition. This business unit’s margins were adversely impacted by increases in input costs that outpaced the rate of increases in selling prices.

Our Composite Fibers business unit’s results in 2007 was positively influenced by additional volumes associated with the Lydney acquisition that was completed in March 2006, as well as improved mix. Average selling prices on a constant currency basis improved in the comparison.

The comparison of year-to-date results are affected by the completion of the business acquisitions referenced earlier which includes: i) the $65 million acquisition of J R Crompton’s Lydney mill on March 13, 2006; and ii) the $83.3 million acquisition

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of Chillicothe, on April 3, 2006, the carbonless paper operation of NewPage Corporation. In 2006, we incurred acquisition integration costs totaling $13.6 million in connection with the Chillicothe and Lydney acquisitions.

In connection with the Chillicothe acquisition, we ceased production at our Neenah, WI facility effective June 30, 2006 and transferred production, including the production of book paper, to Chillicothe. In 2006, we recorded shutdown related charges totaling $54.4 million.

The results of operations in 2007 include $26 million of pre-tax charges related to our estimated costs associated with the Fox River environmental matter. The results also include approximately $5.7 million of income tax benefits recorded as a result of a change in the German corporate income tax rate.

During 2007 and 2006, we sold $87.3 million and $17.1 million of timberlands, respectively, as part of our timberland strategy.

As a result of significantly improved cash flows from operations and from the use of timberland sales proceeds, net debt declined $92.3 million, or 25%, since the end of 2006.

In April 2006, we refinanced our bank credit facility with a $100 million term loan and a $200 million revolving credit facility in addition to the issuance of $200 million 71/8% bonds to replace our $150 million 67/8% notes due July 2007.

RESULTS OF OPERATIONS

2007 versus 2006

The following table sets forth summarized results of operations:

	Year Ended December 31
In thousands, except per share	2007		2006
Net sales	$	1,148,323	$	986,411
Gross profit		156,312		105,294
Operating income		118,818		94
Net income (loss)		63,472		(12,236	)
Earnings (loss) per diluted share		1.40		(0.27	)

The consolidated results of operations for the years ended December 31, 2007 and 2006 include the following significant items:

	After-tax
In thousands, except per share	Income (loss)			Diluted EPS
2007
Gains on sale of timberlands	$	44,052		$	0.97
Environmental remediation		(15,979	)		(0.35	)
Acquisition integration costs		(1,569	)		(0.03	)
2006
Gains on sale of timberlands		8,812			0.20
Shutdown and restructuring charges		(35,212	)		(0.79	)
Acquisition integration costs		(8,647	)		(0.19	)
Debt redemption premium		(1,820	)		(0.04	)
Insurance recoveries		130			—

These items increased earnings by $26.5 million, or $0.59 per diluted share in 2007. Comparatively, the items identified above decreased earnings in 2006 by $36.7 million, or $0.82 per diluted share.

Business Units  Results of individual business units are presented based on our management accounting practices and management structure. There is no comprehensive, authoritative body of guidance for management accounting equivalent to accounting principles generally accepted in the United States of America; therefore, the financial results of individual business units are not necessarily comparable with similar information for any other company. The management accounting process uses assumptions and allocations to measure performance of the business units. Methodologies are refined from time to time as management accounting practices are enhanced and businesses change. The costs incurred by support areas not directly aligned with the business unit are allocated primarily based on an estimated utilization of support area services or are included in “Other and Unallocated” in the table above.

Management evaluates results of operations of the business units before non-cash pension income, charges related to the Fox River environmental reserves, restructuring related charges, unusual items, certain corporate level costs, effects of asset dispositions and insurance recoveries because it believes this is a more meaningful representation of the operating performance of its core papermaking businesses, the profitability of business units and the extent of cash flow generated from core operations. Such amounts are presented under the caption “Other and Unallocated.” This presentation is closely aligned with the management and operating structure of our company. It is also on this basis that the Company’s performance is evaluated internally and by the Company’s Board of Directors.

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Business Unit Performance	Year Ended December 31
In thousands, except tons	Specialty Papers				Composite Fibers				Other and Unallocated						Total
	2007		2006		2007		2006		2007			2006			2007			2006
Net sales		$802,293		$693,660		$346,030		$292,751		$–			$–			$1,148,323			$986,411
Energy sales, net		9,445		10,726		–		–		–			–			9,445			10,726
Total revenue		811,738		704,386		346,030		292,751		–			–			1,157,768			997,137
Cost of products sold		721,216		635,143		287,606		246,797		(7,366	)		9,903			1,001,456			891,843
Gross profit (loss)		90,522		69,243		58,424		45,954		7,366			(9,903	)		156,312			105,294
SG&A		56,561		50,285		32,541		28,458		27,042			13,738			116,144			92,481
Shutdown and restructuring charges		–		–		–		–		35			30,318			35			30,318
Gains on dispositions of plant, equipment and timberlands		–		–		–		–		(78,685	)		(17,394	)		(78,685	)		(17,394	)
Gain on insurance recoveries				–		–		–		–			(205	)		–			(205	)
Total operating income (loss)		33,961		18,958		25,883		17,496		58,974			(36,360	)		118,818			94
Non operating income (expense)		–		–		–		–		(24,884	)		(22,322	)		(24,884	)		(22,322	)
Income (loss) before income taxes		$33,961		$18,958		$25,883		$17,496		$34,090			$(58,682	)		$93,934			$(22,228	)
Supplementary Data
Net tons sold		726,657		653,734		72,855		68,148		–			10			799,512			721,892
Depreciation, depletion and amortization		$34,882		$32,824		$21,119		$17,197		$–			$–			$56,001			$50,021

Sales and Costs of Products Sold

	Year Ended
	December 31
In thousands	2007		2006		Change
Net sales		$1,148,323		$986,411		$161,912
Energy sales – net		9,445		10,726		(1,281	)
Total revenues		1,157,768		997,137		160,631
Costs of products sold		1,001,456		891,843		109,613
Gross profit		$156,312		$105,294		$51,018
Gross profit as a percent of Net sales		13.6%		10.7%

The following table sets forth the contribution to consolidated net sales by each business unit:

	Percent of total
	2007			2006
Business Unit
Specialty Papers		69.9	%		70.3	%
Composite Fibers		30.1			29.7
Total		100.0	%		100.0	%

Net sales totaled $1.1 billion in 2007, an increase of $161.9 million, or 16.4%, compared to the previous year.

In the Specialty Papers business unit, net sales increased $108.6 million to $802.3 million and operating income totaled $34.0 million, an increase of $15.0 million over the previous year. The increase in net sales is attributable to the Chillicothe acquisition that was completed April 3, 2006 and an overall favorable pricing environment that contributed a $16.1 million benefit in 2007 with prices increasing in all product markets. Shipping volumes increased 11% in the comparison. Specialty Papers’ production costs increased in the comparison primarily due to higher shipping volumes. Higher raw material prices largely driven by energy, pulp and wood material usage adversely impacted production costs by $19.2 million. These adverse factors were partially offset by improved material usage and machine yields.

In Composite Fibers, net sales were $346.0 million in 2007, an increase of $53.3 million from the prior year and operating income totaled $25.9 million, an increase of $8.4 million in the comparison. The completion of the March 13, 2006 Lydney acquisition accounted for approximately $17.5 million of the increase in net sales and the translation of foreign currencies benefitted net sales by $19.6 million. On a constant currency basis, average selling prices increased on average 0.3% and volumes increased approximately 7% with increases realized in food and beverage, technical specialties and metallized product markets. Energy and raw material costs in this business unit were $3.2 million higher than a year ago.

The reported amounts of costs of products sold in 2006 included a $25.4 million charge for inventory write-downs and accelerated depreciation on property and equipment abandoned in connection with the Neenah facility shutdown. In the preceding Business Unit Performance table, this amount is included in the “Other and Unallocated” column.

Non-Cash Pension Income Non-cash pension income results from the net over-funded status of our pension plans. The amount of pension income recognized each year is determined using various actuarial assumptions and certain other factors, including the fair value of our pension assets as of the beginning of the year. The following summarizes non-cash pension income, before the curtailment charges recorded in connection with the Neenah shutdown during 2006:

	Year Ended December 31
In thousands	2007		2006		Change
Recorded as:
Costs of products sold		$8,846		$15,480		$(6,634	)
SG&A expense		4,050		1,513		2,537
Total		$12,896		$16,993		$(4,097	)

Selling, general and administrative (“SG&A”)  expenses increased $23.7 million in the year-to-year comparison and totaled $116.1 million in 2007 compared to $92.5 million a year ago. The increase

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was due to a $26.0 million charge for the Fox River environmental matter and the inclusion of a full year’s results for the Chillicothe and Lydney acquisitions in the current period’s results. These unfavorable factors were partially offset in the comparison by $12.2 million of lower acquisition integration costs.

Gain on Sales of Plant, Equipment and Timberlands  During 2007, 2006 and 2005, we completed sales of timberlands. The following table summarizes these transactions.

Dollars in thousands	Acres		Proceeds		Gain
2007
Timberlands		37,448	$	84,409	$	78,958
Other		n/a		377		(273	)
Total			$	84,786	$	78,685
2006
Timberlands		5,923	$	17,130	$	15,677
Other		n/a		3,941		1,717
Total			$	21,071	$	17,394

In connection with each of the asset sales set forth above, we received cash proceeds with the exception of the sale of approximately 26,000 acres of timberland completed in November 2007. As consideration for the timberland sold in this transaction we received a $43.2 million, 20-year interest-bearing note due from the buyer, Glawson Investments Corp. (“Glawson”), a Georgia corporation, and GIC Investments LLC, a Delaware limited liability company owned by Glawson. The note receivable is fully secured by a letter of credit issued by The Royal Bank of Scotland plc. Subsequent to the end of 2007, we monetized this note receivable by pledging it as collateral for a new $36.7 million term note payable.

Shutdown and Restructuring Charges – Neenah Facility Shutdown  In connection with our agreement to acquire the Chillicothe operations, we permanently closed the Neenah, WI facility. Production at this facility ceased effective June 30, 2006 and certain products previously manufactured at the Neenah facility have been transferred to Chillicothe. Results of operations in 2006 included charges totaling $54.4 million including the $25.4 million charge to cost of goods discussed previously.

The remaining reserve as of December 31, 2006 associated with this restructuring initiative totaled $2.8 million. During 2007, we made payments totaling $1.7 million; thus, the remaining reserve balance was $1.1 million at December 31, 2007.

Non-operating income (expense)  During April 2006, we completed the placement of a $200 million bond offering, the proceeds of which were used to redeem the then outstanding $150 million notes scheduled to mature in July 2007. In connection with the early redemption, a charge of $2.9 million, related to a redemption premium and the write-off of unamortized debt issuance costs, was recorded in Consolidated Statement of Income as Non-operating expense under the caption “Other-net.”

Income taxes  During 2007, we recorded income tax expense totaling $30.5 million on pre tax income of $93.9 million. The comparable amounts in 2006 were income tax benefits of $10.0 million on a pre-tax loss of $22.2 million. For 2007, income tax expense is net of a $5.7 million deferred income tax benefit related to the reduction of German corporate income tax rates passed into law July 2007.

Foreign Currency  We own and operate paper and pulp mills in Germany, France, the United Kingdom and the Philippines. The functional currency in Germany and France is the Euro, in the UK it is the British Pound Sterling, and in the Philippines is the Peso. During 2007, Euro functional currency operations generated approximately 19.9% of our sales and 18.8% of operating expenses and British Pound Sterling operations represented 7.6% of net sales and 7.8% of operating expenses. The translation of the results from these international operations into U.S. dollars is subject to changes in foreign currency exchange rates. The table below summarizes the impact on reported results that changes in currency exchange rates in the current year period compared with the prior year period had on our non-U.S. based operations from the conversion of these operation’s non-U.S. dollar denominated revenues and expenses into U.S. dollars.

	Year Ended
In thousands	December 31
	Favorable
	(unfavorable)
Net sales		$19,563
Costs of products sold		(17,952	)
SG&A expenses		(1,927	)
Income taxes and other		79
Net loss		$(237	)

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The above table only presents the financial reporting impact of foreign currency translations. It does not present the impact of certain competitive advantages or disadvantages of operating or competing in multi-currency markets.

RESULTS OF OPERATIONS

2006 versus 2005

The following table sets forth summarized results of operations:

	Year Ended
	December 31
In thousands, except per share	2006			2005
Net sales	$	986,411		$	579,121
Gross profit		105,294			97,176
Operating income		94			70,183
Net income		(12,236	)		38,609
Earnings per diluted share		(0.27	)		0.87

The consolidated results of operations for the years ended December 31, 2006 and 2005 include the following significant items:

	After-tax
In thousands, except per share	Income (loss)			Diluted EPS
2006
Gains on sale of timberlands		$8,812			$0.20
Shutdown and restructuring charges		(35,212	)		(0.79	)
Acquisition integration costs		(8,647	)		(0.19	)
Debt redemption premium		(1,820	)		(0.04	)
Insurance recoveries		130			–
2005
Gains on sale of timberlands		$11,258			$0.26
Insurance recoveries		12,719			0.29
Restructuring charges		(1,017	)		(0.02	)

The above items increased earnings from continuing operations by $36.7 million, or $0.82 per diluted share in 2006, and by $23.0 million, or $0.53 per diluted share in 2005.

Business Units  The following table sets forth profitability information by business unit and the composition of consolidated income from continuing operations before income taxes:

Year Ended December 31
In thousands, except tons	Specialty Papers				Composite Fibers				Other and Unallocated						Total
	2006		2005		2006		2005		2006			2005			2006			2005
Net sales		$693,660		$380,923		$292,751		$198,137		$–			$61			$986,411			$579,121
Energy sales, net		10,726		10,078		–		–		–			–			10,726			10,078
Total revenue		704,386		391,001		292,751		198,137		–			61			997,137			589,199
Cost of products sold		635,143		340,629		246,797		166,153		9,903			(14,759	)		891,843			492,023
Gross profit		69,243		50,372		45,954		31,984		(9,903	)		14,820			105,294			97,176
SG&A		50,285		39,876		28,458		21,282		13,738			6,475			92,481			67,633
Restructuring charges		–		–		–		–		30,318			1,564			30,318			1,564
Gains on dispositions of plant, equipment and timberlands		–		–		–		–		(17,394	)		(22,053	)		(17,394	)		(22,053	)
Gain on insurance recoveries		–		–		–		–		(205	)		(20,151	)		(205	)		(20,151	)
Total operating income (loss)		18,958		10,496		17,496		10,702		(36,360	)		48,985			94			70,183
Nonoperating income (expense)		–		–		–		–		(22,322	)		(10,043	)		(22,322	)		(10,043	)
Income (loss) from continuing operations before income taxes		$18,958		$10,496		$17,496		$10,702		$(58,682	)		$38,942			$(22,228	)		$60,140
Supplementary Data
Net tons sold		653,734		450,900		68,148		47,669		10			24			721,892			498,593
Depreciation expense		$32,824		$35,781		$17,197		$14,866		$–			$–			$50,021			$50,647

Sales and Costs of Products Sold

	Year Ended December 31
In thousands	2006		2005		Change
Net sales	$	986,411	$	579,121	$	407,290
Energy sales – net		10,726		10,078		648
Total revenues		997,137		589,199		407,938
Costs of products sold		891,843		492,023		399,820
Gross profit		105,294	$	97,176	$	8,118
Gross profit as a percent of
Net sales		10.7%		16.8%

The following table sets forth the contribution to consolidated net sales by each business unit:

	Year Ended December 31
	2006			2005
Business Unit
Specialty Papers		70.3	%		65.8	%
Composite Fibers		29.7			34.2
Total		100.0	%		100.0	%

Net sales totaled $986.4 million for the year ended December 31, 2006, an increase of $407.3 million, or 70.3%, compared to the same period a year ago. Net sales from the acquisition of Chillicothe’s carbonless and forms business and the Lydney mill totaled $329.9 million. These acquisitions are reported in the Specialty Papers and Composite Fibers business units, respectively. Organic growth in Specialty Papers was driven by a 4.0% increase in volume and $21.3 million from higher average selling prices in the Specialty Papers business unit. Excluding results of the Lydney mill, Composite Fibers’ volumes shipped increased 15.6%. The translation of foreign currencies unfavorably impacted this business unit’s net sales by $2.5 million and average selling prices declined $3.5 million compared to the same period a year ago.

In connection with the Chillicothe acquisition, we permanently shutdown our Neenah, WI facility. Products previously manufactured at the Neenah facility have been transferred to Chillicothe. The

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results of operations for 2006 include related pre-tax charges of $54.4 million, of which $25.4 million is reflected in the consolidated income statement as components of cost of products sold and $29.0 million is reflected as “Shutdown and restructuring charges.”

Costs of products sold totaled $891.8 million for 2006, an increase of $399.8 million compared with the previous year As discussed above, the 2006 costs of products sold includes a $25.4 million charge for inventory write-downs and accelerated depreciation on property and equipment abandoned in connection with the Neenah shutdown.

In addition to the shutdown charges, the increase in costs of products sold was primarily due to the inclusion of the Chillicothe and Lydney acquisitions and the effect of increased shipping volumes. In addition, higher raw material and energy prices increased costs of products sold by approximately $12.1 million.

Non-Cash Pension Income  Non-cash pension income results from the over-funded status of our pension plans. The amount of pension income recognized each year is determined using various actuarial assumptions and certain other factors, including the fair value of our pension assets as of the beginning of the year. The following summarizes non-cash pension income, before the curtailment charges recorded in connection with the Neenah shutdown during 2006:

	Year Ended December 31
In thousands	2006		2005		Change
Recorded as:
Costs of products sold		$15,480		$14,844		$636
SG&A expense		1,513		1,673		(160	)
Total		$16,993		$16,517		$476

Selling, general and administrative (“SG&A”) expenses totaled $92.5 million in 2006 compared to $67.6 million a year ago. The increase was due to $13.6 million of acquisition integration costs and $16.2 million from the inclusion of the Chillicothe and Lydney acquisitions in the current period’s results of operations. SG&A expenses in 2005 included a $2.7 million charge for certain matters related to our former Ecusta division. In addition, the comparison was favorably affected by lower professional and legal fees in the period to period comparison.

Gain on Sales of Plant, Equipment and Timberlands  The following table summarizes the assets sold in 2006 and 2005.

Dollars in thousands	Acres		Proceeds		Gain
2006
Timberlands		5,923	$	17,130	$	15,677
Other		n/a		3,941		1,717
Total			$	21,071	$	17,394
2005
Timberlands		2,488	$	21,000	$	20,327
Other		n/a		1,778		1,726
Total			$	22,778	$	22,053

Insurance Recoveries  During the 2006 and 2005, we reached successful resolution of certain claims under insurance policies related to the Fox River environmental matter. Insurance recoveries included in the results of operations totaled $0.2 million in 2006 and $20.2 million in 2005. All recoveries were received in cash prior to the end of the applicable period.

Shutdown and Restructuring Charges – Neenah Facility Shutdown  As of June 30, 2006 we permanently shutdown our Neenah facility. The charge incurred in connection with this action was recorded as follows:

	Year Ended
In thousands	December 31, 2006
Recorded as:
Costs of products sold	$	25,371
Shutdown and restructuring charge		29,074
Total	$	54,445

The following table summarizes shutdown reserve activity during 2006:

					Less
					Non-Cash-
					Charges
	Beg.		Amount		and Cash
In thousands	Balance		Accrued		Payments			Balance
Non-cash charges
Accelerated depreciation		$–		$22,466		$(22,466	)		$–
Inventory write-down		–		2,905		(2,905	)		–
Pension curtailments and other retirement benefit charges		–		7,675		(7,675	)		–
Total non cash charges		–		33,046		(33,046	)		–
Cash charges
Severance and benefit continuation		–		7,653		(6,026	)		1,627
Contract termination costs		–		11,367		(11,367	)		–
Other		–		2,379		(1,229	)		1,150
Total cash charges		–		21,399		(18,622	)		2,777
Total		$–		$54,445		$(51,668	)		$2,777

The Neenah facility supported our Specialty Papers business unit. Shutdown of this facility resulted in the elimination of approximately 200 positions.

As part of the Neenah shutdown, we terminated our long-term steam supply contract, as provided for within the agreement, resulting in a termination fee of approximately $11.4 million.

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The results of operations for 2006 and 2005, also include $1.2 million and $1.6 million, respectively, of charges related to the European Restructuring and Optimization (EURO) Program.

Non-operating income (expense)  During April 2006, we completed the placement of a $200 million bond offering, the proceeds of which were used to redeem the then outstanding $150 million notes scheduled to mature in July 2007. In connection with the early redemption, a charge of $2.9 million, related to a redemption premium and the write-off of unamortized debt issuance costs, was recorded in Consolidated Statement of Income as Non-operating expense under the caption “Other-net”.

Income taxes  In 2006 we recorded an income tax benefit at an effective rate of 45.0% compared to an income tax provision at an effective rate of 35.8% in 2005. The beneficial higher effective tax rate in 2006 was primarily due to the effect of state tax law changes and the effect of tax credits, partially offset by the resolution of certain tax matters.

Foreign Currency  We own and operate paper and pulp mills in Germany, France, the United Kingdom and the Philippines. The local currency in Germany and France is the Euro, in the UK the British Pound Sterling, and in the Philippines the currency is the Peso. During 2006, Euro functional currency operations generated approximately 21.0% of our sales and 19.8% of operating expenses and British Pound Sterling operations represented 6.1% of net sales and 6.4% of operating expenses. The translation of the results from these international operations into U.S. dollars is subject to changes in foreign currency exchange rates.

The table below summarizes the impact on reported results that changes in currency exchange rates in the current year compared with the prior year had on our non-U.S. based operations from the conversion of these operation’s non-U.S. dollar denominated revenues and expenses into U.S. dollars.

	Year Ended
In thousands	December 31
	Favorable
	(unfavorable)
Net sales		$2,455
Costs of products sold		(4,045	)
SG&A expenses		(258	)
Income taxes and other		37
Net loss		$(1,811	)

The above table only presents the financial reporting impact of foreign currency translations. It does not present the impact of certain competitive advantages or disadvantages of operating or competing in multi-currency markets.

LIQUIDITY AND CAPITAL RESOURCES

Our business is capital intensive and requires significant expenditures for new or enhanced equipment, for environmental compliance matters and to support our business strategy and research and development efforts. In addition we have mandatory debt service requirements of both principal and interest. The following table summarizes cash flow information for each of the years presented:

	Year Ended
	December 31
In thousands	2007			2006
Cash and cash equivalents at beginning of period	$	21,985		$	57,442
Cash provided by (used for) Operating activities		100,332			(28,427	)
Investing activities		4,733			(181,831	)
Financing activities		(99,371	)		173,388
Effect of exchange rate changes on cash		2,154			1,413
Net cash provided(used)		7,848			(35,457	)
Cash and cash equivalents at end of period	$	29,833		$	21,985

Operating cash flow improved by $128.8 million in the comparison primarily due to improved working capital usage and improved operating results in 2007. The improvement in working capital reflects the use in 2006 of $22.4 million associated with the Lydney acquisition. In addition, cash used for operations in 2006 included $21.7 million to settle a cross currency rate swap, $17.6 million of income tax payments and $18.6 million of cash paid for restructuring charges.

The changes in investing cash flows primarily reflect the use of approximately $158.4 million in 2006 to fund the Lydney and Chillicothe acquisitions. Capital expenditures in the comparison declined $15.5 million in the current year and totaled $29.0 million. In 2008, capital expenditures are expected to total $52 million to $57 million including a $10 million investment to upgrade the capabilities of one of our inclined wire paper machines in Germany.

During 2007 and 2006, cash dividends paid on common stock totaled approximately $16.4 million and $16.0 million, respectively. Our Board of Directors determines what, if any, dividends will be paid to our shareholders. Dividend payment decisions are based upon then-existing factors and conditions and, therefore, historical trends of dividend payments are not necessarily indicative of future payments.

During 2007, net debt declined $92.3 million as proceeds from operations and timberland sales were used to reduce debt outstanding. In the year earlier period borrowings of $158.4 million were used to finance the Lydney and Chillicothe acquisitions.

The significant terms of the debt instruments are more fully discussed in Item 8- Financial Statements,

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Note 18. During 2007, $53 million of required principal payments were made under our Term Loan. In 2008, we are required to make $11 million of quarterly principal repayments. In addition, on April 28, 2006, we completed a private placement offering of $200 million aggregate principal amount of our 71/8% Senior Notes due 2016. We used the net proceeds to redeem $150 million aggregate principal amount of our outstanding 67/8% notes due July 2007, plus the payment of the applicable redemption premium and accrued interest. The following table sets forth our outstanding long-term indebtedness:

	December 31
In thousands	2007			2006
Revolving credit facility, due April 2011		$35,049			$64,795
Term loan, due April 2011		43,000			96,000
71/8% Notes, due May 2016		200,000			200,000
Note payable, due March 2013		34,000			34,000
Total long-term debt		312,049			394,795
Less current portion		(11,008	)		(19,500	)
Long-term debt, excluding current portion		$301,041			$375,295

Subsequent to December 31, 2007, we monetized a note received as consideration from the sale of timberlands. In this monetization, we entered into a new $36.7 million term loan agreement (the “2008 Term Loan”) with a financial institution. The 2008 Term Loan matures in five years, bears interest at a six-month reserve adjusted LIBOR plus a margin rate of 1.20% per annum and is secured by, among other assets, a $43.2 million note received from the buyers of certain timberland sold in November 2007. For a more complete description of the 2008 Term Loan, refer to Note 24.

We are subject to loss contingencies resulting from regulation by various federal, state, local and foreign governmental authorities with respect to the environmental impact of mills we operate, or have operated. To comply with environmental laws and regulations, we have incurred substantial capital and operating expenditures in past years. We anticipate that environmental regulation of our operations will continue to be burdensome and that capital and operating expenditures necessary to comply with environmental regulations will continue, and perhaps increase, in the future. In addition, we may incur obligations to remove or mitigate any adverse effects on the environment resulting from our operations, including the restoration of natural resources and liability for personal injury and for damages to property and natural resources. See Item 8 – Financial Statements – Note 20 for a summary of significant environmental matters.

We expect to meet all of our near and long-term cash needs from a combination of operating cash flow, cash and cash equivalents, our existing credit facility and other long-term debt. However, as discussed in Item 8 – Financial Statements – Note 20, an unfavorable outcome of various environmental matters could have a material adverse impact on our consolidated financial position, liquidity and/or results of operations.

Our credit agreement, as amended, contains a number of customary compliance covenants. In addition, the 71/8% Notes contain a cross default provision that in the event of a default under the credit agreement, the 71/8% Notes would become currently due. As of December 31, 2007, we met all of the requirements of our debt covenants.

Off-Balance-Sheet Arrangements  As of December 31, 2007 and 2006, we had not entered into any off-balance-sheet arrangements. Financial derivative instruments to which we are a party and guarantees of indebtedness, which solely consist of obligations of subsidiaries and a partnership, are reflected in the condensed consolidated balance sheets included herein in Item 8 – Financial Statements.

Contractual Obligations  The following table sets forth contractual obligations as of December 31, 2007.

			Payments Due During the Year
			Ended December 31,
					2009 to		2011 to		2013 and
In millions	Total		2008		2010		2012		beyond
Long-term debt(1)		$450		$31		$64		$71		$284
Operating leases(2)		16		3		4		2		7
Purchase obligations(3)		103		86		17		–		–
Other long term obligations(4),(5)		94		23		17		15		39
Total		$663		$143		$102		$88		$330

(1)

Represents principal and interest payments due on long-term debt. We have $200 million of debt maturing in May 2016 and bearing a fixed rate of interest at 71/8%, payable semiannually and $34 million note maturing in March 2013 and bearing a fixed rate of interest of 3.82%. In addition, at December 31, 2007, $35 million was outstanding under our revolving credit facility and $43 million was outstanding under a term loan. Both the revolving credit facility and the term loan bear a variable interest rate (5.73% as of December 31, 2007) and mature in April 2011.

(2)

Represents rental agreements for various land, buildings, and computer and office equipment.

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(3)	Represents open purchase order commitments and other obligations, primarily for pulpwood contracts with minimum annual purchase obligations. In certain situations, prices are subject to variations based on market prices. In such situations, the information above is based on prices in effect at December 31, 2007 or expectations based on historical experience and/or current market conditions.
(4)	Represents expected benefits to be paid pursuant to medical retirement plans and nonqualified pension plans over the next ten years.
(5)	Since we are not able to reasonably estimate the timing of ultimate payment, the amounts set forth above do not include any payments that may be made related to uncertain tax positions, including potential interest, accounted for in accordance with FASB Interpretation No. 48. As discussed in more detail in Item 8 – Financial Statements, Note 10, “Income Taxes”, such amounts totaled $27.2 million at December 31, 2007.

Critical Accounting Policies and Estimates  The preceding discussion and analysis of our consolidated financial position and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to inventories, long-lived assets, pension and post-retirement obligations, environmental liabilities and income taxes. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

We believe the following represent the most significant and subjective estimates used in the preparation of our consolidated financial statements.

Inventory Reserves  We maintain reserves for excess and obsolete inventories to reflect our inventory at the lower of its stated cost or market value. Our estimate for excess and obsolete inventory is based upon our assumptions about future demand and market conditions. If actual market conditions are more or less favorable than those we have projected, we may need to increase or decrease our reserves for excess and obsolete inventories, which could affect our reported results of operations.

Long-lived Assets  We evaluate the recoverability of our long-lived assets, including plant, equipment, timberlands and intangible assets periodically or whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. Our evaluations include analyses based on the cash flows generated by the underlying assets, profitability information, including estimated future operating results, trends or other determinants of fair value. If the value of an asset determined by these evaluations is less than its carrying amount, a loss is recognized for the difference between the fair value and the carrying value of the asset. Future adverse changes in market conditions or poor operating results of the related business may indicate an inability to recover the carrying value of the assets, thereby possibly requiring an impairment charge in the future.

Pension and Other Post-Retirement Obligations  Accounting for defined-benefit pension plans, and any curtailments thereof, requires various assumptions, including, but not limited to, discount rates, expected rates of return on plan assets and future compensation growth rates. Accounting for our retiree medical plans, and any curtailments thereof, also requires various assumptions, which include, but are not limited to, discount rates and annual rates of increase in the per capita costs of health care benefits. We evaluate these assumptions at least once each year or as facts and circumstances dictate and make changes as conditions warrant. Changes to these assumptions will increase or decrease our reported income, which will result in changes to the recorded benefit plan assets and liabilities.

Environmental Liabilities  We maintain accruals for losses associated with environmental obligations when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated based on existing legislation and remediation technologies. These accruals are adjusted periodically as assessment and remediation actions continue and/or further legal or technical information develops. Such undiscounted liabilities are exclusive of any insurance or other claims against third parties. Recoveries of environmental remediation costs from other parties, including insurance carriers, are recorded as assets when their receipt is assured beyond a reasonable doubt.

Income Taxes  We record the estimated future tax effects of temporary differences between the tax bases of assets and liabilities and amounts reported in our balance sheets, as well as operating loss and tax credit carry forwards. These deferred tax assets and liabilities are measured using enacted tax rates and laws that will be in effect when such amounts are expected to reverse or be utilized. We regularly review our deferred tax assets for recoverability based on

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historical taxable income, projected future taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies. If we are unable to generate sufficient future taxable income, or if there is a material change in the actual effective tax rates or time period within which the underlying temporary differences become taxable or deductible, we could be required to increase the valuation allowance against our deferred tax assets, which may result in a substantial increase in our effective tax rate and a material adverse impact on our reported results.

Significant judgment is required in determining our worldwide provision for income taxes and recording the related assets and liabilities. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is less than certain. We and our subsidiaries are examined by various Federal, State and foreign tax authorities. We regularly assess the potential outcomes of these examinations and any future examinations for the current or prior years in determining the adequacy of our provision for income taxes. We continually assess the likelihood and amount of potential adjustments and adjust the income tax provision, the current liability and deferred taxes in the period in which the facts that give rise to a revision become known.

Other significant accounting policies, not involving the same level of uncertainties as those discussed above, are nevertheless important to an understanding of the Consolidated Financial Statements. Refer to Item 8 – Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements for additional accounting policies.

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

	Year Ended December 31															At December 31, 2007
Dollars in thousands	2008			2009			2010			2011			2012			Carrying Value	Fair Value
Long-term debt
Average principal outstanding
At fixed interest rates – Bond		$200,000			$200,000			$200,000			$200,000			$200,000		$200,000	$192,172
At fixed interest rates – Note payable		34,000			34,000			34,000			34,000			34,000		34,000	31,081
At variable interest rates		72,543			60,160			46,401			13,021			–		78,049	78,047
																$312,049	$301,300
Weighted-average interest rate
Fixed interest rate debt – Bond		7.13	%		7.13	%		7.13	%		7.13	%		7.13	%
Fixed interest rate debt – Note payable		3.82			3.82			3.82			3.82			3.82
Variable interest rate debt		5.83			5.85			5.88			5.89			–

The table above presents average principal outstanding and related interest rates for the next five years. Fair values included herein have been determined based upon rates currently available to us for debt with similar terms and remaining maturities.

Our market risk exposure primarily results from changes in interest rates and currency exchange rates. At December 31, 2007, we had long-term debt outstanding of $312.0 million, of which $78.0 million or 25% was at variable interest rates. Variable-rate debt outstanding represents borrowings under our credit facility that incur interest based on the domestic prime rate or a Eurocurrency rate, at our option, plus a margin. At December 31, 2007, the interest rate paid was 5.73%. A hypothetical 100 basis point increase or decrease in the interest rate on variable rate debt would increase or decrease annual interest expense by $0.8 million.

We are subject to certain risks associated with changes in foreign currency exchange rates to the extent our operations are conducted in currencies other than the U.S. Dollar. During 2007, Euro functional currency operations generated approximately 19.9% of our sales and 18.8% of operating expenses and British Pound Sterling operations represented 7.6% of net sales and 7.8% of operating expenses.

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GLATFELTER

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of P. H. Glatfelter Company (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed under the supervision of the chief executive and chief financial officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States.

As of December 31, 2007, management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based on the framework established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management has determined that the Company’s internal control over financial reporting as of December 31, 2007 is effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States.

Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States, and that receipts and expenditures are being made only in accordance with authorizations of management; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on our financial statements.

The Company’s internal control over financial reporting as of December 31, 2007, has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing herein, which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2007.

The Company’s management, including the chief executive officer and chief financial officer, does not expect that our internal control over financial reporting will prevent or detect all errors and all frauds. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based, in part, on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

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GLATFELTER

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
  P. H. Glatfelter Company

We have audited the internal control over financial reporting of P.H. Glatfelter and subsidiaries (the “Company”) as of December 31, 2007, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2007, of the Company and our report dated March 12, 2008 expressed an unqualified opinion on those financial statements and included an explanatory paragraph regarding the adoption of Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB No. 109” as of January 1, 2007.

Deloitte & Touche LLP

Philadelphia, Pennsylvania

March 12, 2008

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GLATFELTER

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
  P. H. Glatfelter Company

We have audited the accompanying consolidated balance sheets of P. H. Glatfelter Company and subsidiaries (the “Company”) as of December 31, 2007 and 2006, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2007. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of P. H. Glatfelter Company and subsidiaries as of December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2007, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in Note 12 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106, and 132(R),” as of December 31, 2006.

As discussed in Note 3 to the consolidated financial statements, the Company adopted Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB No. 109” as of January 1, 2007.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2007, based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 12, 2008, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Deloitte & Touche LLP

Philadelphia, Pennsylvania

March 12, 2008

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GLATFELTER

P. H. GLATFELTER COMPANY and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

	Year Ended December 31
In thousands, except per share	2007			2006			2005
Net sales		$1,148,323			$986,411			$579,121
Energy sales – net		9,445			10,726			10,078
Total revenues		1,157,768			997,137			589,199
Costs of products sold		1,001,456			891,843			492,023
Gross profit		156,312			105,294			97,176
Selling, general and administrative expenses		116,144			92,481			67,633
Shutdown and restructuring charges		35			30,318			1,564
Gains on disposition of plant, equipment and timberlands, net		(78,685	)		(17,394	)		(22,053	)
Insurance recoveries		–			(205	)		(20,151	)
Operating income		118,818			94			70,183
Other nonoperating income (expense)
Interest expense		(29,022	)		(24,453	)		(13,083	)
Interest income		3,933			3,132			2,012
Other – net		205			(1,001	)		1,028
Total other nonoperating expense		(24,884	)		(22,322	)		(10,043	)
Income (loss) before income taxes		93,934			(22,228	)		60,140
Income tax provision (benefit)		30,462			(9,992	)		21,531
Net income (loss)		$63,472			$(12,236	)		$38,609
Weighted average shares outstanding
Basic		45,035			44,584			44,013
Diluted		45,422			44,584			44,343
Earnings (loss) per share
Basic		$1.41			$(0.27	)		$0.88
Diluted		1.40			(0.27	)		0.87

The accompanying notes are an integral part of the consolidated financial statements.

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GLATFELTER

P. H. GLATFELTER COMPANY and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

	December 31
Dollars in thousands, except par values	2007			2006
Assets
Current assets
Cash and cash equivalents		$29,833			$21,985
Accounts receivable (less allowance for doubtful accounts: 2007 – $3,117; 2006 – $3,613)		122,980			128,255
Inventories		193,042			192,281
Prepaid expenses and other current assets		27,557			32,517
Total current assets		373,412			375,038
Plant, equipment and timberlands – net		519,866			528,867
Other assets		393,789			321,738
Total assets		$1,287,067			$1,225,643
Liabilities and Shareholders’ Equity
Current liabilities
Current portion of long-term debt		$11,008			$19,500
Short-term debt		1,136			2,818
Accounts payable		73,195			70,966
Dividends payable		4,063			4,035
Environmental liabilities		7,038			5,489
Other current liabilities		101,116			90,482
Total current liabilities		197,556			193,290
Long-term debt		301,041			375,295
Deferred income taxes		189,156			182,659
Other long-term liabilities		123,246			86,031
Total liabilities		810,999			837,275
Commitments and contingencies		–			–
Shareholders’ equity
Common stock, $.01 par value; authorized – 120,000,000 shares; issued – 54,361,980 shares (including shares in treasury: 2007 – 9,220,726; 2006 – 9,540,770)		544			544
Capital in excess of par value		44,697			42,288
Retained earnings		563,608			519,489
Accumulated other comprehensive income (loss)		4,061			(32,337	)
		612,910			529,984
Less cost of common stock in treasury		(136,842	)		(141,616	)
Total shareholders’ equity		476,068			388,368
Total liabilities and shareholders’ equity		$1,287,067			$1,225,643

The accompanying notes are an integral part of the consolidated financial statements.

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GLATFELTER

P.H. GLATFELTER COMPANY and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31
In thousands	2007			2006			2005
Operating activities
Net income (loss)		$63,472			$(12,236	)		$38,609
Adjustments to reconcile to net cash (used) provided by operations:
Depreciation, depletion and amortization		56,001			50,021			50,647
Reserve for environmental matters		26,000
Pension income		(12,896	)		(16,993	)		(16,517	)
Restructuring charges		35			37,066			1,564
Deferred income taxes		8,004			(12,726	)		3,020
Gains on dispositions of plant, equipment and timberlands, net		(78,685	)		(17,394	)		(22,053	)
Share-based compensation		3,850			2,335			630
Change in operating assets and liabilities
Accounts receivable		16,662			(17,622	)		(5,876	)
Inventories		8,493			(8,869	)		(6,195	)
Prepaid and other assets		(2,461	)		4,413			3,995
Liabilities		11,857			(36,422	)		(4,956	)
Net cash (used) provided by operations		100,332			(28,427	)		42,868
Investing activities
Expenditures for purchases of plant, equipment and timberlands		(28,960	)		(44,460	)		(31,024	)
Proceeds from disposal of plant, equipment and timberlands		41,616			21,071			22,450
Proceeds from sale of subsidiary, net of cash divested		–			–			545
Acquisitions, net of cash acquired		(7,923	)		(158,442	)		–
Net cash provided (used) by investing activities		4,733			(181,831	)		(8,029	)
Financing activities
Net (repayments of) proceeds from revolving credit facility		(30,656	)		43,522			(1,117	)
Net (repayments of) proceeds from other short-term debt		(6,916	)		(995	)		384
Net (repayments of) net proceeds from $100 million term loan facility		(53,000	)		94,829			–
Payment of dividends		(16,350	)		(16,023	)		(15,839	)
Net proceeds from $200 million 71/8% note offering		–			196,440			–
Repayment of $150 million 67/8 notes		–			(152,675	)		–
Proceeds and tax benefits from stock options exercised and other		7,551			8,290			1,414
Net cash provided (used) by financing activities		(99,371	)		173,388			(15,158	)
Effect of exchange rate changes on cash		2,154			1,413			(2,190	)
Net increase (decrease) in cash and cash equivalents		7,848			(35,457	)		17,491
Cash and cash equivalents at the beginning of period		21,985			57,442			39,951
Cash and cash equivalents at the end of period		$29,833			$21,985			$57,442
Supplemental cash flow information
Cash paid for
Interest		$28,498			$26,218			$12,378
Income taxes		2,614			17,579			17,443

The accompanying notes are an integral part of the consolidated financial statements.

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GLATFELTER

P. H. GLATFELTER COMPANY and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
For the Years Ended December 31, 2007, 2006 and 2005

												Accumulated
			Capital in						Deferred			Other						Total
	Common		Excess of			Retained			Compen-			Comprehensive			Treasury			Shareholders’
In thousands, except shares outstanding	Stock		Par Value			Earnings			sation			Income (Loss)			Stock			Equity
Balance at January 1, 2005	$	544	$	41,828		$	525,056			$(1,275	)	$	8,768		$	(154,551	)	$	420,370
Net income							38,609												38,609
Other comprehensive income
Foreign currency translation adjustments													(9,619	)
Additional minimum pension liability, net of tax benefits of $2,831													(4,492	)
Other comprehensive income													(14,111	)					(14,111	)
Comprehensive income																			24,498
Tax effect on employee stock options exercised				76															76
Cash dividends declared							(15,855	)											(15,855	)
Issuance of restricted stock units, net				1,894						(1,020	)								874
Delivery of treasury shares
Restricted stock awards
401(k) plans				(84	)											917			833
Director compensation				(21	)											123			102
Employee stock options exercised – net				(243	)											1,657			1,414
Balance at December 31, 2005		544		43,450			547,810			(2,295	)		(5,343	)		(151,854	)		432,312
Net loss							(12,236	)											(12,236	)
Foreign currency translation adjustments													12,343
Adjustment to minimum pension liability prior to adoption of SFAS No. 158													583
Other comprehensive income													12,926						12,926
Comprehensive income																			690
Reversal of minimum pension liability under SFAS No. 158													3,909						3,909
Additional net pension liability, net of tax benefit of $27,318													(43,829	)					(43,829	)
Adoption of SFAS No. 123(R)				(2,295	)					2,295
Tax effect on employee stock options exercised				792															792
Cash dividends declared							(16,085	)											(16,085	)
Share-based compensation expense – RSU				1,107															1,107
Delivery of treasury shares
Performance Shares				7												200			207
401(k) plans				46												1,608			1,654
Director compensation				8												105			113
Employee stock options exercised – net				(827	)											8,325			7,498
Balance at December 31, 2006		544		42,288			519,489			–			(32,337	)		(141,616	)		388,368
Comprehensive income
Net income							63,472												63,472
Foreign currency translation adjustments													24,966
Change in benefit plans’ net funded status, net of tax benefit of $7,167													11,432
Other comprehensive income													36,398						36,398
Comprehensive income																			99,870
Cumulative effect of adopting of FIN 48							(2,974	)											(2,974	)
Tax effect on employee stock options exercised				89															89
Cash dividends declared							(16,379	)											(16,379	)
Share-based compensation expense				2,348															2,348
Delivery of treasury shares
401(k) plans				85												3,049			3,134
Director compensation				1												162			163
Employee stock options exercised – net				(114	)											1,563			1,449
Balance at December 31, 2007	$	544	$	44,697		$	563,608			$–		$	4,061		$	(136,842	)	$	476,068

The accompanying notes are an integral part of the consolidated financial statements.

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GLATFELTER

P. H. GLATFELTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   ORGANIZATION

P. H. Glatfelter Company and subsidiaries (“Glatfelter”) is a manufacturer of specialty papers and engineered products. Headquartered in York, Pennsylvania, our manufacturing facilities are located in Spring Grove, Pennsylvania; Chillicothe and Freemont, Ohio; Gloucestershire (Lydney), England; Caerphilly, Wales, Gernsbach, Germany; Scaër, France and the Philippines. Our products are marketed throughout the United States and in over 85 other countries, either through wholesale paper merchants, brokers and agents or directly to customers.

2.   ACCOUNTING POLICIES

Principles of Consolidation The consolidated financial statements include the accounts of Glatfelter and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.

Accounting Estimates  The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingencies as of the balance sheet date and the reported amounts of revenues and expenses during the reporting period. Management believes the estimates and assumptions used in the preparation of these consolidated financial statements are reasonable, based upon currently available facts and known circumstances, but recognizes that actual results may differ from those estimates and assumptions.

Cash and Cash Equivalents  We classify all highly liquid instruments with an original maturity of three months or less at the time of purchase as cash equivalents.

Inventories Inventories are stated at the lower of cost or market. Raw materials and in-process and finished inventories of our domestic manufacturing operations are valued using the last-in, first-out (LIFO) method, and the supplies inventories are valued principally using the average-cost method. Inventories at our foreign operations are valued using a method that approximates average cost.

Plant, Equipment and Timberlands  For financial reporting purposes, depreciation is computed using the straight-line method over the estimated useful lives of the respective assets. For income taxes purposes, depreciation is primarily calculated using accelerated methods over lives established by statute or U.S. Treasury Department procedures. Provision is made for deferred income taxes applicable to this difference.

The range of estimated service lives used to calculate financial reporting depreciation for principal items of plant and equipment are as follows:

Buildings	10 – 45 Years
Machinery and equipment	7 – 35 Years
Other	4 – 40 Years

Maintenance and Repairs  Maintenance and repairs costs are charged to income and major renewals and betterments are capitalized. At the time property is retired or sold, the net carrying value is eliminated and any resultant gain or loss is included in income.

Valuation of Long-lived Assets and Goodwill  We evaluate long-lived assets for impairment when a specific event indicates that the carrying value of an asset may not be recoverable. Recoverability is assessed based on estimates of future cash flows expected to result from the use and eventual disposition of the asset. If the sum of expected undiscounted cash flows is less than the carrying value of the asset, the asset’s fair value is estimated and an impairment loss is recognized for any deficiencies. Goodwill is reviewed for impairment on a discounted cash flow basis at least annually. Impairment losses, if any, are recognized for the amount by which the carrying value of the asset exceeds its fair value.

Asset Retirement Obligations – In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 143, “Accounting for Asset Retirement Obligations”, as interpreted by Financial Accounting Standards Board Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations, an interpretation of SFAS No. 143 (“FIN 47”), we accrue asset retirement obligations, if any, in the period in which obligations relating to future asset retirements are incurred. Under these standards, costs are to be accrued at estimated fair value, and a related long-lived asset is capitalized. Over time, the liability is accreted to its settlement value and the capitalized cost is depreciated over the useful life of the related asset for which the obligation exists. Upon settlement of the liability, we recognize a gain or loss for any difference between the settlement amount and the liability recorded. Asset retirement obligations with indeterminate settlement dates are not recorded until such dates can be reasonably estimated. At

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GLATFELTER

December 31, 2007, we do not have any obligations required to be accrued under FIN 47.

Income Taxes  Income taxes are determined using the asset and liability method of accounting for income taxes in accordance with SFAS No. 109. Under SFAS No. 109, tax expense includes US and international income taxes plus the provision for US taxes on undistributed earnings of international subsidiaries not deemed to be permanently invested. Tax credits and other incentives reduce tax expense in the year the credits are claimed. Certain items of income and expense are not reported in tax returns and financial statements in the same year. The tax effect of such temporary differences is reported in deferred income taxes. Deferred tax assets are recognized if it is more likely than not that the assets will be realized in future years. We establish a valuation allowance for deferred tax assets for which realization is not likely.

Income tax contingencies are accounted for in accordance with FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”). Significant judgment is required in determining our worldwide provision for income taxes and recording the related assets and liabilities. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is less than certain. We and our subsidiaries are examined by various Federal, State and foreign tax authorities. We regularly assess the potential outcomes of these examinations and any future examinations for the current or prior years in determining the adequacy of our provision for income taxes. We continually assess the likelihood and amount of potential adjustments and record any necessary adjustments in the period in which the facts that give rise to a revision become known.

Treasury Stock  Common stock purchased for treasury is recorded at cost. At the date of subsequent reissue, the treasury stock account is reduced by the cost of such stock on the weighted-average cost basis.

Foreign Currency Translation  Our subsidiaries outside the United States use their local currency as the functional currency. Accordingly, translation gains and losses and the effect of exchange rate changes on transactions designated as hedges of net foreign investments are included as a component of other comprehensive income (loss). Transaction gains and losses are included in income in the period in which they occur.

Revenue Recognition  We recognize revenue on product sales when the customer takes title and assumes the risks and rewards of ownership. We record revenue net of an allowance for customer returns and rebates.

Revenue from energy sales is recognized when electricity is delivered to the customer. Certain costs associated with the production of electricity, such as fuel, labor, depreciation and maintenance are netted against energy sales for presentation on the Consolidated Statements of Income. Costs netted against energy sales totaled $10.2 million, $8.4 million and $7.3 million for the years ended December 31, 2007, 2006 and 2005, respectively. Our current contract to sell electricity generated in excess of our own use expires in the year 2010 and requires that the customer purchase all of our excess electricity up to a certain level. The price for the electricity is determined pursuant to a formula and varies depending upon the amount sold in any given year.

Environmental Liabilities  Accruals for losses associated with environmental obligations are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated based on existing legislation and remediation technologies. Costs related to environmental remediation are charged to expense. These accruals are adjusted periodically as assessment and remediation actions continue and/or further legal or technical information develops. Such undiscounted liabilities are exclusive of any insurance or other claims against third parties. Environmental costs are capitalized if the costs extend the life of the asset, increase its capacity and/or mitigate or prevent contamination from future operations. Recoveries of environmental remediation costs from other parties, including insurance carriers, are recorded as assets when their receipt is assured beyond a reasonable doubt.

Accumulated Other Comprehensive Income  The amounts reported on the consolidated Statement of Shareholders’ Equity for Accumulated Other Comprehensive Income consist of $32.4 million of additional pension liability; net of tax, and $36.5 million of gains from foreign currency translation adjustments.

Stock-based Compensation  Effective January 1, 2006, we adopted SFAS No. 123(R), “Share-Based Payment” utilizing the modified prospective method. This standard requires employee stock options and other stock-based compensation awards to be accounted for under the fair value method, and eliminates the ability to account for these

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GLATFELTER

instruments under the intrinsic value method prescribed by APB Opinion No. 25, and allowed under the original provisions of SFAS No. 123, “Accounting for Stock-Based Compensation”. The adoption of SFAS No. 123 (R) did not have a material effect on our consolidated results of operation or financial position no stock options were granted in 2006 and 2005.

Earnings Per Share  Basic earnings per share are computed by dividing net income by the weighted-average common shares outstanding during the respective periods. Diluted earnings per share are computed by dividing net income by the weighted-average common shares and common share equivalents outstanding during the period. The dilutive effect of common share equivalents is considered in the diluted earnings per share computation using the treasury stock method.

Fair Value of Financial Instruments  The amounts reported on the Consolidated Balance Sheets for cash and cash equivalents, accounts receivable, other assets, and short-term debt approximate fair value. The following table sets forth carrying value and fair value of long-term debt:

In thousands	2007				2006
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Long-term debt	$	312,049	$	301,300	$	394,795	$	398,689

3.   RECENT PRONOUNCEMENTS

Effective January 1, 2007, we adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”). The Interpretation prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. The cumulative effect adjustment of $3.0 million was recognized as a reduction to retained earnings.

The following table provides a breakdown of the incremental effect of applying FIN 48 on individual line items in the consolidated balance sheet as of January 1, 2007:

						After
	Before		Effect of			adoption of
In thousands	FIN 48		FIN 48			FIN 48
Prepaid expenses and other current assets	$	32,517	$	193			$32,710
Other current liabilities		90,482		(7,214	)		83,268
Other long-term liabilities		86,031		21,690			107,721
Deferred income taxes		182,659		(11,309	)		171,350
Retained earnings		519,489		(2,974	)		516,515

Effective December 31, 2006 we adopted the provisions of SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment to FASB Statements No. 87, 88, 106, and 132(R)”, (“SFAS No. 158”) which requires entities to recognize the over funded or under funded status of pension plans and other post retirement benefit plans. In the year of adoption, the effect of recognizing additional liabilities is affected through a charge to accumulated other comprehensive income. Accordingly, the accompanying financial statements include an after tax charge of $43.8 million in 2006 to adopt SFAS No. 158.

In September 2006, SFAS No. 157, “Fair Value Measurements”, was issued. SFAS No. 157, which defines fair value, establishes a framework for measurement and requires expanded disclosures about the fair value measurements, is effective for us beginning January 1, 2008. We do not expect the adoption of SFAS No. 157 to have a material impact on our consolidated financial position or results of operations.

In December 2007, SFAS No. 141(R), “Business Combinations” was issued. This statement establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. SFAS No. 141(R) also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. It also changes the recognition of assets acquired and liabilities assumed arising from contingencies, requires the capitalization of in-process research and development at fair value, and requires the expensing of acquisition-related costs as incurred. With respect to us, SFAS No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after January 1, 2009. We expect SFAS No. 141(R) will have an impact on accounting for business combinations once

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adopted but the effect is dependent upon acquisitions at that time.

4.   ACQUISITIONS

Metallised Products Limited  On November 30, 2007, through Glatfelter-UK Limited (“GLT-UK”), a wholly-owned subsidiary, we completed our acquisition of Metallised Products Limited (“MPL”), a privately owned company that manufactures a variety of metallized paper products for consumer and industrial applications. MPL is based in Caerphilly, Wales.

Under terms of the agreement, we agreed to purchase the stock of MPL for $7.2 million cash and assumed $5.8 million of debt in addition to $1.4 million of transaction costs. The purchase price is subject to adjustments based on working capital and other factors. The acquisition was financed from our existing cash balance. This facility employs about 165 people and had 2007 revenues of approximately $53.4 million.

The following table summarizes the preliminary allocation of the purchase price to assets acquired and liabilities assumed:

In thousands
Assets acquired:
Cash	$730
Accounts receivable	7,685
Inventory	4,788
Property and equipment	10,036
Other assets	891
Goodwill	2,167
	26,297
Less acquisition related liabilities including accounts payable and accrued expenses	11,814
Long term debt	5,830
	17,644
Total	$8,653

Lydney  On March 8, 2006, we entered into a definitive agreement to acquire, through GLT-UK, certain assets and liabilities of J R Crompton Limited (“Crompton”), a global supplier of wet laid non-woven products based in Manchester, United Kingdom. On February 7, 2006, Crompton was placed into Administration, the U.K. equivalent of bankruptcy.

Effective March 13, 2006, we completed our purchase of Crompton’s Lydney mill and related inventory, located in Gloucestershire, UK for $65.0 million in cash in addition to $4.2 million of transaction costs. The Lydney facility employed about 240 people, produces a broad portfolio of wet laid non-woven products, including tea bags and coffee filter papers, double-sided adhesive tape substrates and battery grid pasting tissue, and had 2005 revenues of approximately $75 million. The purchase price was financed with existing cash balances and borrowings under our credit facility.

The following table summarizes the allocation of the purchase price to assets acquired and liabilities assumed:

In thousands
Assets acquired:
Inventory	$8,389
Property and equipment	56,885
Intangibles and other assets	9,325
	74,599
Less acquisition related liabilities	(5,374	)
Total	$69,225

Chillicothe  On April 3, 2006, we completed our acquisition of Chillicothe, the carbonless business operations of NewPage Corporation, for $83.3 million in cash, in addition to approximately $5.9 million of transaction and other related costs. The Chillicothe assets consist of a paper making facility in Chillicothe, Ohio with annual production capacity approximating 400,000 tons-per-year and coating operations based in Fremont, Ohio with annual revenue of approximately $440 million. The Chillicothe acquisition was financed with borrowings under our credit facility.

The following table summarizes the allocation of the purchase price to assets acquired and liabilities assumed:

In thousands
Assets acquired:
Accounts receivable	$43,618
Inventory	91,580
Property and equipment	1,959
Prepaid pension and other assets	11,416
Intangibles – customer relationships	6,074
	154,647
Less acquisition related liabilities including accounts payable and accrued expenses	(65,430	)
Total	$89,217

Pro-Forma Financial Information  The information necessary to provide certain pro forma financial data for the Chillicothe acquisition relative to net income and earnings per share is not readily available due to the nature of the accounting and reporting structure of the acquired operation prior to the acquisition date. Pro forma consolidated net sales for 2006 and 2005 were approximately $1.1 billion and $1.0 billion, respectively, assuming the acquisition occurred at the beginning of the respective periods. For the full year 2005, on a pro forma basis, net income was $40.9 million and diluted EPS was $0.92.

This unaudited pro forma financial information above is not necessarily indicative of what the operating results would have been had the acquisition been completed at the beginning of the respective period nor is it indicative of future results.

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5.   NEENAH FACILITY SHUTDOWN

In connection with our agreement to acquire the Chillicothe operations, we committed to a plan to permanently close the Neenah, WI facility. Production at this facility ceased effective June 30, 2006 and certain products previously manufactured at the Neenah facility have been transferred to Chillicothe.

The remaining reserve as of December 31, 2006 associated with this restructuring initiative totaled $2.8 million. During 2007, we made payments totaling $1.7 million; thus, the remaining reserve balance was $1.1 million at December 31, 2007.

The following table summarizes shutdown reserve activity during the year ended December 31, 2006:

					Less non-
					cash
					charges
	Beg.		Amount		and cash
In thousands	balance		Accrued		payments			Balance
Non-cash charges
Accelerated depreciation	$	–	$	22,466	$	(22,466	)		$–
Inventory write-down		–		2,905		(2,905	)		–
Pension curtailments and other retirement benefit charges		–		7,675		(7,675	)		–
Total non cash charges		–		33,046		(33,046	)		–
Cash charges
Severance and benefit continuation		–		7,653		(6,026	)		1,627
Contract termination costs		–		11,367		(11,367	)		–
Other		–		2,379		(1,229	)		1,150
Total cash charges		–		21,399		(18,622	)		2,777
Total	$	–	$	54,445	$	(51,668	)		$2,777

The Neenah shutdown resulted in the elimination of approximately 200 positions that had been supporting our Specialty Papers business unit. Approximately $25.4 million of the Neenah shutdown related charges are recorded as part of costs of products sold in the accompanying statements of income. The amounts accrued for severance and benefit continuation are recorded as other current liabilities in the accompanying consolidated balance sheets. As part of the Neenah shutdown, we terminated our long-term steam supply contract, as provided for within the contract, resulting in a termination fee of approximately $11.4 million as of the end of the second quarter 2006.

6.   RESTRUCTURING CHARGES

European Restructuring and Optimization Program (“EURO Program”)  During the fourth quarter of 2005, we began to implement this restructuring program, a comprehensive series of initiatives designed to improve the performance of our Composite Fibers business unit. In 2006 and 2005, we recorded restructuring charges of $1.2 million and $1.6 million, respectively, associated with the related work force efficiency plans at the Gernsbach, Germany facility. This charge reflects severance, early retirement and related costs for the affected employees. Payments related to these restructuring charges will be made over a 2-3 year period.

7.   GAIN ON DISPOSITIONS OF PLANT, EQUIPMENT AND TIMBERLANDS

During 2007, 2006 and 2005, we completed sales of timberlands. The following table summarizes these transactions.

Dollars in thousands	Acres	Proceeds		Gain
2007
Timberlands	37,448	$	84,409	$	78,958
Other	n/a		377		(273	)
Total		$	84,786	$	78,685
2006
Timberlands	5,923	$	17,130	$	15,677
Other	n/a		3,941		1,717
Total		$	21,071	$	17,394
2005
Timberlands	2,488	$	21,000	$	20,327
Other	n/a		1,778		1,726
Total		$	22,778	$	22,053

In connection with the asset sales set forth above we received cash proceeds with the exception of the sale of approximately 26,000 acres of timberland completed in November 2007. As consideration for the timberland sold in this transaction we received a $43.2 million, 20-year interest-bearing note due from the buyer, Glawson Investments Corp. (“Glawson”), a Georgia corporation, and GIC Investments LLC, a Delaware limited liability company owned by Glawson. The note receivable is fully secured by a letter of credit issued by The Royal Bank of Scotland plc.

8.   EARNINGS PER SHARE

The following table sets forth the details of basic and diluted earnings per share (EPS):

In thousands, except per share	2007		2006			2005
Net income (loss)		$63,472		$(12,236	)		$38,609
Weighted average common shares outstanding used in basic EPS		45,035		44,584			44,013
Common shares issuable upon exercise of dilutive stock options, restricted stock awards and performance awards		387		–			330
Weighted average common shares outstanding and common share equivalents used in diluted EPS		45,422		44,584			44,343
Basic EPS		$1.41		$(0.27	)		$0.88
Diluted EPS		1.40		(0.27	)		0.87

The following table sets forth the potential common shares outstanding for stock options and restricted stock units that were not included in the computation of diluted EPS for the period indicated, because their effect would be anti-dilutive.

In thousands	2007		2006		2005
Potential common shares		438		1,280		758

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9.   GAIN ON INSURANCE RECOVERIES

During 2006 and 2005, we reached successful resolution of certain claims under insurance policies related to the Fox River environmental matter. Insurance recoveries included in the results of operations totaled $0.2 million and $20.2 million in 2006 and 2005, respectively, and were received in cash.

10.   INCOME TAXES

Income taxes are recognized for the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. The effects of income taxes are measured based on enacted tax laws and rates.

Income taxes for 2007 include $5.7 million of tax benefit adjustments related to the revaluation of deferred tax assets and liabilities due to tax legislation enacted in July 2007 by Germany that reduced the corporate income tax rate.

The provision for income taxes from operations consisted of the following:

	Year Ended December 31
In thousands	2007			2006			2005
Current taxes
Federal		$8,388			$1,009			$14,881
State		4,422			1,013			3,145
Foreign		6,397			712			485
		19,207			2,734			18,511
Deferred taxes and other
Federal		11,766			(11,903	)		3,239
State		2,674			(2,970	)		(1,905	)
Foreign		(3,185	)		2,147			1,686
		11,255			(12,726	)		3,020
Income tax provision (benefit)		$30,462			$(9,992	)		$21,531

The amounts set forth above for total deferred taxes and other include deferred taxes of $8.0 million, $(12.7) million and $3.0 million at December 31, 2007, 2006 and 2005, respectively. Other taxes totaled $3.3 million at December 31, 2007 and related to uncertain tax positions expected to be taken in future tax filings.

The following are domestic and foreign components of pretax income from operations:

	Year Ended December 31
In thousands	2007		2006			2005
United States		$70,051		$(30,010	)		$55,865
Foreign		23,883		7,782			4,275
Total pretax income (loss)		$93,934		$(22,228	)		$60,140

A reconciliation between the income tax provision, computed by applying the statutory federal income tax rate of 35% to income before income taxes and the actual income tax.

	Year Ended December 31
	2007			2006			2005
Federal income tax provision at statutory rate		35.0	%		(35.0	)%		35.0	%
State income taxes, net of federal income tax benefit		3.5			(6.7	)		1.3
Foreign income tax rate differential		0.2			3.8			(0.2	)
Change in statutory tax rates		(5.8	)		–			–
Tax credits		(2.8	)		(8.1	)		(3.1	)
Provision for tax matters, net		4.0			3.8			2.2
Other		(1.7	)		(2.8	)		0.6
Total provision for income taxes		32.4	%		(45.0	)%		35.8	%

The sources of deferred income taxes were as follows at December 31:

	2007						2006
				Non						Non-
	Current			current			Current			current
	Asset			Asset			Asset			Asset
In thousands	(Liability)			(Liability)			(Liability)			(Liability)
Reserves		$10,301			$10,008			$8,239			$5,310
Compensation		3,369			2,819			4,460			2,199
Post-retirement benefits		1,409			16,104			1,983			20,266
Property		104			(109,858	)		–			(112,686	)
Pension		833			(98,445	)		182			(88,719	)
Installment sales		–			(25,492	)		–			(10,701	)
Inventories		366			–			2,453			–
Other		501			(1,454	)		472			(5,293	)
Tax carry forwards		–			29,458			–			29,459
Subtotal		16,883			(176,860	)		17,789			(160,165	)
Valuation allowance		(3,280	)		(12,296	)		(59	)		(22,494	)
Total	$	13,603		$	(189,156	)	$	17,730		$	(182,659	)

Current and non-current deferred tax assets and liabilities are included in the following balance sheet captions:

	Year Ended December 31
In thousands	2007		2006
Prepaid expenses and other current assets		$16,982		$18,018
Other current liabilities		3,379		288
Deferred income taxes		189,156		182,659

At December 31, 2007, we had state and foreign tax net operating loss (“NOL”) carryforwards of $103.6 million and $2.4 million, respectively. These NOL carryforwards are available to offset future taxable income, if any. The state NOL carryforwards expire between 2008 and 2027; the foreign NOL carryforwards do not expire.

In addition, we had federal charitable contribution carryforwards of $3.6 million, which expire in 2008 and 2011, federal foreign tax credit carryforwards of $0.3 million, which expire in 2013, and various state tax credit carryforwards totaling $0.4 million, which expire between 2008 and 2020.

We have established a valuation allowance of $15.6 million against the net deferred tax assets, primarily due to the uncertainty regarding the ability to utilize state tax carryforwards and certain deferred foreign tax credits.

Tax credits and other incentives reduce tax expense in the year the credits are claimed. In 2007, we recorded tax credits of $2.6 million related to Research and Development credits, fuels tax, and the

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electricity production tax credits. In 2006 and 2005 similar tax credits of $1.8 million and $1.8 million, respectively, were recorded.

At December 31, 2007 and 2006, unremitted earnings of subsidiaries outside the United States deemed to be permanently reinvested totaled $92.5 million and $69.9 million, respectively. Because the unremitted earnings of subsidiaries are deemed to be permanently reinvested as of December 31, 2007, no deferred tax liability has been recognized in our consolidated financial statements.

Effective January 1, 2007, we adopted FIN 48 at which time we had $20.7 million of gross unrecognized tax benefits. If recognized, approximately $17.0 million would be recorded as a component of income tax expense, thereby affecting our effective tax rate. We accrue interest and penalties related to unrecognized tax benefits as income tax expense. As of January 1, 2007, we had accrued interest related to unrecognized tax benefits of $1.0 million and we had no accrued penalty expenses associated with uncertain tax positions.

A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows:

In millions	2007
Balance at January 1, 2007		$20.7
Increases in tax positions for prior years		0.3
Decreases in tax positions for prior years		(0.5	)
Increases in tax positions for current year		6.1
Lapse in statue of limitations		(0.5	)
Balance at December 31, 2007		$26.1

The current year increase was primarily due to tax positions taken or expected to be taken on certain state income tax returns associated with timberland sales.

The total amount of net unrecognized tax benefits that, if recognized, would affect the effective tax rate was $22.3 million at December 31, 2007.

We, or one of our subsidiaries, file income tax returns with the United States Internal Revenue Service, as well as various state and foreign authorities. The following table summarizes tax years that remain subject to examination by major jurisdiction:

	Open Tax Year
	Examination in	Examination not yet
Jurisdiction	progress	initiated
United States
Federal	2005-2006	2004 and 2007
State	2004	2003 – 2007
Germany(1)	2003-2006	2007
France	N/A	2006 – 2007
United Kingdom	N/A	2006 – 2007
Philippines	2004 – 2006	2007

(1) – includes provincial or similar local jurisdictions, as applicable.

The amount of income taxes we pay is subject to ongoing audits by federal, state and foreign tax authorities, which often result in proposed assessments. Management performs a comprehensive review of its global tax positions on a quarterly basis and accrues amounts for uncertain tax positions. Based on these reviews and the result of discussions and resolutions of matters with certain tax authorities and the closure of tax years subject to tax audit, reserves are adjusted as necessary. However, future results may include favorable or unfavorable adjustments to our estimated tax liabilities in the period the assessments are determined or resolved or as such statutes are closed. Due to potential for resolution of Federal, state and foreign examinations, and the expiration of various statutes of limitation, it is reasonably possible our gross unrecognized tax benefits balance may change within the next twelve months by a range of zero to $0.8 million.

We recognize interest and penalties related to uncertain tax positions as income tax expense. Interest expense recognized in 2007 totaled $1.8 million. We did not record any penalties associated with uncertain tax positions during 2007.

11.   STOCK-BASED COMPENSATION

On April 25, 2005, shareholders approved the P. H. Glatfelter 2005 Long Term Incentive Plan (“2005 Plan”) to authorize, among other things, the issuance of up to 1,500,000 shares of Glatfelter common stock to eligible participants. The 2005 Plan provides for the issuance of restricted stock units, restricted stock awards, non-qualified stock options, performance shares, incentive stock options and performance units. As of December 31, 2007, 729,748 shares of common stock were available for future issuance under the 2005 Plan.

During the 2007 and 2006, we recognized stock-based compensation expense totaling $3.8 million and $2.3 million, respectively, inclusive of matching 401K contributions. Since the approval of the 2005 Plan we have issued to eligible participants restricted stock units and stock only stock appreciation rights.

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Information with respect to each of these forms of stock-based compensation follows:

Restricted Stock Units (“RSU”)  Awards of RSU are made under our 2005 Plan. Under terms of the awards, the RSUs vest based solely on the passage of time on a graded scale over a three, four, and five-year period. The following table summarizes RSU activity during the past three years.

Units	2007			2006			2005
Beginning balance		411,154			290,662			157,280
Granted		127,423			145,398			158,982
Forfeited		(33,404	)		(24,906	)		(25,600	)
Ending balance		505,173			411,154			290,662
In thousands
Compensation expense		$1,768			$1,107			$919

The weighted average grant fair value per unit for awards in 2007, 2006 and 2005 was $15.32, $16.10 and $13.98 respectively. As of December 31, 2007, unrecognized compensation expense for outstanding RSUs totaled $2.8 million. The weighted average remaining period over which the expense will be recognized is 3.25 years.

Non-Qualified Stock Options and Stock Only Stock Appreciation Rights (SOSARs)  The following tables summarize the activity with respect to non-qualified stock options and SOSARS:

	2007					2006					2005
				Weighted-					Weighted-					Weighted-
				Average					Average					Average
Non-Qualified Options	Shares			Exercise Price		Shares			Exercise Price		Shares			Exercise Price
Outstanding at beginning of year		906,210		$	14.06		1,553,209		$	14.06		2,098,612		$	14.65
Granted		–					–			–		–			–
Exercised		(105,190	)		13.78		(560,239	)		13.38		(111,542	)		12.67
Canceled		(100,750	)		17.07		(86,760	)		17.27		(433,861	)		17.30
Outstanding at end of year		700,270			13.81		906,210			14.17		1,553,209			14.06
Exercisable at end of year		700,270		$	13.81		906,210		$	14.17		1,547,422		$	14.07

The following table summarizes information about stock options outstanding at December 31, 2007:

	Options Outstanding
			Weighted-				Options Exercisable
			Average		Weighted-				Weighted-
			Remaining		Average				Average
Non-Qualified Options	Shares		Contractual Life		Exercise Price		Shares		Exercise Price
$10.78 to $12.41		159,570		2.1		12.07		159,570		12.07
12.95 to 14.44		319,900		3.5		13.36		319,900		13.36
15.44 to 17.16		196,300		4.0		15.47		196,300		15.47
17.54 to 18.78		24,500		3.6		17.68		24,500		17.68
		700,270						700,270

All options expire on the earlier of termination or, in some instances, a defined period subsequent to termination of employment, or ten years from the date of grant. The exercise price represents the quoted market price of Glatfelter common stock on the date of grant, or the average quoted market prices of Glatfelter common stock on the first day before and after the date of grant for which quoted market price information was available if such information was not available on the date of grant.

Under terms of the SOSAR, the recipients received the right to receive a payment in the form of shares of common stock equal to the difference if any, in the fair market value of one share of common stock at the time of exercising the SOSAR and the strike price. The SOSARs, which vest ratably over a three year period, had a grant date fair value, estimated using the Black-Scholes valuation model, of $4.63 per right, and an aggregate value of $2.3 million.

				Weighted-
				Average
SOSARS	Shares			Exercise Price
Outstanding at beginning of year		–		$	–
Granted		493,100			15.31
Exercised		–			–
Canceled		(8,300	)		15.94
Outstanding at end of year		484,800		$	15.30
Exercisable at end of year		–			–

12.   RETIREMENT PLANS AND OTHER POST-RETIREMENT BENEFITS

We have both funded and, with respect to our international operations, unfunded noncontributory defined-benefit pension plans covering substantially all of our employees. The benefits are based, in the case of certain plans, on average salary and years of service and, in the case of other plans, on a fixed amount for each year of service. U.S. Plan provisions and funding meet the requirements of the Employee Retirement

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Income Security Act of 1974. We use a December 31-measurement date for all of our defined benefit plans.

We also provide certain health care benefits to eligible retired employees. These benefits include a comprehensive medical plan for retirees prior to age 65 and fixed supplemental premium payments to certain retirees over age 65 to help defray the costs of Medicare. The plan is not funded and claims are paid as reported.

	Pension Benefits						Other Benefits
In millions	2007			2006			2007			2006
Change in Benefit Obligation
Balance at beginning of year	$	378.7		$	316.3			$57.9			$48.3
Service cost		9.6			6.0			2.0			1.7
Interest cost		21.8			20.1			3.0			3.0
Plan amendments		(6.4	)		5.4			(1.2	)		–
Actuarial (gain)/loss		(7.1	)		(13.6	)		(1.7	)		(1.6	)
Chillicothe acquisition		–			66.2			–			11.2
Benefits paid		(23.3	)		(21.7	)		(4.7	)		(4.7	)
Balance at end of year	$	373.3		$	378.7			$55.3			$57.9
Change in Plan Assets
Fair value of plan assets at beginning of year	$	579.0		$	471.6			$10.5			$–
Actual return on plan assets		45.6			58.7			0.8			–
Employer contributions		2.3			(10.0	)		3.3			15.2
Chillicothe acquisition		–			80.4			–			–
Benefits paid		(23.3	)		(21.7	)		(4.7	)		(4.7	)
Fair value of plan assets at end of year		603.6			579.0			9.9			10.5
Funded status at end of year	$	230.3		$	200.3			$(45.4	)		$(47.4	)

The net prepaid pension cost for qualified pension plans is primarily included in “Other assets,” and the accrued pension cost for non-qualified pension plans and accrued post-retirement benefit costs are primarily included in “Other long-term liabilities” on the Consolidated Balance Sheets at December 31, 2007 and 2006. The amounts set forth for “Employer contributions” for 2006 reflect a $12.2 million transfer from the qualified pension plan assets to a post-retirement medical plan sub-account pursuant to Section 420 of the Internal Revenue Code. Such amounts are to be used to satisfy certain post-retirement health care expenses.

Amounts recognized in the consolidated balance sheet consist of the following as of December 31:

	Pension Benefits						Other Benefits
In millions	2007			2006			2007			2006
Other assets	$	259.4		$	230.4			$–			$–
Other long-term liabilities		(29.1	)		(30.1	)		(45.4	)		(47.4	)
Net amount recognized	$	230.3		$	200.3			$(45.4	)		$(47.4	)

The components of amounts recognized as “Accumulated other comprehensive income” consist of the following on a pre-tax basis:

	Pension Benefits				Other Benefits
In millions	2007		2006		2007			2006
Prior service cost/(credit)	$	12.4	$	20.2		$(7.8	)		$(5.7	)
Net actuarial loss		29.7		37.5		18.3			19.2

The accumulated benefit obligation for all defined benefit pension plans was $355.5 million and $366.7 million at December 31, 2007 and 2006, respectively.

The weighted-average assumptions used in computing the benefit obligations above were as follows:

	Pension Benefits						Other Benefits
	2007			2006			2007			2006
Discount rate – benefit obligation		6.25	%		5.75	%		6.25	%		5.75	%
Future compensation growth rate		4.0			4.0			4.0			–

Information for pension plans with an accumulated benefit obligation in excess of plan assets was as follows:

In millions	2007		2006
Projected benefit obligation	$	29.3	$	30.2
Accumulated benefit obligation		27.8		28.4
Fair value of plan assets		–		–

Net periodic benefit (income) cost includes the following components:

	Year Ended December 31
In millions	2007			2006			2005
Pension Benefits
Service cost		$9.6			$6.0			$3.7
Interest cost		21.8			20.1			16.3
Expected return on plan assets		(47.5	)		(44.9	)		(39.4	)
Amortization of prior service cost		2.4			1.8			2.3
Amortization of actuarial loss		0.8			–			0.5
Net periodic benefit income		(12.9	)		(17.0	)		(16.6	)
Special termination benefits		–			4.4			–
Total net periodic benefit income		$(12.9	)		$(12.6	)		$(16.6	)
Other Benefits
Service cost		$2.0			$1.7			$1.1
Interest cost		3.0			3.0			2.7
Expected return on plan assets		(0.9	)		–			–
Amortization of prior service cost		(1.0	)		(0.7	)		(0.7	)
Amortization of actuarial loss		1.0			1.3			1.3
Net periodic benefit cost		4.1			5.3			4.4
Special termination benefits		–			3.3			–
Total net periodic benefit cost		$4.1			$8.6			$4.4

The estimated net loss and prior service cost for our defined benefit pension plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year are $1.7 million and $0.3 million, respectively.

The weighted-average assumptions used in computing the net periodic benefit (income) cost information above were as follows:

	Year Ended December 31
	2007			2006			2005
Pension Benefits
Discount rate – benefit expense		5.75	%		5.5	%		5.75	%
Future compensation growth rate		4.0			4.0			4.0
Expected long-term rate of return on plan assets		8.5			8.5			8.5
Other Benefits
Discount rate – benefit expense		5.75	%		5.5	%		5.75	%
Expected long-term rate of return on plan assets		8.5			–			–

To develop the expected long-term rate of return assumption, we considered the historical returns and

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the future expected returns for each asset class, as well as the target asset allocation of the pension portfolio.

Assumed health care cost trend rates at December 31 were as follows:

	2007			2006
Health care cost trend rate assumed for next year		9.5	%	10.0%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)		5.0		5.0
Year that the rate reaches the ultimate rate		2015		2013

Assumed health care cost trend rates have a significant effect on the amounts reported for health care plans. A one percentage-point change in assumed health care cost trend rates would have the following effects:

	One Percentage Point
In millions	increase		decrease
Effect on:
Post-retirement benefit obligation	$	3.3	$	(3.6	)
Total of service and interest cost components		0.4		(0.4	)

Plan Assets  Glatfelter’s pension plan weighted-average allocations at December 31, 2007 and 2006, by asset category, are as follows:

	2007			2006
Asset Category
Equity securities		72	%		71	%
Cash and fixed income		28			29
Total		100	%		100	%

Our objective is to achieve an above-market rate of return on our pension plan assets. Based upon this objective, along with the timing of benefit payments and the risks associated with various asset classes available for investment, we have established the following asset allocation guidelines:

	Minimum			Target			Maximum
Equity		60	%		70	%		80	%
Fixed Income & Other		20			30			40

Real estate can be between 0% and 5% of the target equity allocation. Glatfelter stock can also be between 0% and 5% of the target equity allocation, although there were no holdings of Glatfelter stock as of December 31, 2007 or 2006. Our investment policy prohibits the investment in certain securities without the approval of the Finance Committee of the Board of Directors. Regarding Fixed Income securities, the weighted-average credit quality will be at least “AA” with a “BBB” minimum credit quality for each issue.

Cash Flow  We do not expect to make contributions to our qualified pension plans in 2008. Contributions expected to be made in 2008 under our non-qualified pension plans and other benefit plans are summarized below:

In thousands
Nonqualified pension plans	$	2,189
Other benefit plans		3,807

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

	Pension
In thousands	Benefits		Other Benefits
2008		$27,985		$5,429
2009		27,722		5,441
2010		27,145		5,471
2011		27,280		5,580
2012		27,135		5,493
2013 through 2017		137,969		26,843

Defined Contribution Plans We maintain 401(k) plans for certain hourly and salaried employees. Employees may contribute up to 15% of their salary to these plans, subject to certain restrictions. We will match a portion of the employee’s contribution, subject to certain limitations, in the form of shares of Glatfelter common stock. The expense associated with our 401(k) match was $1.5 million, $1.2 million and $0.6 million in 2007, 2006 and 2005, respectively.

13.   INVENTORIES

Inventories, net of reserves were as follows:

In thousands	2007		2006
Raw materials		$41,119		$38,539
In-process and finished		102,219		107,811
Supplies		49,704		45,931
Total		$193,042		$192,281

If we had valued all inventories using the average-cost method, inventories would have been $12.9 million and $13.3 million higher than reported at December 31, 2007 and 2006, respectively. During 2007 and 2005 we liquidated certain LIFO inventories, the effect of which did not have a significant impact on results of operations.

14.   PLANT, EQUIPMENT AND TIMBERLANDS

Plant, equipment and timberlands at December 31 were as follows:

In thousands	2007			2006
Land and buildings		$136,875			$135,836
Machinery and equipment		960,133			911,964
Other		90,448			86,606
Accumulated depreciation		(680,804	)		(617,444	)
		506,652			516,962
Construction in progress		11,607			9,759
Timberlands, less depletion		1,607			2,146
Total		$519,866			$528,867

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15.   GOODWILL AND INTANGIBLE ASSETS

The following table sets forth information with respect to goodwill and other intangible assets which are recorded in the caption “Other assets” in the accompanying Consolidated Balance Sheets:

	December 31
In thousands	2007			2006
Goodwill – Composite Fibers		$18,520			$15,198
Specialty Papers
Customer relationships		$6,155			$5,958
Composite Fibers
Technology and related		5,409			4,659
Customer relationships		401			346
Total intangibles		11,965			10,963
Accumulated amortization		(1,032	)		(638	)
Net intangibles		$10,933			$10,325

In thousands	2007		2006
Aggregate amortization expense:
2007		$1,032		$638
Estimated amortization expense:
2008		1,032
2009		1,032
2010		1,032
2011		1,032
2012		1,032

In connection with the acquisition of MPL, we recorded $2.2 million of goodwill. The balance of the increase in goodwill was due to foreign currency translation adjustments. The remaining weighted average useful life of intangible assets was 10 years at December 31, 2007.

16.   OTHER ASSETS

Other assets consist of the following:

	December 31
In thousands	2007		2006
Pension		$259,445		$230,400
Installment notes receivable		81,020		37,850
Goodwill and intangibles		29,453		25,523
Other		23,871		27,965
Total		$393,789		$321,738

17.   OTHER CURRENT LIABILITIES

Other current liabilities consist of the following:

	December 31
In thousands	2007		2006
Accrued payroll and benefits		$37,210		$34,790
Other accrued compensation and retirement benefits		5,963		8,752
Income taxes payable		10,195		602
Accrued rebates		19,707		17,849
Other accrued expenses		28,041		28,489
Total		$101,116		$90,482

18.   LONG-TERM DEBT

Long-term debt is summarized as follows:

	December 31
In thousands	2007			2006
Revolving credit facility, due April 2011		$35,049			$64,795
Term Loan, due April 2011		43,000			96,000
71/8% Notes, due May 2016		200,000			200,000
Note payable due March 2013		34,000			34,000
Total long-term debt		312,049			394,795
Less current portion		(11,008	)		(19,500	)
Long-term debt, excluding current portion		$301,041			$375,295

On April 3, 2006, we, along with certain of our subsidiaries as borrowers and certain of our subsidiaries as guarantors, entered into a credit agreement with certain financial institutions. Pursuant to the credit agreement, we may borrow, repay and reborrow revolving credit loans in an aggregate principal amount not to exceed $200 million outstanding at any time. All borrowings under our credit facility are unsecured. The revolving credit commitment expires on April 2, 2011.

In addition, on April 3, 2006, pursuant to the credit agreement, we received a term loan in the principal amount of $100 million. Quarterly repayments of principal outstanding under the term loan begin on March 31, 2007 with the final principal payment due on April 2, 2011.

Borrowings under the credit agreement bear interest, at our option, at either (a) the bank’s base rate described in the credit agreement as the greater of the prime rate or the federal funds rate plus 50 basis points, or (b) the EURO rate based generally on the London Interbank Offer Rate, plus an applicable margin that varies from 67.5 basis points to 137.5 basis points according to our corporate credit rating determined by S&P and Moody’s.

We have the right to prepay the term loan and revolving credit borrowings in whole or in part without premium or penalty, subject to timing conditions related to the interest rate option chosen. If certain prepayment events occur, such as a sale of assets or the incurrence of additional indebtedness in excess of $30.0 million in the aggregate, we must repay a specified portion of the term loan within five days of the prepayment event.

The credit agreement contains a number of customary covenants for financings of this type that, among other things, restrict our ability to dispose of or create liens on assets, incur additional indebtedness, repay other indebtedness, create liens on assets, make acquisitions and engage in mergers or consolidations. We are also required to comply with specified financial tests and ratios, each as defined in the credit

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agreement, including a consolidated minimum net worth test and a maximum debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) ratio. A breach of these requirements, of which there were none at December 31, 2007, would give rise to certain remedies under the credit agreement, among which are the termination of the agreement and acceleration of the outstanding borrowings plus accrued and unpaid interest under the credit facility.

This new credit facility replaced our prior credit facility which would have matured in June 2006. A portion of the proceeds from the new credit facility were used to finance the Chillicothe acquisition.

On April 28, 2006, we completed an offering of $200.0 million aggregate principal amount of our 71/8% Senior Notes due 2016. Net proceeds from this offering totaled approximately $196.4 million, after deducting the commissions and other fees and expenses relating to the offering and were primarily to redeem $150.0 million aggregate principal amount of our then outstanding 67/8% notes due July 2007, plus the payment of applicable redemption premium and accrued interest.

Interest on these Senior Notes accrues at the rate of 71/8% per annum and is payable semiannually in arrears on May 1 and November 1.

Prior to May 1, 2011, we may redeem all, but not less than all, of the notes at a redemption price equal to 100% of the principal amount thereof plus accrued and unpaid interest, if any, plus a “make-whole” premium. On or after May 1, 2011, we may redeem some or all of the notes at specified redemption prices. In addition, prior to May 1, 2009, we may redeem up to 35% of the aggregate principal amount of the notes using the net proceeds from certain equity offerings.

The 71/8% Senior Note agreement contains a “cross-default” clause that provides if there were to be an event of default under the credit agreement discussed earlier, we would also be in default under the 71/8% Senior Notes.

On March 21, 2003, we sold approximately 25,500 acres of timberlands and received as consideration a $37.9 million 10-year interest bearing note receivable from the timberland buyer. The note receivable is recorded as “Other assets” in the accompanying consolidated balance sheet. We pledged this note as collateral under a $34.0 million promissory note payable to SunTrust Financial (the “Note Payable”). The Note Payable bears interest at a fixed rate of 3.82% and was scheduled to mature in March 2008. In February 2008, we amended the Note Payable to extend its maturity until March 26, 2013. In addition, the amendment provides that, beginning on March 26, 2008, the Note Payable will bear a fixed rate of interest to be based on the three month LIBOR plus 0.50% as of March 24, 2008.

The following schedule sets forth the maturity of our long-term debt during the indicated year.

In thousands
2008	$11,008
2009	13,759
2010	13,759
2011	39,523
2012	–
Thereafter	234,000

P. H. Glatfelter Company guarantees debt obligations of all its subsidiaries. All such obligations are recorded in these consolidated financial statements.

At December 31, 2007 and 2006, we had $14.1 million and $8.1 million, respectively, of letters of credit issued to us by a financial institution. Such letters of credit reduce amounts available under our revolving credit facility. The letters of credit provide financial assurances for i) commitments made related to the Fox River environmental matter, ii) for the benefit of certain state workers compensation insurance agencies in conjunction with our self-insurance program, and iii) assurance related to the purchase of certain utilities for our manufacturing facilities. We bear the credit risk on this amount to the extent that we do not comply with the provisions of certain agreements. As of December 31, 2007, no amounts were outstanding under the letters of credit.

In January 2008, we entered into a $36.7 million term loan agreement (the “2008 Term Loan”) with SunTrust. The 2008 Term Loan matures in five years, bears interest at a six-month reserve adjusted LIBOR plus a margin rate of 1.20% per annum and is secured by, among other assets, a $43.2 million note received from the buyers of certain timberland sold in November 2007. For a more complete description of the 2008 Term Loan, refer to Note 24.

19.   SHAREHOLDERS’ EQUITY

The following table summarizes outstanding shares of common stock:

	Year Ended December 31,
In thousands	2007		2006		2005
Shares outstanding at beginning of year		44,821		44,132		43,950
Treasury shares issued for:
Restricted stock performance awards		–		14		–
401(k) plan		206		108		62
Director compensation		11		7		9
Employee stock options exercised		105		560		111
Shares outstanding at end of year		45,143		44,821		44,132

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20.   COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS

Contractual Commitments  The following table summarizes the minimum annual payments due on noncancelable operating leases and other similar contractual obligations having initial or remaining terms in excess of one year. Other contractual obligations primarily represent minimum purchase commitments under energy and pulp wood supply contracts and other purchase obligations.

In thousands	Leases		Other
2008		$3,044		$86,011
2009		2,372		16,541
2010		1,723		–
2011		1,187		–
2012		868		–
Thereafter		7,464

At December 31, 2007, required minimum annual payments due under operating leases and other similar contractual obligations aggregated $16.7 million and $102.6 million, respectively.

Contingencies

Fox River – Neenah, Wisconsin

Background  We have significant uncertainties associated with environmental claims arising out of the presence of polychlorinated biphenyls (“PCBs”) in sediments in the lower Fox River and in the Bay of Green Bay. As part of the 1979 acquisition of the Bergstrom Paper Company we acquired a facility located at this site (the “Neenah Facility”). In part, the Neenah Facility used wastepaper as a source of fiber. At no time did the Neenah Facility utilize PCBs in the pulp and paper making process, but discharges to the lower Fox River from the facility which may have contained PCBs from wastepaper may have occurred from 1954 to the late 1970s. Any PCBs that the Neenah Facility discharged into the lower Fox River resulted from the presence of PCBs in NCR^®-brand carbonless copy paper in the wastepaper that was received from others and recycled. We closed the Neenah Facility in June 2006.

As discussed below, various state and federal governmental agencies have formally notified nine potentially responsible parties (“PRPs”), including us, that they are potentially responsible for response costs and “natural resource damages” (“NRDs”) arising from PCB contamination at the Lower Fox River and Green Bay Superfund Site, Green Bay, Wisconsin (“Site”) under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) and other statutes. The other identified PRPs are NCR Corporation, Appleton Paper Inc., Georgia Pacific Corp. (formerly Fort Howard Corp. and Fort James O perating Company), WTM I Company (“WTM I”, a subsidiary of Chesapeake Corp.), Riverside Paper Corporation, U.S. Paper Mills Corp. (a subsidiary of Sonoco Products Company), Sonoco Products Company, Menasha Corporation, and the U.S. Army Corps of Engineers.

The United States, on behalf of certain governmental authorities, is pursuing responsible parties to remediate the contaminated areas of the Site, to satisfy Natural Resource Damage claims, and to reimburse the governmental authorities for past costs. The areas of the lower Fox River and in the Bay of Green Bay in which PCB contamination exists are commonly referred to as Operable Unit 1 (“OU1”), which consists of Little Lake Butte des Morts, the portion of the river that is closest to the Neenah Facility, Operable Unit 2 (“OU2”), which is the portion of the river between dams at Appleton and Little Rapids, and Operable Units 3 through 5 (“OU3-5”), an area approximately 20 miles downstream from the Neenah Facility.

CERCLA establishes a two-part liability structure that makes responsible parties liable for (1) “response costs” or “response actions” associated with the remediation of a release of hazardous substances and (2) NRDs related to that release. Courts have interpreted CERCLA to impose strict, joint and several liability on responsible parties for response costs, subject to equitable allocation in certain instances. Prior to a final settlement by all responsible parties and the final cleanup of the contamination, uncertainty regarding the application of that liability will persist.

The following table summarizes the potential range of costs to satisfy total claims associated with the Fox River matter based on the best available estimates. Such amounts are not necessarily indicative of our share of responsibility:

In millions	Low		High
OU1		$93		$137
OU2 – OU5		270		499
Natural Resource Damages (NRD)		76		333

OU1 is currently the only area of the Site in which we, together with WTM I, are conducting remediation activities. With respect to OU1, the high end of the range set forth above assumes dredging of contamination as opposed to the use of alternative remedies. As discussed below, the revised final plan provides for the use of an alternative remedial approach rather than dredging as originally proposed and approved by the United States. Based on discussions to date, we believe dredging the entire OU1 is remote. To date, approximately $63 million of

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escrowed funds have been spent on OU1 remediation. The range of costs set forth above for OU2-5 is based on the United States’ estimated cost of $390 million as set forth in the amended ROD issued in June 2007 plus or minus a 30% contingency factor. However, independent estimates of the cost to complete the remediation of OU2-5 provided to us by other parties indicate the costs likely to be incurred to remediate this portion of the Site could total amounts significantly greater than the United States’ estimate. The range of NRD is based on recently obtained information that indicated $76 million represents the best estimate of NRDs.

Reserves for Fox River Environmental Liabilities

We have reserves for existing environmental liabilities and for those environmental matters for which it is probable that a claim will be made and for which the amount of the obligation is reasonably estimable. The following table summarizes information with respect to such reserves.

	December 31
In millions	2007		2006
Recorded as:
Environmental liabilities		$7.0		$5.5
Other long-term liabilities		20.0		2.2
Total		$27.0		$7.7

With respect to the amounts set forth above, the caption “environmental liabilities” on the consolidated balance sheet represents the current portion of our reserves. Such classification is based on our best estimate as to when the liability is expected to require the use of funds to settle the underlying obligation. As discussed later in this disclosure, during 2007, we recorded additional charges of $26.0 million associated with the Fox River matter in our results of operations.

The following summarizes the status of our potential exposure:

Response Actions and Recent Activities

OU1 and OU2 On January 7, 2003, the Wisconsin Department of Natural Resources (the “Wisconsin DNR”) and the Environmental Protection Agency (“EPA”) issued a Record of Decision (“ROD”) for the cleanup of OU1 and OU2. Subject to extenuating circumstances and alternative solutions provided for in the ROD, the ROD requires the removal of approximately 784,000 cubic yards of sediment from OU1 and no active remediation of OU2. The ROD also requires the long term monitoring of the two operable units. On July 1, 2003, WTM I Company entered into an Administrative Order on Consent (“AOC”) with EPA and the Wisconsin DNR regarding the implementation of the Remedial Design for OU1.

In the first quarter of 2004, the United States District Court for the Eastern District of Wisconsin approved a consent decree regarding OU1 (“the OU1 Consent Decree”). Under terms of the OU1 Consent Decree, we and WTM I each agreed to pay approximately $27 million, of which $25 million from each was placed in escrow to fund response work at OU-1 (“OU-1 Escrow Account”). The remaining amount that the parties agreed to pay under the Consent Decree includes payments for NRD and NRD assessment and other past costs incurred by the governments. In addition, the EPA agreed to contribute $10 million from another settlement to the OU1 Escrow Account for the OU1 cleanup. As a result of these contributions, the total amount of funds initially available for remediation of OU1 totaled $60 million.

The terms of the OU1 Consent Decree restrict the use of the escrowed funds to qualifying remediation activities or restoration activities at the lower Fox River site. The response work is being performed by us and WTM I, with governmental oversight, and funded by the funds placed in the OU1 Escrow Account. Beginning in mid 2004, we and WTM I have performed activities to remediate OU1, including, among others, construction of de-watering and water-treatment facilities, dredging of portions of OU1, dewatering of the dredged materials, and hauling of the dewatered sediment to an authorized disposal facility.

The terms of the OU1 Consent Decree include provisions to be followed should the OU1 Escrow Account be depleted prior to completion of the response work. In this event, each settling company would be notified and be provided an opportunity to contribute additional funds to the OU1 Escrow Account. Should the OU1 Consent Decree be terminated due to insufficient funds, each settling company would lose the protections contained in the OU1 Consent Decree, and the governments may order one or both parties to complete the required remedial activities for OU-1. The governments may issue a similar order to a third party or perform the work themselves and seek response costs from any or all PRPs for the site, including us. If the OU1 Consent Decree is terminated due to the insufficiency of the escrow funds, we and WTM I would each remain potentially responsible for the costs necessary to complete the remedial action.

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Since the start of these activities in the third quarter of 2004, approximately 320,000 cubic yards of contaminated sediment has been dredged.

Recent activity  In late 2006, Glatfelter and WTM I jointly submitted a proposed Final Plan for the completion of the remediation of OU1 (the “Final Plan”) to Wisconsin DNR and EPA. The Final Plan proposed the use of engineered capping of certain areas of the Site as opposed to dredging sediment. Throughout 2007, we and WTM I engaged in discussions with the government agencies concerning the Final Plan. In the first quarter of 2007, after reviewing more refined cost estimates for the OU1 remediation and our projected estimates of the funds that would be available in the OU1 Escrow Account to implement the Final Plan, we revised our cost estimates to implement the Final Plan (including work already performed). As a result of the revised cost estimate to complete the remedy of OU1, we increased our reserve in the first quarter of 2007 by $6.0 million. Further, we and WTM I agreed to address a potential shortfall in the OU1 Escrow Account by executing a supplement to the OU1 Consent Decree which provided that we each would pay an additional $6.0 million into the OU1 Escrow Account.

Subsequently, and as discussed below in June 2007 the agencies issued an amended ROD for operable units (or OUs) 2-5 which included the use of alternative remedies similar to, but more extensive than, those in the proposed Final Plan. In addition, during the third quarter of 2007 the agencies informed us that they would require capping or dredging in large portions of OU1 that we and WTM1 had proposed in the Final Plan not to remediate due to the relatively low levels of contamination. As a result, we and WTM 1, in the fourth quarter of 2007, submitted a proposed revised Final Plan to the agencies that was consistent with the agencies’ new requirements (Revised Final Plan). The estimated cost to implement the Revised Final Plan is higher than that estimated to implement the Final Plan.

In the fourth quarter of 2007, EPA and WDNR proposed to amend the OU1 ROD to adopt the Revised Final Plan. The agencies estimated the cost to implement the Revised Final Plan to be between $90 and $110 million. While the parties have proceeded as if this amendment will be approved and EPA has initiated the amendment process, EPA has not yet issued an amended OU1 ROD.

In October 2007, we and WTM I reached an agreement with another PRP, Menasha Corporation (“Menasha”) which requires Menasha to deposit $7 million to the OU1 Escrow Account to secure performance of the remediation work in OU1 that is currently planned for 2008 (the “PRP’s Funds”). We have agreed with Menasha and WTM I to provide the funds required to complete OU-1 on an interim basis, and there is no agreement that the amounts individually paid by each party either equal or exceed that party’s fair or allocable share of those costs. That agreement was memorialized in a Second Agreed Supplement to the OU1 Consent Decree, filed in November 2007. However, claims between us and WTM may be barred by statute and the OU1 Consent Decree, so any adjustment to our and WTM I’s relative allocable shares would have to come through differential recoveries from other parties who have not paid their fair or allocable share of the OU1 costs.

The United States and the State of Wisconsin have also demanded that we and WTM enter into an amended OU1 Consent Decree that commits us to complete the OU1 remedy without a budget limitation. We are engaged in discussions with the United States and the State of Wisconsin regarding their demand, but have not yet reached an agreement with regard to completing the OU1 remediation.

Also in the third quarter 2007, we conducted a pilot project to validate certain aspects of the Final Plan, including evaluating the engineered capping and covering of contaminated areas in OU1. The aggregate impact of the revised cost estimates to implement the Revised Final Plan, the agreement with Menasha for additional funding and the estimated cost impact of other developments discussed above regarding the site, are reflected in the additional $20 million charge taken in the third quarter of 2007.

Based on information currently available to us, subject to i) government approval of the Revised Final Plan; ii) the successful negotiation of acceptable and cost effective contracts to complete the proposed OU1 remediation activities; and iii) efficient implementation of the engineered cap and cover in designated areas of OU1 by our remediation contractor, we believe the required OU1 remedial actions can be completed for amounts reserved as of December 31, 2007 together with earnings on the funds currently on deposit in the escrow account and other assets available.

OUs 3 – 5 In July 2003, the EPA and the Wisconsin DNR issued a ROD (the “OU3-5 ROD”) for the cleanup of OU3 – 5. The OU3-5 ROD calls for the removal of 6.5 million cubic yards of sediment and certain monitoring at an estimated cost of $324.4 million but could, according to the OU3-5 ROD, cost within a range from approximately $227.0 million to $486.6 million. The most significant

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component of the estimated costs is attributable to large-scale sediment removal by dredging.

In 2004, NCR Corp. and Georgia Pacific Corp. entered into an agreement with the United States EPA under which they agreed to perform the Remedial Design for OU 3-5. After gathering samples to perform the Remedial Design for OU 3-5, elevated concentrations of PCBs were identified in sediments along the west bank of OU4, just downstream of the DePere Dam in Brown County, Wisconsin. Subsequently, in 2006, the United States filed a proposed Consent Decree with the U.S. District Court for the Eastern District of Wisconsin, which the court subsequently entered and under which NCR Corp. and Sonoco-U.S. Mills agreed to perform certain response actions regarding these sediments, on an expedited basis. During 2007, NCR Corp and Sonoco-U.S. Mills commenced this work.

Recent Activity  In February 2007, we, along with the eight other PRPs identified above, received a General Notice Letter from the EPA requesting that each PRP advise the EPA of their willingness to discuss their liability for the costs to remediate OU2-5 (the governments now having demanded a small amount of cleanup in the downstream end of OU2) and to provide a good faith offer to settle by April 1, 2007. Since the receipt of this letter, the PRPs have engaged in discussions to explore a potential settlement of the asserted claims. In an attempt to resolve their disputes concerning allocation of liability, we, together with the other PRPs who received the General Notice Letter, have agreed to participate in non-binding mediation. The mediation, so far, has not resulted in any agreement as to allocation but is continuing. We do not know at this time whether an agreement will be reached between the governments and any PRPs to complete the remediation of OU2-5.

In June 2007, the EPA and the Wisconsin DNR issued an amended ROD covering Operable Units 2-5 (the “Amended OU2-5 ROD”) that primarily, among other matters, expanded the Remedial Design provided for under the original OU3-5 ROD to include the use of engineered caps as an alternative to dredging. The Amended OU3-5 ROD estimates the total projected costs to be approximately $385 million.

In the fourth quarter of 2007, EPA issued a unilateral administrative order (“UAO”) to us and to seven other respondents: Appleton Papers, Inc., CBC Coating, Inc. (a party related to Riverside Paper Corporation), Georgia-Pacific Consumer Products, LP, Menasha Corporation, U.S. Paper Mills Corp., and WTM I Company. That UAO required parties other than us to take certain actions now to prepare for full-scale dredging of OU3-5, and then requires all parties, beginning in August 2008, to begin to implement the Amended OU2-5 ROD.

Natural Resource Damages  Neither the ROD nor the OU3-5 ROD place any value on claims for NRDs associated with this matter. As noted above, NRD claims are distinct from costs related to the primary remediation of a Superfund site. Calculating the value of NRD claims is difficult, especially in the absence of a completed remedy for the underlying contamination. The State of Wisconsin, the United States Fish and Wildlife Service (“FWS”), the National Oceanic and Atmospheric Administration (“NOAA”), four Indian tribes and the Michigan Attorney General have asserted that they possess NRD claims related to the lower Fox River and the Bay of Green Bay.

In September 1994, FWS notified the then-identified PRPs that it considered them potentially responsible for NRDs. The federal, tribal and Michigan agencies claiming to be NRD trustees have proceeded with the preparation of an NRD assessment. While the final assessment has yet to be completed, the federal trustees released a plan on October 25, 2000 that values NRDs for injured natural resources that allegedly fall under their trusteeship at between $176 million and $333 million. We believe that the federal NRD assessment is technically and procedurally flawed. We also believe that the NRD claims alleged by the various alleged trustees are legally and factually without merit.

The OU1 Consent Decree required that Glatfelter and WTM I each pay the governments $1.5 million for NRDs for the Fox River site, and $150,000 for NRD assessment costs. Each of these payments was made in return for credit to be applied toward each settling company’s potential liability for NRDs associated with the Fox River site.

Litigation Activity  In response to the issuance of the UAO in the fourth quarter of 2007, we filed a motion for a case management order in the pending proceeding, United States v. P.H. Glatfelter Co., No. 2:03-cv-949-LA, in which the OU1 Consent Decree has been entered. That motion observed that, in light of the United States’ issuance of the UAO, the OU1 Consent Decree does not resolve some of the claims asserted by the United States and the State of Wisconsin in that law suit. Accordingly, that motion sought an order establishing a procedure for litigating those claims, and through which we could assert our defenses. The United States and the State of Wisconsin opposed that motion. On February 13, 2008, the Court issued an Order denying our motion having concluded that the United States’ complaint and the

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associated OU1 Consent Decree referred only to cleanup activities at OU1 and not the entire Site. We disagree and are currently evaluating whether to appeal the Court’s denial of our motion.

During the first quarter of 2008, Appleton Papers, Inc., and NCR Corporation terminated their tolling and forbearance agreements with all other PRPs, and commenced a lawsuit against George A. Whiting Paper Company (“Whiting”). Their lawsuit against Whiting seeks allocation of all costs of response incurred associated with lower Fox River contamination. At the same time, Appleton Papers, Inc., and NCR Corporation sought and obtained leave to add additional parties following the termination of existing agreements with certain PRPs which prohibited NCR from commencing litigation against those PRPs. During the first quarter of 2008, NCR joined us and Menasha in the Whiting lawsuit. We are currently reviewing the complaint in Whiting lawsuit and intend to defend the lawsuit.

Reserves for the Fox River Site  At December 31, 2007, the OU1 Escrow Account balance totaled $1.9 million none of which was allocable to our portion. In addition to the Escrow Account balance, as discussed above, Menasha has agreed to contribute $7 million to the Escrow Account and we and WTM I each will provide an additional $6 million towards OU1 remediation in 2008. Our committed share is recorded in the accompanying Consolidated Balance Sheet under the caption “Environmental liabilities.”

As a result of the recent developments concerning the Fox River including: (i) our revised cost estimates for the Revised Final Plan; (ii) developments in the ongoing PRP mediation and discussions with other PRPs; and (iii) the then anticipated issuance of the UAO by the United States; we recorded an additional charge of $20 million in the third quarter 2007 to satisfy both our obligations at OU1 and all pending, threatened or asserted and unasserted claims against us for the Fox River including our claimed liability for the remediation of OU3-5. This additional charge represents our current assessment of the ultimate costs to be incurred by us associated with the Revised Final Plan and any settlement of liability for NRDs and for remediation of OU 3-5. As of December 31, 2007, our reserve for the Fox River environmental liability totaled $27.0 million. Our reserve includes amounts originally established in 2003 and adjustments in the first and third quarter of 2007 increasing the liability by $26 million offset by expenditures related to remediation activities.

We believe that we have strong defenses to liability for remediation of OU2-5 including the existence of ample credible data that indicates that PCBs did not leave OU1 in concentrations that could have caused or contributed to the need for cleanup in OU2-5. Others, including the EPA and other PRPs, disagree with us and, as a result, the EPA has issued a UAO to us and to others to perform the OU2-5 work, NCR and Appleton Papers have commenced the Whiting litigation and have joined us and other litigation associated with the remediation of the Site is likely. Even if we are not successful in establishing that we are not liable for the remediation of OU2-5, we do not believe that we would be allocated a significant percentage share of liability in any equitable allocation of the remediation costs and other potential damages associated with OU2 – 5. The accompanying consolidated financial statements do not include reserves for any future litigation or defense costs for the Fox River, and because litigation has commenced, the costs to do so could be significant.

Other than with respect to the OU1 Consent Decree, the amount and timing of future expenditures for environmental compliance, cleanup, remediation and personal injury, NRDs and property damage liabilities cannot be ascertained with any certainty due to, among other things, the unknown extent and nature of any contamination, the response actions that may ultimately be required, the availability of remediation equipment, and landfill space, and the number and financial resources of any other PRPs.

Other Information  The Wisconsin DNR and FWS have each published studies, the latter in draft form, estimating the amount of PCBs discharged by each identified PRP to the lower Fox River and the Bay of Green Bay. These reports estimate the Neenah Facility’s share of the volumetric discharge to be as high as 27%. We do not believe the volumetric estimates used in these studies are accurate because (a) the studies themselves disclose that they are not accurate and (b) the volumetric estimates contained in the studies are based on assumptions that are unsupported by existing evidence. We believe that our volumetric contribution is significantly lower than the estimates set forth in these studies. Further, we do not believe that a volumetric allocation would constitute an equitable allocation of the potential liability for the contamination. Other factors, such as the location of contamination, the location of discharge, and a party’s role in causing discharge, must be considered in order for the allocation to be equitable.

We previously entered into interim cost-sharing agreements with four of the other PRPs, which provided for those PRPs to share certain costs relating to scientific studies of PCBs discharged at the Site

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(“Interim Cost Sharing Agreements”). These interim cost-sharing agreements do not establish the final allocation of remediation costs incurred at the Site. Based upon our evaluation of the volume, nature and location of the various discharges of PCBs at the Site and the relationship of those discharges to identified contamination, we believe our allocable share of liability at the Site is less than our share of costs under the Interim Cost Sharing Agreements.

We also believe that there exist additional potentially responsible parties other than the nine PRPs who were issued the General Notice Letter for OU2-5. For instance, certain of the identified PRPs discharged their wastewater through public wastewater treatment facilities, which we believe makes the owners of such facilities potentially responsible in this matter. We also believe that entities providing PCB-containing wastepaper to each of the recycling mills are also potentially responsible in this matter.

While the OU1 Consent Decree, as amended, provides a negotiated framework for resolving both our and WTM I’s liability for the remediation of OU1, it may not completely resolve our exposure at the Site. We note that EPA has issued a UAO to us calling for further work, and Appleton Papers and NCR have commenced the Whiting litigation that may become more complicated and involve additional parties. We cannot predict the magnitude or outcome of the Whiting litigation or any other litigation related to this matter.

Range of Reasonably Possible Outcomes  Our analysis of the range of reasonably possible outcomes is derived from all available information, including but not limited to official documents such as RODs, discussions with the United States and other PRPs, as well as legal counsel and engineering consultants. Based on our analysis of currently available information and experience regarding the cleanup of hazardous substances, we believe that it is reasonably possible that our costs associated with the Fox River matter discussed herein may exceed the amount of charges taken by amounts that may prove to be insignificant or that could range, in the aggregate, up to approximately $195 million, over a period that is undeterminable but that could range beyond 15 years. We believe that the likelihood of an outcome in the upper end of the monetary range is significantly less than other possible outcomes within the range and that the possibility of an outcome in excess of the upper end of the monetary range is remote.

In our estimate of the upper end of the range of reasonably possible outcomes for the Site, we have considered: (i) the remedial actions agreed upon to date under the OU1 Consent Decree; and (ii) the requirements of the Amended OU2-5 ROD. We have also assumed successful implementation of the Amended OU2-5 ROD, although at a significantly higher cost than estimated in the Amended OU2-5 ROD. We have also assumed our share of the ultimate liability to be 18%, which is significantly higher than we believe is appropriate or than we will incur, and that our ultimate liability for NRDs government oversight costs and for reimbursement of expenses from other parties, although reasonably possible, is unlikely to be significant.

Based on currently available information, including actual remediation costs incurred to date, we believe that the remediation of OU1 as proposed in the Revised Final Plan can be completed with available amounts in the OU1 Escrow Account, the amounts committed to be funded and the amounts currently reserved. Our assessment assumes that: 1) the Revised Final Plan will be approved by the United States; 2) we and WTM I successfully negotiate acceptable contracts to complete remediation activities; and 3) the OU1 remediation contractor will successfully implement the Revised Final Plan. However, if we are unsuccessful in managing our costs to implement the Revised Final Plan additional charges may be necessary and such amounts could be material.

The OU1 Consent Decree does not address response costs necessary to remediate the remainder of the Site and only addresses NRDs and claims for reimbursement of government expenses to a limited extent. Because CERCLA imposes strict joint and several liability, uncertainty persists regarding our exposure with respect to the remainder of the Fox River site.

In estimating both our current reserves for environmental remediation at the Site, we have assumed that we will not bear the entire cost of remediation and damages to the exclusion of other known PRPs at the Site who are also potentially jointly and severally liable. The ability of other PRPs to participate has also been taken into account in preparing our estimates, and is generally based on our evaluation of recent publicly available financial information on each PRP, and any known insurance, indemnity or cost sharing agreements between PRPs and third parties.

In addition, our assessment is based upon the magnitude, nature, location and circumstances associated with the various discharges of PCBs to the river and the relationship of those discharges to identified contamination. We will continue to evaluate

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our exposure and the level of our reserves, including, but not limited to, our potential share of the costs and NRDs, if any, associated with the Fox River site.

Summary  Our current assessment is that we will be able to manage these environmental matters without a long-term, material adverse impact on the Company. These matters could, however, at any particular time or for any particular year or years, have a material adverse effect on our consolidated financial position, liquidity and/or results of operations or could result in a default under our loan covenants. Moreover, there can be no assurance that our reserves will be adequate to provide for future obligations related to these matters, that our share of costs and/or damages for these matters will not exceed our available resources, or that such obligations will not have a long-term, material adverse effect on our consolidated financial position, liquidity or results of operations. With regard to the Fox River site, if we are not successful in managing the completion of the remaining remedial work at OU1 and/or should the United States seek to enforce the UAO for OU2-5 against us which requires us to either perform directly or contribute significant amounts towards the performance of that work, such developments could have a material adverse effect on our consolidated financial position, liquidity and results of operations and may result in a default under our loan covenants.

Ecusta Division Matters

At December 31, 2007, we had reserves for various matters associated with our former Ecusta Division. Summarized below is the activity in these reserves during the period indicated:

	Ecusta
	Environmental			Workers’
In thousands	Matters			Comp			Other			Total
Balance, Jan. 1, 2007	$	7,202		$	1,409		$	–		$	8,611
Accruals		258			125			–			383
Payments		(1,024	)		(997	)		–			(2,021	)
Dec. 31, 2007	$	6,436		$	537		$	–		$	6,973
Balance, Jan. 1, 2006	$	8,105		$	1,913		$	3,300		$	13,318
Accruals		–			–			–			–
Payments		(903	)		(504	)		(3,262	)		(4,669	)
Other adjustments		–			–			(38	)		(38	)
Dec. 31, 2006	$	7,202		$	1,409		$	–		$	8,611
Balance, Jan. 1, 2005	$	6,391		$	2,144		$	3,300		$	11,835
Accruals		2,700			–			–			2,700
Payments		(986	)		(231	)		–			(1,217	)
Dec. 31, 2005	$	8,105		$	1,913		$	3,300		$	13,318

With respect to the reserves set forth above as of December 31, 2007, $3.7 million is recorded under the caption “Other current liabilities” and $3.3 million is recorded under the caption “Other long-term liabilities” in the accompanying consolidated balance sheets.

The following discussion provides more details on each of these matters.

Background Information  In August 2001, pursuant to an acquisition agreement (the “Acquisition Agreement”), we sold the assets of our Ecusta Division to four related entities, consisting of Purico (IOM) Limited, an Isle of Man limited liability company (“Purico”), RF&Son Inc. (“RF”), RFS US Inc. (“RFS US”) and RFS Ecusta Inc. (“RFS Ecusta”), each of which is a Delaware corporation (collectively, the “Buyers”).

In August 2002, the Buyers shut down the manufacturing operation of the pulp and paper mill in Pisgah Forest, North Carolina, which was the most significant operation of the Ecusta Division. On October 23, 2002, RFS Ecusta and RFS US (the “Debtors”) separately filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. The bankruptcy cases were later converted to Chapter 7 proceedings. Effective August 8, 2003, the assets of RFS Ecusta and RFS US, which substantially consist of the pulp and paper mill and related real property, were sold to several third parties unrelated to the Buyers (the “New Buyers”).

Ecusta Environmental Matters  Beginning in April 2003, government authorities, including the North Carolina Department of Environment and Natural Resources (“NCDENR”), initiated discussions with us and the New Buyers regarding, among other environmental issues, certain landfill closure liabilities associated with the Ecusta mill and its properties (the “Ecusta Property”). The discussions focused on NCDENR’s desire to establish a plan and secure financial resources to close three landfills located at the Ecusta Property and to address other environmental matters at the facility. During the third quarter of 2003, the discussions ended with NCDENR’s conclusion to hold us responsible for the closure of three landfills. Accordingly, we established reserves approximating $7.6 million representing estimated closure costs. In March 2004 and September 2005, NCDENR issued us separate orders requiring the closure of two of the three landfills at issue. We have completed the closure of these two landfills and are in the process of closing the third; in addition, we have accepted responsibility for decommissioning a fourth landfill (collectively, the “Landfill Closure and Post-Closure Obligations”).

In September 2005 we established a $2.7 million reserve for potential environmental liabilities associated with the Ecusta Property relating to: (i) mercury releases from the Electro-Chemical Building; (ii) contamination in and operation of the aeration and stabilization basin (the “ASB”), which is part of the Ecusta Property’s wastewater treatment system; (iii) a previously closed ash landfill (“Brown #1

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Landfill”); and (iv) contamination in the vicinity of a former caustic building.

On November 15, 2006, Olin Corporation (“Olin”), a former owner of the Ecusta Property, filed a First Amended Complaint against us in the United States District Court for the Western District of North Carolina asking the court for a declaratory judgment that under the terms of a Purchase Agreement, Olin is not liable for certain environmental contamination that occurred at the Ecusta Property during the time period when Olin owned such facility. We answered and filed a counterclaim against Olin, alleging claims for (i) fraud and fraudulent omissions; (ii) negligent misrepresentation; and (iii) violation of the North Carolina Unfair and Deceptive Trade Practices Act. Specifically, we alleged that Olin had knowledge of extensive environmental contamination at the Ecusta Property, but that it had concealed this information in the course of negotiating the sale of the property in 1985 to our predecessor. The parties are currently engaged in the discovery process. We intend to vigorously defend and prosecute this action.

Recent Activities  On January 25, 2008, we entered into a series of agreements (the “DRV Transaction”) pursuant to which we transferred potential liabilities for certain environmental matters at the Ecusta Property to Davidson River Village, LLC (“DRV”), which contemporaneously purchased the facility from the New Buyers. As part of the DRV Transaction, DRV assumed, and indemnified us for, liability arising from environmental matters and conditions at the Ecusta Property with certain enumerated exceptions, including the Landfill Closure and Post-Closure Obligations and investigation and remediation (if necessary) of any pollutants that may have migrated from the Ecusta Property to the Davidson and French Broad Rivers (the “River Areas”), which liabilities were retained by us.

DRV’s assumption of liability and indemnification of us was secured in a number of ways: (i) an escrow account in the amount of $4.4 million, of which we contributed $2.2 million, was established to pay for the estimated cost of the assessment and remediation of on-site mercury contamination at the Ecusta Property; (ii) DRV caused two irrevocable letters of credit totaling $7.0 million to be issued by Bank of America in our favor; and (iii) DRV purchased environmental insurance to cover up to $11.4 million of potential remediation cost overruns and $25 million of potential third party liability. Thus, in consideration of the amount we contributed to the escrow account and bearing a share of the cost of the insurance policies, our potential liability for future claims with respect to the previously disclosed environmental matters has been transferred to DRV. Our reserve, at December 31, 2007, associated with this matter was adequate to cover the amounts contributed towards resolution of these matters.

With respect to the River Areas, we entered into two agreements with the U.S. Environmental Protection Agency (“EPA”) and/or NCDENR. Specifically, we agreed to determine the nature and extent of contamination and threat to the public health, welfare or the environment caused by hazardous substances released from the Ecusta Property to the River Areas and, if necessary, to identify and evaluate remedial alternatives to prevent, mitigate or remedy such a release. In the event the results of this study indicates the existence of a material contamination, additional activities may be required and further charges could be necessary.

Workers’ Compensation  Prior to 2003, we established reserves related to potential workers’ compensation claims associated with the former Ecusta Division, which at that time were estimated to total approximately $2.2 million. In the fourth quarter of 2005, the North Carolina courts issued a ruling that held us liable for workers’ compensation claims of certain employees injured during their employment at the Ecusta facility prior to our sale of the Division. Since this ruling, we have made payments as indicated in the reserve analysis presented earlier in this Note 20.

In addition to the specific matters discussed above, we are subject to loss contingencies resulting from regulation by various federal, state, local and foreign governments with respect to the environmental impact of our mills. To comply with environmental laws and regulations, we have incurred substantial capital and operating expenditures in past years. We anticipate that environmental regulation of our operations will continue to become more burdensome and that capital and operating expenditures necessary to comply with environmental regulations will continue, and perhaps increase, in the future. In addition, we may incur obligations to remove or mitigate the adverse effects, if any, on the environment resulting from our operations, including the restoration of natural resources and liability for personal injury and for damages to property and natural resources.

We are also involved in other lawsuits that are ordinary and incidental to our business. The ultimate outcome of these lawsuits cannot be predicted with certainty; however, we do not expect that such lawsuits in the aggregate or individually will have a material adverse effect on our consolidated financial position, liquidity or results of operations.

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21.   SEGMENT AND GEOGRAPHIC INFORMATION

The following table sets forth profitability and other information by business unit for the year ended December 31:

	Specialty Papers						Composite Fibers						Other and Unallocated									Total
In millions	2007		2006		2005		2007		2006		2005		2007			2006			2005			2007			2006			2005
Net sales		$802,293		$693,660		$380,923		$346,030		$292,751		$198,137		$–			$–			$61			$1,148,323			$986,411			$579,121
Energy sales, net		9,445		10,726		10,078				–		–		–			–			–			9,445			10,726			10,078
Total revenue		811,738		704,386		391,001		346,030		292,751		198,137		–			–			61			1,157,768			997,137			589,199
Cost of products sold		721,216		635,143		340,629		287,606		246,797		166,153		(7,366	)		9,903			(14,759	)		1,001,456			891,843			492,023
Gross profit (loss)		90,522		69,243		50,372		58,424		45,954		31,984		7,366			(9,903	)		14,820			156,312			105,294			97,176
SG&A		56,561		50,285		39,876		32,541		28,458		21,282		27,042			13,738			6,475			116,144			92,481			67,633
Restructuring charges		–		–		–		–		–		–		35			30,318			1,564			35			30,318			1,564
Gains on dispositions of plant, equipment and timberlands		–		–		–		–		–		–		(78,685	)		(17,394	)		(22,053	)		(78,685	)		(17,394	)		(22,053	)
Gain on insurance recoveries		–		–		–		–		–		–		–			(205	)		(20,151	)		–			(205	)		(20,151	)
Total operating income (loss)		33,961		18,958		10,496		25,883		17,496		10,702		58,974			(36,360	)		48,985			118,818			94			70,183
Nonoperating income (expense)		–		–		–		–		–		–		(24,884	)		(22,322	)		(10,043	)		(24,884	)		(22,322	)		(10,043	)
Income (loss) before income taxes		$33,961		$18,958		$10,496		25,883		$17,496		$10,702		34,090			$(58,682	)		$38,942			$93,934			$(22,228	)		$60,140
Supplemental Data
Plant, equipment and timberlands, net		$287,107		$315,556		$335,745		$232,759		$213,311		$143,083		–			–			–			$519,866			$528,867			$478,828
Capital expenditures		17,395		36,484		21,413		11,565		7,976		9,611		–			–			–			28,960			44,460			31,024
Depreciation, depletion and amortization		34,882		32,824		35,781		21,119		17,197		14,866		–			–			–			56,001			50,021			50,647

Results of individual business units are presented based on our management accounting practices and management structure. There is no comprehensive, authoritative body of guidance for management accounting equivalent to accounting principles generally accepted in the United States of America; therefore, the financial results of individual business units are not necessarily comparable with similar information for any other company. The management accounting process uses assumptions and allocations to measure performance of the business units. Methodologies are refined from time to time as management accounting practices are enhanced and businesses change. The costs incurred by support areas not directly aligned with the business unit are allocated primarily based on an estimated utilization of support area services.

Management evaluates results of operations of the business units before non-cash pension income, charges related to the Fox River environmental reserves, restructuring related charges, unusual items, certain corporate level costs, effects of asset dispositions and insurance recoveries because it believes this is a more meaningful representation of the operating performance of its core papermaking businesses, the profitability of business units and the extent of cash flow generated from core operations. Such amounts are presented under the caption “Other and Unallocated.” This presentation is closely aligned with the management and operating structure of our company. It is also on this basis that the Company’s performance is evaluated internally and by the Company’s Board of Directors.

Our North America-based Specialty Papers business unit focuses on papers for the production of high-quality hardbound books and other book publishing needs, carbonless papers designed for multiple end-uses, such as credit card receipts, forms and other applications, envelope & converting markets and highly technical customized products for the digital imaging, casting and release, pressure sensitive, and several niche technical specialty markets.

Composite Fibers, based in Gernsbach, Germany, focuses on higher-value-added products, such as paper for tea bags and coffee pods/pads and filters, decorative laminates used for furniture and flooring, and metallized products used in the labeling of beer bottles.

We sell a significant portion of our specialty papers through wholesale paper merchants. No individual customer accounted for more than 10% of our consolidated net sales in 2007, 2006 or 2005.

Our net sales to external customers and location of net plant, equipment and timberlands are summarized below. Net sales are attributed to countries based upon origin of shipment.

	2007				2006				2005
			Plant,				Plant,				Plant,
			Equipment and				Equipment and				Equipment and
In thousands	Net sales		Timberlands – Net		Net sales		Timberlands – Net		Net sales		Timberlands – Net
United States	$	832,724	$	287,107	$	719,720	$	315,556	$	399,705	$	335,745
Germany		190,796		133,505		173,267		128,290		143,227		123,685
United Kingdom		87,054		74,000		60,115		63,061		–		–
Other		37,749		25,254		33,309		21,960		36,189		19,398
Total	$	1,148,323	$	519,866	$	986,411	$	528,867	$	579,121	$	478,828

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22.   GUARANTOR FINANCIAL STATEMENTS

Our 71/8% Senior Notes have been fully and unconditionally guaranteed, on a joint and several basis, by certain of our 100%-owned domestic subsidiaries, PHG Tea Leaves, Inc., Mollanvick, Inc., The Glatfelter Pulp Wood Company, GLT International Finance, LLC, Glatfelter Holdings, LLC and Glatfelter Holdings II, LLC.

The following presents our consolidating statements of income and cash flow for the years ended December 31, 2007, 2006 and 2005 and our consolidating balance sheets as of December 31, 2007 and 2006. These financial statements reflect P. H. Glatfelter Company (the parent), the guarantor subsidiaries (on a combined basis), the non-guarantor subsidiaries (on a combined basis) and elimination entries necessary to combine such entities on a consolidated basis.

Condensed Consolidating Statement of Income for the
year ended December 31, 2007

	Parent						Non			Adjustments/
In thousands	Company			Guarantors			Guarantors			Eliminations			Consolidated
Net sales	$	802,293		$	42,801		$	346,030		$	(42,801	)	$	1,148,323
Energy sales – net		9,445			–			–			–			9,445
Total revenues		811,738			42,801			346,030			(42,801	)		1,157,768
Costs of products sold		716,015			40,181			287,931			(42,671	)		1,001,456
Gross profit		95,723			2,620			58,099			(130	)		156,312
Selling, general and administrative expenses		80,112			1,845			34,187			–			116,144
Shutdown and restructuring charges		201			–			(166	)		–			35
Gains on dispositions of plant, equipment and timberlands, net		76			(78,761	)		–			–			(78,685	)
Gains from insurance recoveries		–			–			–			–			–
Operating income (loss)		15,334			79,536			24,078			(130	)		118,818
Non-operating income (expense)
Interest expense		(26,980	)		(3	)		(2,039	)		–			(29,022	)
Other income (expense) – net		75,806			15,910			(5,939	)		(81,639	)		4,138
Total other income (expense)		48,826			15,907			(7,978	)		(81,639	)		(24,884	)
Income (loss) before income taxes		64,160			95,443			16,100			(81,769	)		93,934
Income tax provision (benefit)		688			35,992			555			(6,773	)		30,462
Net income (loss)	$	63,472		$	59,451		$	15,545		$	(74,996	)	$	63,472

Condensed Consolidating Statement of Income for the
year ended December 31, 2006

	Parent						Non			Adjustments/
In thousands	Company			Guarantors			Guarantors			Eliminations			Consolidated
Net sales	$	693,661		$	36,432		$	292,750		$	(36,432	)	$	986,411
Energy sales – net		10,726			–			–			–			10,726
Total revenues		704,387			36,432			292,750			(36,432	)		997,137
Costs of products sold		647,877			33,340			247,041			(36,415	)		891,843
Gross profit		56,510			3,092			45,709			(17	)		105,294
Selling, general and administrative expenses		60,119			2,501			29,861			–			92,481
Shutdown and restructuring charges		29,073			–			1,245			–			30,318
Gains on dispositions of plant, equipment and timberlands, net		(1,761	)		(15,960	)		327			–			(17,394	)
Gains from insurance recoveries		(205	)		–			–			–			(205	)
Operating income		(30,716	)		16,551			14,276			(17	)		94
Non-operating income (expense)
Interest expense		(20,942	)		(463	)		(3,048	)		–			(24,453	)
Other income (expense) – net		22,643			14,767			(5,477	)		(29,802	)		2,131
Total other income (expense)		1,701			14,304			(8,525	)		(29,802	)		(22,322	)
Income (loss) before income taxes		(29,015	)		30,855			5,751			(29,819	)		(22,228	)
Income tax provision (benefit)		(16,779	)		11,062			1,908			(6,183	)		(9,992	)
Net income (loss)	$	(12,236	)	$	19,793		$	3,843		$	(23,636	)	$	(12,236	)

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GLATFELTER

Condensed Consolidating Statement of Income for the
year ended December 31, 2005

	Parent						Non			Adjustments/
In thousands	Company			Guarantors			Guarantors			Eliminations			Consolidated
Net sales		$380,906			$34,334			$198,254			$(34,373	)		$579,121
Energy sales – net		10,078			–			–			–			10,078
Total revenues		390,984			34,334			198,254			(34,373	)		589,199
Costs of products sold		326,433			33,101			167,157			(34,668	)		492,023
Gross profit		64,551			1,233			31,097			295			97,176
Selling, general and administrative expenses		44,381			1,798			21,454			–			67,633
Shutdown and restructuring charges		–			–			1,564			–			1,564
Gains on dispositions of plant, equipment and timberlands, net		(881	)		(21,213	)		41			–			(22,053	)
Gains from insurance recoveries		(20,151	)		–			–			–			(20,151	)
Operating income		41,202			20,648			8,038			295			70,183
Non-operating income (expense)
Interest expense		(10,730	)		–			(2,353	)		–			(13,083	)
Other income (expense) – net		16,697			8,231			(1,330	)		(20,558	)		3,040
Total other income (expense)		5,967			8,231			(3,683	)		(20,558	)		(10,043	)
Income (loss) before income taxes		47,169			28,879			4,355			(20,263	)		60,140
Income tax provision (benefit)		8,560			11,956			1,808			(793	)		21,531
Net income (loss)		$38,609			$16,923			$2,547			$(19,470	)		$38,609

Condensed Consolidating Balance Sheet as of December 31, 2007

	Parent				Non			Adjustments/
In thousands	Company		Guarantors		Guarantors			Eliminations			Consolidated
Assets
Current assets
Cash and cash equivalents		$6,693		$162		$22,978			$–			$29,833
Other current assets		257,804		277,958		37,008			(229,191	)		343,579
Plant, equipment and timberlands – net		279,511		7,591		232,764			–			519,866
Other assets		749,913		212,513		(78,513	)		(490,124	)		393,789
Total assets		$1,293,921		$498,224		$214,237			$(719,315	)		$1,287,067
Liabilities and Shareholders’ Equity
Current liabilities		$319,516		$39,285		$64,423			$(225,668	)		$197,556
Long-term debt		267,041		–		34,000			–			301,041
Deferred income taxes		138,615		33,557		32,236			(15,252	)		189,156
Other long-term liabilities		92,681		14,310		8,489			7,766			123,246
Total liabilities		817,853		87,152		139,148			(233,154	)		810,999
Shareholders’ equity		476,068		411,072		75,089			(486,161	)		476,068
Total liabilities and shareholders’ equity		$1,293,921		$498,224		$214,237			$(719,315	)		$1,287,067

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GLATFELTER

Condensed Consolidating Balance Sheet as of December 31, 2006

					Non			Adjustments/
In thousands	Parent Company		Guarantors		Guarantors			Eliminations			Consolidated
Assets
Current assets
Cash and cash equivalents		$10,227		$546		$11,212			$–			$21,985
Other current assets		234,038		10,083		114,983			(6,051	)		353,053
Plant, equipment and timberlands – net		302,606		12,945		213,316			–			528,867
Other assets		1,269,299		475,354		(153,452	)		(1,269,463	)		321,738
Total assets		$1,816,170		$498,928		$186,059			$(1,275,514	)		$1,225,643
Liabilities and Shareholders’ Equity
Current liabilities		$157,029		$2,753		$36,375			$(2,867	)		$193,290
Long-term debt		329,516		–		45,779			–			375,295
Deferred income taxes		137,180		18,112		29,472			(2,105	)		182,659
Other long-term liabilities		804,077		91,418		25,844			(835,308	)		86,031
Total liabilities		1,427,802		112,283		137,470			(840,280	)		837,275
Shareholders’ equity		388,368		386,645		48,589			(435,234	)		388,368
Total liabilities and shareholders’ equity		$1,816,170		$498,928		$186,059			$(1,275,514	)		$1,225,643

Condensed Consolidating Statement of Cash Flows for the year
ended December 31, 2007

							Non			Adjustments/
In thousands	Parent Company			Guarantors			Guarantors			Eliminations		Consolidated
Net cash provided (used) by
Operating activities		$92,366			$(40,334	)		$48,300			$–		$100,332
Investing activities
Purchase of plant, equipment and timberlands		(16,334	)		(1,091	)		(11,535	)		–		(28,960	)
Proceeds from disposal plant, equipment and timberlands		199			41,041			376			–		41,616
Acquisition of Lydney mill, Chillicothe and Caerphilly		–			–			(7,923	)		–		(7,923	)
Total investing activities		(16,135	)		39,950			(19,082	)		–		4,733
Financing activities
Net (repayments of) proceeds from indebtedness		(71,570	)		–			(19,002	)		–		(90,572	)
Payment of dividends		(16,350	)		–			0			–		(16,350	)
Other		7,551			–			0			–		7,551
Total financing activities		(80,369	)		–			(19,002	)		–		(99,371	)
Effect of exchange rate on cash		604			–			1,550			–		2,154
Net increase (decrease) in cash		(3,534	)		(384	)		11,766			–		7,848
Cash at the beginning of period		10,227			546			11,212			–		21,985
Cash at the end of period		$6,693			$162			$22,978			–		$29,833

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GLATFELTER

Condensed Consolidating Statement of Cash Flows for the year
ended December 31, 2006

	Parent						Non			Adjustments/
In thousands	Company			Guarantors			Guarantors			Eliminations			Consolidated
Net cash provided (used) by
Operating activities		$(75,468	)		$23,795			$13,860			$9,386			$(28,427	)
Investing activities
Purchase of plant, equipment and timberlands		(35,527	)		(957	)		(7,976	)		–			(44,460	)
Proceeds from disposal plant, equipment and timberlands		4,632			16,436			3			–			21,071
Proceeds from sale of subsidiary, net of cash dividend		(89,217	)		(69,225	)		–			–			(158,442	)
Total investing activities		(120,112	)		(53,746	)		(7,973	)		–			(181,831	)
Financing activities
Net (repayments of) proceeds from indebtedness		199,016			–			(8,476	)		(9,419	)		181,121
Payment of dividends		(16,023	)		–			–			–			(16,023	)
Proceeds from stock options exercised		8,290			–			–			–			8,290
Total financing activities		191,283			–			(8,476	)		(9,419	)		173,388
Effect of exchange rate on cash		–			2			1,411			–			1,413
Net increase (decrease) in cash		(4,297	)		(29,949	)		(1,178	)		(33	)		(35,457	)
Cash at the beginning of period		14,524			30,495			12,390			33			57,442
Cash at the end of period		$10,227			$546			$11,212			$–			$21,985

Condensed Consolidating Statement of Cash Flows for the year
ended December 31, 2005

	Parent						Non			Adjustments/
In thousands	Company			Guarantors			Guarantors			Eliminations			Consolidated
Net cash provided (used) by
Operating activities		$28,694			$42,318			$(12,497	)		$(15,647	)		$42,868
Investing activities
Purchase of plant, equipment and timberlands		(20,319	)		(1,094	)		(9,611	)		–			(31,024	)
Proceeds from disposal plant, equipment and timberlands		55			981			21,414			–			22,450
Proceeds from sale of subsidiary, net of cash dividend		–			–			545			–			545
Total investing activities		(20,264	)		(113	)		12,348			–			(8,029	)
Financing activities
Net (repayments of) proceeds from indebtedness		–			–			(4,153	)		3,420			(733	)
Payment of dividends		(15,839	)		(12,001	)		–			12,001			(15,839	)
Proceeds from stock options exercised		1,414			–			–			–			1,414
Total financing activities		(14,425	)		(12,001	)		(4,153	)		15,421			(15,158	)
Effect of exchange rate on cash		–			(1	)		(2,189	)		–			(2,190	)
Net increase (decrease) in cash		(5,995	)		30,203			(6,491	)		(226	)		17,491
Cash at the beginning of period		20,399			412			18,881			259			39,951
Cash at the end of period		$14,404			$30,615			$12,390			$33			$57,442

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GLATFELTER

23.   QUARTERLY RESULTS (UNAUDITED)

In thousands, except per share

														Diluted
	Net sales				Gross Profit				Net Income (loss)					Earnings (loss) Per Share
	2007		2006		2007		2006		2007		2006			2007		2006
First	$	280,989	$	160,606	$	36,709	$	20,265	$	3,253		$(11,865	)	$	0.07	$	(0.27	)
Second		288,091		279,720		28,800		5,733		1,998		(20,722	)		0.04		(0.46	)
Third		291,859		277,489		46,880		37,903		7,812		5,368			0.17		0.12
Fourth		287,384		268,596		43,923		41,393		50,409		14,983			1.12		0.33

The information set forth above includes the following, on an after-tax basis:

	Restructuring Charges and Unusual Items						Gains on Sales of Plant, Equipment and Timberlands, and Other Asset Sales				Environmental Reserve
In thousands	2007			2006			2007		2006		2007		2006
First	$	(147	)		$(17,864	)		$1,914		$—		$3,695		$—
Second		—			(14,731	)		3,486		—		—		—
Third		—			(1,901	)		1,415		264		12,286		—
Fourth		(85	)		(428	)		37,237		8,576		—		—

24.   SUBSEQUENT EVENT

On January 15, 2008, GPW Virginia Timberlands LLC (“GPW Virginia”), an indirect wholly owned and bankruptcy-remote subsidiary of ours, entered into a Term Loan Agreement with SunTrust Bank (the “Agent”), pursuant to which GPW Virginia borrowed $36.7 million on fully secured basis (the “Term Loan”). The Term Loan bears interest at a six month reserve adjusted LIBOR rate plus a margin rate of 1.20% per annum. Interest on the Term Loan is payable semiannually. The principal amount of the Term Loan is due on January 15, 2013, but GPW Virginia may prepay the Term Loan, in whole or in part, without premium or penalty. The bulk of the proceeds from the term loan are expected to be used to pay down outstanding debt in accordance with our credit facility.

The Term Loan is secured by all of the assets of GPW Virginia, including, without limitation, (i) a 20-year note (the “GIC Note”) in the principal amount of $43.2 million, dated November 16, 2007, issued by GIC Investments LLC, a wholly owned subsidiary of Glawson Investments Corp., in connection with GIC’s purchase of certain timberlands from the Company, (ii) an irrevocable letter of credit supporting the GIC Note (the “GIC Letter of Credit”) issued by The Royal Bank of Scotland plc (the “L/C Issuer”) and (iii) notes with an aggregate principal amount of $9.2 million issued by the Company in favor of GPW Virginia (the “Company Notes”). The Term Loan requires mandatory prepayment in the event that the maturity of the GIC Note is accelerated for any reason.

ITEM 9A.   CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our chief executive officer and our chief financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), as of December 31, 2007, have concluded that, as of the evaluation date, our disclosure controls and procedures were effective.

Internal Control Over Financial Reporting.

Management’s report on the Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) and the related report of our independent registered public accounting firm are included in Item 8 – Financial Statements and Supplementary Data.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended December 31, 2007, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting. In the course of completing our evaluation of internal control over financial reporting we implemented certain changes and enhancements to our controls.

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GLATFELTER

PART III

ITEM 10.   DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors  The information with respect to directors required under this Item is incorporated herein by reference to our Proxy Statement, to be dated on or about March 21, 2008. Our board of directors has determined that, based on the relevant experience of the members of the Audit Committee, the members are audit committee financial experts as this term is set forth in the applicable regulations of the SEC.

Executive Officers of the Registrant  The information with respect to the executive officers required under this Item is set forth in Part I of this report.

We have adopted a Code of Business Ethics for the CEO and Senior Financial Officers in compliance with applicable rules of the Securities and Exchange Commission that applies to our chief executive officer, chief financial officer and our principal accounting officer or controller, or persons performing similar functions. A copy of the Code of Ethical Business Conduct is filed as an exhibit to this Annual Report on Form 10-K and is available on our website, free of charge, at www.glatfelter.com.

ITEM 11.   EXECUTIVE COMPENSATION

The information required under this Item is incorporated herein by reference to our Proxy Statement, to be dated on or about March 21, 2008.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required under this Item is incorporated herein by reference to our Proxy Statement, to be dated on or about March 21, 2008.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required under this Item is incorporated herein by reference to our Proxy Statement, to be dated on or about March 21, 2008.

ITEM 14.   PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required under this Item is incorporated herein by reference to our Proxy Statement, to be dated on or about March 21, 2008.

Our Chief Executive Officer has certified to the New York Stock Exchange that he is not aware of any violations by the Company of the NYSE corporate governance listing standards.

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GLATFELTER

PART IV

ITEM 15.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

(a)	1.		Our Consolidated Financial Statements as follows are included in Part II, Item 8:
		i.	Consolidated Statements of Income for the Years Ended December 31, 2007, 2006 and 2005
		ii.	Consolidated Balance Sheets as of December 31, 2007 and 2006
		iii.	Consolidated Statements of Cash Flows for the Years Ended December 31, 2007, 2006 and 2005
		iv.	Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2007, 2006 and 2005
		v.	Notes to Consolidated Financial Statements for the Years Ended December 31, 2007, 2006 and 2005
	2.		Financial Statement Schedules (Consolidated) are included in Part IV:
		i.	Schedule II -Valuation and Qualifying Accounts – For Each of the Three Years in the Period Ended December 31, 2007

(b)   Exhibit Index

Exhibit Number				Description of Documents				Incorporated by Reference to
								Exhibit	(Filing)
	2	(a)		Asset Purchase Agreement, dated February 21, 2006, among NewPage Corporation, Chillicothe Paper Inc. and P. H. Glatfelter Company				2.1	February 21, 2006 Form 8-K
		(b)		Agreement for Sale of Assets (Lydney), dated March 8, 2006, by and among J R Crompton Limited, Nicholas James Dargan and Willian Kenneth Dawson, as administrators and Glatfelter-UK Limited and the Company				10	March 31, 2006 Form 10-Q
		(c)		Agreement, dated as of November 30, 2007, between Metallised Products Limited (“MPL”) and Glatfelter Lydney Limited, a wholly-owned indirect subsidiary of P. H. Glatfelter Company to acquire MPL, filed herewith. (the schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K and will be provided to the Securities and Exchange Commission upon request)
	3	(a)		Articles of Amendment dated April 27, 1977, including restated Articles of Incorporation, as amended by:				3(a)	1993 Form 10-K
					i	.	Articles of Merger dated January 30, 1979	3(a)	1993 Form 10-K
					ii	.	Statement of Reduction of Authorized Shares dated May 12, 1980	3(a)	1993 Form 10-K
					iii	.	Statement of Reduction of Authorized Shares dated September 23, 1981	3(a)	1993 Form 10-K
					iv	.	Statement of Reduction of Authorized Shares dated August 2, 1982	3(a)	1993 Form 10-K
					v	.	Statement of Reduction of Authorized Shares dated July 29, 1983	3(a)	1993 Form 10-K
					vi	.	Articles of Amendment dated April 25, 1984	3(a)	1994 Form 10-K
					vii	.	Statement of Reduction of Authorized Shares dated October 15, 1984	3(b)	1984 Form 10-K
					viii	.	Statement of Reduction of Authorized Shares dated December 24, 1985	3(b)	1985 Form 10-K
					ix	.	Articles of Amendment dated April 23, 1986	(3)	March 31, 1986 Form 10-Q
					x	.	Statement of Reduction of Authorized Shares dated July 11, 1986	3(b)	1986 Form 10-K
					xi	.	Statement of Reduction of Authorized Shares dated March 25, 1988	3(b)	1987 Form 10-K
					xii	.	Statement of Reduction of Authorized Shares dated November 9, 1988	3(b)	1988 Form 10-K
					xiii	.	Statement of Reduction of Authorized Shares dated April 24, 1989	3(b)	1989 Form 10-K
					xiv	.	Articles of Amendment dated November 29, 1990	3(b)	1990 Form 10-K
					xv	.	Articles of Amendment dated June 26, 1991	3(b)	1991 Form 10-K
					xvi	.	Articles of Amendment dated August 7, 1992	3(b)	1992 Form 10-K
					xvii	.	Articles of Amendment dated July 30, 1993	3(b)	1993 Form 10-K
					xviii	.	Articles of Amendment dated January 26, 1994	3(b)	1993 Form 10-K
					xix	.	Articles of Amendment dated December 20, 2007, filed herewith
		(b)		Articles of Incorporation, as amended through January 26, 1994 (restated for the purpose of filing on EDGAR), filed herewith
		(c)		By-Laws as amended through December 18, 2007, filed herewith
	4	(a)		Indenture, dated as of April 28, 2006, by and between the Company and SunTrust Bank, as trustee relating to 71/8 Notes due 2016				4.1	May 3, 2006 Form 8-K
		(b)		First Supplemental Indenture, dated as of September 22, 2006, among Glatfelter Holdings, LLC, Glatfelter Holdings II, LLC, the Existing Subsidiary Guarantors named therein and SunTrust Bank relating to 71/8 Notes due 2016				4.3	September 22, 2006 Form S-4/A
	10	(a)		P. H. Glatfelter Company Management Incentive Plan, effective January 1, 1982, as amended and restated effective January 1, 1994**				10(a)	2000 Form 10-K**
		(b)		P. H. Glatfelter Company 2005 Management Incentive Plan, adopted as of April 27, 2005**				10.4	April 27, 2005 Form 8-K
		(c)		P. H. Glatfelter Company Supplemental Executive Retirement Plan, as amended and restated effective April 23, 1998 and further amended December 20, 2000**				10(c)	2000 Form 10-K**
		(d)		Description of Executive Salary Continuation Plan**				10(g)	1990 Form 10-K**
		(e)		P. H. Glatfelter Company Supplemental Management Pension Plan, effective as of April 23, 1998**				10(f)	1998 Form 10-K**
		(f)		P. H. Glatfelter Company 1992 Key Employee Long-Term Incentive Plan, as amended December 20, 2000**				10(g)	2000 Form 10-K **
		(g)		P. H. Glatfelter Company 2005 Long-Term Incentive Plan, adopted as of April 27, 2005**				10.1	April 27, 2005 Form 8-K
		(g)	(A)	Form of Top Management Restricted Stock Unit Award Certificate.**				10.2	April 27, 2005 Form 8-K
		(g)	(B)	Form of Non-Employee Director Restricted Stock Unit Award Certificate**				10.3	April 27, 2005 Form 8-K
		(h)		P. H. Glatfelter Company Deferred Compensation Plan for Directors, effective as of April 22, 1998**				10(h)	1998 Form 10-K**
		(i)		Change in Control Employment Agreement by and between P. H. Glatfelter Company and George H. Glatfelter II, dated as of March 7, 2008, filed herewith**
		(j)		Form of Change in Control Employment Agreement by and between P. H. Glatfelter Company and certain employees, dated as of March 7, 2008 , filed herewith**

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GLATFELTER

Exhibit Number					Description of Documents	Incorporated by Reference to
						Exhibit	(Filing)
			(j)	(A)	Schedule of Change in Control Employment Agreements, filed herewith**
			(k)		Agreement between the State of Wisconsin and Certain Companies Concerning the Fox River, dated as of January 31, 1997, among P. H. Glatfelter Company, Fort Howard Corporation, NCR Corporation, Appleton Papers Inc., Riverside Paper Corporation, U.S. Paper Mills, Wisconsin Tissue Mills Inc. and the State of Wisconsin	10(i)	1996 Form 10-K
			(l)		Credit Agreement, dated as of April 3, 2006, by and among the Company, certain of the Company’s subsidiaries as guarantors, the banks party thereto, PNC Bank, National Association, as agent for the banks under the Credit Agreement, PNC Capital Markets LLC and Credit Suisse Securities (USA) LLC, as joint arrangers and bookrunners, and Credit Suisse Securities (USA) LLC, as syndication agent	10.1	April 7, 2006 Form 8-K
			(l)	(A)	First Amendment to Credit Agreement among the Company, certain of the Company’s subsidiaries, certain lenders party thereto and PNC Bank, National Association, in its capacity as agent for such lenders, dated April 25, 2006	10.1	Aug 7, 2007 Form 10-Q
			(l)	(B)	Second Amendment to Credit Agreement among the Company, certain of the Company’s subsidiaries, certain lenders party thereto and PNC Bank, National Association, in its capacity as agent for such lenders, dated December 22, 2006	10.2	Aug 7, 2007 Form 10-Q
			(l)	(C)	Third Amendment to Credit Agreement among the Company, certain of the Company’s subsidiaries, certain lenders party thereto and PNC Bank, National Association, in its capacity as agent for such lenders, dated June 8, 2007*	10.3	Aug 7, 2007 Form 10-Q
			(m)		Contract for the Purchase and Bargain Sale of Property, dated as of December 16, 2002, by and among Glatfelter Pulp Wood Company (a wholly owned subsidiary of the Registrant), the Conservation Fund and Fidelity National Title Insurance Company	10(o)	2002 Form 10-K
			(n)		Term Loan Agreement, dated as of March 21, 2003, among GPW Timberlands, LLC (a wholly owned subsidiary of the Registrant) and SunTrust Bank, as Administrative Agent	10.3	March 31, 2003 Form 10-Q
			(n)	(A)	First Amendment to Term Loan Agreement dated January 31, 2008, by and among GPW Timberlands, LLC, P.H. Glatfelter Company and SunTrust Bank, as administrative agent, filed herewith.
			(o)		Consent Decree for Remedial Design and Remedial Action at Operable Unit 1 of the Lower Fox River and Green Bay site by and among the United States of America and the State of Wisconsin v. P. H. Glatfelter Company and WTMI Company (f/k/a Wisconsin Tissue Mills, Inc.)	10.2	October 1, 2003 Form 8-K/A -- No. 1
			(o)	(A)	Agreed Supplement to Consent Decree between United States of America and the State of Wisconsin vs. P.H. Glatfelter Company and WTM I Company (f/k/a Wisconsin Tissue Mills Inc.), filed herewith
			(o)	(B)	Second Agreed Supplement to Consent Decree between United States of America and the State of Wisconsin vs. P.H. Glatfelter Company and WTM I Company (f/k/a Wisconsin Tissue Mills Inc.)	10.1	Nov 15, 2007 Form 8-K
			(p)		Administrative Order for Remedial Action dated November 13, 2007; issued by the United States Environmental Protection Agency.	10.2	Nov 15, 2007 Form 8-K
			(q)		Compensatory Arrangements with Certain Executive Officers, filed herewith**
			(r)		Summary of Non-Employee Director Compensation (effective January 1, 2005), filed herewith **
			(s)		Service Agreement, commencing on August 1, 2006, between the Registrant (through a wholly owned subsidiary) and Martin Rapp**	10(r)	2006 Form 10-K
			(t)		Retirement Pension Contract, dated October 31, 2007, between Registrant (through a wholly owned subsidiary) and Martin Rapp, filed herewith**
			(u)		Form of Stock-Only Stock Appreciation Right Award Certificate**	10(s)	2006 Form 10-K
			(v)		Form of Top Management Restricted Stock Unit Award Certificate**	10(t)	2006 Form 10-K
			(w)		Timberland Purchase & Sale Agreement - Virginia Timberlands, entered into by and among Glawson Investments Corp., GIC Investments LLC and Glatfelter Pulp Wood Company, dated and effective as of August 8, 2007	10.1	Nov 9, 2007 Form 10-Q
			(x)		Term Loan Agreement dated January 15, 2008, among GPW Virginia Timberlands LLC, certain lenders party thereto and SunTrust Bank, in its capacity as agent for such lenders, filed herewith
	14				Code of Business Ethics for the CEO and Senior Financial Officers of Glatfelter.	14	2003 Form 10-K
	21				Subsidiaries of the Registrant, filed herewith.
	23				Consent of Independent Registered Public Accounting Firm, filed herewith.
	31	.1			Certification of George H. Glatfelter II, Chairman and Chief Executive Officer of Glatfelter, pursuant to Section 302 (a) of the Sarbanes-Oxley Act Of 2002, filed herewith.
	31	.2			Certification of John P. Jacunski, Senior Vice President and Chief Financial Officer of Glatfelter, pursuant to Section 302 (a) of the Sarbanes-Oxley Act Of 2002, filed herewith.
	32	.1			Certification of George H. Glatfelter II, Chairman and Chief Executive Officer of Glatfelter, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, filed herewith.
	32	.2			Certification of John P. Jacunski, Senior Vice President and Chief Financial Officer of Glatfelter, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, filed herewith.

* Confidential treatment has been requested for certain portions thereof pursuant to a confidential treatment request filed with the Commission on August 7, 2007. Such provisions have been filed separately with the Commission.

** Management contract or compensatory plan

-58-

GLATFELTER

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

P. H. GLATFELTER COMPANY
(Registrant)

March 13, 2008

By  /s/  George H. Glatfelter II

George H. Glatfelter II

Chairman and

  Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated:

Date	Signature	Capacity
March 13, 2008	/s/ George H. Glatfelter II George H. Glatfelter II Chairman and Chief Executive Officer	Principal Executive Officer and Director
March 13, 2008	/s/ John P. Jacunski John P. Jacunski Senior Vice President and Chief Financial Officer	Principal Financial Officer
March 13, 2008	/s/ David C. Elder David C. Elder Corporate Controller and Chief Accounting Officer	Controller
March 13, 2008	/s/ Kathleen A. Dahlberg Kathleen A. Dahlberg	Director
March 13, 2008	/s/ Nicholas DeBenedictis Nicholas DeBenedictis	Director
March 13, 2008	/s/ Richard C. III Richard C. III	Director
March 13, 2008	/s/ J. Robert Hall J. Robert Hall	Director
March 13, 2008	/s/ Ronald J. Naples Ronald J. Naples	Director
March 13, 2008	/s/ Richard L. Smoot Richard L. Smoot	Director
March 13, 2008	/s/ Lee C. Stewart Lee C. Stewart	Director

-59-

GLATFELTER

CERTIFICATION PURSUANT TO SECTION 302 (a) OF THE SARBANES-OXLEY ACT OF 2002

   I, George H. Glatfelter II, certify that:

1.	I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2007 of P. H. Glatfelter Company (“Glatfelter”);
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.
4.	Glatfelter’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for Glatfelter and have:

(a)  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to Glatfelter, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)  Evaluated the effectiveness of Glatfelter’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)  Disclosed in this report any change in Glatfelter’s internal control over financial reporting that occurred during Glatfelter’s most recent fiscal quarter (the fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, Glatfelter’s internal control over financial reporting; and

5.  Glatfelter’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to Glatfelter’s auditors and the audit committee of the Glatfelter’s board of directors:

(a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Glatfelter’s ability to record, process, summarize and report financial information; and

(b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in Glatfelter’s internal control over financial reporting.

Date: March 13, 2008

By:  /s/  George H. Glatfelter II

George H. Glatfelter II

Chairman and Chief Executive Officer

-60-

GLATFELTER

CERTIFICATION PURSUANT TO SECTION 302 (a) OF THE SARBANES-OXLEY ACT OF 2002

   I, John P. Jacunski, certify that:

1.	I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2007 of P. H. Glatfelter Company (“Glatfelter”);
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	Glatfelter’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for Glatfelter and have:

(a)  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to Glatfelter, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)  Evaluated the effectiveness of Glatfelter’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)  Disclosed in this report any change in Glatfelter’s internal control over financial reporting that occurred during Glatfelter’s most recent fiscal quarter (the fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, Glatfelter’s internal control over financial reporting; and

5.  Glatfelter’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to Glatfelter’s auditors and the audit committee of the Glatfelter’s board of directors:

(a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Glatfelter’s ability to record, process, summarize and report financial information; and

(b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in Glatfelter’s internal control over financial reporting.

Date: March 13, 2008

By:  /s/  John P. Jacunski

John P. Jacunski

Senior Vice President and

  Chief Financial Officer

-61-

GLATFELTER

Schedule II

P. H. GLATFELTER COMPANY AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL STATEMENT SCHEDULE

For Each of the Three Years in the Period Ended December 31, 2007
Valuation and Qualifying Accounts

	Allowance for
In thousands	Doubtful Accounts									Sales Discounts and Deductions
	2007			2006			2005			2007			2006			2005
Balance, beginning of year		$3,613			$931			$2,364			$2,585			$2,045			$2,217
Provision (a)		781			2,771			382			6,723			3,153			2,788
Write-offs, recoveries and discounts allowed		(1,319	)		(137	)		(1,726	)		(5,195	)		(2,795	)		(2,711	)
Other (b)		42			48			(89	)		232			182			(249	)
Balance, end of year		$3,117			$3,613			$931			$4,345			$2,585			$2,045

The provision for doubtful accounts is included in administrative expense and the provision for sales discounts and deductions is deducted from sales. The related allowances are deducted from accounts receivable.

(a)  The amount in 2006 includes $1.8 million of doubtful account allowances acquired in connection with the Chillicothe and Lydney acquisitions.

(b)  Relates primarily to changes in currency exchange rates.

-62-

GLATFELTER

EX-2.(C)

                                                                  Exhibit 2(C)

                         (SHEARMAN & STERLING LLP LOGO)

                            DATED NOVEMBER 30, 2007

                               ALAN RICHARD MORRIS

                                       and

                                EDWIN RHYS MORRIS

                                       and

                               MORGAN LAWN MORRIS

                                       and

                            GLATFELTER LYDNEY LIMITED

                                   ----------
                            SHARE PURCHASE AGREEMENT
                                   ----------


ABU DHABI | BEIJING | BRUSSELS | DUSSELDORF | FRANKFURT | HONG KONG | LONDON |
MANNHEIM | MENLO PARK MUNICH | NEW YORK | PARIS | ROME | SAN FRANCISCO | SAO
PAULO | SINGAPORE | TOKYO | TORONTO | WASHINGTON, DC



                                    CONTENTS


CLAUSE                                                                      PAGE
- ------                                                                      ----
                                                                         
1.  INTERPRETATION.......................................................      1
2.  SALE AND PURCHASE....................................................     12
3.  CONSIDERATION........................................................     13
4.  PRICE ADJUSTMENT.....................................................     13
5.  RETENTION............................................................     14
6.  PROTECTION FOR THE SELLERS...........................................     15
7.  COMPLETION...........................................................     15
8.  WARRANTIES AND INDEMNITIES...........................................     16
9.  RESTRICTIONS ON SELLERS' BUSINESS ACTIVITIES.........................     17
10. EFFECT OF COMPLETION.................................................     18
11. LIABILITY OF THE SELLERS.............................................     18
12. ENTIRE AGREEMENT.....................................................     18
13. REMEDIES AND WAIVERS.................................................     19
14. VARIATION............................................................     19
15. ASSIGNMENT...........................................................     19
16. THIRD PARTY RIGHTS...................................................     20
17. NOTICES..............................................................     20
18. ANNOUNCEMENTS........................................................     22
19. CONFIDENTIALITY......................................................     22
20. COSTS AND EXPENSES...................................................     23
21. COUNTERPARTS.........................................................     24
22. TIME OF ESSENCE......................................................     24
23. INVALIDITY...........................................................     24
24. INTEREST.............................................................     24
25. FURTHER ASSURANCES...................................................     24
26. GOVERNING LAW AND SUBMISSION TO JURISDICTION.........................     24
SCHEDULE 1                                                                    25
    PARTICULARS OF THE SELLERS AND THE COMPANY...........................     25
    Part A Particulars of the Sellers....................................     25
    Part B Particulars of the Company....................................     26
SCHEDULE 2 WARRANTIES....................................................     27



                                       i



                                                                         
    Part A Warranties given by the Sellers...............................     27
    Part B Warranties given by the Purchaser.............................     44
SCHEDULE 3 COMPLETION OBLIGATIONS........................................     45
    Part A Sellers' Obligations..........................................     45
    Part B Purchaser's Obligations.......................................     47
    Part C Sellers' and Purchaser's Obligations..........................     48
SCHEDULE 4 COMPLETION STATEMENT..........................................     49
    Part A Completion Statement..........................................     49
    Part B Basis of preparation of Net Current Assets and Completion
       Statement.........................................................     51
SCHEDULE 5 THE PROPERTY..................................................     54
SCHEDULE 6 INTELLECTUAL PROPERTY.........................................     55
SCHEDULE 7 PROTECTIONS FOR THE SELLER....................................     56
SCHEDULE 8 FIXED ASSETS..................................................     64




                                       ii


THIS AGREEMENT is made on __________ 2007

BETWEEN:

(1)  ALAN RICHARD MORRIS, whose address is at 14 Lee Lane, Millhouse Green
     Penistone, Sheffield, South Yorkshire, S36 9LN;

(2)  EDWIN RHYS MORRIS, whose address is at 14 Lee Lane, Millhouse Green
     Penistone, Sheffield, South Yorkshire, S36 9LN;

(3)  MORGAN LAWN MORRIS, whose address is at 4 East Park Road, Harrogate, North
     Yorkshire, HG1 5QT; and

     (collectively, the "SELLERS" and each a "SELLER"); and

(4)  GLATFELTER LYDNEY LIMITED, a company registered in England and Wales
     (company registration number 05734921) whose registered office is at Lydney
     Paper Mill, Church Road, Lydney, Gloucestershire GL15 5EG (the
     "PURCHASER").

WHEREAS the Sellers have agreed to sell and the Purchaser has agreed to purchase
the Shares (as defined in this Agreement) in each case on the terms and subject
to the conditions of this Agreement.

IT IS AGREED as follows:

1.   INTERPRETATION

1.1  In this Agreement and the Schedules to it, unless the context otherwise
     requires:-

     "ACCEPTANCE NOTICE"           has the meaning given in paragraph 9.8(a) of
                                   Schedule 7;

     "ACCOUNTS"                    means the audited financial statements of the
                                   Company for the last accounting reference
                                   period ending on the Accounts Date;

     "ACCOUNTS DATE"               means 31 March 2007;

     "AFFILIATE"                   means, in relation to any person which is a
                                   company, a company which is a subsidiary of
                                   the person concerned or which is a holding
                                   company of such person or a subsidiary of
                                   such holding company;

     "AGREED TERMS"                means, in relation to any document, such
                                   document in the terms agreed between the
                                   Sellers and the Purchaser;

     "API ACQUISITION DATE"        means 8 December 2004 being the date of
                                   completion of the acquisition of the business
                                   and assets, including the employees under the
                                   Transfer of Undertakings (Protection of
                                   Employment) Regulations 1981 (as amended), of
                                   Henry & Leigh Slater Limited by the


                                        1



                                   Company;

     "ASBESTOS INDEMNITY"          means the indemnity set out in clause 8.8(d);

     "ASSIGNMENT"                  means the deed of assignment, in the agreed
                                   terms, to be entered into on the date of this
                                   Agreement between MW Associates Limited and
                                   the Company in respect of the "Metbrite"
                                   trade mark;

     "ATEX REGULATIONS"            means, without limitation, the Equipment and
                                   Protective Systems for Use in Potentially
                                   Explosive Atmospheres Regulations (1996) and
                                   the Dangerous Substances and Explosive
                                   Atmosphere Regulations (2002);

     "ATEX STUDY INDEMNITY"        means the indemnity set out in clause 8.8(b);

     "BANK INSTRUCTION LETTER"     means the letter, in agreed form, to be
                                   delivered from the Escrow Agents to the
                                   Escrow Bank in accordance with paragraph 1 of
                                   Part C of Schedule 3;

     "BREAK-FEE LETTER"            means the letter from P.H. Glatfelter Company
                                   to the Sellers dated 3 August 2007, relating
                                   to the payment of the Earnest Money Deposit;

     "BUSINESS"                    means the manufacture of metallised paper
                                   conducted by or on behalf of the Company and
                                   all activities incidental thereto;

     "BUSINESS DAY"                means a day (other than a Saturday or a
                                   Sunday) on which banks are open for business
                                   in London and a Business Day shall not
                                   include any day when the Business is closed
                                   down during a Christmas period which, for
                                   Christmas 2007 shall be from 6.00 p.m. on 21
                                   December 2007 to 9.00 a.m. on 3 January 2008
                                   inclusive;

     "BUSINESS INFORMATION"        means all information, know-how and records
                                   (whether or not confidential and in whatever
                                   form held) including (without limitation) all
                                   formulas, designs, specifications, drawings,
                                   data, manuals and instructions and all
                                   customer lists, sales information, business
                                   plans and forecasts, and all technical or
                                   other expertise and all computer software and
                                   all accounting and tax records,
                                   correspondence, orders and inquiries;

     "CASH BALANCES"               means cash in hand or credited to any account
                                   with a financial institution and securities
                                   with a maturity of less than one year which
                                   are readily convertible into


                                        2



                                   cash;

     "CLAIM NOTICE"                has the meaning given in paragraph 6 of
                                   Schedule 7;

     "COMPANY"                     means Metallised Products Limited (company
                                   registration number 05285231), basic
                                   information concerning which is set out in
                                   Part B of Schedule 1;

     "COMPLETION"                  means completion of the sale and purchase of
                                   the Shares under this Agreement;

     "COMPLETION AMOUNT"           means the sum of L3,000,000 adjusted:

                                   (a)  in accordance with clause 4.1; and

                                   (b)  so as to deduct an amount equal to the
                                        Earnest Money Deposit;

     "COMPLETION DATE"             means the date of this Agreement;

     "COMPLETION STATEMENT"        means the statement, in the agreed form, to
                                   be produced in accordance with Schedule 4;

     "CONFIDENTIAL BUSINESS        means Business Information which is
     INFORMATION"                  confidential or not generally known;

     "CONSIDERATION"               has the meaning given in Clause 3.1;

     "CONSULTANCY AGREEMENT"       means an agreement other than a contract of
                                   employment with the Company pursuant to which
                                   an individual provides services to the
                                   Company as a Consultant;

     "CONSULTANT"                  means an individual providing services to the
                                   Company pursuant to a Consultancy Agreement
                                   where the annual fees payable to such
                                   consultant exceed L50,000 (or the equivalent
                                   in another currency);

     "COVENANTORS"                 means the covenantors named in the Tax Deed;

     "CPSE REPLIES"                means the replies to Commercial Property
                                   Standard Enquiries 1 (Version 2.6) and
                                   Commercial Property Standard Enquiries 4
                                   (version 2.1) dated 27 November 2007 given by
                                   the Sellers to the Purchaser;

     "CREDITORS"                   means the items listed in the Accounts as
                                   amounts of money owed to third parties and
                                   falling due within one year including, but
                                   not limited to:

                                   (a)  trade creditors:


                                        3



                                   (b)  Tax;

                                   (c)  payroll creditors:

                                   (d)  other creditors;

                                   (e)  invoice discounting;

                                   (f)  accruals and deferred income; and

                                   (g)  any and all debt obligations (short
                                        and long term) of the Business;

     "CURRENT ASSETS"              means the current assets of the Company,
                                   being:

                                   (a)  stocks (including raw materials,
                                        work-in-progress and finished goods);

                                   (b)  VAT;

                                   (c)  debtors (including trade debtors and
                                        debtor provision);

                                   (d)  prepayments;

                                   (e)  accrued income; and

                                   (f)  cash (at bank and in hand);

     "DEED OF VARIATION"           means the deed of variation of the Lease, in
                                   the agreed terms, between the Company, First
                                   Propco Limited and P.H. Glatfelter Company to
                                   be entered into on the date of this
                                   Agreement;

     "DISCLOSURE BUNDLE"           means the bundle of documents to be appended
                                   to the Disclosure Letter;

     "DISCLOSURE LETTER"           means the letter of even date with this
                                   Agreement written by the Sellers to the
                                   Purchaser disclosing information constituting
                                   exceptions to the Warranties;

     "DISPUTE"                     means any dispute, difference, controversy or
                                   claim (of any and every kind or type, whether
                                   based on contract, tort, statute, regulation,
                                   or otherwise) arising out of, in relation to,
                                   or in connection with this Agreement,
                                   including any dispute as to the construction,
                                   validity, interpretation, enforceability or
                                   breach of this Agreement;

     "DISTRIBUTION AND AGENCY      means the indemnity set out in Clause 8.9;
     INDEMNITY"


                                        4



     "DUE AMOUNT"                  the amount (if any) due and payable to the
                                   Purchaser on a Relevant Claim being settled
                                   or due and payable to the Purchaser in
                                   relation to a Tax Claim;

     "EARNEST MONEY DEPOSIT"       means the non-refundable deposit of
                                   L30,000 paid by P.H. Glatfelter Company to
                                   the Sellers on the terms set out in the
                                   Break-fee Letter;

     "EMPLOYEES"                   means employees of the Company as at the date
                                   of this Agreement;

     "ENCUMBRANCE"                 means any claim, charge, mortgage, security,
                                   lien, option, equity, power of sale,
                                   usufruct, hypothecation, retention of title,
                                   right of pre-emption, right of first refusal
                                   or other third party rights or security
                                   interest of any kind or an agreement to
                                   create any of the foregoing;

     "ENVIRONMENT"                 means all or any of the following media
                                   (alone or in combination): air (including the
                                   air within buildings and the air within other
                                   natural or man-made structures whether above
                                   or below ground); water (including surface
                                   water, sub-surface water, groundwater,
                                   coastal and inland waters and water in drains
                                   or sewers and any other natural or man-made
                                   structures); soil and land and any ecological
                                   systems and living organisms supported by
                                   these media;

     "ENVIRONMENTAL AUTHORITY"     means any legal person or body of persons
                                   (including any government department or
                                   government agency or court or tribunal)
                                   having jurisdiction to determine any matter
                                   arising under Environmental Law, including,
                                   without limitation, the Caerphilly Borough
                                   Council and the Environment Agency in England
                                   and Wales;

     "ENVIRONMENTAL DEED"          means the deed, in the agreed terms, between
                                   First Propco and the Company to be entered
                                   into on Completion;

     "ENVIRONMENTAL INSURANCE      means the environmental insurance policy in
     POLICY"                       relation to the Property in the agreed terms
                                   to be entered into by the Company, the
                                   Purchaser, First Propco and Nationwide
                                   Building Society as named insureds on
                                   Completion;

     "ENVIRONMENTAL LAW"           means all applicable laws (including, for the
                                   avoidance of doubt, common law), statutes,
                                   regulations, statutory guidance notes, rules,
                                   codes, written guidelines, policies and
                                   requirements of any Environmental Authority,
                                   and court and other tribunal decisions of any
                                   relevant jurisdiction in force in


                                        5



                                   England and Wales at Completion, related to
                                   protection or prevention of pollution of the
                                   Environment, protection of health or safety,
                                   noise, regulation of emissions, discharges,
                                   or releases of Hazardous Substances into the
                                   Environment, or regulation of the use,
                                   treatment, storage, burial, disposal,
                                   transport or handling of Hazardous
                                   Substances, including, without limitation,
                                   the following: European Union Directive
                                   1999/13/EC regarding emissions of volatile
                                   organic compounds; the Environmental
                                   Protection Act 1990; the Equipment and
                                   Protective Systems for Use in Potentially
                                   Explosive Atmospheres Regulations (1996); the
                                   Dangerous Substances and Explosive Atmosphere
                                   Regulations (2002); the Control of Major
                                   Accident Hazards Regulations (1999) as
                                   amended by the Control of Major Accident
                                   Hazards (Amendment) Regulations 2005; the
                                   Control of Asbestos Regulations (2006); the
                                   Producer Responsibility Obligations
                                   (Packaging Waste) Regulations 2007; and the
                                   Pollution Prevention and Control Regulations
                                   (2000);

     "ESCROW ACCOUNT"              means the joint interest-bearing bank account
                                   at the Escrow Bank to be established in
                                   accordance with the Escrow Letter;

     "ESCROW AGENTS"               the Purchaser's Solicitors and the Sellers'
                                   Solicitors;

     "ESCROW BANK"                 Barclays Bank PLC, whose registered office is
                                   at 1 Churchill Place, London, E14 5HP;

     "ESCROW LETTER"               the letter, in the agreed form, to be signed
                                   by the parties and authorising the Escrow
                                   Agents to establish and operate the Escrow
                                   Account;

     "ESTIMATED NET CURRENT        means the Net Current Assets balance given at
     ASSETS"                       26 November 2007 by the Sellers to the
                                   Purchaser in writing;

     "ESTIMATED LIABILITY"         has the meaning given to that term in
                                   paragraph 6 of Schedule 7;

     "EXPERT"                      means an expert appointed pursuant to
                                   paragraph 9.10 of Schedule 7;

     "FINAL NET CURRENT ASSETS"    means the Net Current Assets balance referred
                                   to in paragraph 2 of Part B of Schedule 4;


                                        6



     "FIRST RELEASE DATE"          means the date falling one year after the
                                   Completion Date;

     "FIRST PROPCO"                means First Propco Limited registered in
                                   England and Wales with company registration
                                   number 05286483 whose registered office is at
                                   14 Lee Lane, Millhouse Green, Sheffield, S36
                                   9LN;

     "FIVE ARROWS AGREEMENT"       means the agreement dated 2 February 2005
                                   between the Company and Five Arrows
                                   Commercial Finance Limited (serial no MA
                                   0677) in relation to the Master Invoice
                                   Discounting Agreement (serial no: MA 0677);

     "FIXED ASSETS"                means the assets listed in Schedule 8, being
                                   the capital assets of the Company each with
                                   an estimated value at Completion in excess of
                                   L25,000;

     "HAZARDOUS SUBSTANCE"         means any solid, liquid, gaseous or thermal
                                   irritant, pollutant or contaminant,
                                   including, without limitation, smoke,
                                   vapours, soot, fumes, acids, alkalis, toxic
                                   chemicals, medical waste, polychlorinated
                                   biphenyls, trichloroethene and other volatile
                                   organic compounds and their degradation
                                   products, heavy metals and waste materials;

     "IHTA"                        means the Inheritance Tax Act 1984;

     "INDEMNITIES"                 means the Workplace Noise Indemnity, the ATEX
                                   Study Indemnity, the PCB Inspection
                                   Indemnity, the Asbestos Indemnity and the
                                   Distribution and Agency Indemnity (and
                                   "INDEMNITY" shall be construed accordingly);

     "INFORMATION TECHNOLOGY"      has the meaning given to that term in
                                   paragraph 9.4 of Part A of Schedule 2;

     "INSURER"                     means the insurer from time to time under the
                                   Environmental Insurance Policy;

     "INTELLECTUAL PROPERTY"       means patents, inventions, know-how, trade
                                   marks and service marks, rights in designs,
                                   trade or business names, copyrights, domain
                                   names, get-up and topography rights (whether
                                   or not any of these is registered and
                                   including any registration of such rights,
                                   applications and rights to apply for such
                                   registrations) and all rights or forms of
                                   protection of a similar nature or having
                                   equivalent or similar effect to any of these
                                   which may subsist anywhere in the world;

     "LEASE"                       means the lease between (1) First Propco
                                   Limited and (2) Metallised Products Limited,
                                   dated 16 May 2005,


                                        7



                                   relating to land and buildings registered at
                                   HM Land Registry under title number WA39664;

     "LOSSES"                      means all losses, liabilities, costs
                                   (including, without limitation, legal,
                                   consultants' and other professional fees and
                                   costs), damages, charges, expenses, actions,
                                   proceedings, claims and demands, including
                                   interest, fines and penalties;

     "M LICENCE AGREEMENT"         means the licence agreement, in the agreed
                                   terms, to be entered into on the date of this
                                   Agreement between MW Associates Limited and
                                   the Company relating to Community trade mark
                                   number 005157714 filed on 23 June 2006;

     "MATERIAL INTELLECTUAL        means all Intellectual Property used by the
     PROPERTY"                     Company and which is material in relation to
                                   the Business and which is listed in Schedule
                                   6;

     "NET CURRENT ASSETS"          means the Current Assets minus Creditors
                                   calculated in accordance with and subject to
                                   the provisions set out in Part B of Schedule
                                   4;

     "NOTIFIED CLAIM"              has the meaning given to it in clause 5.6;

     "PAYMENT ACCOUNT DETAILS"     means, in relation to any payment to be made
                                   under or pursuant to this Agreement, the
                                   account name, account number, bank name, bank
                                   sort code, bank location and other details
                                   specified by the payee and necessary to
                                   effect payment (including, where relevant,
                                   the SWIFT number) (whether by cheque,
                                   banker's draft, telegraphic or other
                                   electronic means of transfer) to the payee;

     "PCB INSPECTION INDEMNITY"    means the indemnity set out in clause 8.8(c);

     "PROPERTY PRE-EMPTION         means the pre-emption agreement in the agreed
     AGREEMENT"                    terms between the Company and First Propco
                                   Limited relating to the Property entered into
                                   on the date of this Agreement;

     "PROPERTY"                    means the property details of which are set
                                   out in Schedule 5;

     "PURCHASER'S GROUP"           means the Purchaser, its subsidiaries and
                                   subsidiary undertakings, any holding company
                                   of the Purchaser and all other subsidiaries
                                   of any such holding company from time to
                                   time;

     "PURCHASER'S LAWYERS"         means Shearman & Sterling (London) LLP of


                                        8



                                   Broadgate West, 9 Appold Street, London EC2A
                                   2AP;

     "REJECTION NOTICE"            has the meaning given in paragraph 9.8(b) of
                                   Schedule 7;

     "RELEASE DATE"                means the First Release Date or the Second
                                   Release Date as the case may be;

     "RELEVANT CLAIM"              means a claim under the Warranties (excluding
                                   the Tax Warranties), amended to reflect any
                                   accounting adjustments made under this
                                   Agreement;

     "RESTRICTED BUSINESS"         means the manufacture of metallised paper and
                                   metallised film;

     "RETENTION AMOUNT"            has the meaning given to the term in Clause
                                   3.3(a)(ii);

     "SECOND RELEASE DATE"         means the date falling two years after the
                                   Completion Date;

     "SELLERS' LAWYERS"            means Walker Morris of Kings Court, 12 King
                                   Street, Leeds, LS1 2HL;

     "SENIOR EMPLOYEE"             means any employee employed or engaged by the
                                   Company on an annual salary (on the basis of
                                   full time employment) in excess of
                                   L40,000 (or the equivalent in another
                                   currency);

     "SHARES"                      means 99 ordinary shares of L1 each being all
                                   the issued shares in the capital of the
                                   Company;

     "SHARES PRE-EMPTION           means the pre-emption agreement in the agreed
     AGREEMENT"                    terms between Top Propco Limited and the
                                   Company relating to the shares in First
                                   Propco Limited to be entered into on the date
                                   of this Agreement;

     "TA"                          means the Income and Corporation Taxes Act
                                   1988;

     "TAX" OR "TAXATION"           means all forms of taxation and statutory,
                                   governmental, national, state, provincial,
                                   local or municipal charges, impositions,
                                   duties, contribution levies or withholdings
                                   wherever chargeable and whether of the United
                                   Kingdom or any other jurisdiction, and all
                                   penalties, charges, fines, surcharges, costs
                                   and interest relating thereto;

     "TAX AUTHORITY"               means any taxing or other authority (whether
                                   within or outside of the United Kingdom)
                                   having power or authority in relation to Tax
                                   including HM Revenue & Customs;


                                        9



     "TAX CLAIM"                   means a claim under the Tax Deed or the Tax
                                   Warranties;

     "TAX DEED"                    means the deed of covenant relating to
                                   Taxation in the agreed terms to be entered
                                   into at Completion;

     "TAX RETURN"                  means any return, notice, computation or
                                   claim in relation to Tax;

     "TAX WARRANTY"                means any Warranty set out in paragraph 15 of
                                   Part A of Schedule 2;

     "TCGA"                        means the Taxation of Chargeable Gains Act
                                   1992;

     "THIRD PARTY CLAIM"           means a claim by a third party against the
                                   Purchaser or the Company in respect of which
                                   claim it appears to the Purchaser acting
                                   resonably that the Sellers are likely to
                                   become liable under the Warranties excluding
                                   a Claim for Tax (as defined in the Tax Deed);

     "TOP PROPCO LIMITED"          means the company registered in England and
                                   Wales with company registration number
                                   05285314 whose registered office is at 14 Lee
                                   Lane, Millhouse Green, Sheffield, S36 9LN;

     "TRANSACTION DOCUMENTS"       means this Agreement, the Disclosure Letter,
                                   the Tax Deed, the Environmental Deed, the
                                   Deed of Variation, the Property Pre-Emption
                                   Agreement, the Shares Pre-Emption Agreement,
                                   the Assignment, the M Licence Agreement and
                                   the Escrow Letter;

     "UK GAAP"                     means all Statements of Standard Accounting
                                   Practice, Financial Reporting Standards and
                                   Urgent Issues Task Force Abstracts issued by
                                   the Accounting Standards Board, and mandatory
                                   for adoption on the relevant date;

     "VAT"                         means value added tax chargeable under the
                                   VATA and any similar replacement or
                                   additional tax;

     "VATA"                        means the Value Added Tax Act 1994;

     "WARRANTIES"                  means the warranties set out in Part A of
                                   Schedule 2 given by the Sellers and
                                   "WARRANTY" shall be construed accordingly;

     "WELSH ASSEMBLY GRANT"        means the Deed of Novation and Amendment
                                   dated 27 February 2006 between (1) the
                                   National Assembly for Wales, (2) Henry &
                                   Leigh Slater Limited and (3) the Company and
                                   all agreements and letters relating thereto;
                                   and


                                       10



     "WORKPLACE NOISE INDEMNITY"   means the indemnity set out in clause 8.8(a).

1.2  In this Agreement, unless otherwise specified:-

     (a)  references to clauses, sub-clauses, paragraphs, sub-paragraphs and
          Schedules are to clauses, sub-clauses, paragraphs sub-paragraphs of,
          and Schedules to, this Agreement;

     (b)  a reference to any statute or statutory provision shall be construed
          as a reference to the same as it may have been, or may from time to
          time be, amended, modified or re-enacted provided that this sub-clause
          (b) shall not operate so as to impose any additional liability on the
          Sellers which would not otherwise have arisen or to increase any
          liability of the Sellers which could arise under the terms of this
          agreement;

     (c)  references to a statutory provision include any subordinate
          legislation made from time to time under that provision which is in
          force at the date of this Agreement;

     (d)  references to a "COMPANY" shall be construed so as to include any
          company, corporation or other body corporate, wherever and however
          incorporated or established;

     (e)  references to a "PERSON" shall be construed so as to include any
          individual, firm, company, government, state or agency of a state or
          any joint venture, association or partnership (whether or not having
          separate legal personality);

     (f)  the singular includes the plural and vice versa and references to one
          gender include all genders;

     (g)  references to "INDEMNIFY" and "INDEMNIFYING" any person against any
          circumstance include indemnifying and keeping him harmless from all
          actions, claims and proceedings from time to time made against that
          person and all loss or damage and all payments, costs or expenses made
          or incurred by that person as a consequence of or which would not have
          arisen but for that circumstance;

     (h)  a company is a "SUBSIDIARY" of another company (its "HOLDING COMPANY")
          if that other company, directly or indirectly, though one or more
          subsidiaries:

          (i)  holds a majority of the voting rights in it;

          (ii) is a member or shareholder of it and has the right to appoint or
               remove a majority of its board of directors or equivalent
               managing body;

          (iii) is a member or shareholder of it and controls alone, or pursuant
               to an agreement with other shareholders or members, a majority of
               the voting rights in it; or


                                       11



          (iv) has the right to exercise a dominant influence over it pursuant
               to its constitutional documents or pursuant to a control
               contract;

     (i)  any amounts denominated in a currency other than pound sterling
          required to be translated into pound sterling for the purposes of this
          Agreement shall, save as otherwise provided herein, be translated at
          the prevailing exchange rate as at the following dates;

          (i)  at the date hereof for the purposes of Schedule 3; and

          (ii) as at the date on which the event in question occurs for the
               purposes of Schedule 4;

     (j)  references to writing shall include any modes of reproducing words in
          a legible and non-transitory form;

     (k)  headings to clauses and Schedules are for convenience only and do not
          affect the interpretation of this Agreement;

     (l)  the Schedules and any attachments form part of this Agreement and
          shall have the same force and effect as if expressly set out in the
          body of this Agreement, and any reference to this Agreement shall
          include the Schedules;

     (m)  any reference to books, records or other information means books,
          records or other information in any form including paper,
          electronically stored data, magnetic media, film and microfilm;

     (n)  references to the knowledge, information, belief or awareness of any
          person shall be treated as being the actual knowledge of the Sellers
          (or any of them), Georgina Tallowin (in respect of the Warranties set
          out in paragraph 10 of Part A of Schedule 2), Maria Tee (in respect of
          the Warranties set out in paragraphs 4 to 13 and 15 (taxation) of Part
          A of Schedule 2), Chris Marshall (in respect of the Warranties set out
          in paragraph 3 of Part A of Schedule 2), and Hugh Campbell (in respect
          of the Warranties set out in paragraphs 8.3 to 8.5 of Part A of
          Schedule 2).

     (o)  the rule known as the ejusdem generis rule shall not apply and
          accordingly general words introduced by the word "other" shall not be
          given a restrictive meaning by reason of the fact that they are
          preceded by words indicating a particular class of acts, matters or
          things; and

     (p)  general words shall not be given a restrictive meaning by reason of
          the fact that they are followed by particular examples intended to be
          embraced by the general words.

2.   SALE AND PURCHASE

2.1  The Sellers shall sell, and the Purchaser shall purchase, those Shares set
     opposite its name in Part A of Schedule 1 together with all rights and
     advantages attached or accruing to them as at Completion.

2.2  The Shares shall be sold free from all Encumbrances.


                                       12



2.3  The Sellers irrevocably waive all rights of pre-emption over any of the
     Shares conferred upon them by the articles of association of the Company or
     in any other way and undertakes to take all other steps necessary to ensure
     that any other rights of pre-emption over any of the Shares are irrevocably
     waived.

3.   CONSIDERATION

3.1  The total consideration (payable in cleared funds pursuant to the
     provisions of this Agreement) for the sale of the Shares shall be the
     payment by the Purchaser of the sum of L3.5 million adjusted in accordance
     with Clause 4 (the "CONSIDERATION") payable in accordance with Clause 3.3.

3.2  The proportion of the total consideration to which each Seller is entitled
     shall be that set opposite his name in Part A of Schedule 1.

3.3  Payment of the Consideration shall be made as follows:

     (a)  on the date of this Agreement the Purchaser shall:

          (i)  pay to the Sellers the Completion Amount in cash; and

          (ii) deposit L500,000 (the "RETENTION AMOUNT") into the Escrow Account
               to be maintained in accordance with Clause 4; and

     (b)  the Sellers will treat the Earnest Money Deposit as being provided on
          behalf of the Purchaser as part of the Consideration.

3.4  Wherever in this Agreement provision is made for the payment by one party
     to another, such payment shall be made by crediting for same day value the
     account specified in the Payment Account Details (such details to be
     notified in writing by the payee to the payer prior to the due date for
     payment) of the party entitled to the payment by way of CHAPS transfer on
     or before the due date for payment. Payment of such sum shall be a good
     discharge to the payer of its obligation to make such payment and (in the
     case of a payment by the Purchaser) the payer shall not be obliged to see
     to the application of the Consideration as between the Sellers.

3.5  If any payment is made by the Sellers to the Purchaser pursuant to this
     Agreement or the Tax Deed, the payment shall be made by way of an
     adjustment of the Consideration paid by the Purchaser and the Consideration
     shall be deemed to have been reduced by the amount of such payment.

3.6  Each of the parties shall comply with the requirements pertaining to that
     party set out in Schedule 3.

4.   PRICE ADJUSTMENT

4.1  The Consideration shall be adjusted so that there shall be deducted an
     amount, if any, by which Estimated Net Current Assets are less than zero
     (such amount being the "COMPLETION ADJUSTMENT") and the Completion Amount
     shall be adjusted accordingly.


                                       13



4.2  The Purchaser shall prepare the Completion Statement in accordance with the
     provisions of Schedule 4. Upon the Completion Statement and Final Net
     Current Assets having been agreed or determined in accordance with Schedule
     4, if and to the extent that in calculating the Final Net Current Assets
     shown by the Completion Statement (having added back the amount of any
     Completion Adjustment) the Final Net Current Assets are less than zero,
     then:

     (a)  the Purchaser shall be paid from the Escrow Account the aggregate
          amount by which the Final Net Current Assets are less than zero (the
          "SHORTFALL"); and

     (b)  if and to the extent that the Shortfall exceeds L50,000, the Sellers
          shall (within 5 Business Days of agreement or determination) pay into
          the Escrow Account an amount equal to 50 per cent of the Shortfall.

4.3  The amount of any deduction from the Escrow Account pursuant to clause
     4.2(a) shall be subject to a maximum cap of L500,000 and any payment
     pursuant to Clause 4.2(b) shall be subject to an aggregate maximum cap of
     L250,000.

5.   RETENTION

5.1  No amount shall be released out of the Escrow Account otherwise than in
     accordance with Clause 4.2, this Clause 5 and Schedule 7.

5.2  Subject as otherwise provided by this Clause 5, the amount (if any) in
     excess of L250,000 standing to the credit of the Escrow Account (less any
     accrued interest) on the First Release Date shall be paid to the Sellers.

5.3  Subject as otherwise provided by this Clause 5, the amount (if any)
     standing to the credit of the Escrow Account (including any accrued
     interest) on the Second Release Date shall be paid to the Sellers.

5.4  Any interest that may accrue on the credit balance on the Escrow Account
     shall be credited to the Escrow Account and any payment of principal out of
     the Escrow Account shall include a payment of the interest earned on such
     principal sum by the Escrow Account.

5.5  The liability to Taxation on any interest on any amount in the Escrow
     Account shall be borne by the party ultimately entitled to that amount.

5.6  If, prior to a Release Date:

     (a)  a Relevant Claim has been notified by the Purchaser to the Sellers in
          accordance with paragraph 9 of Schedule 7 (a "NOTIFIED CLAIM"); or

     (b)  a Tax Claim has been notified by the Purchaser to the Representative
          Covenanter (as defined in the Tax Deed) and the Sellers' Lawyers in
          accordance with paragraph 9 of Schedule 7; or

     (c)  a Third Party Claim or a Claim for Tax (as defined in the Tax Deed)
          has been made and where in respect of such Claim for Tax, it appears
          to the Purchaser, acting reasonably, that the Sellers are likely to
          become liable under the Tax Deed,


                                       14



          then:

          (i)  an amount equal to the Estimated Liability or the amount of the
               liability in respect of the Third Party Claim or the Claim for
               Tax (as the case may be) shall be retained in the Escrow Account;
               or

          (ii) where the Estimated Liability or amount of the liability in
               respect of the Third Party Claim or the Claim for Tax (as the
               case may be) is greater than the amount held in the Escrow
               Account at the date of the Claim Notice, Tax Claim, Third Party
               Claim or Claim for Tax (as the case may be), then the entire
               balance of the Escrow Account shall be retained in the Escrow
               Account;

          and shall not be released to the Sellers from the Escrow Account
          otherwise than in accordance with this Clause 5 and paragraph 9 of
          Schedule 7.

5.7  If, prior to a Release Date, a Notified Claim is settled or there is a Tax
     Claim and there is a Due Amount, the parties shall as soon as practicable
     following such settlement (or, in the case of a Tax Claim, so as to comply
     with the timing set out in Clause 3 of the Tax Deed), instruct the Escrow
     Agents to pay to the Purchaser out of the Escrow Account the lesser of the
     Due Amount and the amount standing to the credit of the Escrow Account.

5.8  As soon as practicable following the settlement of any Notified Claim
     outstanding at a Release Date in respect of which there is a Due Amount or,
     if at the Relevant Date there is a Tax Claim outstanding in respect of
     which there is a Due Amount, so as to comply with the timing set out in
     Clause 3 of the Tax Deed, the parties shall instruct the Escrow Agents to
     pay to the Purchaser out of the Escrow Account the lesser of the Due Amount
     and the amount standing to the credit of the Escrow Account (together with
     any interest which has accrued on the amount so paid).

5.9  Subject to Clause 5.6, at the Second Release Date and following payment of
     all Due Amounts to the Purchaser from the Escrow Account, the parties
     shall, as soon as practicable, instruct the Escrow Agents to pay any
     balance standing to the credit of the Escrow Account (together with any
     interest which has accrued on such balance) to the Sellers in equal
     proportions.

5.10 Nothing in this Clause 5 or paragraph 9 of Schedule 7 permits the Sellers'
     liability to pay a Relevant Claim to end on the Second Release Date if that
     Relevant Claim arises or is delayed as a result of dishonesty, fraud or
     wilful misconduct.

6.   PROTECTION FOR THE SELLERS

6.1  The provisions of Schedule 7 shall have effect to limit or qualify any
     liability of the Sellers under the Transaction Documents (excluding the
     Environmental Deed in respect of which the Sellers (or any one of them)
     will have no liability whatsoever).

7.   COMPLETION

7.1  Completion shall take place before 11.59 p.m. on the Completion Date at the
     offices of the Purchaser's Lawyers at 9 Appold Street, London EC2A 2AP.


                                       15



7.2  At Completion:

     (a)  the Sellers shall procure that the obligations listed in Part A and
          Part C of Schedule 3 are fulfilled;

     (b)  against compliance by the Sellers with their obligations under Clause
          7.2(a), the Purchaser shall ensure payment of the Completion Amount to
          the Sellers in accordance with Clause 3.3(a)(i) and 3.4 and the
          Retention Amount into the Escrow Account in accordance with Clause
          3.3(a)(ii); and

     (c)  the Purchaser shall procure that the obligations listed in Part B of
          Schedule 3 are fulfilled.

7.3  The Purchaser shall not be obliged to complete the sale and purchase of any
     of the Shares pursuant to this Agreement unless each Seller complies fully
     with its obligations under Clause 7.2.

7.4  The Purchaser shall not be obliged to complete the sale and purchase of any
     of the Shares unless the sale and purchase of all the Shares is completed
     simultaneously. This Clause 7.4 shall not limit any other clause of this
     Agreement and in particular Clause 13.

7.5  The Sellers will indemnify and keep indemnified the Company from and
     against all and any Losses incurred by the Company which arise out of or
     are in any way connected with any claim brought or threatened by either
     Alan Richard Morris or Morgan Lawn Morris against the Company arising out
     of their resignation from office.

8.   WARRANTIES AND INDEMNITIES

8.1  The Sellers warrant to the Purchaser in the terms set out in Part A of
     Schedule 2 as at the date of this Agreement.

8.2  The Sellers accept that the Purchaser is entering into this Agreement in
     reliance upon each of the Warranties.

8.3  The Warranties are given subject to anything which is fully and fairly
     disclosed in the Disclosure Letter with sufficient detail to clarify the
     nature, scope and significance of the fact or matter generally disclosed in
     the context of the relevant Warranty or Warranties.

8.4  The Sellers undertake (if any claim is made against any one or all of them
     in connection with the sale of the Shares to the Purchaser) not to make any
     claim against the Company in connection with assisting the Sellers in
     giving the Warranties, preparing the Disclosure Letter and/or entering into
     this Agreement and the documents entered into pursuant to this Agreement.
     This Clause 8.3 shall not prevent any Seller making or pursuing any claim
     or action in relation to fraud.

8.5  Each of the Warranties shall be construed as a separate and independent
     warranty and (except where expressly provided to the contrary) shall not be
     limited or restricted by reference to or inference from the terms of any
     other Warranty or any other term of this Agreement.


                                       16



8.6  If in respect of or in connection with any breach of any of the Warranties
     (excluding Tax Warranties) or any facts or matters warranted not being true
     and being misleading any amount payable to the Purchaser by the Sellers
     (including, without limitation, any payment under this clause or otherwise)
     is subject to any deductions or withholdings for or on account of Tax and
     to the extent that such payment to the Purchaser by the Sellers has not
     been increased by the amount of that deduction or withholding for or on
     account of Tax, such additional amounts shall be paid to the Purchaser by
     the Sellers so as to ensure that the net amount received by the Purchaser
     is equal to the full amount payable to the Purchaser under this Agreement.
     For the avoidance of doubt, any payment pursuant to this Clause 8.6 shall
     to the extent that there are sufficient funds in the Escrow Account to
     allow such payment to be made, be made from the Escrow Account.

8.7  The Purchaser warrants to the Sellers in the terms set out in Part B of
     Schedule 2 as at the date of this Agreement.

8.8  The Sellers undertake to pay the Purchaser on demand (for itself and as
     trustee for the benefit of the Company) a sum equal to all reasonably and
     properly incurred costs and expenses which the Purchaser or the Company
     incurs or suffers arising out of or in connection with any remediation
     works required in order to ensure that the Company is (to the extent that
     it is not already) compliant with applicable UK laws and regulations in
     respect of each or any of the following:

     (a)  work place noise;

     (b)  modifications required pursuant to the ATEX Regulations;

     (c)  control of Polychlorinated biphenyls (or PCBs); or

     (d)  control of asbestos,

     in each case in respect of the carrying on of the Business at the Property
     in the manner in which it is carried on at the Completion Date.

8.9  The Sellers undertake to indemnify the Purchaser on demand (for itself and
     as trustee for the benefit of the Company) a sum equal to any Losses
     suffered or incurred relating to termination by the Company in the ordinary
     course of business of:

     (a)  the Company's distribution arrangements in Russia and Estonia; and

     (b)  the Company's agency arrangements in Benelux, Finland, Portugal,
          Belgium, South America, Israel, the West Indies, Hungary, Bulgaria,
          Slovenia, Greece and Italy.

9.   RESTRICTIONS ON SELLERS' BUSINESS ACTIVITIES

9.1  Each Seller undertakes that he will not, either alone or in conjunction
     with or on behalf of any other person, do any of the following things:

     (a)  within three years after the Completion Date, be engaged or (except as
          the holder of shares in a listed company which confer not more than
          one per cent.


                                       17



          of the votes which could normally be cast at a general meeting of the
          company) directly or indirectly interested in carrying on any business
          within Europe which competes with or is likely to compete with the
          Restricted Business;

     (b)  within three years after Completion induce or seek to induce any
          Restricted Employee to become employed whether as employee, consultant
          or otherwise by any of the Sellers provided that the placing of an
          advertisement of a post available to a member of the public generally
          and the recruitment of a person through an employment agency shall not
          constitute a breach of this Clause 9.1(b) provided that none of the
          Sellers encourages or advises such agency to approach any such
          Restricted Employee; nor

     (c)  assist any other person to do any of the foregoing things.

9.2  The Sellers agree that they consider the restrictions contained in this
     Clause 9 to be no greater than is reasonable and necessary for the
     protection of the interest of the Purchaser. Notwithstanding the foregoing,
     each undertaking contained in this Clause 9 shall be construed as a
     separate undertaking and if one or more of the undertakings is held to be
     against the public interest or unlawful or in any way an unreasonable
     restraint of trade, the remaining undertakings shall continue to bind the
     Sellers.

9.3  In this Clause 9, "RESTRICTED EMPLOYEE" means any present Employee of the
     Company who is a Senior Employee.

10.  EFFECT OF COMPLETION

     Any provision of this Agreement and any other documents referred to in it
     which is capable of being performed after but which has not been performed
     at Completion and all Warranties and covenants and other undertakings
     contained in or entered into pursuant to this Agreement shall remain in
     full force and effect notwithstanding Completion.

11.  LIABILITY OF THE SELLERS

11.1 The obligations of the Sellers under this Agreement are joint and several.

11.2 If any liability of one of the Sellers is, or becomes illegal, invalid or
     unenforceable in any respect, that shall not affect or impair the
     liabilities of the other Sellers under this Agreement.

11.3 The Purchaser may release, or compromise the liability of, any Seller or
     grant time or other indulgence to any Seller without releasing or reducing
     the liability of any other Seller. Where a liability of one or some but not
     all of the Sellers under any obligation which is both joint and several is
     released or compromised, the remaining Sellers shall continue to be
     severally and shall together be jointly liable on that obligation.

12.  ENTIRE AGREEMENT

12.1 This Agreement and the other Transaction Documents set out the entire
     agreement between the parties to this Agreement and those documents in
     respect of the transactions contemplated by this Agreement to the exclusion
     of any terms implied by


                                       18



     law which may be excluded by contract and supersedes any previous written
     or oral agreement between the parties in relation to the matters dealt with
     in this Agreement.

12.2 The Purchaser acknowledges that it has not relied on, nor been induced to
     enter into this Agreement by any representation, warranty or undertaking
     not expressly incorporated into it.

12.3 So far as permitted by law and except in the case of fraud, each party
     agrees and acknowledges that its only right and remedy in relation to any
     warranty, representation or undertaking given in connection with this
     Agreement shall be for breach of the terms of this Agreement to the
     exclusion of all other rights or remedies (including those in tort or
     arising under statute).

12.4 Without prejudice to the generality of the foregoing, the Purchaser
     acknowledges and agrees that, save as expressly set out in this Agreement,
     no representation, warranty or other assurance has been given by any of the
     Sellers in respect of any projection, forecast or other forward looking
     information.

13.  REMEDIES AND WAIVERS

13.1 No delay or omission by any party to this Agreement in exercising any
     right, power or remedy provided by law or under this Agreement or any other
     documents referred to in it shall affect that right, power or remedy or
     operate as a waiver thereof.

13.2 The single or partial exercise of any right, power or remedy provided by
     law or under this Agreement shall not preclude any other or further
     exercise of it or the exercise of any other right, power or remedy.

13.3 The rights, powers and remedies provided in this Agreement are cumulative
     and not exclusive of any rights, powers and remedies provided by law.

14.  VARIATION

     No variation of this Agreement shall be effective unless in writing and
     signed by or on behalf of each of the parties to this Agreement.

15.  ASSIGNMENT

15.1 This Agreement is personal to the parties and accordingly no party may
     assign (at law or in equity), transfer, charge, make the subject of a trust
     or deal in any manner with any of its rights or benefits under this
     Agreement or purport to do any of the same without the prior written
     consent of all the other parties, such consent not to be unreasonably
     withheld or delayed except that the Purchaser may, upon giving written
     notice to the Sellers, assign all or any part of the benefit of, or its
     rights and benefits under, this Agreement to a member of the Purchaser's
     Group provided that:

     (a)  any such assignee remains a member of the Purchaser's Group; and

     (b)  before such assignee ceases to be a member of the Purchaser's Group,
          the Purchaser will procure that the benefit of this Agreement and the
          rights and benefits under it are (i) reassigned to the Purchaser or
          (ii) (upon giving further written notice to the Sellers) assigned to
          another company within the


                                       19



          Purchaser's Group (any such further assignment to be subject to the
          same conditions as above).

16.  THIRD PARTY RIGHTS

     A person who is not a party to this Agreement shall have no right under the
     Contracts (Rights of Third Parties) Act 1999 to enforce any of its terms.

17.  NOTICES

17.1 Except where expressly stated otherwise, a notice under this Agreement
     shall only be effective if it is in writing, is sent by recorded delivery
     and is made in accordance with this Clause 17 and, where notice is to be
     served on the Sellers, is served on each of them at the addresses specified
     below.

17.2 Notices under this Agreement shall be sent to a party at its address and
     for the attention of the individual set out below:

     (a)  In the case of the Sellers:

     Alan Richard Morris   14 Lee Lane
                           Millhouse Green
                           Penistone
                           Sheffield
                           South Yorkshire
                           S36 9LN

     Edwin Rhys Morris     14 Lee Lane
                           Millhouse Green Penistone
                           Sheffield
                           South Yorkshire
                           S36 9LN

     Morgan Lawn Morris    4 East Park Road
                           Harrogate
                           North Yorkshire
                           HG1 5QT


                                       20



     (b)  In the case of the Purchaser:

     Glatfelter Lydney Limited
     Lydney Paper Mill
     Church Road
     Lydney
     Gloucestershire
     GL15 5EG

     For the attention of: Mill Manager

     With a copy to:

     Glatfelter
     96 South George Street
     York PA 17401
     USA

     For the attention of:  General Counsel

     (c)  In the case of the Sellers' Lawyers:

     Walker Morris
     Kings Court
     12 King Street
     Leeds
     LS1 2HL

     For the attention of: Debbie Jackson

     (d)  In the case of the Purchaser's Lawyers:

     Shearman & Sterling LLP
     9 Appold Street
     London
     EC2A 2AP

     For the attention of: Peter King

     Provided that a party may change its notice details on giving notice to the
     other party of the change in accordance with this Clause 17.

17.3 Any notice given under this Agreement shall, in the absence of earlier
     receipt be deemed to have been duly given if sent by recorded post, two
     clear Business Days after the date of posting.


                                       21



18.  ANNOUNCEMENTS

     No announcement or circular concerning the sale of the Shares or otherwise
     in connection with the existence or the subject matter of this Agreement
     shall be made or issued by or on behalf of the Sellers without the prior
     written approval of the Purchaser. This shall not affect any announcement
     or circular required by law or any regulatory body, including the United
     States Securities and Exchange Commission, or the rules of any recognised
     stock exchange or regulatory body to which that party is subject but in
     such circumstances the party with an obligation to make an announcement or
     issue a circular shall consult with the other party or parties insofar as
     is reasonably practicable before complying with such an obligation.

19.  CONFIDENTIALITY

19.1 Subject to Clause 19.3, the Sellers shall:

     (a)  treat as confidential:

          (i)  the provisions of the Transaction Documents and any information
               regarding the negotiations relating to the Transaction Documents;

          (ii) all information about the Purchaser and any member of the
               Purchaser's Group obtained or received by it as a result of
               negotiating, entering into or performing its obligations under
               any of the Transaction Documents or the performance by the other
               parties of their obligations under any of the Transaction
               Documents; and

          (iii) all information used in or otherwise relating to the business,
               financial or other affairs of the Company (including future plans
               and targets),

          together, the "PURCHASER CONFIDENTIAL INFORMATION"; and

     (b)  not, except with the prior written consent of the Purchaser, publish
          or otherwise disclose to any person or use any Purchaser Confidential
          Information.

19.2 Subject to Clause 19.3, the Purchaser shall procure that each member of the
     Purchaser's Group shall:

     (a)  treat as confidential:

          (i)  the provisions of the Transaction Documents and any information
               regarding the negotiations relating to the Transaction Documents;
               and

          (ii) all information about the Sellers obtained or received by it as a
               result of negotiating, entering into or performing its
               obligations under any of the Transaction Documents or the
               performance by the other parties of their obligations under any
               of the Transaction Documents,

          together, the "SELLERS' CONFIDENTIAL INFORMATION"; and


                                       22



     (b)  not, except with the prior written consent of the Sellers, publish or
          otherwise disclose to any person or use any Sellers' Confidential
          Information.

19.3 Neither Clause 19.1 nor 19.2 shall prohibit disclosure or use of any
     information if and to the extent:

     (a)  the disclosure or use is required by law, any regulatory body or the
          rules and regulations of any recognised stock exchange or regulatory
          body including, but not limited to, the US Securities an Exchange
          Commission in the case of the Purchaser;

     (b)  the disclosure or use is required for the purposes of any judicial
          proceedings arising out of this Agreement or any of the Transaction
          Documents or the disclosure is required to be made to a Tax Authority
          in connection with the Taxation affairs of the disclosing party;

     (c)  the disclosure or use is required to vest the full benefit of this
          Agreement in any of the Sellers or in the Purchaser, as the case may
          be;

     (d)  the disclosure or use is required in the view of the Purchaser, acting
          reasonably, for any filing or submission to be made in furtherance of
          securing any competition or regulatory approvals;

     (e)  the disclosure is made to professional advisers of the Sellers or the
          Purchaser provided that such disclosure is made in terms that such
          professional advisers, auditors or bankers undertake to comply with
          the provisions of Clauses 19.1 or 19.2 (as the case may be) in respect
          of such information as if they were a party to the Agreement;

     (f)  the information has come into the public domain (other than through
          the fault of that party or the fault of any person to whom such
          information is disclosed in accordance with sub-paragraph (e);

     (g)  the information is at any time after the date of this Agreement
          lawfully acquired on a non-confidential basis from a third party who,
          as far as the Sellers are or the Purchaser is (as the case may be)
          aware, does not owe the other party or any of its affiliates an
          obligation of confidence in relation to it.

19.4 The restrictions contained in this Clause 19 shall survive Completion or
     termination of this Agreement for any reason and shall continue for a
     period of three years from the date of this Agreement.

19.5 The confidentiality agreement between the Purchaser and the Sellers dated
     16 April 2007 is hereby terminated and shall have no further force or
     effect.

20.  COSTS AND EXPENSES

     Except as otherwise stated in this Agreement, each party shall pay its own
     costs and expenses in relation to the negotiation, preparation, execution
     and carrying into effect of this Agreement and all other Transaction
     Documents. For the avoidance of doubt, the Company shall not pay any such
     costs and expenses.


                                       23



21.  COUNTERPARTS

     This Agreement may be executed in any number of counterparts, and by the
     parties on separate counterparts, but shall not be effective until each
     party has executed at least one counterpart. Each counterpart shall
     constitute an original of this Agreement, but all the counterparts shall
     together constitute but one and the same instrument.

22.  TIME OF ESSENCE

     Except as otherwise expressly provided, time is of the essence in this
     Agreement, both as regards, any dates, times and periods mentioned and as
     regards any dates, times and periods which may be substituted for them in
     accordance with this Agreement or by agreement in writing between the
     parties.

23.  INVALIDITY

     If any provision of this Agreement is or becomes illegal, invalid or
     unenforceable in any respect under the law of any jurisdiction, that shall
     not affect or impair the legality, validity or enforceability in that
     jurisdiction of any other provision of this Agreement.

24.  INTEREST

     If the Sellers or the Purchaser default in the payment when due of any sum
     payable under this Agreement the liability of the Sellers or the Purchaser
     (as the case may be) shall be increased to include interest on such sum
     from the date when such payment is due until the date of actual payment (as
     well after as before judgment) at a rate per annum of two per cent. above
     the base rate from time to time of Barclays Bank Plc. Such interest shall
     accrue from day to day and shall be without prejudice to any other remedy
     available to the Sellers or the Purchaser (as the case may be) in respect
     of such default.

25.  FURTHER ASSURANCES

     The Sellers shall, and shall use reasonable endeavours to procure that any
     necessary third party shall, execute such documents and do such acts and
     things as the Purchaser may reasonably require for the purpose of giving to
     the Purchaser the full benefit of all the provisions of this Agreement.

26.  GOVERNING LAW AND SUBMISSION TO JURISDICTION

26.1 This Agreement shall be governed by and construed in accordance with
     English law.

26.2 Each of the parties irrevocably submits to the jurisdiction of the High
     Court of England & Wales and agrees that, subject to the provisions of
     Schedule 7, the High Court shall have exclusive jurisdiction to settle any
     Disputes which may arise out of or in connection with this Agreement and
     any documents executed or agreed pursuant to it.

IN WITNESS whereof this Agreement has been entered into on the date first above
written.


                                       24



                                   SCHEDULE 1

                   PARTICULARS OF THE SELLERS AND THE COMPANY

                                     PART A
                           PARTICULARS OF THE SELLERS



NAME & ADDRESS OF SELLER   SHARES SOLD   CONSIDERATION
- ------------------------   -----------   -------------
                                   
Alan Richard Morris            33        L1,166,666.66
14 Lee Lane
Millhouse Green
Penistone
Sheffield
South Yorkshire
S36 9LN

Edwin Rhys Morris              33        L1,166,666.66
14 Lee Lane
Millhouse Green
Penistone
Sheffield
South Yorkshire
S36 9LN

Morgan Lawn Morris             33        L1,166,666.66
4 East Park Road
Harrogate
North Yorkshire
HG1 5QT



                                       25



                                     PART B
                           PARTICULARS OF THE COMPANY

                                 
Registered Number                   05285231

Registered Office                   Pontygwindy Industrial Estate
                                    Caerphilly
                                    Mid Glamorgan
                                    CF83 3HU

Date and Place of Incorporation     12/11/2004, UK

Directors                           A R Morris

Secretary                           M L Morris

Share capital                       100 authorised, 99 issued ordinary shares of
                                    L1 each

Accounting Reference Date           31/03

Auditors                            Broomfield & Alexander Limited
                                    Waters Lane Chambers
                                    Waters Lane Newport
                                    NP20 1LA

Tax Residence                       England and Wales

Tax District and Reference Number   South Wales Area
                                    14th Floor
                                    Phase 2 Building
                                    Llanishen
                                    Cardiff
                                    CF14 5FP
                                    Ref. 204/29658/18261

VAT Number                          847 7496 67A




                                       26


                                   SCHEDULE 2

                                   WARRANTIES

                                     PART A
                         WARRANTIES GIVEN BY THE SELLERS

1.   GENERAL CORPORATE INFORMATION

1.1  THE COMPANY AND THE SHARES

     (a)  The Sellers specified in Part A of Schedule 1 are the sole legal and
          beneficial owners of the Shares and have the right to exercise all
          voting and other rights over the Shares.

     (b)  The Shares comprise the whole of the issued and allotted share capital
          of the Company, have been properly and validly issued and allotted and
          are each fully paid.

     (c)  No person has the right (whether exercisable now or in the future and
          whether contingent or not) to call for the allotment, conversion,
          issue, registration, sale or transfer, amortisation or repayment of
          any share capital or any other security giving rise to a right over,
          or an interest in, the capital of the Company under any option,
          agreement or other arrangement (including conversion rights and rights
          of pre-emption).

     (d)  There are no Encumbrances on the Shares.

     (e)  All consents for the transfer of the Shares have been obtained or will
          be obtained by Completion.

     (f)  The Shares have not been and are not listed on any stock exchange or
          regulated market.

     (g)  The Company does not:

          (i)  have any interest in, nor has agreed to acquire, any share
               capital or other security referred to in paragraph (c) above of
               any other company (wherever incorporated); or

          (ii) has any branch, division, establishment or operations outside the
               jurisdiction in which it is incorporated.

     (h)  The particulars contained in Schedule 1 are true and accurate.

1.2  CONSTITUTIONAL DOCUMENTS, CORPORATE REGISTERS AND MINUTE BOOKS

     (a)  The constitutional documents attached to the Disclosure Letter are
          true, complete and accurate copies of the constitutional documents of
          the Company and there have not been and are not any breaches by the
          Company of its constitutional documents.


                                       27



     (b)  The registers and minute books required to be maintained by the
          Company under the law of the jurisdiction of its incorporation are
          up-to-date, are maintained in accordance with applicable law and
          contain complete and accurate records of all matters required to be
          dealt with in such books and records.

     (c)  All registers and books referred to in paragraph (b) above are in the
          possession (or under the control) of the Company and no notice or
          allegation that any of such books and records are incorrect or should
          be rectified has been received.

     (d)  All registrations, filings, publications and other formalities
          required by applicable law to be made or delivered by the Company to
          the Registrar of Companies have been duly made or delivered on a
          timely basis.

1.3  NO BREACH

     The execution and delivery of, and the performance by the Sellers of their
     obligations under, this Agreement, and any of the Transaction Documents to
     be executed by the Sellers pursuant to or in connection with this Agreement
     will not result in:

     (a)  a breach of, or give rise to a default under, any contract, licence or
          instrument to which any of the Sellers is a party or by which it is
          bound;

     (b)  a violation or breach of any applicable laws or regulations or of any
          order, decree or judgment of any court, governmental agency or
          regulatory body by which any of the Sellers is bound; or

     (c)  a requirement for any of the Sellers to obtain any consent or approval
          of, or give any notice to or make any registration with any
          governmental, regulatory or other authority which has not been
          obtained or made at the date of this Agreement on a basis which is
          both unconditional and cannot be revoked.

2.   AUTHORITY AND CAPACITY

     The Transaction Documents will, when executed, constitute valid and binding
     obligations on the Sellers, in accordance with their respective terms.

3.   CONTRACTS AND COMMITMENTS

3.1  The Company is not a party to or subject to any obligation, contract,
     arrangement, transaction or understanding (other than in relation to any
     property, lease or contract of employment) which:

     (a)  is not in the ordinary and usual course of business; or

     (b)  is not wholly on an arm's length basis; or

     (c)  is of a long term nature (that is, unlikely to have been fully
          performed, in accordance with its terms, more than six months after
          the date of Completion or incapable of termination by the Company
          within six months of Completion; or


                                       28



     (d)  restricts its freedom to carry on its business in any part of the
          world in such manner as it thinks fit so as to have a material adverse
          effect on the Company; or

     (e)  is of a loss making nature (that is known to be likely to result in
          loss on completion of performance) which is material to the Company in
          the context of the Business as a whole; or

     (f)  cannot readily be fulfilled or performed on time without undue or
          unusual expenditure of money or effort; or

     (g)  requires the Business to reveal confidential information, gross margin
          or profits, or to otherwise share sensitive or confidential
          information with a supplier or customer that is not normally shared in
          such transactions; or

     (h)  contains any antidiscrimination pricing or other provision requiring
          the Company to offer or adjust any pricing to any customer to the
          lowest pricing offered to another customer,

     except paragraphs (c) and (e) and shall not apply in the case of orders
     that have been received by the Company on or before Completion.

3.2  During the last 12 months, no significant customer of or any significant
     supplier to the Company has ceased to deal with the Company or has
     indicated to the Company an intention to cease to deal with the Company,
     either in whole or in part, or on materially different terms, and, so far
     as the Sellers are aware, no such person has indicated that they are likely
     to cease to deal with the Company or deal with the Company on a materially
     smaller scale or (in writing) on materially different terms. For the
     purposes of paragraph 3.4(a) a "significant customer" is a customer who has
     accounted for more than 5 per cent of turnover in any of the 2006 and 2007
     calendar years and a significant supplier is a supplier who has accounted
     for more than 5 per cent of operating costs in any of the 2006 and 2007
     calendar years.

3.3  (a)  The Company is not nor has been party to any contract arrangement or
          understanding material to the Business with any current or former
          employee or current or former director or officer or any current or
          former Consultant of the Company or any person connected (as defined
          in section 252 and 253 of the Companies Act 2006) with any of such
          persons, or in which any such person as aforesaid is interested
          (whether directly or indirectly), other than on normal commercial
          terms in the ordinary and usual course of business.

     (b)  There are no existing contracts or arrangements between or involving
          the Company and any of the Sellers and/or any person connected with
          any of them.

     (c)  Any existing contracts or arrangements between or involving the
          Company and any of the Sellers and/or any person connected with any of
          them, together with any outstanding liabilities, shall be terminated
          and settled at or prior to Completion.

3.4  So far as the Sellers are aware:


                                       29



     (a)  all the contracts in respect of significant customers or significant
          suppliers to which the Company is a party are valid and binding
          obligations of the parties thereto and the terms thereof have been
          materially complied with by the Company and by any other party to such
          contracts.

     (b)  no notice of termination or of intention to terminate has been
          received in respect of any such contracts and there are no grounds for
          rescission, avoidance or repudiation of any of such material
          contracts.

3.5  The Company has not, nor has agreed to become, a member of any joint
     venture, consortium, partnership or other unincorporated association (other
     than a recognised trade association in relation to the Company has a
     liability or obligation except for the payment of annual subscription or
     membership fees).

3.6  The Company has not applied for or received any grant, allowance, and / or
     subsidy from any supranational, national or local authority or government
     agency during the last six years.

4.   LEGAL COMPLIANCE

4.1  So far as the Sellers are aware, as at the date of the Agreement, the
     Company has all licences, consents, authorisations, orders, warrants,
     confirmations, permissions, certificates, approvals and authorities
     necessary for the carrying on of the businesses and operations of the
     Company ("LICENCES") and such Licences are in full force and effect and
     have been and are being complied with in accordance with their terms and to
     the extent required by law. There is no investigation or proceeding
     outstanding in respect of any such Licences.

4.2

     (a)  The Company is conducting, and, so far as the Sellers are aware,
          during the two year period prior to Completion, has conducted the
          Business in material compliance with applicable laws and regulations
          in each country in which the Business is carried on and has full
          corporate power and authority to carry on such Business and to own the
          material property and assets it owns.

     (b)  So far as the Sellers are aware, there is no investigation,
          disciplinary proceedings, or order, decree, decision or judgment of,
          any court, tribunal, arbitrator, governmental agency or regulatory
          body outstanding against the Company which will have a material
          adverse effect upon the Business.

     (c)  The Company has not received any written notice from any court,
          tribunal, arbitrator, governmental agency or regulatory body with
          respect to a violation and/or failure to comply with any such
          applicable law, regulation, or requiring it to take or omit any action
          which in any case would have a material adverse effect on the
          Business.

     (d)  So far as the Sellers are aware, the Company is conducting and, during
          the two year period prior to Completion, has conducted the Business as
          carried on at the Property in material compliance with Environmental
          Law.


                                       30



5.   LITIGATION

5.1  There is no claim, legal action, proceeding, suit, litigation, prosecution,
     investigation, enquiry or arbitration in which the Company is involved
     whether as claimant or defendant or as another party (other than as
     claimant in the collection of debts arising in the ordinary and usual
     course of its business (none of which exceeds L50,000)) in respect of which
     the amount claimed is more than L10,000 or which is otherwise material to
     the Business.

5.2  So far as the Sellers are aware, no such claim, legal action, proceeding,
     suit, litigation, prosecution, investigation, enquiry or arbitration is
     pending or threatened by or against the Company.

6.   ACCOUNTS

6.1  The Accounts:

     (a)  have been prepared on a basis consistent with UK GAAP; and

     (b)  fairly present in all material respects the state of affairs of the
          Company as at the Accounts Date for the financial year ended on that
          date.

6.2  (a)  So far as the Sellers are aware, the management accounts relating to
          the Company for the period ended 31 August 2007 (the "MANAGEMENT
          ACCOUNTS" and the "MANAGEMENT ACCOUNTS DATE", respectively) (which it
          is acknowledged have not been the subject of an audit report):

          (i)  have been accurately prepared with due care and attention in
               compliance with the Company's procedures and good commercial
               practice; and

          (ii) have been prepared on a basis consistent with the management
               accounts of the Company for the preceding 12 months.

     (b)  The Management Accounts do not materially misstate the assets and
          liabilities of the Company as at the Management Accounts Date nor the
          profits or losses of the Company for the period concerned.

6.3  The audited accounts of the Company for the last two financial years have
     been duly filed with the appropriate body in the relevant jurisdiction on a
     timely basis.

6.4  The Accounts make full provision for all actual liabilities, proper
     provision (or note) for all contingent liabilities and provision reasonably
     regarded as adequate for bad and doubtful debts in each case if and to the
     extent required by UK generally accepted accounting principles.

6.5  The rights of the Company in respect of debts shown in the books and
     records of the Company

     (a)  are valid and subject to a legal right of enforcement; and


                                       31



     (b)  are not subject to any valid defence, right of set-off or
          counter-claim, withholding or other deduction, subject always to any
          provisions made in respect of such debts in the Completion Statement
          or in the Accounts.

6.6  Save in respect of the Five Arrows Agreement, the Company has not factored
     or discounted any of its debts or other receivables or agreed to do so.

6.7  The books of account and financial records of the Company are up to date
     and maintained in accordance with all applicable legal requirements on a
     proper and consistent basis and contain appropriate records of all matters
     to be dealt with in such books and all such books and records and all other
     documents (including documents of title) which are the property of the
     Company or ought to be in its possession are in its possession (or under
     its control).

7.   FINANCIAL OBLIGATIONS

7.1  Material details of all financial facilities (including loans, derivatives
     and hedging arrangements) available to the Company and the amounts
     outstanding under them are set out in the Disclosure Letter and the Sellers
     have supplied true and correct copies of all terms relating thereto.

7.2  The total amount borrowed by the Company:

     (a)  from its bankers does not exceed its facilities at the Completion
          Date; and

     (b)  does not exceed any limitation on its borrowings contained in its
          constitutional documents or in any debenture or loan stock deed or
          credit agreement or other instrument.

7.3  The Company has not engaged in any borrowing or financing which would not
     have been required to be reflected in the audited balance sheet of the
     Company as at the Accounts Date.

7.4  There is no outstanding guarantee, indemnity or security (whether or not
     legally binding) given:

     (a)  by the Company; or

     (b)  for the benefit of the Company.

7.5  There are no loans due to the Company from any Seller or any person
     beneficially interested in any part of the share capital of the Company, or
     any director of the Company or any person connected with any such director,
     which are not of an entirely arm's length nature and/or in the ordinary
     course of business, and which will not be settled prior to or at
     Completion.

8.   PROPERTY AND ASSETS

8.1  REPLIES TO ENQUIRIES

     So far as the Sellers are aware, the CPSE Replies are true, accurate and
     not misleading.


                                       32



8.2  THE PROPERTY

     (a)  The Property comprises all of the premises and land owned, occupied or
          otherwise used in connection with the business of the Company or in
          which the Company has an interest.

     (b)  The details of the Property set out in Schedule 5 are true, complete
          and not misleading.

     (c)  The Company is the lessee of the whole Property and is in possession
          of the whole of the Property and the Company has not received notice
          in writing that any other person is in, or otherwise entitled to,
          occupation or use.

     (d)  The Company has no continuing liability in respect of any leasehold
          property other than the Property.

     (e)  Save as disclosed by the title deeds and documents which have been
          disclosed to the Purchaser, there are no mortgages, charges (whether
          legal or equitable and whether fixed or floating) or debentures, rent
          charges, liabilities to maintain roadways, liens (whether for costs or
          to an unpaid vendor or otherwise), annuities or other unusual
          outgoings, or trusts (whether for securing money or otherwise),
          affecting the Property or the proceeds of sale thereof.

8.3  All assets included in the Accounts or acquired by the Company since the
     Accounts Date, other than any assets disposed of or realised in the
     ordinary and usual course of business, and excepting rights and retention
     of title arrangements arising by operation of law in the ordinary and usual
     course of business are:

     (a)  legally and beneficially owned by the Company;

     (b)  where capable of possession, in the possession of, or under the
          control of the Company,

     and none of such assets is the subject of an Encumbrance. True and accurate
     details of the Fixed Assets are set out in Schedule 8.

8.4  The plant and machinery, vehicles and other equipment owned by the Company
     are suitable for the purposes for which they are used in the Business.

8.5  So far as the Sellers are aware, the property, rights and assets owned,
     leased or otherwise used by the Company comprise all the property, rights
     and assets necessary or convenient for the carrying on of the Business
     fully and effectively in, and to the extent to, which it is presently
     conducted.

9.   INTELLECTUAL PROPERTY AND INFORMATION TECHNOLOGY

9.1  (a)  So far as the Sellers are aware, all the Material Intellectual
          Property is legally owned by, licensed to or used under the authority
          of the owner by the Company. Brief details of all such licences and
          authorities (excluding any shrink-wrap licences for computer software)
          are set out in paragraph 4 of Schedule 6.


                                       33



     (b)  All the Material Intellectual Property which is owned by the Company
          is:

          (i)  not being infringed or attacked or opposed by any person;

          (ii) not licensed to a third party except under those licences, brief
               details of which are set out in paragraph 3 of Schedule 6 or
               subject to any encumbrance; and

          (iii) listed and briefly described in paragraphs 1 and 2 of Schedule
               6.

9.2  The several licences and agreements included in the Material Intellectual
     Property (including all amendments, novations, supplements or replacements
     to those licences and agreements), brief details of which are set out in
     paragraphs 3 and 4 of Schedule 6 and true and accurate copies of which are
     included in the Disclosure Bundle, are in full force and effect and no
     notice has been given on either side to terminate them and the obligations
     of all parties have been fully complied with.

9.3  So far as the Sellers are aware, all patentable inventions made by
     Employees of the Company and used in the Business were made in the normal
     course of the duties of the Employees concerned and there are no
     outstanding or expected claims against the Company under any contract or
     under any law providing for employee compensation in respect of any rights
     or interests in Intellectual Property.

9.4  For the purposes of this paragraph 9.4

     (a)  "INFORMATION TECHNOLOGY" means computer systems, communication
          systems, software and hardware which at or before Completion is used
          in the Business.

     (b)  In the 24 months prior to the date of this Agreement, there have been
          no failures or breakdowns of any Information Technology which have
          caused any substantial disruption or interruption in or to the
          Business or which have had a material adverse effect on the Business.

     (c)  The Company has in place reasonably adequate procedures to prevent
          unauthorised access to and the introduction of viruses into the
          Information Technology, and for the taking and storing on-site and
          off-site of back-up copies of the software and data contained in the
          Information Technology.

     (d)  Details of all agreements or arrangements material to the Business
          relating to the maintenance and support, security, disaster recovery,
          management and utilisation (including escrow arrangements relating to
          the deposit of source codes, facilities management and computer bureau
          services agreements) of the Information Technology are disclosed in
          the Disclosure Bundle.

9.5  (a)  So far as the Sellers are aware, the Company has complied throughout
          the last 24 months in all material respects with applicable
          requirements (including registration or notification requirements) of
          applicable data protection legislation.


                                       34



     (b)  No notice alleging non-compliance with any such legislation (including
          any enforcement notice, deregistration notice, transfer prohibition
          notice or equivalent notice) has been received by the Company.

     (c)  The Company has not received any claim from any individual in respect
          of any infringement or alleged infringement of any applicable data
          protection legislation.

10.  EMPLOYEES AND EMPLOYEE BENEFITS

10.1 GENERAL

     Full and accurate details are contained in the Disclosure Letter of:

     (a)  the Employees (including details of their respective salaries, length
          of service, notice periods and benefits);

     (b)  the terms of all current contracts of employment of the directors and
          any Senior Employees;

     (c)  all terms of employment or benefits provided of general application or
          of application to a particular grade of or category of Employee
          including but not limited to copies of any staff handbooks and
          policies or arrangements which apply to any Employee;

     (d)  the terms of all current recognition, procedural, collective or other
          agreements between the Company and any trade union, works council or
          other body representing the Employees of any of them;

     (e)  the terms of all share incentive schemes, share option schemes, profit
          sharing, bonus, commission or other incentive schemes, permanent
          health insurance, medical, directors' and officers' insurance, travel,
          car, redundancy and any other benefit schemes applicable to the
          directors or any of the Employees or their dependents (the "SCHEMES");
          and

     (f)  copies of all Consultancy Agreements with the Company.

10.2 No payment has been made or promised to be made or benefit given or
     promised to be given by the Company in connection with the actual or
     proposed termination or suspension of employment or variation of any
     contract of employment of any director, Employee or former employee or
     former director.

10.3 In the last 12 months no employee has been made redundant or has been given
     notice of redundancy and the Company has not given notice of redundancies
     to the Secretary of State or started consultations with appropriate
     representatives under the provisions of Part IV of the Trade Union and
     Labour Relations (Consolidation) Act 1992.

10.4 The Disclosure Letter sets out details of redundancy payments made by the
     Company. There is no agreed procedure for selection of employees for
     redundancy. In the event of termination of employment by reason of
     redundancy, none of the Employees would have an express or implied
     contractual right to receive redundancy payments from the


                                       35



     Company in excess of minimum statutory redundancy payments provided under
     UK law.

10.5 The Company has paid or discharged in full or will pay or discharge in full
     in respect of the period up to and including the last regular date for such
     payments prior to the date of Completion the salaries and wages and other
     benefits of all of its directors, Employees, former employees and former
     directors (including reimbursement of all expenses properly due to such
     persons) and shall make or have made all related payments to third party
     benefit providers and all related payments (including but not limited to
     payments of income tax and National Insurance contributions) to the
     relevant authorities in respect of that period.

10.6 There are no amounts owing or agreed to be loaned or advanced by the
     Company to any of its Employees, directors or former employees or former
     directors (other than amounts representing remuneration accrued due for the
     current pay period, accrued holiday pay for the current holiday year or for
     reimbursement of business expenses).

10.7 The Company has in relation to each of its Employees and former employees
     complied in all material respects with all applicable legislation,
     regulations, codes of conduct, codes of practice, collective agreements,
     terms and conditions of employment, orders, agreements with third parties,
     and awards relevant to their conditions of service or to the relations
     between it and the Employees and former employees or any recognised trade
     union or body representing the Employees and has complied in all material
     respects with all its obligations concerning the health and safety at work
     of each of the Employees and former employees and has not incurred any
     liability to any Employee or former employee in respect of any accident or
     injury.

10.8 No Senior Employee nor any material number, grade or category of Employees
     has given or received notice of termination of his or their contract of
     employment.

10.9 No Employees are on secondment, maternity leave or absent on grounds of
     disability, long term sickness or other leave of absence and have, or may
     have, a statutory or contractual right to return to work.

10.10 There are no outstanding offers of employment or engagement to work in the
     Company and no person has accepted such an offer but not yet taken up the
     position accepted, and, so far as the Sellers are aware, no Employee
     intends to resign as a result of the acquisition of the Shares by the
     Purchaser or other performance of the terms of this Agreement.

10.11 The acquisition of the Shares or change of control or ownership of the
     Company under this Agreement will not entitle any of the directors or
     Employees of the Company to terminate his employment or engagement nor
     trigger any entitlement on the part of any director or Employee to receive
     a right or benefit or to receive an increased right or benefit.

10.12 The Company has not entered into any arrangement regarding any future
     variation of any contract of employment in respect of any Employee or any
     agreement imposing an obligation on the Company to increase the basis
     and/or rates of remuneration and/or the provision of benefits in kind to or
     on behalf of any of the Employees at any future date.


                                       36



10.13 There are no contracts of employment (written or unwritten) with any
     director or Employee which require the employing company to give more than
     three months' notice to terminate the employment of such person.

10.14 There are no complaints, disputes or claims pending or threatened against
     the Company of whatsoever nature in relation to any Employee or former
     employee and, so far as the Sellers are aware, there are no matters which
     could give rise to any such complaints, disputes or claims.

10.15 So far as the Sellers are aware, since the API Acquisition Date all
     disciplinary matters and grievances have materially complied with the
     requirements of the Employment Act 2002 and the Employment Act 2002
     (Dispute Resolution) Regulations 2004.

10.16 The Company has not since the API Acquisition Date entered into any
     agreement, which involved or may involve the Company acquiring or disposing
     of any undertaking or part of one, to which the Transfer of Undertaking
     (Protection of Employment) Regulations 1981 or 2006 as amended from time to
     time may apply and which affected or may affect any Employee.

10.17 Save as disclosed in the Disclosure Letter no Employees are member of a
     trade union or any other body representing workers and there is no trade
     union recognised or works council in existence in relation to any of the
     Employees for the purposes of collective bargaining or any other purposes.

10.18 Since the API Acquisition Date no written request has been received by the
     Company for recognition of a trade union in respect of all or any of the
     Employees.

10.19 Since the API Acquisition Date the Company has not been engaged or
     involved in any industrial or trade dispute or any dispute or negotiation
     with any Employees, former employees, trade union, works council or any
     other body representing any Employee or any number or category of Employees
     or former employees.

10.20 There are no enquiries or investigations affecting the Company in relation
     to any of the Employees by the Equal Opportunities Commission, the
     Commission for Racial Equality, the Health and Safety Executive, the
     Disability Rights Commission or by any other regulatory or governmental
     body which is responsible for employment matters.

10.21 Full details of all health and safety policies and procedures, health and
     safety committees, health and safety representatives, and any written
     complaints, recommendations by the Health and Safety Executive,
     investigations by the Health and Safety Executive or claims relating to
     health and safety issues made or carried out since the API Acquisition Date
     and affecting the Company and the Employees or former employees have been
     disclosed in the Disclosure Letter.

10.22 PENSIONS

     The Company has complied and continues to comply with all legal obligations
     to offer the Employees access to a stakeholder pension scheme in accordance
     with UK law. Otherwise, the Company does not have any arrangements or
     agreements to provide any sort of pension of retirement benefits to the
     Employees or any former


                                       37



     employees or their dependents, nor is the Company under any obligation to
     make any contributions to any personal pension arrangements of any of the
     Employees. None of the Employees have any rights that relate to or are in
     any way connected with an occupational pension scheme which rights were or
     may have been preserved by operation of the Transfer of Undertakings
     (Protection of Employment) Regulations 1981 on the transfer which occurred
     on the API Acquisition Date.

11.  ENVIRONMENT

11.1 So far as the Sellers are aware all relevant documentation in the
     possession, control or actual knowledge of the Sellers in connection with
     the Environment in respect of the Property has been provided to the
     relevant Insurer in connection with the Environmental Insurance Policy.

12.  ANTI-TRUST

12.1 So far as the Sellers are aware, the Company is not a party to any
     agreement, arrangement or concerted practice nor is it carrying on any
     practice material to the Business:

     (a)  which in whole or in part may contravene or may be invalidated by any
          anti-trust, fair trading, dumping, consumer protection or similar
          legislation in any jurisdiction where the Company has assets or
          carries on business or sells its goods and services;

     (b)  in particular and without prejudice to the generality of the
          foregoing, which in whole or in part contravenes Article 81(1) or 82
          of the Treaty of Rome, Chapters I or II of the Competition Act 1998 or
          any equivalent national legislation in any member state of the
          European Economic Area; or

     (c)  in respect of which any filing, registration or notification is
          required or is advisable pursuant to the legislation referred to in
          (a) or (b) above (whether or not the same has in fact been made).

12.2 So far as the Sellers are aware, the Company has not received directly or
     indirectly any advantage in any form whatsoever from state resources which
     could amount to state aid within the meaning of Article 87(1) EC Treaty
     requiring exemption by the European Commission and which has not received
     such exemption.

12.3 So far as the Sellers are aware, the Company has not been awarded any
     contract by a state entity in breach of EC Council Directive 93/36 (as
     amended), EC Council Directive 93/37 (as amended); EC Council Directive
     93/38 (as amended) and EC Council Directive 92/50 (as amended) (together
     "the Procurement Directives") or national legislation implementing the
     Procurement Directives.

13.  INSURANCE

13.1 Summary particulars of the insurances of the Company material to the
     Business are contained in the Disclosure Letter.

13.2 In respect of the insurances referred to in paragraph 13.1:


                                       38



     (a)  all premiums have been duly paid to date;

     (b)  no Seller has received any notification that such insurances are not
          valid or enforceable;

     (c)  so far as the Sellers are aware, no act, omission, misrepresentation
          or non-disclosure by or on behalf of the Company has occurred which
          makes any of these policies voidable;

     (d)  so far as the Sellers are aware, no circumstances have arisen which
          would render any of the policies void or unenforceable for illegality
          or otherwise; and

     (e)  so far as the Sellers are aware, there has been no breach of the
          terms, conditions and warranties of any of the policies that would
          entitle insurers to decline to pay all or any part of any claim made
          under the policies or to terminate any policy.

13.3 INSURANCE CLAIMS

     (a)  Details of all insurance claims in excess of L25,000 made by the
          Company during the past two years are contained in the Disclosure
          Letter.

     (b)  No insurance claim by the Company in excess of L25,000 is
          outstanding and no circumstances exist which are likely to give rise
          to any insurance claim.

13.4 CLAIMS REFUSED

     Since 31 March 2007 no claim has been refused by an insurer and no amount
     paid by an insurer in respect of any claim has been less than the amount
     owing in respect of any such claim.

14.  PRODUCTS

     During the 12 month period prior to Completion, no individual claims where
     the net cost value to the Company in respect of such claims is greater than
     L50,000 have been made against the Company in relation to any products or
     services which have been manufactured, sold or supplied by the Company.

15.  TAX

15.1 The Company has duly and punctually paid all Tax which it has become liable
     to pay and is not under any liability to pay any penalty, interest,
     surcharge or fine in connection with any Tax.

15.2 The Company has made all returns, maintained all records, supplied all
     information and given all notices to any Taxation Authority as requested or
     required by law within any requisite period and all such returns,
     information and notices are correct and accurate in all respects and are
     not the subject of any dispute and, so far as the Sellers are aware, there
     are no facts or circumstances likely to give rise to or be the subject of
     any such dispute.


                                       39



15.3 The Company is not involved in any dispute in relation to Tax and no
     Taxation Authority has investigated or indicated that it intends to
     investigate the Tax affairs of the Company other than under the normal tax
     audit procedures of the relevant Taxation Authority.

15.4 The Company has duly submitted all claims, disclaimers, elections,
     surrenders and applications which have been assumed to have been made for
     the purposes of the Accounts and details of all such claims, disclaimers,
     elections, surrenders and applications are set out in the Disclosure
     Letter.

15.5 No Taxation Authority has operated or agreed to operate any special
     arrangement (being an arrangement which is not based on relevant
     legislation, published practice or convention) in relation to the affairs
     of the Company.

15.6 No claim has been made for the depreciation of any asset of the Company for
     Tax purposes in circumstances in which the claim is likely to be
     disallowed.

15.7 The Disclosure Letter sets out full particulars of all claims and elections
     made (or assumed in the Accounts to be made) under sections 23, 152-162,
     165, 247, 247A or 248 of the TCGA insofar as they could affect the
     chargeable gain or allowable loss which would arise in the event of a
     disposal after the Accounts Date by the Company of any of its assets.

15.8 All documents in the enforcement of which the Company is or may be
     interested in order to establish legal entitlement or any other right have
     been duly stamped and since the Accounts Date the Company has not been a
     party to any transaction whereby the Company was or is or could become
     liable to stamp duty reserve tax.

15.9 So far as the Sellers are aware, the Accounts for the Company make full
     provision or reserve in respect of any period ended on or before the
     Accounts Date for all Tax assessed or liable to be assessed on the Company
     or for which it is accountable at the Accounts Date whether or not the
     Company has or may have any right of reimbursement against any other person
     including in particular (but without prejudice to the generality of the
     foregoing) Tax in respect of property (of whatever nature) income, profits
     or gains held, earned, accrued or received by or to a person on or before
     the Accounts Date or by reference to any event occurring, acts done or
     circumstances existing on or before that date including distributions made
     down to such date or provided for in the Accounts and proper provision has
     been made and shown in the Accounts for deferred taxation in accordance
     with UK GAAP.

15.10 The Company is a registered taxable person for the purpose of the VATA and
     all regulations and orders made thereunder (the "VAT LEGISLATION") and the
     Company has complied in all material respects with the requirements and
     provisions of the VAT legislation.

15.11 So far as the Sellers are aware, no transaction, act, omission or event
     has occurred (including without limitation the execution or implementation
     of this agreement) in consequence of which the Company is or may be held
     liable for any Tax or may otherwise be held liable for or to indemnify any
     person in respect of any Tax which is primarily or directly chargeable
     against or attributable to any person other than the Company.


                                       40



15.12 The Company has no liability to make any payment pursuant to an indemnity,
     guarantee or covenant entered into before Completion under which the
     Company has agreed to meet or pay a sum equivalent to or by reference to
     another person's liability to Tax.

15.13 The Company will not become liable to pay any Tax or suffer an alteration
     in the manner in which it is assessed for Tax, or lose any relief or
     allowances otherwise available to it as a result of entering into this
     Agreement other than by virtue of it becoming associated with the
     Purchaser.

15.14 All transactions entered into by the Company have been entered into on an
     arm's length basis and the consideration (if any) charged or received or
     paid by the Company on all transactions entered into by it has been equal
     to the consideration which might have been expected to be charged, received
     or paid (as appropriate) between independent persons dealing at arm's
     length and no notice or enquiry by any Taxation Authority has been made in
     connection with any such transaction.

15.15 The Company is not liable to Tax in any jurisdiction other than the
     jurisdiction in which it is incorporated nor does the Company have or has
     ever had a permanent establishment in a jurisdiction other than the
     jurisdiction of incorporation.

15.16 The Company has deducted Tax from all payments made where required by
     applicable legislation and accounted to the relevant Taxation Authority for
     Tax so deducted within all applicable time limits.

15.17 The Company is not and has never been a member of a group of companies for
     the purposes of any corporate income Tax.

15.18 The Company has made no transfer of value such as is specified in section
     94(1) (or section 99(2)) of the IHTA.

15.19 The Company has not made any loan advance or payment or given any
     consideration falling within sections 419-420 or 422 of the TA.

15.20 The Company has made no payments and conferred no benefits falling to be
     treated as distributions under section 418 of the TA.

15.21 The Company has not made a transfer at an undervalue so that section 125
     of the TCGA could apply.

15.22(a) The Company is not, and, so far as the Sellers are aware, will
          not become, liable to be assessed to inheritance tax as donor or donee
          of any gift or transferor or transferee of value (actual or deemed)
          nor as a result of any disposition chargeable transfer or transfer of
          value (actual or deemed) made by or deemed to be made by any other
          person where such gift, transfer or disposition was made prior to
          Completion.

     (b)  There is no unsatisfied liability to inheritance tax attached or
          attributable to the Shares or any asset of the Company and in
          consequence no person has the power to raise the amount of such Tax by
          sale or mortgage of or by a terminable charge on any of the Shares or
          assets of the Company as mentioned


                                       41



     in section 212 of the IHTA and none of the Shares or assets of the Company
     are subject to a charge by HM Revenue & Customs within section 237 of the
     IHTA.

16.  EVENTS SINCE THE ACCOUNTS DATE

     Since the Accounts Date:

16.1 there has been no material adverse change in the financial or trading
     position or prospects of the Company (other than a change affecting or
     likely to affect all companies carrying on business in similar countries in
     which the Company carries on business) and no event, fact or matter has
     occurred or is likely to occur which will or is likely to give rise to any
     such change;

16.2 the Business has not been materially and adversely affected by any abnormal
     factor whether or not affecting similar businesses to a like extent and
     there are no facts which are likely to give rise to any such effects;

16.3 the Business has been carried on as a going concern in the ordinary and
     usual course.

16.4 the Company has not entered into any transaction or assumed or incurred any
     liabilities (including contingent liabilities) or made any payment not
     provided for in the Accounts otherwise than in the ordinary and usual
     course of carrying on its business;

16.5 no material capital commitments have been entered into or proposed by the
     Company. For these purposes a material capital commitment is one involving
     capital expenditure of over L150,000;

16.6 the Business has not been materially and adversely affected by the loss of
     any important customer or source of supply and there are no facts or
     circumstances which are likely to give rise to any such effect. For these
     purposes, an important customer or source of supply in relation to the
     Company means one which in either of the two financial periods immediately
     preceding the Accounts Date accounted for 5 per cent or more (in the case
     of a customer) of the turnover of the Company or (in the case of a source
     of supply) of the goods, services or equipment supplied to the Company;

16.7 the Company has not declared, made or paid any dividend or other
     distribution to its members;

16.8 the Company has not allotted or issued or agreed to allot or issue any
     share capital or any other security giving rise to a right over its
     capital;

16.9 the Company has not redeemed or purchased or agreed to redeem or purchase
     any of its share capital; and

16.10 otherwise than in the ordinary and usual course of carrying on its
     business, the Company has not incurred any additional borrowings or
     incurred any other indebtedness.


                                       42



17.  INSOLVENCY

     (a)  The Company is not insolvent under the laws of its jurisdiction or
          incorporation or unable to pay its debts as they fall due.

     (b)  The Company has not been held in default by lenders under any debt
          financing.

     (c)  There are no proceedings in relation to any compromise or arrangement
          with creditors or any winding up, bankruptcy or other insolvency
          proceedings concerning the Company and, so far as Sellers are aware,
          no events have occurred which, under applicable laws, would justify
          such proceedings.

     (d)  So far as the Sellers are aware, no steps have been taken to enforce
          any security over any assets of the Company and no event has occurred
          to give the rights to enforce such security.


                                       43



                                     PART B

                        WARRANTIES GIVEN BY THE PURCHASER

1.   AUTHORITY AND CAPACITY

1.1  The Purchaser is a company validly existing and duly incorporated and
     registered under the law of its jurisdiction of incorporation.

1.2  The Purchaser has the legal right and full power and authority to enter
     into and perform this Agreement, and the Transaction Documents to which it
     is a party and to be executed by it pursuant to or in connection with this
     Agreement or the Transaction Documents.

1.3  The documents referred to in paragraph 1.2 above will, when executed,
     constitute valid and binding obligations on the Purchaser in accordance
     with their respective terms.

1.4  The Purchaser has taken all corporate action required by it to authorise it
     to enter into and perform this Agreement, any Transaction Document to which
     it is a party and any other documents to be executed by it pursuant to or
     in connection with this Agreement or any Transaction Document.


                                       44


                                   SCHEDULE 3

                             COMPLETION OBLIGATIONS

                                     PART A
                              SELLERS' OBLIGATIONS

1.   At Completion the Sellers shall:

1.1  Deliver to the Purchaser:

     (a)  evidence that the unpaid Tax liability in relation to the Company's
          2006 financial year has been settled in full with the relevant Tax
          Authority;

     (b)  transfers in respect of the Shares duly executed by the registered
          holders in favour of the Purchaser (or such person as the Purchaser
          may nominate in writing prior to Completion) and share certificates
          for the Shares in the name of the relevant transferors (or an express
          indemnity in a form satisfactory to the Purchaser in the case of any
          certificate found to be missing) and any power of attorney under which
          any transfer is executed on behalf of any Seller or nominee;

     (c)  such waivers or consents as the Purchaser may require to enable the
          Purchaser or its nominees to be registered as holders of the Shares;

     (d)  powers of attorney in such form as the Purchaser may reasonably
          require executed by each of the holders of the Shares in favour of the
          Purchaser to enable the Purchaser (pending registration of the
          relevant transfers) to exercise all voting and other rights attaching
          to the Shares and to appoint proxies for this purpose; and

     (e)  the Disclosure Letter duly executed by the Seller.

1.2  Procure that the Tax Deed is executed and delivered to the Purchaser by the
     Covenantors named therein;

1.3  Procure that First Propco Limited enters into:

     (a)  the Deed of Variation of the Property with the Company; and

     (b)  the Property Pre-Emption Agreement with the Purchaser.

1.4  Procure that the Company and First Propco Limited enter into the
     Environmental Insurance Policy.

1.5  Procure that the Company and First Propco Limited enter into the
     Environmental Deed.

1.6  Procure that the Company and Top Propco Limited enter into the Shares
     Pre-Emption Agreement.


                                       45



1.7  Procure that the Company and MW Associates Limited enter into the M Licence
     Agreement.

1.8  Procure that the Company and MW Associates Limited enter into the
     Assignment.

1.9  Deliver to the Purchaser (or to any person whom the Purchaser may nominate
     (for the Purchaser itself and as agent for the Company and the
     Subsidiaries) (or otherwise make available in a manner reasonably
     acceptable to the Purchaser) such of the following as the Purchaser may
     require:

     (a)  the statutory books (which shall be written up to but not including
          the Completion Date), the certificate of incorporation (and any
          certificate of incorporation on change of name) and common seal (if
          any) of the Company and share certificates or other documents of title
          in respect of all the issued share capital of each Subsidiary which is
          owned directly or indirectly by the Company;

     (b)  the written resignations of each of the directors and secretaries of
          the Company from his office as a director or secretary in agreed terms
          in each case acknowledging that he relinquishes any rights which he
          may have under any contract of employment with the Company or under
          any statutory provision including any right to damages for wrongful
          dismissal, redundancy payment or compensation for loss of office or
          unfair dismissal;

     (c)  the written resignations of the auditors of the Company with
          acknowledgements signed by each of them in agreed terms to the effect
          that they have no claim against the Company and containing the
          statement referred to in section 394 of the Companies Act 1985 to the
          effect that there are no circumstances connected with their
          resignation which they consider should be brought to the notice of the
          members or creditors of the Company;

     (d)  a statement of the current balance owed by the Company to Five Arrows
          Commercial Finance Limited as at the Completion Date in relation to
          the Five Arrows Agreement;

1.10 Deliver to the Purchaser (or otherwise make available in a manner
     reasonably acceptable to the Purchaser) all the financial and accounting
     books and records of the Company, together with the cheque books of the
     Company;

1.11 Procure board meetings of the Company to be held at which:

     (a)  in the case of the Company, it shall be resolved that each of the
          transfers relating to the Shares shall be approved for registration
          and (subject only to the transfer being duly stamped) each transferee
          registered as the holder of the Shares concerned in the register of
          members;

     (b)  each of the persons nominated by the Purchaser (such persons to be
          nominated in writing prior to Completion) shall be appointed directors
          and/or secretary, as the case may be, such appointments to take effect
          on the Completion Date;


                                       46



     (c)  the resignations of the directors and secretaries referred to in
          paragraph (a) above shall be tendered and accepted;

     (d)  the resignations of the auditors referred to in paragraph (b) above
          shall be accepted and Deloitte shall be appointed as auditors of the
          Company;

     (e)  all existing instructions to banks shall be revoked and new
          instructions shall be given to such banks in such form as the
          Purchaser may direct (provided that any such direction shall be given
          by the Purchaser to the Sellers in writing prior to Completion);

     (f)  the situation of the registered office shall be changed to such
          address as the Purchaser may nominate and (subject to any requirements
          of law) the accounting reference date shall be changed in accordance
          with any instructions given by the Purchaser (provided that any such
          nomination and instruction shall be given by the Purchaser to the
          Sellers in writing prior to Completion);

     and the Sellers shall procure that minutes of each duly held board meeting,
     certified as correct by the secretary of the relevant company, referred to
     above are delivered to the Purchaser.

1.12 Procure that First Propco pays the full amount of the premium relating to
     the Environmental Insurance Policy as directed in the invoice provided by
     Giles Insurance Brokers Limited.

                                     PART B

                             PURCHASER'S OBLIGATIONS

At Completion:

1.   The Purchaser shall deliver to the Sellers' Lawyers:

     1.1  The Tax Deed, the Environmental Deed, the Disclosure Letter and the
          Escrow Letter duly executed by the Purchaser; and

     1.2  A copy of the minutes of a duly held meeting of the directors of the
          Purchaser authorising the execution by the Purchaser of the
          Transaction Documents to which the Purchaser is a party (such copy
          minutes being certified as correct by the secretary of the Purchaser).

2.   The Purchaser shall procure that the Company shall maintain the credit
     insurance policy held by the Company at Completion in terms no less
     beneficial to the Company as at the date of Completion for a period of at
     least six months from the date of Completion.

3.   The Purchaser shall enter into the Environmental Policy.


                                       47



4.   The Purchaser shall procure that the Company shall pay to First Propco 50
     per cent of:

     4.1  the premium payable in respect of the Environmental Insurance Policy;
          and

     4.2  the commission payable to Giles Insurance Brokers Limited,

     within 3 days of receipt of the invoice from First PropCo requesting
     payment.

                                     PART C

                      SELLERS' AND PURCHASER'S OBLIGATIONS

1.   At Completion the Purchaser and Sellers shall Sign the Escrow Letter and
     procure that the Escrow Agents sign and deliver the Bank Instruction Letter
     to the Escrow Bank.


                                       48



                                   SCHEDULE 4

                              COMPLETION STATEMENT

                                     PART A
                              COMPLETION STATEMENT

1.   The Purchaser shall use all reasonable endeavours to procure that a draft
     Completion Statement in the agreed form set out in Part B of this Schedule
     is produced and delivered to the Sellers within 90 days of Completion.

2.   Following receipt of the draft Completion Statement, the Sellers and their
     advisers shall be given such reasonable access as they may reasonably
     request by giving written notice to Chris Jowsey (or such other person who
     shall be notified to the Sellers in writing) to:

     2.1  the working papers of the Purchaser relating to the draft Completion
          Statement;

     2.2  the Property; and

     2.3  the relevant employees of the Company,

     in order to properly consider the draft Completion Statement and the
     Sellers and their advisers shall also be given reasonable opportunity to
     gain explanations from the Purchaser in respect of any matter directly
     arising from such review of those papers.

3.   Within 30 Business Days of the date of receipt of the draft Completion
     Statement, the Sellers shall serve a notice on the Purchaser stating either
     that the Sellers:

     3.1  agree that the draft Completion Statement has been drawn up in the
          correct form and in accordance with this Agreement (an "ACCEPTANCE
          NOTICE"), or

     3.2  do not agree with the draft Completion Statement on the grounds that:

          (a)  it has not been drawn up in the correct form; and/or

          (b)  it is not in accordance with this Agreement (a "DISPUTE NOTICE").

4.   The Dispute Notice shall set out:

     4.1  the items being disputed;

     4.2  the reasons for disputing the items, and

     4.3  to the extent possible, a quantification of the proposed adjustments
          to the draft Completion Statement.

     For the avoidance of doubt (i) items not set out in the Dispute Notice
     shall be deemed to be agreed, and (ii) none of the items set out in the
     Dispute Notice shall be deemed to be agreed until the Completion Statement
     has been agreed as a whole between the parties in accordance with this
     Schedule 4.


                                       49



5.   If the Sellers, following the 30 Business Day period referred to at
     paragraph 3 above:

     5.1  serve an Acceptance Notice pursuant to paragraph 3.1 above; or

     5.2  do not serve any notice pursuant to paragraph 3 above,

     the draft Completion Statement delivered pursuant to paragraph 1 above
     shall be accepted as final and the Consideration shall be subject to the
     adjustment provisions set out in Clause 4 of this Agreement.

6.   If the Sellers serve a Dispute Notice pursuant to paragraph 3.2 above, the
     parties shall use all reasonable endeavours to agree upon a solution to the
     items contained therein. If such agreement is reached and agreed in writing
     between the parties either (i) on all of the items stated in the Dispute
     Notice, or (ii) on any item within the Dispute Notice, it shall be final
     and binding on the parties.

7.   If the parties cannot agree upon a solution to either (i) all of the
     disputed items, or (ii) can only agree upon a solution to some of the
     disputed items (the remaining item or items being the "DISPUTED ITEM" or
     "DISPUTED ITEMS", as the case may be), within 30 Business Days of the
     receipt of the Dispute Notice, they shall:

     7.1  jointly instruct an independent auditor to resolve the dispute in
          relation to such Disputed Items;

     7.2  make available to the independent auditor all relevant data,
          documentation and information as it may from time to time reasonably
          require; and

     7.3  use all reasonable endeavours to procure that the independent auditor
          shall determine the dispute in relation to such Disputed Item or
          Disputed Items as soon as possible.

8.   If the parties are unable to agree on an independent auditor within 5
     Business Days of either party serving details of a suggested independent
     auditor on the other, either party shall be entitled to request the then
     President of the Institute of Chartered Accountants in England and Wales to
     appoint an independent auditor who is an accountant of repute with relevant
     experience.

9.   The independent auditor shall act as an expert and not an arbitrator and
     the parties agree that the decision of the independent auditor shall be
     final and binding on the parties in the absence of manifest error or fraud.

10.  Following the decision of the independent auditor, the Consideration shall
     be subject to the adjustment provisions in Clause 4 of this Agreement.

11.  The Sellers and the Purchaser shall be responsible for their own costs of
     presenting their case to the independent auditor. The fees and properly
     incurred costs of the independent auditor shall be borne in such
     proportions as the independent auditor decides.


                                       50



                                     PART B
       BASIS OF PREPARATION OF NET CURRENT ASSETS AND COMPLETION STATEMENT

1.   The Net Current Assets and Completion Statement shall be calculated

     (a)  To reflect the provisions of paragraph 2 (below);

     (b)  Subject to and to the extent not inconsistent with the provisions in
          paragraph 2 (below), then insofar as it results in a treatment
          consistent with UK GAAP, by applying principles, bases, policies,
          practices and categorisations consistent in all respects with those
          applied in the preparation of the Accounts, and subject thereto;

     (c)  Subject to and to the extent not inconsistent with the provisions in
          paragraph 2 (below) and the principles, bases, policies, practices and
          categorisations consistent in all respects with those referred to in
          paragraph 9.1(b), then by applying principles, bases, policies,
          practices and categorisations consistent in all respects with those
          applied in UK GAAP.

2.   In calculating the Net Current Assets and the Completion Statement

     Fixed Assets

     (a)  For all Fixed Assets currently under construction, or for any
          commitment made for spare parts or maintenance items, any amount
          already paid shall be shown as a cash reduction and any amounts owed
          to third parties shall be classified as a current short-term liability
          of the Company and included in Creditors. These amounts will be
          included in the Net Current Asset calculation.

     Negative Goodwill

     (b)  The payment to API plc in the sum of L105,000 shall be deducted
          from the amount of negative goodwill. For the avoidance of doubt, the
          API plc payment will not be included in the Net Current Assets.

     Stock

     (c)  A physical stock take will be completed by the Purchaser as at
          Completion, provided that the Sellers and their advisers will be
          entitled to be present at such stock take and to have reasonable
          access to and, at the Sellers' expense, to take copies of directly
          relevant papers produced by the Purchaser and/or the Company
          specifically in respect of such stock take.

     (d)  Provisions made in respect of stock should reflect the valuation of
          stock at the lower of cost or net realisable value in accordance with
          UK GAAP.

     Debtors and Creditors

     (e)  Debtors and Creditors which are denominated in a foreign currency
          shall be valued in full at the sell-side sterling exchange rate
          offered at Completion by


                                       51



          Barclays Bank Plc in respect of that foreign currency and be
          consistently applied to both debtors and Creditors.

     (f)  Any provisions made for bad and doubtful debts shall reflect the
          recoveries that have been claimed (or could have been claimed save for
          a breach or invalidation of the Company's credit insurance policy
          after Completion) and are entitled to be compensated in accordance
          with the Company's credit insurance policy.

     (g)  Any provisions made for bad and doubtful debts or customer credit
          notes shall reflect the full value of the liability of the Company
          provided that any credit notes issued in the ordinary course of
          business by the Company after Completion in respect of supplies made
          before Completion should be issued subject to the bases, principles,
          policies and practices consistent with historic practices of the
          Company in issuing credit notes for the 12 month period prior to
          Completion.

     (h)  All customer credit notes shall be deducted in full provided that if
          any credit notes are issued for amounts higher than should have been
          issued as a result of the Company not complying with the historic
          practices referred to at sub-paragraph (g) above, there will be an
          upwards adjustment to the Net Current Assets in respect of the
          difference.

     (i)  Any customer claims in respect of supplies made by the Company before
          Completion which remain unresolved at the date on which the draft
          Completion Statement is issued should reflect the net loss to the
          Company in respect of such claim or claims in the view of the
          Company's technical department using the bases, principles, policies
          and practices consistent with historic practices of the Company in
          respect of customer claims for the 12 month period prior to
          Completion.

     (j)  Any provisions for trade creditors shall reflect any recoveries made
          against and already accepted in writing by suppliers to the Company.

     (k)  Cash receipts from customers will be applied against the earliest
          invoice that is not disputed by a customer, unless the customer
          specifically states otherwise in writing.

     (l)  The proportion of the premium paid by the Company in respect of the
          Environmental Insurance Policy shall not be taken into account in the
          determination of Net Current Assets.

     (m)  The amount due to the Carbon Trust shall be classified as a current
          liability and listed in the Creditors of the Company.

     (n)  Any amount actually received in respect of the Welsh Assembly Grant is
          to be classified as cash in the Current Assets. The obligation to
          amortise this amount in the profit and loss statement will be
          classified as a long-term liability. For the avoidance of doubt, this
          long-term liability amount will be excluded from the calculation of
          Net Current Assets.


                                       52



     (o)  Any amounts in respect of deferred tax shall be classified as
          long-term liabilities and excluded from the calculation of Net Current
          Assets.

     (p)  Trade Creditors shall reflect amounts receivable in respect of volume
          related rebates or discounts already agreed with suppliers on or
          before the Completion Date to the extent that they have already been
          achieved and agreed with suppliers.

     Contingent Liabilities

     (q)  No provision shall be made for any contingent liabilities whatsoever.

          Tax

     (r)  No provision shall be made for corporation tax whatsoever.

     Going Concern

     (s)  The Net Current Assets calculation and the Completion Statement shall
          be prepared on a going concern basis.

     Cut-off Date and post-balance sheet events

     (t)  For the purposes of post-balance sheet events, the final cut-off date
          is the date falling 90 days after the Completion Date. The Completion
          Statement speaks as at Completion and the only post-balance sheet
          events that will be recognised are those referred to at sub-paragraphs
          (f), (g), (h), (i), (j) and (p), in each case in respect of supplies
          received or goods shipped by the Company on or before the Completion
          Date.


                                       53



                                   SCHEDULE 5

                                  THE PROPERTY


                                                            CURRENT RENT AND
                 CURRENT               DATE OF              NEXT RENT REVIEW
   ADDRESS       TENANT     LANDLORD    LEASE      TERM           DATE            NATURE OF USE
- ------------   ----------   --------   -------   --------   ----------------   -------------------
                                                             
  Land and     Metallised     First     16 May   20 years     L 200,000 per    Uses within classes
  buildings     Products     Propco      2005     from 16         annum        B1 and B2 as defined
 registered     Limited      Limited             May 2005                        in the Schedule
 at HM Land                                                  Review date is      to the Town and
  Registry                                                   16 May 2010 and     Country Planning
 under title                                                   every fifth        (Use Classes)
   number                                                    anniversary of         Order 1987
 CYM259834                                                      that date
                                                             (including the
                                                              last date of
                                                            that contractual
                                                                  term).



                                       54



                                   SCHEDULE 6

                              INTELLECTUAL PROPERTY

              MATTERS INCLUDED IN "MATERIAL INTELLECTUAL PROPERTY"

1.   LIST OF REGISTERED INTELLECTUAL PROPERTY INCLUDED IN "MATERIAL INTELLECTUAL
     PROPERTY"



TRADE MARK             COUNTRY      REG. NO
- ----------           -----------   ---------
                             
ATALFA               CTM           1301803
ATALFA               Norway        202993
HiBrite (stylised)   Argentina     1.738.709
HiBrite (stylised)   Brazil        821426788
HiBrite (stylised)   Czech Rep     225484
HiBrite (stylised)   EU            1038264
HiBrite (stylised)   Hungary       162001
HiBrite (stylised)   Poland        NR134825
HiBrite (stylised)   Romania       39527
Holobrite            Bulgaria      43678
Holobrite            Czech Rep     244926
Holobrite            EU            2008712
Holobrite            Russian Fed   229858


2.   LIST OF UNREGISTERED INTELLECTUAL PROPERTY INCLUDED IN "MATERIAL
     INTELLECTUAL PROPERTY"

     Bespoke shop floor data collection software which has been created by the
     Company's in-house IT department.

     Domain name: www.metpap.com

3.   LICENCE AGREEMENTS INCLUDED IN "MATERIAL INTELLECTUAL PROPERTY" IN RESPECT
     OF WHICH THE COMPANY IS LICENSOR

     None.

4.   LICENCE AGREEMENTS INCLUDED IN "MATERIAL INTELLECTUAL PROPERTY" IN RESPECT
     OF WHICH THE COMPANY IS LICENSEE

     "Slaterbrite" Trademark licence agreement entered into between API
     Laminates Limited and the Company on 23 November 2007.

     Usual shrinkwrap software licences.


                                       55


                                   SCHEDULE 7

                           PROTECTIONS FOR THE SELLER

1.   ACCOUNTING

1.1  The Sellers shall not be liable under the Warranties (excluding the Tax
     Warranties):

     (a)  to the extent that provision, reserve or allowance for the matter or
          liability giving rise to the claim has been made in the Completion
          Statement or is otherwise directly noted or reflected in the
          Completion Statement; or

     (b)  to the extent that the claim would not have arisen but for, or is
          increased because of, timing differences or changes in accounting
          policy or practice of or affecting the Company where such changes are
          introduced after Completion other than a change which is required in
          order to comply with UK GAAP, as in force at Completion.

2.   GENERAL LIMITATIONS

2.1  The Sellers shall not be liable under the Warranties (excluding the Tax
     Warranties) in respect of any claim:

     (a)  to the extent that the claim arises as a result of, or would not have
          arisen but for, or a liability is increased as a result of, any
          statutory or other binding or advisory legislative or regulatory
          provision not in force at the date of this Agreement; or

     (b)  to the extent that the claim arises as a result of, or would not have
          arisen but for, or a liability is increased as a result of, any change
          in any statutory or other binding or advisory legislative or
          regulatory provision after the date of this Agreement; or

     (c)  to the extent that the claim is based upon a liability which is
          contingent only, unless and until such contingent liability becomes an
          actual liability.

3.   ACTS OF THE PURCHASER

3.1  The Sellers shall not be liable under the Warranties (excluding the Tax
     Warranties) in respect of any claim:

     (a)  to the extent that such claim arises, or would not have arisen but
          for, or a liability is increased directly as a result of the
          notifications made by the Purchaser to the Office of Fair Trading and
          the German Federal Cartel Office prior to Completion;

     (b)  to the extent that the claim arises, or would not have arisen but for
          or a liability is increased as a result of any transaction,
          arrangement, act or omission (or any combination of them) carried out
          or effected at any time after Completion by the Purchaser or any
          member of the Purchaser's Group:


                                       56



          (i)  outside the ordinary course of Business; or

          (ii) to the extent that the claim arises as a result of, or would not
               have arisen but for, or a liability is increased as a result of
               the Purchaser ceasing to be resident in the United Kingdom for
               Taxation purposes after Completion; or

     (c)  to the extent that the Purchaser had actual knowledge of the facts,
          matters or circumstances giving rise to such claim at or before
          Completion.

4.   TAXATION

4.1  Save for paragraphs 6, 7.1, 7.3, 8 and 9.21, this Schedule 7 shall Schedule
     7 shall not apply to Tax Claims.

5.   THIRD PARTY RECOVERIES

5.1  The Sellers shall not be liable for any claim under the Warranties
     (excluding the Tax Warranties) in relation to:

     (a)  any matter or thing to the extent that the Company is entitled to
          claim under any policy of insurance in which case no such matter shall
          be the subject of a claim under the Warranties unless and until the
          Company shall have made a claim against its insurers under any such
          policy of insurance and any such insurance claim shall then reduce by
          the amount recovered or extinguish any such claim for breach of the
          Warranties; or

     (b)  any claim which has been or is made good or is otherwise compensated
          for otherwise than by the Purchaser.

5.2  Where the Purchaser and/or the Company are at any time entitled to recover
     from some other person (other than its insurers) any sum in respect of any
     matter giving rise to a claim under the Warranties (excluding the Tax
     Warranties), the Purchaser shall and shall, at the Sellers' expense,
     procure that the Company shall undertake all commercially reasonable steps
     to enforce such recovery prior to taking any action (other than notifying
     the Sellers of the potential claim) against the Sellers and in the event
     that the Purchaser or the Company shall recover any amount from such other
     person the amount of the claim against the Sellers shall be reduced by the
     amount recovered, less all reasonable costs, charges and expenses properly
     incurred by the Purchaser or the Company (to the extent that such costs,
     charges and expenses (or any part of them) have not already been met by the
     Sellers) in recovering that sum from such other person.

5.3  If the Sellers at any time make a payment to the Purchaser from the Escrow
     Account in respect of any Relevant Claim in accordance with the provisions
     of this Agreement (such payment being an "AGREED PAYMENT") and the
     Purchaser or the Company subsequently becomes entitled to make recovery in
     whole or in part from any third party in respect of any matter giving rise
     to such Relevant Claim:


                                       57



     (a)  if the Sellers so request, the Purchaser shall assign or procure the
          assignment to the Sellers (subject to payment by the Sellers of
          associated costs and expenses) of such right; or

     (b)  if such right is not legally capable of effective assignment, or if
          the Sellers do not request an assignment of such right the Purchaser
          shall and shall, at the Sellers' expense, procure that the Company
          shall take all commercially reasonable steps to enforce such recovery.

5.4  Where either the Seller or the Purchaser recovers from some other person a
     sum that is referable to an Agreed Payment then they shall:

     (a)  in the event that any such recovery occurs prior to the Second Release
          Date, repay to the Escrow Account; or

     (b)  in the event that any such recovery occurs after the Second Release
          Date, pay to the Sellers or, in the case of a recovery by the Sellers
          pursuant to paragraph 5.3(a) retain,

     an amount equal to the amount recovered upon receipt or, if lower, the
     amount of the Agreed Payment to the Purchaser less, in either case, any
     amount payable by either the Purchaser, Seller or the Company in respect of
     Taxation on the amount recovered.

6.   TIME LIMITS FOR BRINGING CLAIMS

6.1  The Purchaser shall give written notice of any Relevant Claim to each of
     the Sellers and to the Sellers' Lawyers (the "CLAIM NOTICE") and written
     notice in respect of any Tax Claim to the Representative Covenantor (as
     defined in the Tax Deed) and to the Sellers' Lawyers specifying (in
     reasonable detail) the matter which gives rise to the Relevant Claim or Tax
     Claim (as the case may be), the nature of the claim and the amount claimed
     (to the extent known and if not known a best estimate of the amount
     claimed) (detailing in case of a Relevant Claim or a claim for a breach of
     the Tax Warranties) the Purchaser's calculation of the loss alleged to have
     been suffered by it or the Company (as the case may be), as a result of the
     breach of the Warranties) (the "ESTIMATED LIABILITY") as soon as
     practicable after the Purchaser becomes aware of the possibility of a claim
     and in any event:

     (a)  in the case of a Tax Claim within the period of seven years beginning
          with the Completion Date; and

     (b)  in any other case, within the period of two years beginning with the
          Completion Date.

7.   LIMITATIONS ON QUANTUM

7.1  Subject to paragraphs 7.2, 7.4 and 7.4, the aggregate liability of the
     Sellers in respect of all claims under the Warranties (including the Tax
     Warranties), the Indemnities, the Tax Deed and the Transaction Documents (a
     "TRANSACTION CLAIM") shall not in any circumstances exceed the amount held
     in the Escrow Account from time to time (which amount for the avoidance of
     doubt can never exceed L500,000) and a payment


                                       58



     to the Purchaser in respect of any such Transaction Claim may only be made
     out of the Escrow Account.

7.2  Notwithstanding any other provision of this Agreement no Transaction Claim
     shall be brought and the Purchaser shall not be entitled to make any
     recovery from the Escrow Account in respect of any Transaction Claim unless
     the amount in respect of which such Transaction Claim may properly be
     brought following the application of the other provisions of this Schedule
     when aggregated with any other claims is equal to or exceeds L10,000
     in which case the Purchaser shall be able to claim for the full amount of
     all such claims and not merely the excess over L10,000.

7.3  The aggregate liability of the Sellers in respect of the Indemnities shall
     not in any circumstances exceed the amount stated against the relevant
     matter in the table set out below:



INDEMNITY                           MAXIMUM AGGREGATE LIABILITY
- ---------                           ---------------------------
                                 
Workplace Indemnity                           L30,000
ATEX Study Indemnity                          L20,000
PCB Inspection Indemnity                      L30,000
Asbestos Indemnity                            L10,000
Distribution and Agency Indemnity             L50,000


     For the avoidance of doubt, any payment to the Purchaser in respect of any
     matter referred to in this paragraph 7.3 may only be made out of the Escrow
     Account.

7.4  In the event that there is any Tax Claim at any time:

     (a)  after Completion but on or before the Second Release Date which
          exceeds the amount held in the Escrow Account at that time; or

     (b)  after the end of the Second Release Date,

     then the Sellers shall, during the period from the Completion Date to the
     seventh anniversary of Completion only, have a liability in respect of any
     such Tax Claim in addition to the aggregate liability referred to at
     paragraph 7.1. Such additional liability shall not in any circumstances
     exceed L75,000. For the avoidance of doubt, if at any time during the
     period from the Completion Date to the seventh anniversary of Completion
     there is a positive balance held in the Escrow Account then any Tax Claim
     that is due and payable in accordance with the terms of the Tax Deed shall
     first be paid to the Purchaser out of the Escrow Account to the extent that
     there are


                                       59



     sufficient funds available in the Escrow Account to meet such liability
     before the additional liability of L75,000 is called upon.

8.   NO DOUBLE COUNTING

8.1  The Seller shall have no liability under the Warranties, Indemnities or Tax
     Deed more than once in respect of the same loss arising out of or in
     respect of the same act, matter or thing to the extent that the Seller has
     made a payment to the Purchaser in respect of such matter under the
     Warranties, Indemnities or under the Tax Deed as the case may be.

9.   CONDUCT OF CLAIMS

9.1  Wherever any Claim Notice is duly served in accordance with this Agreement,
     the parties irrevocably agree that any dispute, difference or claim
     pursuant to such Claim Notice shall be resolved in accordance with the
     provisions of this paragraph 9.

9.2  Subject to the Purchaser being indemnified and secured to its satisfaction
     in accordance with paragraph 9.7, upon serving a Claim Notice on the
     Sellers, the Purchaser shall (and shall procure that the Company shall) at
     the cost of the Sellers, give such information and access to personnel,
     premises, chattels, documents and records relevant to the Claim Notice to
     the Sellers and their professional advisers as the Sellers may reasonably
     request.

9.3  The Purchaser shall inform, or shall procure that the Company shall inform
     the Sellers in writing of a Third Party Claim which comes to the notice of
     the Purchaser whereby it appears that the Sellers are likely to become
     liable under the Warranties or indemnities in this Agreement as soon as
     reasonably practicable after such Third Party Claim comes to the notice of
     the Purchaser, or the Company as the case may be.

9.4  Subject to the Purchaser being indemnified and secured to its satisfaction
     in accordance with paragraph 9.7, where a Third Party Claim has been made,
     the Purchaser shall take (or shall procure the Company shall take) such
     action and give (or procure the giving of) such information as the Sellers
     may reasonably request in order to avoid, dispute, resist, mitigate,
     compromise, defend or appeal against any such Third Party Claim and any
     adjudication with respect to any such Third Party Claim.

9.5  On the written request of the Sellers, the sole conduct of any legal
     proceedings of whatsoever nature arising out of any Third Party Claim (the
     "PROCEEDINGS") shall be delegated to the Sellers. For this purpose, the
     Purchaser shall give or procure that the Company gives to the Sellers all
     such relevant assistance as the Sellers may reasonably require.

9.6  Where Proceedings are delegated to the Sellers in accordance with paragraph
     9.5 above:

     (a)  the Sellers shall keep the Purchaser fully and promptly informed of
          the Proceedings and shall consult with the Purchaser on any matter
          which is or is likely to be, in the opinion of the Purchaser, material
          in relation to the Proceedings; and


                                       60



     (b)  the Sellers shall not make any settlement or compromise of the Third
          Party Claim which is the subject of Proceedings, or agree to any
          matter in the conduct of such Proceedings which may affect the amount
          of liability in connection with such Third Party Claim without the
          prior written consent of the Purchaser.

9.7  The Sellers shall indemnify and secure the Purchaser to its reasonable
     satisfaction in respect of all costs, charges and expenses reasonably and
     properly incurred by the Purchaser or the Company, as the case may be, as a
     consequence of any actions taken at the request of the Sellers pursuant to
     paragraphs 9.2 to 9.5.

9.8  Within 20 Business Days of service of a Claim Notice by the Purchaser
     served pursuant to paragraph 6, the Sellers shall serve a notice on the
     Purchaser stating that they either:

     (a)  accept liability for the Notified Claim and the Estimated Liability
          (the "ACCEPTANCE NOTICE"); or

     (b)  dispute the Notified Claim and/or the Estimated Liability (the
          "REJECTION NOTICE"),

     provided that where there is a Third Party Claim, such 20 Business Day time
     limit shall only start to run from the date on which the Third Party Claim
     is settled and, for the purposes of this paragraph 9, a Third Party Claim
     shall be settled if the parties to the Third Party Claim irrevocably and
     unconditionally so agree in writing; or the Third Party Claim has been
     determined by a court of competent jurisdiction from which there is no
     right of appeal, or from whose judgment the parties to the Third Party
     Claim are debarred by passage of time or otherwise from making an appeal.

9.9  If the Sellers serve a Rejection Notice in respect of a Notified Claim,
     then the parties shall collaborate in good faith to identify the areas of
     disagreement and shall each use their reasonable endeavours to agree a
     solution to the dispute.

9.10 If within 20 Business Days of the date of service of a Rejection Notice,
     the parties cannot agree a solution in respect of a Notified Claim, then
     either party that wishes to appoint or to refer the Notified Claim to an
     expert for determination (the "EXPERT") shall give written notice to that
     effect to the other party and, with such notice, shall give details of the
     reason for the appointment of, and the matter to be referred to, the
     Expert.

9.11 Following such notice, the parties shall promptly meet and endeavour to
     agree upon a person to be the Expert. If, within five (5) Business Days
     from the date of the notice under 9.10 above, the parties have failed to
     agree upon an Expert, the matter shall forthwith be referred by the party
     wishing the appointment to be made to the President or Vice President of
     the Chartered Institute of Arbitrators for England & Wales (the
     "APPOINTER"), which shall be requested, but not bound, to make the
     appointment of the Expert within five (5) Business Days and, in so doing,
     may take such independent advice as it thinks fit.

9.12 Upon an Expert being appointed under the foregoing provisions, the parties
     shall forthwith notify the Expert of his selection and shall request him to
     confirm in writing


                                       61



     within five (5) Business Days whether or not he is willing and able to
     accept the appointment and that he will comply with the time periods set
     out in paragraph 9.14(d) below. If such Person is either unwilling or
     unable to accept such appointment or will not agree to comply with the
     periods set out in paragraph 9.14(d) below, or shall not have confirmed his
     willingness and ability to accept such appointment within the said period
     of five (5) Business Days, then (unless the parties are able to agree upon
     the appointment of another Expert) the matter shall be referred to the
     Appointer to select an alternative Expert.

9.13 A person shall not be appointed as the Expert if he has an interest or duty
     which would materially conflict with his role (including being a director,
     officer, employee or consultant to a party or to any affiliate of a party).

9.14 The following provisions shall apply to the Expert determination:

     (a)  each party shall supply to the Expert such data, documents and
          information as the Expert may request;

     (b)  each party may provide the Expert with such further data, documents
          and information as it sees fit;

     (c)  the Expert may make such further procedural directions as he sees fit
          save that any meetings or hearings with the Expert shall take place in
          England & Wales or any other location agreed by the parties;

     (d)  the Expert shall make his decision as soon as reasonably practicable
          after receiving data, information and submissions supplied and made to
          him by the parties and, in any event, not later than thirty (30)
          Business Days after he has confirmed to the parties acceptance of his
          appointment, or such longer period as the Sellers and the Purchaser
          may agree in writing; and

     (e)  the Expert shall be entitled to obtain such independent professional
          and/or technical advice as he may reasonably require and to obtain any
          necessary secretarial assistance as is reasonably necessary.

9.15 If the Expert fails to notify the parties of his decision with respect to
     any Notified Claim referred to him pursuant to this Schedule 7 within the
     time-limit specified herein, either party may give notice within ten (10)
     Business Days after expiration of such time-limit that the dispute is to be
     decided pursuant to clause 26 of this Agreement whereupon the Expert shall
     give no further consideration to the Dispute and shall not issue a
     decision.

9.16 All communications between the parties and the Expert or the Appointer
     shall be made in writing and a copy of such communications shall be
     provided simultaneously to the other party.

9.17 The Expert shall be deemed not to be an arbitrator but shall render his
     decision as an expert and the laws governing arbitrations, including but
     not limited to the Arbitration Act 1996, shall not apply to the Expert or
     his determination or the procedure by which he reaches his decision.


                                       62



9.18 The costs of the Expert (including the costs of the Seller and the
     Purchaser in presenting their respective cases to the Expert) shall be
     borne in such proportions and by such parties as the Expert decides.

9.19 The decision of the Expert shall be final and binding on the parties.

9.20 If, in respect of any Notified Claim:

     (a)  the Sellers fail to serve either an Acceptance Notice or Rejection
          Notice within the time period specified in paragraph 9.4; or

     (b)  the Sellers serve an Acceptance Notice; or

     (c)  the Expert finds in favour of the Purchaser,

     then the Seller shall be deemed to accept liability for the Notified Claim
     and agree to pay an amount equal to the Estimated Liability (or, where the
     Expert has determined the claim, an amount equal to the amount that the
     Expert determines is payable by the Sellers in respect of that claim (such
     amount being the "DETERMINED LIABILITY")) and the Purchaser shall be
     permitted to withdraw from the Escrow Account an amount equal to the
     Estimated Liability or Determined Liability (as the case may be), or where
     the Estimated Liability or Determined Liability is more than the amount
     standing to the credit of the Escrow Account, the entire amount of the
     Escrow Account.

9.21 For the avoidance of doubt the conduct of any Claim for Tax (as defined in
     the Tax Deed) shall be governed by Clause 5 of the Tax Deed.

10.  MITIGATION

10.1 Nothing in this Agreement shall relieve the Purchaser of any common law or
     other duty to mitigate any loss, liability or damage suffered or incurred
     by it.

11.  FRAUD

11.1 Nothing in this Schedule 7 will operate to exclude any liability for fraud.


                                       63



                                   SCHEDULE 8

                                  FIXED ASSETS

Ashe 160-60 Slitter

Henderson 3364-69 Reel to Reel Embosser

Atlas 97007 Reel To Reel Embosser

Galileo Vacuum Metalliser

Galileo Mega Vacuum Metalliser

GV 1650PD Metalliser

GV Vacuum Metalliser

Kroenert Reco 880A Reel to Reel Coating Line

Prandi Coating Line

Maxon Mamco Reel Unwind Sheeter

Atlas Slitter Rewinder

Pascaban Slitter

Strachen and Henshaw Sheeter

TEC Coating Line

Wickelteknic Slitter

Lacquer Handling System

LTG3 Oxidiser

LTG Oxidiser

Water Tower

Trim Extraction and Baler

Ashe 45-60 Rewinder

Ashe 30-60 Rewinder

Parkland TC40 Automatic core cutter


                                       64



Parkland TC10/100 manuel core cutter

Polar 155 VTX Guillotine


                                       65



SIGNED by Alan Richard Morris            )

SIGNED by Edwin Rhys Morris              )

SIGNED by Morgan Lawn Morris             )

SIGNED by                                )
and                                      )
on behalf of Glatfelter Lydney Limited   )


                                       66

EX-3.(A)(XIX)

                                                                 Exhibit 3(a)xix

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

                        PENNSYLVANIA DEPARTMENT OF STATE
                               CORPORATION BUREAU

                                   ----------

                   Articles of Amendment-Domestic Corporation
                                  (15 Pa.C.S.)

Entity Number
140599

                     [X]   Business Corporation (Section 1915)

                     [ ]   Nonprofit Corporation (Section 5915)

Name                                            DOCUMENT WILL BE RETURNED TO THE
                                                NAME AND ADDRESS YOU ENTER TO
ESQUIRE ASSIST                                  THE LEFT.

Address

COUNTER PICK-UP

City              State              Zip Code
_____________________________________________

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

Fee: $70                          ----------------------------------------------

                                  Filed in the Department of State on 12/20/2007


                                                  Pedro A. Cortes
                                           Secretary of the Commonwealth

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

     In compliance with the requirements of the applicable provisions (relating
to articles of amendment), the undersigned, desiring to amend its articles,
hereby states that:

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

1.   The name of the corporation is:

P. H. GLATFELTER COMPANY

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

2.   The (a) address of this corporation's current registered office in this
     Commonwealth or (b) name of its commercial registered office provider and
     the county of venue is (the Department is hereby authorized to correct the
     following information to conform to the records of the Department):

     (a)  Number and Street         City         State         Zip        County
     ___________________________________________________________________________

     (b)  Name of Commercial Registered Office Provider                   County

     c/o CORPORATION SERVICE COMPANY

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

3.   The statute by or under which it was incorporated: Pennsylvania Business
     Corporation Law

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

4.   The date of its incorporation: DECEMBER 16, 1905

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

5.   Check, and if appropriate complete, one of the following:

[X]  The amendment shall be effective upon filing these Articles of Amendment in
     the Department of State.

[ ]  The amendment shall be effective on: ____________ at ____________
                                              Date            Hour

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


DSCB:15-1915/5915-2

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

6.   Check one of the following:

[ ]  The amendment was adopted by the shareholders or members pursuant to 15
     Pa.C.S. Section 1914(a) and (b) or Section 5914(a).

[X]  The amendment was adopted by the board of directors pursuant to 15 Pa. C.S.
     Section 1914(c) or Section 5914(b).

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

7.   Check, and if appropriate, complete one of the following:

[ ]  The amendment adopted by the corporation, set forth in full, is as follows:

[X]  The amendment adopted by the corporation is set forth in full in Exhibit A
     attached hereto and made a part hereof.

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

8.   Check if the amendment restates the Articles:

[ ]  The restated Articles of Incorporation supersede the original articles and
     all amendments thereto.

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

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

                                        IN TESTIMONY WHEREOF, the undersigned
                                        corporation has caused these Articles of
                                        Amendment to be signed by a duly
                                        authorized officer thereof this 20th day
                                        of December, 2007.

                                                P. H. GLATFELTER COMPANY
                                                   Name of Corporation


                                                  /s/ Jeffery J. Norton
                                        ----------------------------------------
                                                        Signature

                                           V.P., General Counsel and Secretary
                                                          Title

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



                                    EXHIBIT A
                                       TO
                              ARTICLES OF AMENDMENT
                                       TO
                            ARTICLES OF INCORPORATION
                                       OF
                            P. H. GLATFELTER COMPANY

The first paragraph of Article 5 of the Company's Articles of Incorporation, as
amended and restated and subsequently amended, is further amended to add the
following two sentences to the end of the first paragraph, effective as of the
filing of the Articles of Amendment with the Pennsylvania Department of State:

Any or all classes and series of shares, or any part thereof, may be represented
by certificates or may be uncertificated shares, provided, however, that any
shares represented by a certificate that are issued and outstanding shall
continue to be represented thereby until the certificate is surrendered to the
Corporation. The rights and obligations of the holders of shares represented by
certificates and the rights and obligations of the holders of uncertificated
shares of the same class and series shall be identical.

EX-3.(B)

                                                                    Exhibit 3(b)

                            P. H. GLATFELTER COMPANY

                            ARTICLES OF INCORPORATION

     1. The name of the corporation is

                            P. H. GLATFELTER COMPANY

     2. The location and post office address of its registered office in this
Commonwealth is Spring Grove, York County, Pennsylvania.

     3. The purpose or purposes for which the corporation is organized are to
acquire by purchase, or otherwise, own, buy, sell and deal in standing timber
lands, and to buy, cut, haul, drive and sell timber and logs, and to saw and
otherwise work the same, and to buy, manufacture and sell lumber, bark, wood,
pulp and all products made therefrom; to manufacture, produce, purchase, sell
and deal in any and all kinds of papers, and in all ingredients, products and
compounds thereof, and in any and all materials that now are or hereafter may be
used in or in connection with such manufacture, including the manufacture of
wood pulp and any other fibre; and to engage in, and to do, any other lawful act
concerning any or all lawful business for which corporations may be incorporated
under the Business Corporation Law of the Commonwealth of Pennsylvania,
including, but not limited to, manufacturing, processing, owning, using and
dealing in personal property of every class and description, engaging in
research and development, furnishing services, and acquiring, owning, using and
disposing of real property of any nature whatsoever.

     4. The term for which the corporation is to exist is perpetual.

     5. The aggregate number of shares which the corporation (hereinafter
referred to as the "Company") has authority to issue is 120,040,000 shares
divided into two classes consisting of (a) 40,000 shares of Preferred Stock of
the par value of $50 each; and (b) 120,000,000 shares of Common Stock of the par
value of $.01 each. Each share of Common Stock of the par value of $.01 each
which is issued and outstanding when this provision becomes effective, including
each share owned by the Company, shall be reclassified as two fully paid and
non-assessable shares of Common Stock of the par value of $.01 each, which shall
be included in the 120,000,000 shares of Common Stock herein authorized. Any or
all classes and series of shares, or any part thereof, may be represented by
certificates or may be uncertificated shares, provided, however, that any shares
represented by a certificate that are issued and outstanding shall continue to
be represented thereby until the certificate is surrendered to the Corporation.
The rights and obligations of the holders of shares represented by certificates
and the rights and obligations of the holders of uncertificated shares of the
same class and series shall be identical.

     The designations and the powers, preferences and rights, and the
qualifications, limitations or restrictions thereof, of the classes of stock of
the Company which are fixed by the Articles of Incorporation, and the express
grant of authority to the Board of Directors of the Company (hereinafter
referred to as the "Board of Directors") to fix by resolution or resolutions the
designations and the powers, preferences and rights, and the qualifications,
limitations or



restrictions thereof, of the shares of Preferred Stock, which are not fixed by
the Articles of Incorporation, are as follows:

                                 PREFERRED STOCK

     1. The Preferred Stock may be issued at any time or from time to time in
any amount, not exceeding in the aggregate the total number of shares of
Preferred Stock hereinabove authorized, as Preferred Stock of one or more
series, as hereinafter provided, and for such lawful consideration as shall be
fixed from time to time by the Board of Directors. All shares of any one series
of Preferred Stock shall be alike in every particular, each series of Preferred
Stock shall be distinctively designated by letter or descriptive words, and all
series of Preferred Stock shall rank equally and be identical in all respects
except as permitted by the provisions of Section 2 of this Article.

     2. To the extent that this Article does not establish series of Preferred
Stock and fix and determine the variations in the relative rights and
preferences as between series, authority is hereby expressly granted to and
vested in the Board of Directors at any time, or from time to time, to authorize
the issue of Preferred Stock as Preferred Stock of one or more series and, in
connection with the creation of each such series, to fix by resolution or
resolutions providing for the issue of shares thereof the designations,
preferences and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, of such series, to the full
extent now or hereafter permitted by the laws of the Commonwealth of
Pennsylvania, in respect of the matters set forth in the following subdivisions
(a) to (g), inclusive:

          (a) The designation of such series;

          (b) The dividend rate of such series;

          (c) The price at, and the terms and conditions on, which shares of
such series may be redeemed, subject to the provisions of subdivision (e) of
Section 3 of this Article;

          (d) The amounts payable upon shares of such series in the event of
voluntary liquidation of the Company;

          (e) Subject to the limitations provided by law, whether or not the
shares of such series shall be entitled to the benefit of a sinking fund to be
applied to the purchase or redemption of shares of such series, and if so
entitled, the amount of such fund, the manner of its application and the sinking
fund redemption price;

          (f) Whether or not the shares of such series shall be made convertible
into, or exchangeable for, shares of any other class or classes or of any other
series of the same or any other class or classes of stock of the Company, and,
if made so convertible or exchangeable, the conversion price or prices, or the
rates of exchange, and the adjustments, if any, at which, and all other terms
and conditions upon which, such conversion or exchange may be made; and

          (g) Whether or not the shares of such series shall be entitled to
other special rights in addition to those in this Article provided for,
including, without limitation, restrictive provisions with respect to the issue
of additional shares of stock of the same class or series or of


                                        2



any other class of the Company or of any subsidiary, restrictive provisions with
respect to the payment of dividends upon, or the making of any other
distribution in respect of, or the making of any purchase or redemption of,
stock of any class of the Company or of any subsidiary, and the incurring of
indebtedness, secured or unsecured, by the Company or by any subsidiary, and, if
so, the nature thereof.

     The Board of Directors may from time to time authorize and direct by
resolution or resolutions an increase in the number of shares of any series of
Preferred Stock already created by specifying that any or all unissued shares of
Preferred Stock shall be assigned to and included in such series and/or a
decrease in the number of shares of any such series (but not below the number of
shares thereof then outstanding) by specifying that any or all unissued shares
of Preferred Stock previously assigned to such series shall no longer be
included therein.

                        4-1/2% Cumulative Preferred Stock

     The series of the authorized shares of Preferred Stock of the par value of
Fifty Dollars ($50) per share designated at 4-1/2% Cumulative Preferred Stock
(hereinafter called "4-1/2% Preferred Stock"), of which 20,000 shares were
issued and at one time outstanding, shall consist of 7,000 shares; and the
shares of said series shall have, in addition to the rights and preferences
granted by law and the other provisions of this Article, the following relative
rights and preferences:

               (i) The dividend rate of the 4-1/2% Preferred Stock shall be four
          and one-half percent (4-1/2%) per share per annum, and no more, upon
          the par value thereof.

               (ii) The redemption price per share of the 4-1/2% Preferred Stock
          shall be $50 plus an amount equal to full cumulative dividends, as
          defined in Section 3(f) of this Article, thereon to the date fixed by
          the Board of Directors as the redemption date.

               (iii) In the event of any voluntary liquidation, dissolution or
          winding up of the Company, the holders of the 4-1/2% Preferred Stock
          shall be entitled to receive an amount equal to the redemption price
          specified in subsection (ii) above for every share thereof
          respectively held by them, before any distribution shall be made to
          the holders of the Common Stock.

               (iv) The 4-1/2% Preferred Stock shall be entitled to the benefit
          of a sinking fund to be applied to the purchase or redemption of such
          series as follows:

               The 4-1/2% Preferred Stock shall be subject to redemption through
          the operation of a Sinking Fund hereinbelow provided for at the
          Sinking Fund redemption price which shall be $50 per share plus an
          amount equal to all accumulated and unpaid dividends thereon, whether
          or not earned or declared, to the date fixed for redemption.

               On or before March 25 in each year, if any 4-1/2% Preferred Stock
          remains outstanding or owned by the Company and if the amount in the
          Sinking


                                        3



          Fund shall be less than the Sinking Fund redemption price of all
          outstanding 4-1/2% Preferred Stock (including 4-1/2% Preferred Stock
          owned by the Company) the Company shall, subject to the conditions
          hereinafter set forth, set aside a sum (hereinafter called "Sinking
          Fund Installment") in cash equal to the aggregate par value of 2-1/2%
          of the greatest number of shares of 4-1/2% Preferred Stock at any one
          time theretofore outstanding (including 4-1/2% Preferred Stock owned
          by the Company); provided, however, that such amount may be reduced,
          at the option of the Company, by the aggregate par value of such
          number of shares of 4-1/2% Preferred Stock theretofore acquired by the
          Company by purchase other than through the Sinking Fund or by
          voluntary redemption and not therefore used to reduce the amount of
          any Sinking Fund Installment or theretofore restored to the status of
          authorized and unissued Preferred Stock and classified as to series,
          as the Board of Directors shall specify by resolution. The Company may
          omit to set aside in any year such portion of any Sinking Fund
          Installment as shall be in excess of the net income of the Company for
          the immediately preceding fiscal year, determined in accordance with
          sound accounting practice, after deducting therefrom dividend
          requirements during such year on all outstanding Preferred Stock, and
          the Company shall not set aside any Sinking Fund Installment unless
          full cumulative dividends on the Preferred Stock to the end of the
          then current dividend period shall have been paid or declared and set
          apart for payment. If, however, the Company shall omit to set aside
          the full amount of any Sinking Fund Installment owing to any
          deficiency in net income as above provided, or if for any other reason
          (including the fact that dividends have not been provided for) the
          Company shall fail to set aside on or before the date due the full
          amount of any Sinking Fund Installment, or if the Company shall fail
          to apply amounts in the Sinking Fund as herein provided, the Company
          shall be deemed to be in arrears in connection with its Sinking Fund
          obligations in respect of the 4-1/2% Preferred Stock until such time
          as the full amount which the Company shall have omitted or failed to
          set aside shall have been set aside and applied as herein provided.

               From each Sinking Fund Installment, together with all amounts
          from prior installments not theretofore applied to the purchase or
          redemption of 4-1/2% Preferred Stock, the Company shall use its best
          efforts to purchase, from time to time, in the open market, on any
          stock exchange or at private sale, as the Board of Directors may
          determine, and at the lowest available price (not exceeding the
          Sinking Fund redemption price) such number of outstanding shares of
          4-1/2% Preferred Stock as the amount then in the Sinking Fund shall be
          sufficient to purchase, as nearly as may be. On July 1 of each year,
          if the unexpended balance in the Sinking Fund shall be sufficient to
          redeem one hundred or more shares of 4-1/2% Preferred Stock (or less
          than one hundred shares if the Company so desires) the Company shall
          apply such unexpended balance to the redemption on August 1 of such
          year of such number of outstanding shares of 4-1/2% Preferred Stock at
          the Sinking Fund redemption price as said balance shall be sufficient
          to redeem, as nearly as may be. Any such redemption shall be
          accomplished in the manner and with the effect provided in Section
          3(e) of this Article.


                                        4



               (v) The 4-1/2% Preferred Stock shall not be convertible.

               (vi) So long as any shares of 4-1/2% Preferred Stock shall be
          outstanding, the Company shall not create, assume or guarantee or
          permit any subsidiary to create, assume or guarantee at any one time
          or from time to time any funded debt in excess of $36,000,000 at any
          one time outstanding (except any purchase money mortgage upon property
          acquired after January 1, 1947, and any mortgage to which such
          property may be subject at the time of its acquisition) unless notice
          of the intention of the Company to create, assume or guarantee such
          funded debt shall be given to the holders of the 4-1/2% Preferred
          Stock and a meeting of said shareholders called upon thirty days'
          written notice or on such longer notice as may be provided by law. At
          said meeting the holders of 4-1/2% Preferred Stock shall vote for or
          against the creation, assumption or guaranty of such proposed funded
          debt and the negative vote of the holders of forty percent (40%) of
          the 4-1/2% Preferred Stock then outstanding shall absolutely prevent
          the creation, assumption or guaranty of any such funded debt by the
          Company.

                4-5/8% Cumulative Preferred Stock, Series of 1955

     The series of the authorized shares of Preferred Stock of the par value of
Fifty Dollars ($50) per share designated as 4-5/8% Cumulative Preferred Stock,
Series of 1955 (hereinafter called "Preferred Stock, Series of 1955"), of which
40,000 shares were issued and at one time outstanding, shall consist of 21,000
shares; and the shares of said series shall have, in addition to the rights and
preferences granted by law and the other provisions of this Article, the
following relative rights and preferences:

               (i) The dividend rate of the Preferred Stock, Series of 1955,
          shall be four and five-eighths percent (4-5/8%) per share per annum,
          and no more, upon the par value thereof.

               (ii) The redemption price per share of the Preferred Stock,
          Series of 1955, shall be $50.75 plus an amount equal to full
          cumulative dividends, as defined in Section 3(f) of this Article,
          thereon to the date fixed by the Board of Directors as the redemption
          date.

               (iii) In the event of any voluntary liquidation, dissolution or
          winding up of the Company, the holders of the Preferred Stock, Series
          of 1955, shall be entitled to receive an amount equal to the
          redemption price specified in subsection (ii) above for every share
          thereof respectively held by them, before any distribution shall be
          made to the holders of the Common Stock.

               (iv) The Preferred Stock, Series of 1955, shall be entitled to
          the benefit of a sinking fund to be applied to the purchase or
          redemption of such series as follows:

               The Preferred Stock, Series of 1955, shall be subject to
          redemption through the operation of a Sinking Fund for the Preferred
          Stock, Series of 1955, herein below provided for at the Sinking Fund
          redemption price which shall be


                                        5



          $50 per share plus an amount equal to all accumulated and unpaid
          dividends thereon, whether or not earned or declared, to the date
          fixed for redemption.

               On or before March 25 in each year, if any Preferred Stock,
          Series of 1955, remains outstanding or owned by the Company and if the
          amount in the Sinking Fund shall be less than the Sinking Fund
          redemption price of all outstanding Preferred Stock, Series of 1955
          (including Preferred Stock, Series of 1955, owned by the Company), the
          Company shall, subject to the conditions hereinafter set forth, set
          aside a sum (hereinafter called "Sinking Fund Installment") in cash
          equal to the aggregate par value of 2-1/2% of the greatest number of
          shares of Preferred Stock, Series of 1955, at any one time theretofore
          outstanding (including Preferred Stock, Series of 1955, owned by the
          Company); provided, however, that any such amount may be reduced, at
          the option of the Company, by the aggregate par value of such number
          of shares of Preferred Stock, Series of 1955, theretofore acquired by
          the Company by purchase other than through the Sinking Fund or by
          voluntary redemption and not therefore used to reduce the amount of
          any Sinking Fund Installment or theretofore restored to the status of
          authorized and unissued Preferred Stock and classified as to series,
          as the Board of Directors shall specify by resolution. The Company may
          omit to set aside in any year such portion of any Sinking Fund
          Installment as shall be in excess of the net income of the Company for
          the immediately preceding fiscal year, determined in accordance with
          sound accounting practice, after deducting therefrom dividend
          requirements during such year on all outstanding Preferred Stock, and
          the Company shall not set aside any Sinking Fund Installment unless
          full cumulative dividends on all outstanding Preferred Stock to the
          end of the then current dividend period shall have been paid or
          declared and set apart for payment. If, however, the Company shall
          omit to set aside the full amount of any Sinking Fund Installment
          owing to any deficiency in net income as above provided, or if for any
          other reason (including the fact that dividends have not been provided
          for) the Company shall fail to set aside on or before the date due the
          full amount of any Sinking Fund Installment, or if the Company shall
          fail to apply amounts in the Sinking Fund as herein provided, the
          Company shall be deemed to be in arrears in connection with its
          Sinking Fund obligations in respect of the Preferred Stock, Series of
          1955, until such time as the full amount which the Company shall have
          omitted or failed to set aside shall have been set aside and applied
          as herein provided.

               From each Sinking Fund Installment, together with all amounts
          from prior installments not theretofore applied to the purchase or
          redemption of Preferred Stock, Series of 1955, the Company shall use
          its best efforts to purchase, from time to time, in the open market,
          on any stock exchange or at private sale, as the Board of Directors
          may determine, and at the lowest available price (not exceeding the
          Sinking Fund redemption price) such number of outstanding shares of
          Preferred Stock, Series of 1955, as the amount then in the Sinking
          Fund shall be sufficient to purchase, as nearly as may be. On July 1
          of each year, if the unexpended balance in the Sinking Fund shall be
          sufficient to redeem one hundred or more shares of Preferred Stock,
          Series of 1955, (or less than one


                                        6



          hundred shares if the Company so desires) the Company shall apply such
          unexpended balance to the redemption on August 1 of such year of such
          number of outstanding shares of Preferred Stock, Series of 1955, at
          the Sinking Fund redemption price as said balance shall be sufficient
          to redeem, as nearly as may be. Any such redemption shall be
          accomplished in the manner and with the effect provided in Section
          3(e) of this Article.

               (v) The Preferred Stock, Series of 1955, shall not be
          convertible.

               (vi) The Preferred Stock, Series of 1955, shall be entitled to no
          other special rights in addition to those provided herein and in the
          other provisions of this Article.

     3. (a) The holders of shares of Preferred Stock of each series shall be
entitled to receive, when and as declared by the Board of Directors, dividends
at the rate for such series fixed in Section 2 of this Article or fixed by
resolution or resolutions as provided in Section 2 of this Article and no more,
payable quarterly on the first days of February, May, August and November in
each year (the quarterly periods ending on the first days of such months,
respectively, being herein designated as dividend periods), in each case from
the date of cumulation, as hereinafter in subdivision (f) of this Section 3
defined, of such series. Such dividends shall be cumulative (whether or not in
any dividend period or periods there shall be net profits or net assets of the
Company legally available for the payment of such dividends), so that if at any
time full cumulative dividends upon the outstanding Preferred Stock of all
series to the end of the then current dividend period shall not have been paid
or declared and set apart for payment, the amount of the deficiency shall be
fully paid, but without interest, either by redemption and the payment or
deposit, as provided in subdivision (e) hereof, of the redemption price thereof
or by dividends in the amount of such deficiency paid or declared and set apart
for payment on each such series, before any sum or sums shall be set aside for
or applied to the purchase or redemption of Preferred Stock of any series,
Common Stock or any other class of stock ranking junior to the Preferred Stock
and before any dividend shall be paid or declared or any other distribution
ordered or made upon the Common Stock or any other class of stock ranking junior
to the Preferred Stock, provided that any moneys theretofore set aside for any
sinking fund provided for in Section 2 of this Article or by resolution or
resolutions as provided in Section 2 of this Article may be applied to the
purchase or redemption of the Preferred Stock in accordance with the terms of
Section 2 of this Article or in accordance with the terms of such resolution or
resolutions.

     All dividends declared on the Preferred Stock of the respective series
outstanding shall be declared pro rata, so that the amounts of dividends
declared per share on the Preferred Stock of different series shall in all cases
bear to each other the same ratio that full cumulative dividends on such
respective series bear to each other.

          (b) After full cumulative dividends to the end of the then current
dividend period upon the outstanding Preferred Stock of all series shall have
been paid or declared and set apart for payment, and before any sum or sums
shall be set aside for, or applied to, the purchase of Common Stock or any other
class of stock ranking junior to the Preferred Stock and before any dividend
shall be paid or declared or any other distribution ordered or made upon the


                                        7



Common Stock or any other class of stock ranking junior to the Preferred Stock,
the Company shall set aside as a sinking fund, when and as required, out of any
funds legally available for that purpose, in respect of each series of Preferred
Stock any shares of which shall at the time be outstanding and in respect of
which a sinking fund for the purchase or redemption thereof has been provided
for in Section 2 of this Article or by resolution or resolutions as provided in
Section 2 of this Article, the sum or sums required by the terms of Section 2 of
this Article or by the terms of such resolution or resolutions as a sinking fund
to be applied in the manner specified therein.

     Preferred Stock of any series purchased or redeemed by the use of sinking
fund moneys or purchased or redeemed otherwise than by the use of sinking fund
moneys and applied by the Company as a credit against sinking fund payments,
shall be cancelled and shall not be reissued.

          (c) After full cumulative dividends to the end of the then current
dividend period upon the Preferred Stock of all series then outstanding shall
have been paid or declared and set apart for payment, and after the Company
shall have complied with the provisions of the foregoing subdivision (b) of this
Section 3 in respect of any and all amounts then or theretofore required to be
set aside or applied in respect of any sinking fund mentioned in said
subdivision (b), then and not otherwise, the holders of the Common Stock shall,
subject to the provisions of this Article and of any resolution providing for
the issue of any series of the Preferred Stock, be entitled to receive such
dividends as may be declared by the Board of Directors.

          (d) In the event of any liquidation, dissolution or winding up of the
Company, the holders of the Preferred Stock of each series then outstanding
shall be entitled to receive out of the assets of the Company available for
distribution to its stockholders, whether from capital, surplus or earnings,
before any distribution of the assets shall be made to the holders of the Common
Stock or any other class of stock ranking junior to the Preferred Stock, if such
liquidation, dissolution or winding up shall be involuntary, the sum of $50 for
every share of their holdings of Preferred Stock of such series plus full
cumulative dividends thereon to the date of final distribution, and if such
liquidation, dissolution or winding up shall be voluntary, the amount fixed in
Section 2 of this Article or fixed by resolution or resolutions as provided in
Section 2 of this Article for every share of their holdings of Preferred Stock
of such series; and in the event of any such distribution of assets, the holders
of the Common Stock shall be entitled, to the exclusion of the holders of the
Preferred Stock, to share ratably in all assets of the Company thereafter
remaining according to the number of shares of the Common Stock held by them
respectively. If upon any liquidation, dissolution or winding up of the Company
the amounts payable on or with respect to the Preferred Stock of all series are
not paid in full, the holders of shares of Preferred Stock of all series shall
share ratably in any distribution of assets in proportion to the respective
amounts which would be payable in respect of the shares held by them upon such
distribution if all amounts payable on or with respect to the Preferred Stock of
all series were paid in full. Neither the merger or consolidation of the Company
into or with any other corporation, nor the merger or consolidation of any other
corporation into or with the Company, nor a sale or lease of all or
substantially all the assets of the Company, shall be deemed to be a
liquidation, dissolution or winding up of the Company.

          (e) The Preferred Stock of all series, or of any series thereof, or
any part of any series thereof, at any time outstanding, may be redeemed by the
Company, at its election


                                        8



expressed by resolution of the Board of Directors, at any time or from time to
time (which time, when fixed in each case, is hereinafter called the "redemption
date"), upon not less than thirty (30) days' previous notice to the holders of
record of the Preferred Stock to be redeemed, given by mail in such manner as
may be prescribed by resolution or resolutions of the Board of Directors, at the
redemption price or prices fixed in Section 2 of this Article or fixed by
resolution or resolutions as provided in Section 2 of this Article for the
Preferred Stock to be redeemed. If less than all the outstanding shares of the
Preferred Stock of any series is to be redeemed, the redemption may be made
either by lot or pro rata in such manner as may be prescribed by resolution of
the Board of Directors. The Company may, if it so elects, provide moneys for the
payment of the redemption price by depositing the amount thereof, after notice
of redemption has first been mailed, for the account of the holders of Preferred
Stock entitled thereto with a bank or trust company doing business in the City
of Philadelphia, Pennsylvania, or in the Borough of Manhattan, in the City of
New York, and having capital and surplus of at least Five Million Dollars
($5,000,000) (the date of any such deposit being hereinafter called the "date of
deposit"). In such event, the notice of redemption shall include a statement of
the date of deposit and the name and address of the bank or trust company with
which the deposit will be made. From and after the redemption date (unless
default shall be made by the Company in providing moneys for the payment of the
redemption price), or, if the Company shall make such deposit on or before the
date specified therefor in the notice, then on and after the date of deposit,
all rights of the holders thereof as stockholders of the Company shall cease and
terminate, except the right to receive the redemption price as hereinafter
provided and except any conversion rights not theretofore expired. Anything
herein or in any resolution providing for the issue of any series of the
Preferred Stock to the contrary notwithstanding, said redemption price shall
include an amount equal to full cumulative dividends on the Preferred Stock to
be redeemed to the redemption date thereof, and the Company shall not be
required to declare or pay on such Preferred Stock to be redeemed, and the
holders thereof shall not be entitled to receive, any dividends in addition to
those thus reflected in the redemption price; provided, however, that the
Company may pay in regular course any dividends thus reflected in the redemption
price either to the holders of record on the record date fixed for determination
of stockholders entitled to receive such dividends (in which event, anything
herein to the contrary notwithstanding, the amount so deposited need not include
any dividends so paid or to be paid), or as part of the redemption price upon
surrender of the certificates for the shares redeemed. On and after the
redemption date, or, if the Company shall elect to deposit the moneys for such
redemption as herein provided, then on and after the date of deposit, the
holders of record of the Preferred Stock to be redeemed shall be entitled to
receive the redemption price upon actual delivery to the Company or, in the
event of such a deposit, to the bank or trust company with which such deposit is
made, of certificates for the number of shares to be redeemed (such
certificates, if required, to be properly stamped for transfer and duly endorsed
in blank or accompanied by proper instruments of assignment and transfer duly
endorsed in blank). Any moneys so deposited which shall remain unclaimed by the
holders of such Preferred Stock at the end of six (6) years after the redemption
date shall be paid by such bank or trust company to the Company; provided,
however, that all moneys so deposited, which shall not be required for such
redemption because of the exercise of any right of conversion or exchange, shall
be returned to the Company forthwith. Any interest accrued on moneys so
deposited shall be paid to the Company from time to time.


                                        9



     Preferred Stock redeemed pursuant to the provisions of this subdivision (e)
shall be cancelled and shall not be reissued.

          (f) The term "full cumulative dividends" whenever used in this Article
with reference to any share of any series of the Preferred Stock shall be deemed
to mean (whether or not in any dividend period, or any part thereof, in respect
of which such term is used there shall have been net profits or net assets of
the Company legally available for the payment of such dividends) that amount
which shall be obtained by multiplying the full dividend rate for such series
fixed in Section 2 of this Article or fixed by resolution or resolutions as
provided in Section 2 of this Article by the period of time elapsed from the
date of cumulation of such series to the date as of which full cumulative
dividends are to be computed (including the elapsed portion of the current
dividend period), less the amount of all dividends paid, or deemed paid upon
such share.

     The term "date of cumulation" as used in this Article with reference to any
series of the Preferred Stock shall be deemed to mean the February 1, May 1,
August 1 or November 1 on which, or next preceding the date on which, shares of
Preferred Stock of such series shall first be issued.

     In the event of the issue of additional Preferred Stock of any then
existing series, all dividends paid on Preferred Stock of such series prior to
the issue of such additional Preferred Stock, and all dividends declared and
payable to holders of Preferred Stock of such series of record on any date prior
to such additional issue, shall be deemed to have been paid on the additional
Preferred Stock so issued.

     The term "stock ranking junior to the Preferred Stock", whenever used in
this Article, shall mean any stock of the Company over which the Preferred Stock
has preference or priority in the payment of dividends or in the distribution of
assets on any dissolution, liquidation or winding up of the Company.

          (g) Except as otherwise required by the statutes of the Commonwealth
of Pennsylvania and as otherwise provided in this Article, and subject to the
provisions of the by-laws of the Company, as from time to time amended, with
respect to the closing of the transfer books and the fixing of a record date for
the determination of stockholders entitled to vote, the holders of the Common
Stock shall exclusively possess voting power for the election of directors and
for all other purposes, and the holders of the Preferred Stock shall have no
voting power and shall not be entitled to any notice of any meeting of
stockholders.

     Provided, however, that if and whenever a default in preferred dividends,
as hereinafter defined, shall exist, the holders of the outstanding Preferred
Stock, voting separately as a class, shall have the right to elect two directors
at the annual meeting of stockholders of the Company for the election of
directors next succeeding the occurrence of such default, and at each such
annual meeting thereafter so long and only so long as such default shall exist.
The term of office of each such director elected by the holders of the Preferred
Stock as aforesaid shall continue until the next annual meeting of stockholders
of the Company for the election of directors, notwithstanding that prior to the
end of such term the default in preferred dividends shall cease to exist. If,
prior to the end of such term, a vacancy in the office of such director shall
occur by


                                       10



reason of his death, resignation, removal or disability, or for any other cause,
such vacancy shall be filed for the remainder of the term in the manner provided
in the by-laws of the Company; provided, that, if such vacancy shall be filled
by election by the stockholders at a meeting thereof, the holders of the then
outstanding Preferred Stock, voting separately as a class, shall have the right
to fill such vacancy for the remainder of the term, unless at the time of such
election o default in preferred dividends shall exist. At any meeting of
stockholders at which the holders of Preferred Stock shall be entitled to vote
for the election of a director or directors as aforesaid, the holders of
twenty-five percent (25%) of the then outstanding Preferred Stock present in
person or by proxy shall be sufficient to constitute a quorum for the election
of such director or directors and for no other purpose, and the vote of the
holders of a majority of the Preferred Stock so present at such meeting at which
there shall be a quorum, shall be sufficient to elect such director or
directors. For the purposes of this subdivision (g), a default in preferred
dividends shall be deemed to have occurred whenever, on any dividend payment
date, the amount of unpaid full cumulative dividends upon any series of the
Preferred Stock shall be equivalent to eight (8) quarterly dividends thereon or
more, and, having so occurred, such default shall be deemed to exist thereafter
until, but only until, full cumulative dividends on all shares of Preferred
Stock then outstanding of each and every series, to the end of the last
preceding dividend period, shall have been paid. Nothing herein contained shall
be deemed to prevent an amendment of the by-laws of the Company, in the manner
therein provided, which shall increase the number of directors of the Company or
to prevent any other change in the number of directors of the Company.

          (h) So long as any shares of the Preferred Stock of any series shall
be outstanding, the Company shall not without the consent given by resolution
adopted at a meeting duly called for that purpose of the holders of record of at
least two-thirds of the number of shares of the Preferred Stock of all series
then outstanding:

               (1) alter or change the designations or the powers, preferences
or rights, or the qualifications, limitations or restrictions thereof, of the
Preferred Stock or of any series thereof in any material respect prejudicial to
the holders thereof;

               (2) create any new class of stock having preference over the
Preferred Stock as to dividends or assets, or create any obligation or security
of the Company convertible into shares of stock of any class having such
preference over the Preferred Stock;

               (3) sell, transfer or lease all, or substantially all, the assets
of the Company unless as a part of such transaction or prior thereto the
Preferred Stock of all series shall be retired or called for redemption and the
necessary funds therefor deposited as provided in subdivision (e) hereof; or

               (4) effect a statutory merger or consolidation of or with any
other corporation or corporations; provided that such consent shall not be
necessary if as a result of such merger or consolidation (A) the Company shall
be the surviving corporation and the Preferred Stock then outstanding shall
continue to be outstanding, there shall be no alteration or change in the
designations or the powers, preferences or rights, or the qualifications,
limitations or restrictions thereof, in any material respect prejudicial to the
holders thereof, there shall be no increase in the authorized number of shares
of Preferred Stock, and there shall not be created any


                                       11



new class of stock having preference over, or being on a parity with, the
Preferred Stock as to dividends or assets, or (B) if the Company shall not be
the surviving corporation, the shares of the Preferred Stock of each series then
outstanding shall be converted into, or be exchangeable for, a like number of
shares of preferred stock of the surviving corporation which preferred stock
shall have substantially the same designations, powers, preferences and rights,
and qualifications, limitations or restrictions thereof, as the Preferred Stock
of such series, and there shall not be outstanding or created any class of stock
of the surviving corporation having preference over, or being on a parity with,
such preferred stock as to dividends or assets.

               (i) So long as any shares of the Preferred Stock of any series
shall be outstanding, the Company shall not, without the consent given by
resolution adopted at a meeting duly called for that purpose of the holders of
record of at least a majority of the number of shares of the Preferred Stock of
all series then outstanding, increase the authorized number of shares of the
Preferred Stock or create any new class of stock which shall be on a parity with
the Preferred Stock as to dividends or assets, or create any obligation or
security of the Company convertible into shares of stock of any class which
shall be on a parity with the Preferred Stock as to dividends or assets.

     The holders of the Preferred Stock shall not be entitled to subscribe to
any increased issue of the Preferred Stock or the Common Stock unless such
privilege is provided for by resolution of the holders of the Common Stock and
the Board of Directors of the Company.

     Anything in this Article hereof or in any resolution or resolutions
providing for the issue of Preferred Stock of any series contained to the
contrary notwithstanding, dividends upon shares of stock of any class of the
Company shall be payable only out of unreserved and unrestricted earned surplus
of the Company legally available for dividends, and the rights of the holders of
all classes of stock of the Company in respect of the payment of dividends shall
at all times be subject to the power of the Board of Directors from time to time
to set aside such reserves and to make such other provisions, if any, as said
Board shall deem to be necessary or advisable for working capital, for additions
and improvements to plant and equipment, for expansion of the Company's business
(including the acquisition of real and personal property for that purpose) or
for any other proper purpose of the Company.

                                  COMMON STOCK

     The holders of Common Stock shall have no preemptive rights and the Company
shall have the right to issue any shares of its capital stock, option rights or
securities having conversion or option rights without first offering such
shares, rights or securities to the holders of the Common Stock.


                                       12

EX-3.(C)

                                                                    Exhibit 3(c)

                                                   As amended by the
                                                   Board of Directors
                                                   at a meeting held
                                                   December 18, 2007
                                                   (Effective December 18, 2007)

                            P. H. GLATFELTER COMPANY

                                     BY-LAWS

                                    ARTICLE I

                    MEETINGS OF SHAREHOLDERS AND RECORD DATE

     1.1 ANNUAL MEETING. An annual meeting of shareholders for the election of
directors and the transaction of such other business as may properly come before
the meeting shall be held on the date and time fixed and designated by the Board
of Directors, but, if no such date and time is fixed and designated by the Board
for a calendar year, then the meeting for such calendar year shall be held on
the fourth Wednesday in April of such year at 10:00 A.M., if not a legal
holiday, and, if a legal holiday, then on the next succeeding full business day
which is not a legal holiday at the same hour.

     1.2 SPECIAL MEETINGS. Special meetings of the shareholders may be called at
any time by the Board of Directors, the Chairman of the Board, the Chief
Executive Officer or the President.

     1.3 PLACE. All meetings of the shareholders shall be held at the principal
office of the Company, such other place within or without the Commonwealth of
Pennsylvania as may be designated by the Board of Directors in the notice of a
meeting, or by means of the Internet or other electronic communications
technology in a fashion pursuant to which the shareholders have the opportunity
to read or hear the proceedings substantially concurrently with their
occurrence, vote on matters submitted to the shareholders and pose questions to
the directors of the Company.



     1.4 NOTICE. Written notice stating the place, day and hour of each meeting
of shareholders and, in the case of a special meeting, the general nature of the
business to be transacted shall be given by the Secretary or other
duly-authorized officer of the Company at least ten days before the meeting to
each shareholder of record entitled to vote at the meeting.

     1.5 QUORUM. Except as otherwise provided in the Articles of Incorporation,
the presence in person or by proxy of shareholders entitled to cast at least a
majority of the votes which all shareholders are entitled to cast on a
particular matter shall constitute a quorum for the purpose of considering such
matter at a meeting of shareholders, but less than a quorum may adjourn from
time to time to reconvene at such time and place as they may determine. When a
quorum is present, except as may be otherwise specified in the Articles of
Incorporation or provided by law, all matters shall be decided by the vote of
the holders of a majority of the votes entitled to be cast at the meeting, in
person or by proxy.

     1.6 RECORD DATES. The Board of Directors may fix a time not more than
ninety days prior to the date of any meeting of shareholders, or the date fixed
for the payment of any dividend or distribution, or the date for the allotment
of rights, or the date when any change or conversion or exchange of shares will
be made or go into effect, as a record date for the determination of the
shareholders entitled to notice of or to vote at any such meeting, or to receive
payment of any such dividend or distribution, or to receive any such allotment
of rights, or to exercise the rights in respect to any such change, conversion
or exchange of shares. In such case, only such shareholders as shall be
shareholders of record at the close of business on the date so fixed shall be
entitled to notice of or to vote at such meeting, or to receive payment of such
dividend or distribution, or to receive such allotment of rights, or to exercise
such rights in respect to any change, conversion or exchange of shares, as the
case may be, notwithstanding any transfer of any shares on the books of the
Company after the record date so fixed.


                                       2



     1.7 NOMINATIONS AND NOTICE OF BUSINESS AT MEETINGS. At any annual meeting
of shareholders only persons who are nominated or business that is proposed in
accordance with the procedures set forth in this Section 1.7 shall be eligible
for election as directors or considered for action by shareholders. Nominations
of persons for election to the Board of Directors of the Company may be made or
business proposed at a meeting of shareholders (i) by or at the direction of the
Board of Directors or (ii) by any shareholder of the Company entitled to vote at
the meeting who complies with the notice and other procedures set forth in this
Section 1.7. Such nominations or business proposals, other than those made by or
at the direction of the Board of Directors, shall be made pursuant to timely
notice in writing to the Secretary of the Company and such proposals must, under
applicable law, be a proper matter for shareholder action. To be timely, a
shareholder's notice shall be delivered to or mailed and received at the
principal office of the Company not less than 120 days in advance of the date
which is the anniversary of the date the Company's proxy statement was released
to shareholders in connection with the previous year's annual meeting or if the
date of the applicable annual meeting has been changed by more than 30 days from
the date contemplated at the time of the previous year's proxy statement, not
less than 90 days before the date of the applicable annual meeting. Such
shareholder's notice shall set forth (i) as to each person who such shareholder
proposes to nominate for election or reelection as a director, all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(including such person's written consent to being named in the proxy statement
as a nominee and to serving as a Director if elected); (ii) as to any other
business that the shareholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the annual meeting, the
reasons for conducting such business at the annual meeting and any material
interest in such business of such person on whose behalf such proposal is made;
and (iii) as to the shareholder giving the notice and the beneficial owner, if
any, on whose


                                       3


behalf the nomination or proposal is made, (a) the name and address of such
shareholder and beneficial owner, if any, (b) the class and number of shares of
the Company which are beneficially owned, (c) a description of all arrangements
or understandings between such shareholder and each proposed nominee and any
other person or persons (including their names) with respect to any such
nomination(s) or proposal(s) and (d) a representation that such shareholder
intends to appear in person or by proxy at the meeting to nominate the person(s)
named, or move the proposal identified, in its notice. The Company may require
any proposed nominee to furnish such other information as may reasonably be
required by the Company to determine the eligibility of such proposed nominee to
serve as a director of the Company. No person shall be eligible for election as
a director of the Company and no business shall be conducted at the annual
meeting of shareholders, other than those made by or at the direction of the
Board of Directors, unless nominated or proposed in accordance with the
procedures set forth in this Section 1.7. The Chairman of the meeting may, if
the facts warrant, determine and declare to the meeting that a nomination or
proposal was not made in accordance with the provisions this Section 1.7 and, if
he should so determine, he shall so declare to the meeting and the defective
nomination or proposal shall be disregarded.

                                   ARTICLE II

                                    DIRECTORS

     2.1 NUMBER AND TERM. The Board of Directors shall consist of eight persons,
comprising two classes of three directors each, and one class of two directors.
At each annual meeting of shareholders, the successors to those directors whose
terms expire in that year shall be elected to hold office for a term of three
years each, so that the term of office of one class of directors shall expire
each year.

     2.2 AGE QUALIFICATION. No person, other than an officer or employee of the
Company, shall be elected or reelected a director after reaching 72 years of
age. When


                                       4



the term of any director, other than an officer or employee of the Company,
extends beyond the date when the director reaches 72 years of age, such director
shall resign from the Board of Directors effective at the annual meeting of
shareholders next succeeding his 72nd birthday.

     2.3 VACANCIES. In the case of any vacancy in the Board of Directors by
death, resignation or for any other cause, including an increase in the number
of directors, the Board may fill the vacancy by choosing a director to serve
until the next selection of the class for which such director has been chosen
and until his successor has been selected and qualified or until his earlier
death, resignation or removal.

     2.4 ANNUAL MEETING. An annual meeting of the Board of Directors shall be
held each year as soon as practicable after the annual meeting of shareholders,
at the place where such meeting of shareholders was held or at such other place
as the Board of Directors may determine, for the purposes of organization,
election of officers and the transaction of such other business as shall come
before the meeting. No notice of the meeting need be given.

     2.5 REGULAR MEETINGS. Regular meetings of the Board of Directors may be
held without notice at such times and at such places as the Board of Directors
may determine.

     2.6 SPECIAL MEETINGS. Special meetings of the Board of Directors may be
called by the Chairman of the Board, the Chief Executive Officer or the
President. Notice of every special meeting shall be given to each director not
later than the second day immediately preceding the day of such meeting in the
case of notice by mail, telegram or courier service, and not later than the day
immediately preceding the day of such meeting in the case of notice delivered
personally or by telephone, telex, TWX, facsimile transmission, e-mail or other
electronic communication. Such notice shall state the time and place of the
meeting, but, except as otherwise provided in the by-laws, neither the business
to be transacted at, nor the purpose of, any special meeting of the Board of
Directors need be specified in the notice, or waiver of notice, of such meeting.


                                       5



     2.7 QUORUM AND ACTION BY UNANIMOUS CONSENT.

          (a) Quorum. A majority of the directors in office shall constitute a
quorum for the transaction of business but less than a quorum may adjourn from
time to time to reconvene at such time and place as they may determine.

          (b) Action by Unanimous Consent. Any action required or permitted to
be taken at a meeting of the Board of Directors may be taken without a meeting
if, prior or subsequent to the action, a consent or consents thereto by all of
the directors in office is filed with the secretary of the Company. For the
purposes of this Section 2.7(b), consent may be given by means of a physical
written copy or transmitted by facsimile transmission, e-mail or similar
electronic communications technology; provided that the means of giving consent
shall enable the Company to keep a record of the consents in a manner satisfying
the requirements of Section 107 of the Pennsylvania Associations Code.

     2.8 COMPENSATION. Directors shall receive such compensation for their
services as shall be fixed by the Board of Directors.

     2.9 COMMITTEES. The Board of Directors may, by resolution adopted by a
majority of the whole Board, designate one or more committees, each committee to
consist of two or more of the directors of the Company. The Board may designate
one or more directors as alternate members of any Committee, who may replace any
absent or disqualified member at any meeting of the committee. Any such
committee to the extent provided in such resolution shall have and exercise the
authority of the Board of Directors in the management of the business and
affairs of the Company.

     2.10 PARTICIPATION IN MEETINGS BY COMMUNICATIONS EQUIPMENT. One or more
directors may participate in a meeting of the Board of Directors or a committee
of the Board by means of conference telephone or other electronic technology by
means of which all persons participating in the meeting can hear each other.
Directors so participating shall be deemed present at the meeting.


                                       6



     2.11 LIABILITY OF DIRECTORS. A director of the Company shall not be
personally liable for monetary damages for any action taken, or any failure to
take any action, on or after January 27, 1987 unless he has breached or failed
to perform the duties of his office as provided for under Section 1713 of the
Pennsylvania Business Corporation Law of 1988, as amended, and the breach or
failure to perform constitutes self-dealing, willful misconduct or recklessness.
Any repeal, amendment, or modification of this Paragraph shall be prospective
only and shall not increase, but may decrease, the liability of a director with
respect to actions or failures to act occurring prior to such change.

     2.12 OFFICERS. The officers of the Company shall be a Chairman of the
Board, a Chief Executive Officer, a President, one or more Vice Presidents, a
Secretary, a Treasurer, a Controller and such other officers as the Board of
Directors may deem advisable. In the absence or disability of the Chairman of
the Board and the Chief Executive Officer, the President, a Director designated
by the Board or the officer or officers in the order designated by the Board of
Directors shall have the authority and perform the duties of the Chairman of the
Board and Chief Executive Officer. Any two or more offices may be held by the
same person.

     2.13 TERM. Each officer shall hold office until his successor is elected or
appointed and qualified or until his death, resignation or removal by the Board
of Directors.

     2.14 AUTHORITY, DUTIES AND COMPENSATION. All officers shall have such
authority, perform such duties and receive such compensation as may be provided
in the by-laws or as may be determined by the Board of Directors.

     2.15 CHAIRMAN OF THE BOARD. The Chairman of the Board shall preside at all
meetings of the Board of Directors and shall perform such other duties as may be
assigned by the Board of Directors.


                                       7



     2.16 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall be the
chief executive officer of the Company and shall preside at all meetings of the
shareholders and, if a director of the Company, in the absence or disability of
the Chairman of the Board, or if that office is vacant, shall preside at all
meetings of the Board of Directors. He or she shall be responsible for the
general management of the business of the Company, subject to the control of the
Board of Directors. In the absence or disability of the President, or if that
office is vacant, the Chief Executive Officer shall have the authority and
perform the duties of the President.

     2.17 PRESIDENT. The President shall perform such duties as may be assigned
by the Board of Directors and, in the absence or disability of the Chief
Executive Officer, or if that office is vacant, shall have the authority and
perform the duties of the Chief Executive Officer.

     2.18 VICE PRESIDENT. In the absence or disability of the Chief Executive
Officer and the President, or any other officer or officers, the Vice Presidents
in the order designated by the Board of Directors shall have the authority and
perform the duties of the Chief Executive Officer, the President or other
officer as the case may be.

     2.19 SECRETARY. The Secretary shall give notice of meetings of the
shareholders, of the Board of Directors and of the Executive Committee, attend
all such meetings and record the proceedings thereof. In the absence or
disability of the Secretary, an Assistant Secretary or any other person
designated by the Board of Directors or the Chief Executive Officer shall have
the authority and perform the duties of the Secretary.

     2.20 TREASURER. The Treasurer shall have charge of the securities of
Company and the deposit and disbursement of its funds, subject to the control of
the Board of Directors. In the absence or disability of the Treasurer, as
Assistant Treasurer or any other


                                       8



person designated by the Board of Directors of the Chief Executive Officer shall
have the authority and perform the duties of the Treasurer.

     2.21 CONTROLLER. The Controller shall be the principal accounting officer
and shall keep books recording the business transactions of the Company. He
shall be in charge of the accounts of all of its offices and shall promptly
report and properly record in the books of the Company all relevant date
relating to the Company's business.

                                   ARTICLE III

                                 INDEMNIFICATION

     3.1 INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER PERSONS. The Company
shall indemnify any director or officer of the Company or any of its
subsidiaries who was or is an "authorized representative" of the Company (which
shall mean for the purposes of Paragraphs 3.1. through 3.7, a director or
officer of the Company, or a person serving at the request of the Company as a
director, officer, partner, fiduciary or trustee of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise)
and who was or is a "party" (which shall include for purposes of Paragraphs 3.1
through 3.7 the giving of testimony or similar involvement) or is threatened to
be made a party to any "proceeding" (which shall mean for purposes of Paragraphs
3.1 through 3.7 any threatened, pending or completed action, suit, appeal or
other proceeding of any nature, whether civil, criminal, administrative or
investigative, whether formal or informal, and whether brought by or in the
right of the Company, its shareholders or otherwise) by reason of the fact that
such person was or is an authorized representative of the Company to the fullest
extent permitted by law, including without limitation indemnification against
expenses (which shall include for purposes of Paragraphs 3.1 through 3.7
attorneys' fees and disbursements), damages, punitive damages, judgments,
penalties, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such proceeding unless


                                       9



the act or failure to act giving rise to the claim is finally determined by a
court to have constituted willful misconduct or recklessness. If an authorized
representative is not entitled to indemnification in respect of a portion of any
liabilities to which such person may be subject, the Company shall nonetheless
indemnify such person to the maximum extent for the remaining portion of the
liabilities.

     3.2 ADVANCEMENT OF EXPENSES. The Company shall pay the expenses (including
attorneys' fees and disbursements) actually and reasonably incurred in defending
a proceeding on behalf of any person entitled to indemnification under Paragraph
3.1 in advance of the final disposition of such proceeding upon receipt of an
undertaking by or on behalf of such person to repay such amount if it shall
ultimately be determined that such person is not entitled to be indemnified by
the Company as authorized in Paragraphs 3.1 through 3.7 and may pay such
expenses in advance on behalf of any employee or agent on receipt of a similar
undertaking. The financial ability of such authorized representative to make
such repayment shall not be prerequisite to the making of an advance.

     3.3 EMPLOYEE BENEFIT PLANS. For purposes of Paragraphs 3.1 through 3.7, the
Company shall be deemed to have requested an officer or director to serve as
fiduciary with respect to an employee benefit plan where the performance by such
person of duties to the Company also imposes duties on, or otherwise involves
services by, such person as a fiduciary with respect to the plan; excise taxes
assessed on an authorized representative with respect to any transaction with an
employee benefit plan shall be deemed "fines"; and action taken or omitted by
such person with respect to an employee benefit plan in the performance of
duties for a purpose reasonably believed to be in the interest of the
participants and beneficiaries of the plan shall be deemed to be for a purpose
which is not opposed to the best interests of the Company.

     3.4 SECURITY FOR INDEMNIFICATION OBLIGATIONS. To further effect, satisfy or
secure the indemnification obligations provided herein or otherwise, the Company
may maintain insurance, obtain a letter of credit, act as self-insurer, create a


                                       10



reserve, trust, escrow, cash collateral or other fund or account, enter into
indemnification agreements, pledge or grant a security interest in any assets or
properties of the Company, or use any other mechanism or arrangement whatsoever
in such amounts, at such costs, and upon such other terms and conditions as the
Board of Directors shall deem appropriate.

     3.5 RELIANCE UPON PROVISIONS. Each person who shall act as an authorized
representative of the Company shall be deemed to be doing so in reliance upon
the rights of indemnification provided by these Paragraphs 3.1 through 3.7.

     3.6 AMENDMENT OR REPEAL. All rights of indemnification under Paragraphs 3.1
through 3.7 shall be deemed a contract between the Company and the person
entitled to indemnification under these Paragraphs 3.1 through 3.7 pursuant to
which the Company and each such person intend to be legally bound. Any repeal,
amendment or modification hereof shall be prospective only and shall not limit,
but may expand, any rights or obligations in respect of any proceeding whether
commenced prior to or after such change to the extent such proceeding pertains
to actions or failures to act occurring prior to such change.

     3.7 SCOPE. The indemnification, as authorized by these Paragraphs 3.1
through 3.7, shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any
statute, agreement, vote of shareholders or disinterested directors or
otherwise, both as to action in an official capacity and as to action in any
other capacity while holding such office. The indemnification and advancement of
expenses provided by or granted pursuant to these Paragraphs 3.1 through 3.7
shall continue as to a person who has ceased to be an officer or director in
respect of matters arising prior to such time, and shall inure to the benefit of
the heirs and personal representatives of such person.

                                   ARTICLE IV

                      STOCK CERTIFICATES AND CORPORATE SEAL


                                       11



     4.1 EXECUTION. Certificates representing shares of capital stock of the
Company shall be signed by the Chairman of the Board, the Chief Executive
Officer, the President or a Vice President and by the Secretary, an Assistant
Secretary, the Treasurer or an Assistant Treasurer, but where a certificate is
signed by a transfer agent or a registrar, the signature of any corporate
officer may be facsimile, engraved or printed.

     4.2 UNCERTIFICATED SHARES.

          (a) Notwithstanding anything herein to the contrary, any or all
classes and series of shares, or any part thereof, may be represented by
uncertificated shares, except that shares represented by a certificate that are
issued and outstanding shall continue to be represented thereby until the
certificate is surrendered to the Company. Within a reasonable time after the
issuance or transfer of uncertificated shares, the Company shall, or shall
instruct its transfer agent to, send to the registered owner (holder) thereof a
written notice containing the information required to be set forth or stated on
certificates. The rights and obligations of the holders of uncertificated shares
and those of certificated shares, of the same class or series, shall be
identical.

          (b) The Board of Directors may prescribe procedures for the issuance
and registration of transfer of uncertificated shares, and with respect to such
other matters relating to uncertificated shares as the Board of Directors may
deem appropriate.

          (c) Each registered holder of capital stock represented by
uncertificated shares shall be entitled, upon request to the custodian of the
stock transfer books of the Company, or other person designated as the custodian
of the records of uncertificated shares, to have physical certificates
representing such shares registered in such holder's name.


                                       12



     4.3 SEAL. The Company shall have a corporate seal which shall bear the name
of the Company and State and year of its incorporation. The seal shall be in the
custody of the Secretary and may be used by causing it or a facsimile to be
impressed or reproduced upon or affixed to any document.

                                    ARTICLE V

                                     NOTICES

     5.1 FORM OF NOTICE. Whenever written notice is required to be given to any
person under the provisions of the Pennsylvania Business Corporation Law of 1988
(as amended from time to time, the "Business Corporation Law") or by the
Articles of Incorporation or these by-laws, it may be given to the person: (i)
by personal delivery, (ii) by facsimile number, e-mail or other electronic
communication to his or her facsimile number or address for e-mail or other
electronic communications supplied by him or her to the Company for the purpose
of notice, or (iii) by sending a copy thereof by first class or express mail,
postage prepaid, or by telegram (with messenger service specified), telex or TWX
(with answer back received) or courier service, charges prepaid, to the address
(or to the telex or TWX number) of the person appearing on the books of the
Company or, in the case of notice to be given to a director, to the address (or
to the telex or TWX number) supplied by the director to the Company for the
purpose of notice. If the notice is sent by mail, telegraph or courier service,
it shall be deemed to have been given to the person entitled thereto when
deposited in the United States mail or with a telegraph office or courier
service for delivery to that person or, in the case of telex or TWX, when
dispatched. Notice given by facsimile transmission, e-mail or other electronic
communication shall be deemed to have been given to the person entitled thereto
when sent. A notice of meeting shall specify the place, day and hour of the
meeting and any other information required by any other provision of the
Business Corporation Law, the Articles or these by-laws.


                                       13



     5.2 ADJOURNED SHAREHOLDER MEETINGS. When a meeting of shareholders is
adjourned, it shall not be necessary to give any notice of the adjourned meeting
or of the business to be transacted at an adjourned meeting, other than by
announcement at the meeting at which the adjournment is taken, unless the Board
of Directors fixes a new record date for the adjourned meeting, in which event
the notice shall be given in accordance with this section.

     5.3 WAIVER OF NOTICE. Any notice required to be given under these by-laws
may be effectively waived by the person entitled thereto by written waiver
signed before or after the meeting to which such notice would relate or by
attendance at such meeting otherwise than for the purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
was not lawfully called or convened.

                                   ARTICLE VI

                                   AMENDMENTS

     6.1 AMENDMENTS. These by-laws may be amended or repealed and new by-laws
may be adopted by the affirmative vote of a majority of the directors of the
Company or by the affirmative vote of shareholders entitled to cast a majority
of the votes which all shareholders are entitled to cast at any annual, regular
or special meeting of directors or shareholders, as the case may be; provided,
however, that new by-laws may not be adopted and these by-laws may not be
amended or repealed in any way that limits indemnification rights, increases the
liability of directors or changes the manner or vote required for any such
adoption, amendment or repeal, except by the affirmative vote of the
shareholders entitled to cast at least a majority of the votes which all
shareholders are entitled to cast thereon. In the case of a meeting of
shareholders, written notice shall be given to each shareholder entitled to vote
thereat that the purpose, or one of the purposes, of the meeting is to consider
the adoption, amendment or repeal of the by-laws.


                                       14



                                   ARTICLE VII

                                EMERGENCY BY-LAWS

     7.1 WHEN OPERATIVE. The emergency by-laws provided by the following
Paragraphs shall be operative during any emergency resulting from warlike damage
or an attack on the United States or any nuclear or atomic disaster,
notwithstanding any different provision in the preceding Paragraphs of the
by-laws or in the Articles of Incorporation of the Company or in the
Pennsylvania Business Corporation Law. To the extent not inconsistent with these
emergency by-laws, the by-laws provided in the preceding Paragraphs shall remain
in effect during such emergency and upon the termination of such emergency the
emergency by-laws shall cease to be operative unless and until another such
emergency shall occur.

     7.2 MEETINGS. During any such emergency:

          (a) Any meeting of the Board of Directors may be called by any
director. Whenever any officer of the Company who is not a director has reason
to believe that no director is available to participate in a meeting, such
officer may call a meeting to be held under the provisions of this Paragraph.

          (b) Notice of each meeting called under the provisions of this
Paragraph shall be given by the person calling the meeting or at his request by
any officer of the Company. The notice shall specify the time and the place of
the meeting, which shall be the head office of the Company at the time if
feasible and otherwise any other place specified in the notice. Notice need be
given only to such of the directors as it may be feasible to reach at the time
and may be given by such means as may be feasible at the time, including
publication or radio. If given by mail, messenger, telephone or telegram, the
notice shall be addressed to the director at his residence or business address
or such other place as the person giving the notice shall deem suitable. In the
case of meetings called by an officer who is not a director, notice shall also
be given similarly, to the extent feasible, to the persons named on


                                       15



the list referred to in part (c) of this Paragraph. Notice shall be given at
least two days before the meeting if feasible in the judgment of the person
giving the notice and otherwise the meeting may be held on any shorter notice he
shall deem suitable.

          (c) At any meeting called under the provisions of this Paragraph, the
director or directors present shall constitute a quorum for the transaction of
business. If no director attends a meeting called by an officer who is not a
director and if there are present at least three of the persons named on a
numbered list of personnel approved by the Board of Directors before the
emergency, those present (but not more than the seven appearing highest in
priority on such list) shall be deemed directors for such meeting and shall
constitute a quorum for the transaction of business.

     7.3 LINES OF SUCCESSION. The Board of Directors, during as well as before
any such emergency, may provide, and from time to time modify, lines of
succession in the event that during such an emergency any or all officers or
agents of the Company shall for any reason be rendered incapable of discharging
their duties.

     7.4 OFFICES. The Board of Directors, during as well as before any such
emergency, may, effective in the emergency, change the head office or designate
several alternative head offices or regional offices, or authorize the officers
so to do.

     7.5 LIABILITY. No officer, director or employee acting in accordance with
these emergency by-laws shall be liable except for willful misconduct.

     7.6 REPEAL OR CHANGE. These emergency by-laws shall be subject to repeal or
change by further action of the Board of Directors or by action of the
shareholders, except that no such repeal or change shall modify the provisions
of the next preceding Paragraph with regard to action or inaction prior to the
time of such repeal or change.


                                       16



                                  ARTICLE VIII

                           PENNSYLVANIA ACT 36 OF 1990

     8.1 FIDUCIARY DUTY. Subsections (a) through (d) of Section 1715 of the
Pennsylvania Business Corporation Law of 1988, as amended, shall not be
applicable to the Company.

     8.2 CONTROL-SHARE ACQUISITIONS. Subchapter G of Chapter 25 of the
Pennsylvania Business Corporation Law of 1988, as amended, (relating to
control-share acquisitions), shall not be applicable to the Company.

     8.3 DISGORGEMENT. Subchapter H of Chapter 25 of the Pennsylvania Business
Corporation Law of 1988, as amended, (relating to disgorgement by certain
controlling shareholders following attempts to acquire control), shall not be
applicable to the Company.


                                       17

EX-10.(I)

                                                                  Exhibit 10(i)

                                CHANGE IN CONTROL
                              EMPLOYMENT AGREEMENT

          AGREEMENT by and between P.H. Glatfelter Company (the "Company"), and
George H. Glatfelter II (the "Employee"), dated as of the 7th day of March,
2008.

          The Board of Directors of the Company (the "Board") has determined
that it is in the best interests of the Company and its shareholders to ensure
that the Company and its subsidiaries will have the continued dedication of the
Employee, notwithstanding the possibility, threat, or occurrence of a Change in
Control (as defined below) of the Company. The Board believes it is imperative
to diminish the inevitable distraction of the Employee by virtue of the personal
uncertainties and risks created by a threatened or pending Change in Control, to
encourage the Employee's full attention and dedication to the Company currently
and in the event of any threatened or pending Change in Control, and to provide
the Employee with compensation arrangements upon a Change in Control that
provide the Employee with individual financial security and which are
competitive with those of other comparably situated companies and, in order to
accomplish these objectives, the Board has authorized the Company to enter into
this Agreement.

          NOW, THEREFORE, the parties hereto, intending to be legally bound,
agree as follows:

          1. EFFECTIVE DATE.

               (a) The "Effective Date" shall be the first date during the
"Change in Control Period" (as defined in Section 1(b)) on which a Change in
Control occurs. Anything in this Agreement to the contrary notwithstanding, if
the Employee's employment with the Company is terminated prior to the date on
which a Change in Control occurs, and it is



reasonably demonstrated that such termination (i) was at the request of a third
party who has taken steps reasonably calculated to effect a Change in Control or
(ii) otherwise arose in connection with or anticipation of a Change in Control,
then for all purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination.

               (b) The "Change in Control Period" is the period commencing on
the date hereof and ending on the second December 31 immediately following such
date; provided, however, that commencing on the first December 31 immediately
following the date hereof, and on each annual anniversary of such December 31
(such December 31 and each annual anniversary thereof is hereinafter referred to
as the "Renewal Date"), the Change in Control Period shall be automatically
extended so as to terminate two years from such Renewal Date, unless at least 60
days prior to the Renewal Date the Company shall give notice that the Change in
Control Period shall not be so extended.

          2. CHANGE IN CONTROL. For the purpose of this Agreement, a "Change in
Control" shall mean:

               (a) Any person, entity or "group" (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), excluding, for this purpose, the Company, its subsidiaries, any
employee benefit plan of the Company or its subsidiaries, and any purchaser or
group of purchasers who are descendants of, or entities controlled by
descendants of, P.H. Glatfelter which acquires beneficial ownership of voting
securities of the Company) (a "Third Party") becomes the beneficial owner
(within the meaning of Rule 13d-3 promulgated under the Exchange Act), directly
or indirectly, of securities of the Company representing 20% or more of the
combined voting power of the Company's


                                       2



then outstanding voting securities entitled to vote generally in the election of
directors, other than in connection with an acquisition from the Company; or

               (b) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Directors") cease in any twelve (12) month period for any reason
to constitute at least a majority of the Board, provided that any person
becoming a director subsequent to the date hereof whose election, or nomination
for election by the Company's shareholders, was approved by a vote of at least a
majority of the Incumbent Directors who are directors at the time of such vote
shall be, for purposes of this Agreement, an Incumbent Director, but, excluding
for this purpose, any such person whose initial election as a member of the
Board occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Third Party other than
the Board; or

               (c) Consummation of (i) a reorganization, merger or
consolidation, in each case, with respect to which persons who were the
shareholders of the Company immediately prior to such reorganization, merger or
consolidation (other than the acquiror) do not, immediately thereafter,
beneficially own more than 50% of the combined voting power of the reorganized,
merged or consolidated company's then outstanding voting securities entitled to
vote generally in the election of directors, or (ii) a liquidation or
dissolution of the Company or the sale of all or substantially all of the assets
of the Company (whether such assets are held directly or indirectly) to a Third
Party.

          3. EMPLOYMENT PERIOD. The Company hereby agrees to continue the
Employee in its employ, and the Employee hereby agrees to remain in the employ
of the


                                       3



Company, for the period commencing on the Effective Date and ending on the
second anniversary of such date (the "Employment Period").

          4. TERMS OF EMPLOYMENT.

               (a) POSITION AND DUTIES.

                    (i) During the Employment Period,

                         (A) the Employee's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the most significant of
those held, exercised and assigned at any time during the 90-day period
immediately preceding the Effective Date and

                         (B) the Employee's services shall be performed at the
location where the Employee was employed immediately preceding the Effective
Date or any office or location less than forty (40) miles from such location.

                    (ii) During the Employment Period, excluding any periods of
vacation and sick leave to which the Employee is entitled, the Employee agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Employee hereunder, to use the Employee's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Employee to

                         (A) serve on corporate, civic or charitable boards or
committees,

                         (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions, and


                                       4



                         (C) manage personal investments, so long as such
activities do not significantly interfere with the performance of the Employee's
responsibilities as an employee of the Company in accordance with this
Agreement. It is expressly understood and agreed that to the extent that any
such activities have been conducted by the Employee prior to the Effective Date,
the continued conduct of such activities (or the conduct of activities similar
in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Employee's
responsibilities to the Company.

                    (iii) During the Employment Period, the Employee shall be
subject to, and shall comply with, the Company's policies regarding sexual
harassment, insider trading, confidentiality, non-disclosure, non-competition,
non-disparagement, substance abuse, and conflicts of interest and any other
written policy of the Company, the violation of which could result in
termination of employment.

               (b) COMPENSATION.

                    (i) Base Salary. During the Employment Period, the Employee
shall receive a base salary ("Base Salary") at a monthly rate at least equal to
the highest monthly base salary paid or payable to the Employee by the Company
during the twelve-month period immediately preceding the month in which the
Effective Date occurs. During the Employment Period, the Base Salary shall be
reviewed at least annually and shall be increased at any time and from time to
time as shall be substantially consistent with increases in base salary awarded
in the ordinary course of business to other key employees of the Company and its
subsidiaries in the same salary grade (or, if there are no salary grades, to
other key employees of the Company and its subsidiaries in comparable
positions). Any increase in Base


                                       5



Salary shall not serve to limit or reduce any other obligation to the Employee
under this Agreement. Base Salary shall not be reduced after any such increase.

                    (ii) Annual Bonus. In addition to Base Salary, the Employee
shall be awarded, for each fiscal year ending during the Employment Period, an
annual bonus (an "Annual Bonus"), either pursuant to the Company's Management
Incentive Plan or otherwise, in cash at least equal to the average Annual Bonus
paid to the Employee for each of the three fiscal years immediately preceding
the Effective Date (or for such fewer number of such years as the Employee has
been employed by the Company, with the bonus for any partial year in such period
being annualized), but not less than the target bonus for the Employee under the
Company's Management Incentive Plan for the fiscal year during which the
Effective Date occurs, provided that the Employee is employed as of the last day
of the fiscal year in respect of which such Annual Bonus is paid.

                    (iii) Incentive, Savings and Retirement Plans. In addition
to Base Salary and Annual Bonus payable as hereinabove provided, the Employee
shall be entitled to participate during the Employment Period in all incentive,
savings and retirement plans, practices, policies and programs applicable to
other key employees of the Company and its subsidiaries (including the 2005
Long-Term Incentive Plan or any successor thereto). Such plans, practices,
policies and programs, in the aggregate, shall provide the Employee with
compensation, benefits and reward opportunities at least as favorable as the
most favorable of such compensation, benefits and reward opportunities provided
by the Company to the Employee under such plans, practices, policies and
programs as in effect at any time during the 90-day period immediately preceding
the Effective Date or, if more favorable to the Employee, as provided at any
time thereafter with respect to other key employees of the Company and its


                                       6



subsidiaries in the same salary grade (or, if there are no salary grades, to
other key employees of the Company and its subsidiaries in comparable
positions).

                    (iv) Welfare Benefit Plans. During the Employment Period,
the Employee and/or the Employee's covered dependents, as the case may be, shall
be eligible for participation in and shall receive all benefits under welfare
benefit plans, practices, policies and programs provided by the Company and its
subsidiaries (including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs), at least as favorable as the most
favorable of such plans, practices, policies and programs of the Company and its
subsidiaries in effect at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Employee and/or the
Employee's covered dependents, as applicable, as in effect at any time
thereafter with respect to other key employees of the Company and its
subsidiaries in the same salary grade (or, if there are no salary grades, to
other key employees of the Company and its subsidiaries in comparable
positions).

                    (v) Expenses. During the Employment Period, the Employee
shall be entitled to receive prompt reimbursement for all reasonable business
expenses incurred by the Employee in accordance with the most favorable
policies, practices and procedures of the Company and its subsidiaries in effect
at any time during the 90-day period immediately preceding the Effective Date
or, if more favorable to the Employee, as in effect at any time thereafter with
respect to other key employees of the Company and its subsidiaries in the same
salary grade (or, if there are no salary grades, to other key employees of the
Company and its subsidiaries in comparable positions). Notwithstanding anything
to the contrary in the preceding sentence, the amount of expenses eligible for
reimbursement during a calendar year may not


                                       7



affect the expenses eligible for reimbursement in any other calendar year and
all reimbursements must be made on or before the last day of the calendar year
following the calendar year in which the expense was incurred.

                    (vi) Fringe Benefits. During the Employment Period, the
Employee shall be entitled to fringe benefits in accordance with the most
favorable plans, practices, programs and policies of the Company and its
subsidiaries in effect at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Employee, as in effect
at any time thereafter with respect to other key employees of the Company and
its subsidiaries in the same salary grade (or, if there are no salary grades, to
other key employees of the Company and its subsidiaries in comparable
positions).

                    (vii) Vacation. During the Employment Period, the Employee
shall be entitled to paid holidays and vacation in accordance with the most
favorable plans, policies, programs and practices of the Company and its
subsidiaries as in effect at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Employee, as in effect
at any time thereafter with respect to other key employees of the Company and
its subsidiaries in the same salary grade (or, if there are no salary grades, to
other key employees of the Company and its subsidiaries in comparable
positions).

          5. TERMINATION.

               (a) DEATH OR DISABILITY. This Agreement shall terminate
automatically upon the Employee's death. If the Company determines in good faith
that the Disability of the Employee has occurred (pursuant to the definition of
"Disability" set forth below), it may give to the Employee written notice of its
intention to terminate, or its intention to cause its subsidiary to terminate,
the Employee's employment. In such event, the Employee's employment with the


                                       8



Company shall terminate effective on the 30th day after receipt of such notice
by the Employee (the "Disability Effective Date"), provided that, within 30 days
after such receipt, the Employee shall not have returned to full-time
performance of the Employee's duties. For purposes of this Agreement, a
"Disability" shall occur if the Employee, by reason of any medically
determinable physical or mental impairment, is determined to be disabled and
eligible for benefits under the terms of the Company's long-term disability plan
or policy applicable to the Employee. Such determination of Disability shall be
made by the plan administrator or insurer with respect to such Company long-term
disability plan or policy.

               (b) CAUSE. The Company may terminate the Employee's employment
for "Cause." For purposes of this Agreement, "Cause" means (i) an act or acts of
personal dishonesty taken by the Employee and intended to result in substantial
personal enrichment of the Employee at the expense of the Company, (ii) repeated
violations by the Employee of the Employee's obligations under Section 4(a) of
this Agreement or illegal conduct or gross misconduct by the Employee which is
materially injurious to the Company and which violations, conduct or misconduct
are demonstrably willful and deliberate on the Employee's part and which are not
remedied within thirty (30) days after receipt of written notice from the
Company, (iii) violation by the Employee of any of the Company's policies,
including, but not limited to, policies regarding sexual harassment, insider
trading, confidentiality, non-disclosure, non-competition, non-disparagement,
substance abuse and conflicts of interest and any other written policy of the
Company, which violation could result in the termination of the Employee's
employment; or (iv) the conviction of the Employee of a felony which is
materially injurious to the Company or a plea by the Employee of guilty or no
contest to a charge of a felony which is materially injurious to the Company.


                                       9



               (c) GOOD REASON. The Employee's employment may be terminated by
the Employee for Good Reason. For purposes of this Agreement, "Good Reason"
means

                    (i) the assignment to the Employee of any duties
inconsistent in any respect with the Employee's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 4(a) of this Agreement, or any other
action by the Company which results in a material diminution in such position,
authority, duties or responsibilities;

                    (ii) any failure by the Company to comply with any of the
provisions of Section 4(b) of this Agreement;

                    (iii) the Company's requiring the Employee to be based at
any office or location other than that described in Section 4(a)(i)(B) hereof,
except for travel reasonably required in the performance of the Employee's
responsibilities;

                    (iv) any purported termination by the Company of the
Employee's employment otherwise than as expressly permitted by this Agreement;
or

                    (v) any failure by the Company to comply with and satisfy
Section 11(c) of this Agreement;

provided that within ninety (90) days after the occurrence of any of the events
listed in clauses (i), (ii), (iii), (iv) or (v) above the Employee delivers
written notice to the Company of his intention to terminate for Good Reason
specifying in reasonable detail the facts and circumstances claimed to give rise
to the Employee's right to terminate his employment for Good Reason and the
Company shall not have cured such facts and circumstances within thirty (30)
days after delivery of such notice by the Employee to the Company (unless the
Company shall have waived its right to cure by written notice to the Employee),
and provided further that


                                       10



within thirty (30) days after the expiration of such thirty (30) day period or
the date of receipt of such waiver notice, if earlier, the Employee delivers a
Notice of Termination to the Company under Section 5(d) based on the same Good
Reason specified in the notice of intent to terminate delivered to the Company
under this Section 5(c).

          For purposes of this Section 5(c), any good faith determination of the
facts and circumstances giving rise to "Good Reason" made by the Employee shall
be conclusive, subject to the Company's right to cure such facts and
circumstances as described above.

               (d) NOTICE OF TERMINATION. Any termination by the Company for
Cause or by the Employee for Good Reason shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 14(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Employee's
employment under the provision so indicated and (iii) if the Date of Termination
(as defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall not be prior to the date of receipt of
such notice). The failure by the Employee to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of Good
Reason shall not waive any right of the Employee hereunder or preclude the
Employee from asserting such fact or circumstance in enforcing his rights
hereunder.

               (e) DATE OF TERMINATION. "Date of Termination" means the date of
receipt of the Notice of Termination or any later date specified therein as
permitted by Section 5(d), as the case may be; provided, however, that (i) if
the Employee's employment is terminated by the Company or a subsidiary of the
Company other than for Cause, death or Disability, the


                                       11



Date of Termination shall be the date on which the Employee receives notice from
the Company or such subsidiary of such termination and (ii) if the Employee's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Employee or the Disability
Effective Date, as the case may be.

          6. OBLIGATIONS OF THE COMPANY UPON TERMINATION.

               (a) DEATH. If the Employee's employment is terminated during the
Employment Period by reason of the Employee's death, this Agreement shall
terminate without further obligations to the Employee's legal representatives
under this Agreement, other than (i) those obligations accrued or earned and
vested (if applicable) by the Employee as of the Date of Termination, including,
for this purpose (i) the Employee's full Base Salary through the Date of
Termination at the rate in effect on the Date of Termination and (ii) accrued
vacation pay not yet paid by the Company (such amounts are collectively
hereinafter referred to as "Accrued Obligations"). All such Accrued Obligations
shall be paid to the Employee's estate or beneficiary, as applicable, in a lump
sum in cash within 30 days after the Date of Termination.

               (b) DISABILITY. If the Employee's employment is terminated during
the Employment Period by reason of the Employee's Disability, this Agreement
shall terminate without further obligations to the Employee, other than Accrued
Obligations and such obligations as may exist under the terms of the Company's
long term disability plan or policy applicable to the Employee. All such Accrued
Obligations shall be paid to the Employee in a lump sum in cash within 30 days
after the Date of Termination.

               (c) TERMINATION FOR CAUSE; TERMINATION BY EMPLOYEE OTHER THAN FOR
GOOD REASON. If, during the Employment Period, the Employee's employment is
terminated for Cause or the Employee terminates employment other than for Good
Reason, this Agreement


                                       12



shall terminate without further obligations to the Employee, other than Accrued
Obligations. All such Accrued Obligations shall be paid to the Employee in a
lump sum in cash within 30 days after the Date of Termination.

               (d) TERMINATION FOR GOOD REASON; TERMINATION BY THE COMPANY OTHER
THAN FOR CAUSE, DISABILITY OR DEATH. If, during the Employment Period, the
Company terminates the Employee's employment other than for Cause, Disability,
or Death, or if the Employee terminates his employment for Good Reason:

                    (i) the Company shall pay to the Employee the Accrued
Obligations;

                    (ii) the Company shall pay as a severance benefit to the
Employee in a lump sum in cash (less applicable withholdings) the aggregate of
the following amounts:

                         (A) the product of the average Annual Bonus paid to the
Employee for each of the three full fiscal years immediately preceding the Date
of Termination (or for such fewer number of such years as the Employee has been
employed by the Company, with the bonus for any partial year in such period
being annualized), but not less than the greater of the target bonus for the
Employee for the fiscal year during which the Effective Date occurs and the
target bonus for the Employee for the fiscal year during which the Date of
Termination occurs, and a fraction, the numerator of which is the number of days
in the current fiscal year through the Date of Termination, and the denominator
of which is 365; and

                         (B) three times the sum of (1) the Employee's annual
Base Salary at the highest rate in effect at any time during the period
beginning 90 days before the Effective Date through the Date of Termination and
(2) the average Annual Bonus paid to the


                                       13



Employee for each of the three full fiscal years immediately preceding the Date
of Termination (or for such fewer number of such years as the Employee has been
employed by the Company, with the bonus for any partial year in such period
being annualized), but not less than the greater of the target bonus for the
Employee for the fiscal year during which the Effective Date occurs and the
target bonus for the Employee for the fiscal year during which the Date of
Termination occurs.

                    Payment of the lump sum amount described in this clause (ii)
shall be made within 30 days after the Date of Termination, provided however,
that if the Employee is a "specified employee" within the meaning of Section
409A(a)(2)(B)(i) of the Internal Revenue Code ("Code"), payment shall be made
within 30 days following the date which is six (6) months following the
Employee's separation from service following a Notice of Termination. In the
event that payment is delayed for six months pursuant to the preceding sentence,
not later than 30 days following the Date of Termination, the Company shall
establish a grantor trust that qualifies as a grantor trust or trust fund within
the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the
Code (a "Rabbi Trust") and deposit in the Rabbi Trust an amount equal to the
lump sum payable to the Employee, plus interest for the six-month delay period
at the applicable Federal rate on the Employee's separation from service. The
Employee shall remain during such time a general unsecured creditor of the
Company and amounts held in the Rabbi Trust shall remain subject to the claims
of the Company's creditors in the event of the Company's insolvency.

                    (iii) for a period of three years after the Date of
Termination, or such longer period as any plan, program, practice or policy may
provide, the Company shall continue group medical, prescription, dental,
disability, salary continuance, group life, accidental


                                       14



death and dismemberment and travel accident insurance benefits (each, a "Welfare
Benefit" and, together "Welfare Benefits") to the Employee and/or the Employee's
covered dependents, as applicable, at levels substantially equal to those which
would have been provided to them in accordance with the Company's plans,
programs, practices and policies with respect to such benefits if the Employee's
employment had not been terminated, in accordance with the most favorable plans,
practices, programs or policies of the Company and its subsidiaries in effect
during the 90-day period immediately preceding the Date of Termination or, if
more favorable to the Employee, as in effect at any time thereafter with respect
to other key employees in the same salary grade (or, if there are no salary
grades, to other key employees of the Company and its subsidiaries in comparable
positions) and their dependents. To the extent that a Welfare Benefit is taxable
to the Employee, the following rules shall apply to the provision of such
benefits pursuant to this paragraph: (1) the benefits provided during any
calendar year shall not affect the benefits provided in any other calendar year
and (2) if the Employee is a "specified employee" within the meaning of Section
409A(a)(2)(B)(i) of the Code, the Employee shall pay the cost of such benefit
for the first six months following the Date of Termination and shall be
reimbursed by the Company for such costs, with interest at the applicable
federal rate, within thirty days of the end of such six month period, provided
that the amount of such expenses eligible for reimbursement in any calendar year
shall not affect the expenses eligible for reimbursement in any other calendar
year. For purposes of eligibility for post-retirement benefits pursuant to such
plans, practices, programs and policies and for purposes of health benefit
continuation coverage pursuant to Section 601 et seq of ERISA ("COBRA"), the
Employee shall be considered to have remained employed until the end of the
Employment Period and to have retired on the last day of such period.


                                       15



                    (iv) in the event that the Employee has not, as of the Date
of Termination, earned sufficient vesting service to have earned (A) a
nonforfeitable interest in his matching contribution account under the P.H.
Glatfelter Company 401(k) Retirement Savings Plan (the "401(k) Plan"), and (B) a
nonforfeitable interest in his accrued benefit under the terms of the P.H.
Glatfelter Company Retirement Plan for Salaried Employees (the "Retirement
Plan") (or any successors to those plans), the Company shall pay to the Employee
a lump sum in cash (less applicable withholdings) in an amount equal to the sum
of:

                         (A) the Employee's unvested matching contribution
account under the 401(k) Plan, valued as of the Date of Termination; and

                         (B) the actuarial present value of the Employee's
unvested normal retirement pension under the Retirement Plan, based on the
Employee's accrued benefit under the terms of the Retirement Plan as determined
by the Company's actuary utilizing actuarial equivalency factors for determining
single sum amounts under the terms of the Retirement Plan.

          Payment of the lump sum amount described in this clause (iv) shall be
made within 30 days after the Date of Termination, provided however, that if the
Employee is a "specified employee" within the meaning of Section
409A(a)(2)(B)(i) of the Code, payment shall be made within 30 days following the
date which is six (6) months following the Employee's separation from service
following a Notice of Termination (or, if earlier, the Employee's death).

          In the event that the Employee should return to employment with the
Company and acquire a vested, nonforfeitable interest in any of the plans with
respect to which the payment in this clause (iv) is determined, the Employee
shall return an amount equal to the payment made under this subsection, within
30 days of demand by the Company.


                                       16



                    (v) If the Employee is, as of the Date of Termination, a
participant in the Restoration Pension (the "Restoration Pension") or the Final
Average Compensation Pension ("FAC Pension") under the terms of the P.H.
Glatfelter Company Supplemental Early Retirement Plan (the "SERP"), the Employee
will become fully vested in his accrued benefit under the terms of the
Restoration Pension or FAC Pension, as applicable, and the Employee's vested
benefit thereunder shall be paid to the Employee in accordance with the terms of
the SERP subject to the applicable requirements of Section 409A of the Code and
its implementing regulations ("Section 409A"). In addition, the Company shall be
obligated to contribute funds, to the extent it has not already done so, to the
Trust serving as a funding vehicle for the SERP (the P.H. Glatfelter Company
Nonqualified Plans Master Trust), in sufficient amount to pay the Employee's
accrued benefit under the Restoration Pension or the FAC Pension, as
appropriate, within five days of the Date of Termination.

                    (vi) If the Employee is, as of the Date of Termination, a
participant in the P.H. Glatfelter Company Supplemental Management Pension Plan
(the "SMPP") with at least five years of vesting service (as measured for
purposes of the Retirement Plan), then the Company shall be obligated to
contribute funds, to the extent it has not already done so, to the Trust serving
as a funding vehicle for that plan (the P.H. Glatfelter Company Nonqualified
Plans Master Trust) as follows:

                         (A) If the Employee is a participant in the MIP
Adjustment Supplement under the SMPP, the Company shall fund the Trust with
sufficient assets to pay the Employee's accrued benefit under the MIP Adjustment
Supplement within five days of the Date of Termination.


                                       17



                         (B) If the Employee is eligible to receive the Early
Retirement Supplement under the SMPP, the Company shall fund the Trust with
sufficient assets to pay the Employee's accrued benefit under the Early
Retirement Supplement, within five days following the later to occur of (1) the
Date of Termination or (2) the benefit commencement date with respect to the
Employee's Early Retirement Supplement.

                    (vii) Amounts contributed to the P.H. Glatfelter
Nonqualified Plans Master Trust pursuant to paragraphs 6(d)(iv) or (v) above
shall in no event be invested in assets located outside the United States or
otherwise violate the requirements of Section 409A(b).

                    (viii) If the Employee has previously deferred compensation
under a plan or arrangement not described above which has not yet been paid by
the Company, the Employee's right to payment of such compensation shall be
considered vested and nonforfeitable as of the Date of Termination. Such
deferred compensation shall be paid to the Employee in accordance with the terms
of the deferred compensation plan or arrangement subject to the applicable
requirements of Section 409A.

                    (ix) Notwithstanding the foregoing, the Company shall have
no obligation under this Section 6(d) unless the Employee executes and delivers
to the Company a valid general release agreement in a form reasonably acceptable
to the Company in which the Employee releases the Company from any and all
possible liability, including, without limitation, any and all liability based
on the Employee's employment or the termination of his employment; provided,
however, that nothing in such release shall include any release of the Company's
indemnification obligations to or for the benefit of the Employee.


                                       18



                    (x) Notwithstanding the foregoing, any benefit or payment
that is due upon termination of Employee's employment under this Agreement and
that represents a "deferral of compensation" within the meaning of Section 409A
shall only be paid or provided to Employee upon a "separation from service" as
defined in Section 409A. For purposes of this Agreement, amounts payable under
this Agreement shall be deemed not to be a "deferral of compensation" subject to
Section 409A to the extent provided in the exceptions in Treasury Regulation
Sections 1.409A-1(b)(4) ("short-term deferrals") and (b)(9) ("separation pay
plans," including the exception under subparagraph (iii)) and other applicable
provisions of Treasury Regulation Section 1.409A-1 through A-6 (or any successor
to any of the foregoing provisions). To the extent that any provision of this
Agreement would, if enforced as written, cause adverse tax consequences to
either party under Section 409A, the parties shall work together in good faith
to seek to avoid, or minimize, such consequences.

          7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent
or limit the Employee's continuing or future participation in any benefit,
bonus, incentive or other plans, programs, policies or practices provided by the
Company or its subsidiaries and for which the Employee may qualify, nor shall
anything herein limit or otherwise affect such rights as the Employee may have
under any stock option, restricted stock, restricted stock unit, performance
share or other agreements with the Company or any of its subsidiaries. Amounts
which are vested benefits or which the Employee is otherwise entitled to receive
under any plan, policy, practice or program of the Company or any of its
subsidiaries at or subsequent to the Date of Termination shall be payable in
accordance with such plan, policy, practice or program.

          8. FULL SETTLEMENT. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be


                                       19



affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Employee or others. In no event
shall the Employee be obligated to seek other employment or take any other
action by way of mitigation of the amounts payable to the Employee under any of
the provisions of this Agreement.

          9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.

               (a) Anything in this Agreement to the contrary notwithstanding,
in the event it shall be determined that any payment or distribution by the
Company to or for the benefit of the Employee (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise) (a "Payment") would be subject to the excise tax imposed by Section
4999 of the Code or any interest or penalties with respect to such excise tax
(such excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Employee shall be
entitled to receive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by the Employee of all taxes (including any interest or
penalties imposed with respect to such taxes), including any Excise Tax, imposed
upon the Gross-Up Payment, the Employee retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payment.

               (b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether a Gross-Up Payment
is required and the amount of such Gross-Up Payment, shall be made by a firm of
independent accountants selected by the Audit Committee of the Board, which firm
may, if consistent with applicable securities laws, be the firm of independent
accountants engaged to audit the Company's financial statements (the "Accounting
Firm") which shall provide detailed supporting calculations both to the Company
and the Employee within 15 business days after the Date of Termination or such


                                       20



earlier time as is requested by the Company. The initial Gross-Up Payment, if
any, as determined pursuant to this Section 9(b), shall be paid to the Employee
within five days of the receipt of the Accounting Firm's determination. If the
Accounting Firm determines that no Excise Tax is payable by the Employee, it
shall furnish the Employee with an opinion that he has substantial authority not
to report any Excise Tax on his federal income tax return. Any determination by
the Accounting Firm shall be binding upon the Company and the Employee. As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that a Gross-Up Payment which will not have been made by the Company
should have been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 9(c) and the Employee thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such Underpayment shall be paid by
the Company to or for the benefit of the Employee promptly thereafter, but in no
event later than the end of the calendar year following the calendar year in
which the Employee pays the Excise Tax to which the Gross-Up Payment relates.

               (c) The Employee shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten business days after the Employee knows of
such claim and shall apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid. The Employee shall not pay
such claim prior to the expiration of the thirty-day period following the date
on which it gives such notice to the Company (or such shorter period ending on
the date that any


                                       21



payment of taxes with respect to such claim is due). If the Company notifies the
Employee in writing prior to the expiration of such period that it desires to
contest such claim, the Employee shall:

                    (i) give the Company any information reasonably requested by
the Company relating to such claim,

                    (ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company,

                    (iii) cooperate with the Company in good faith in order
effectively to contest such claim,

                    (iv) permit the Company to participate in any proceedings
relating to such claim;

provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest during the lifetime of the Employee (the "Contest Expenses")
and shall indemnify and hold the Employee harmless, on an after-tax basis, for
any Excise Tax or income tax, including interest and penalties with respect
thereto, imposed as a result of such representation and payment of costs and
expenses ("Tax Expenses"). The Company's obligation for the Contest Expenses
shall be subject to the following restrictions: (1) the Contest Expenses borne
and paid by the Company in one calendar year shall not affect the Contest
Expenses borne and paid by the Company in another calendar year and (2) the
Company's obligation to bear and pay the Contest Expenses is not subject to
liquidation or exchange for another benefit. The Company's reimbursement to the


                                       22



Employee of the Tax Expenses shall be subject to the following restrictions:
such reimbursement must be made by the end of the calendar year following the
calendar year in which the Employee pays the taxes to which the reimbursement
relates.

Without limitation on the foregoing provisions of this Section 9(c), the Company
shall control all proceedings taken in connection with such contest and, at its
sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect of
such claim and may, at its sole option, if in compliance with applicable
securities laws, either direct the Employee to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Employee agrees
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the Company directs the
Employee to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to the Employee, on an interest-free basis, and shall
indemnify and hold the Employee harmless, on an after-tax basis, from any Excise
Tax or income tax, including interest or penalties with respect thereto, imposed
with respect to such advance or with respect to any imputed income with respect
to such advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Employee
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Any tax reimbursement payment made by the
Company to the Employee with respect to the preceding sentence will be made by
the Company to the Employee no later than the end of the second calendar year
following the calendar year in which the Employee pays the taxes to which the
reimbursement relates. Furthermore, the Company's control of the contest shall
be limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and the


                                       23



Employee shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.

               (d) If, after the receipt by the Employee of an amount advanced
by the Company pursuant to Section 9(c), the Employee becomes entitled to
receive any refund with respect to such claim, the Employee shall (subject to
the Company's complying with the requirements of Section 9(c)) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Employee of an amount advanced by the Company pursuant to Section 9(c), a
determination is made that the Employee shall not be entitled to any refund with
respect to such claim and the Company does not notify the Employee in writing of
its intent to contest such denial of refund prior to the expiration of thirty
days after such determination, then such advance shall be forgiven and shall not
be required to be repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.

          10. CONFIDENTIAL INFORMATION. The Employee shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its subsidiaries, and their
respective businesses, which shall have been obtained by the Employee during the
Employee's employment by the Company or any of its subsidiaries and which shall
not be or become public knowledge (other than by acts by the Employee or his
representatives in violation of this Agreement). After termination of the
Employee's employment with the Company, the Employee shall not, without the
prior written consent of the Company, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted


                                       24


violation of the  provisions of this Section 10 constitute a basis for deferring
or  withholding  any  amounts  otherwise  payable  to the  Employee  under  this
Agreement.

          11. SUCCESSORS.

               (a) This Agreement is personal to the Employee and without the
prior written consent of the Company shall not be assignable by the Employee
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Employee's legal
representatives.

               (b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.

               (c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company (whether such
assets are held directly or indirectly) to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.

          12. ARBITRATION.

               (a) Any controversy or claim arising out of or relating to this
Agreement, or any breach hereof, shall be settled in accordance with the terms
of this Section 12. All claims by the Employee for benefits under this Agreement
shall first be directed to and determined by the Board and shall be in writing.
Any denial by the Board of a claim for benefits under this Agreement shall be
delivered to the Employee in writing within thirty (30) days and


                                       25



shall set forth the specific reasons for the denial and the specific provisions
of this Agreement relied upon. The Board shall afford a reasonable opportunity
to the Employee for a review of the decision denying a claim and shall further
allow the Employee to appeal to the Board a decision of the Board within thirty
(30) days after notification by the Board that the Employee's claim has been
denied. Any further dispute, controversy or claim arising out of or relating to
this Agreement, or the interpretation or alleged breach hereof, shall be settled
by arbitration in accordance with Employment Dispute Resolution Rules of the
American Arbitration Association (or such other rules as may be agreed upon by
the Employee and the Company). The place of the arbitration shall be
Philadelphia, Pennsylvania and judgment upon the award rendered by the
arbitrator(s) may be entered by any court having jurisdiction thereof. Such an
award shall be binding and conclusive upon the parties hereto.

               (b) Judgment may be entered on the arbitrator's award in any
court having jurisdiction; provided, however, that the Employee shall be
entitled to seek specific performance of his or her right to be paid until the
Date of Termination during pendency of any dispute arising out of this
Agreement.

          13. LEGAL EXPENSES. The Company agrees to reimburse the Employee, to
the full extent permitted by law, for all costs and expenses (including without
limitation reasonable attorneys' fees) which the Employee may reasonably incur
as a result of any contest of the validity or enforceability of, or the
Company's liability under, any provision of this Agreement, plus in each case
interest at the applicable Federal rate provided for in Section 7872(f)(2) of
the Code; provided, however, that such payment shall be made only if the
Employee prevails on at least one material issue provided, further, (1) that the
amount of such expenses eligible for reimbursement in any calendar year shall
not affect the expenses eligible for reimbursement in


                                       26



any other calendar year and (2) all such reimbursements must be made on or
before the last day of the calendar year following the calendar year in which
the expense was incurred.

          14. MISCELLANEOUS.

               (a) This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania without reference
to principles of conflict of laws. The captions of this Agreement are not part
of the provisions hereof and shall have no force or effect. This Agreement may
not be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.

               (b) Any notices required or permitted to be given hereunder shall
be sufficient if in writing, and if delivered by hand, or sent by registered or
certified mail, return receipt requested, or overnight delivery using a national
courier service, or by facsimile or electronic transmission, with confirmation
as to receipt, to the Company at the address set forth below and to the Employee
at the address set forth in the personnel records of the Company, or such other
address as either party may from time to time designate in writing to the other,
and shall be deemed given as of the date of the delivery or mailing:

               P.H. Glatfelter Company
               96 South George Street
               York, PA 17401
               Attention: General Counsel

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.

               (c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.


                                       27



               (d) The Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.

               (e) The Employee's failure to insist upon strict compliance with
any provision hereof shall not be deemed to be a waiver of such provision or any
other provision hereof.

               (f) No material provisions of this Agreement may be waived or
discharged, unless such waiver or discharge is in writing signed by the party
who is making the waiver or discharge.

               (g) This Agreement shall be binding upon and enforceable by the
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributes, devisees and legatees and shall be binding upon
and enforceable by the Company's successors.

               (h) This Agreement contains the entire understanding of the
Company and the Employee with respect to the subject matter hereof and
supersedes (i) all prior change in control employment agreements and (ii) all
other agreements or understandings between the Company and the Employee relating
to the subject matter hereof, but only during the two-year period commencing on
the Effective Date, if the Employee remains employed by the Company at the end
of such two-year period.


                                       28



          IN WITNESS WHEREOF, the Employee has hereunto set his hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name and on its behalf, all as of
the day and year first above written.

                                        /s/ George H. Glatfelter
                                        ----------------------------------------
                                        George H. Glatfelter II


                                        P.H. GLATFELTER COMPANY


                                        By /s/ Jeffrey J. Norton
                                           -------------------------------------


                                       29

EX-10.(J)

                                                                  Exhibit 10(j)

                               CHANGE IN CONTROL
                              EMPLOYMENT AGREEMENT

          AGREEMENT by and between P.H. Glatfelter Company (the "Company"), and
___________ (the "Employee"), dated as of the 7th day of March, 2008. The Board
of Directors of the Company (the "Board") has determined that it is in the best
interests of the Company and its shareholders to ensure that the Company and its
subsidiaries will have the continued dedication of the Employee, notwithstanding
the possibility, threat, or occurrence of a Change in Control (as defined below)
of the Company. The Board believes it is imperative to diminish the inevitable
distraction of the Employee by virtue of the personal uncertainties and risks
created by a threatened or pending Change in Control, to encourage the
Employee's full attention and dedication to the Company currently and in the
event of any threatened or pending Change in Control, and to provide the
Employee with compensation arrangements upon a Change in Control that provide
the Employee with individual financial security and which are competitive with
those of other comparably situated companies and, in order to accomplish these
objectives, the Board has authorized the Company to enter into this Agreement.

          NOW, THEREFORE, the parties hereto, intending to be legally bound,
agree as follows:

          1. EFFECTIVE DATE.

               (a) The "Effective Date" shall be the first date during the
"Change in Control Period" (as defined in Section 1(b)) on which a Change in
Control occurs. Anything in this Agreement to the contrary notwithstanding, if
the Employee's employment with the Company is terminated prior to the date on
which a Change in Control occurs, and it is



reasonably demonstrated that such termination (i) was at the request of a third
party who has taken steps reasonably calculated to effect a Change in Control or
(ii) otherwise arose in connection with or anticipation of a Change in Control,
then for all purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination.

               (b) The "Change in Control Period" is the period commencing on
the date hereof and ending on the second December 31 immediately following such
date; provided, however, that commencing on the first December 31 immediately
following the date hereof, and on each annual anniversary of such December 31
(such December 31 and each annual anniversary thereof is hereinafter referred to
as the "Renewal Date"), the Change in Control Period shall be automatically
extended so as to terminate two years from such Renewal Date, unless at least 60
days prior to the Renewal Date the Company shall give notice that the Change in
Control Period shall not be so extended.

          2. CHANGE IN CONTROL. For the purpose of this Agreement, a "Change in
Control" shall mean:

               (a) Any person, entity or "group" (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), excluding, for this purpose, the Company, its subsidiaries, any
employee benefit plan of the Company or its subsidiaries, and any purchaser or
group of purchasers who are descendants of, or entities controlled by
descendants of, P.H. Glatfelter which acquires beneficial ownership of voting
securities of the Company) (a "Third Party") becomes the beneficial owner
(within the meaning of Rule 13d-3 promulgated under the Exchange Act), directly
or indirectly, of securities of the Company representing 20% or more of the
combined voting power of the Company's


                                       2



then outstanding voting securities entitled to vote generally in the election of
directors, other than in connection with an acquisition from the Company; or

               (b) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Directors") cease in any twelve (12) month period for any reason
to constitute at least a majority of the Board, provided that any person
becoming a director subsequent to the date hereof whose election, or nomination
for election by the Company's shareholders, was approved by a vote of at least a
majority of the Incumbent Directors who are directors at the time of such vote
shall be, for purposes of this Agreement, an Incumbent Director, but, excluding
for this purpose, any such person whose initial election as a member of the
Board occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Third Party other than
the Board; or

               (c) Consummation of (i) a reorganization, merger or
consolidation, in each case, with respect to which persons who were the
shareholders of the Company immediately prior to such reorganization, merger or
consolidation (other than the acquiror) do not, immediately thereafter,
beneficially own more than 50% of the combined voting power of the reorganized,
merged or consolidated company's then outstanding voting securities entitled to
vote generally in the election of directors, or (ii) a liquidation or
dissolution of the Company or the sale of all or substantially all of the assets
of the Company (whether such assets are held directly or indirectly) to a Third
Party.

          3. EMPLOYMENT PERIOD. The Company hereby agrees to continue the
Employee in its employ, and the Employee hereby agrees to remain in the employ
of the


                                       3


Company, for the period commencing on the Effective Date and ending on the
second anniversary of such date (the "Employment Period").

          4. TERMS OF EMPLOYMENT.

               (a) POSITION AND DUTIES.

                    (i) During the Employment Period,

                         (A) the Employee's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the most significant of
those held, exercised and assigned at any time during the 90-day period
immediately preceding the Effective Date and

                         (B) the Employee's services shall be performed at the
location where the Employee was employed immediately preceding the Effective
Date or any office or location less than forty (40) miles from such location.

                    (ii) During the Employment Period, excluding any periods of
vacation and sick leave to which the Employee is entitled, the Employee agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Employee hereunder, to use the Employee's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Employee to

                         (A) serve on corporate, civic or charitable boards or
committees,

                         (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions, and


                                       4



                         (C) manage personal investments, so long as such
activities do not significantly interfere with the performance of the Employee's
responsibilities as an employee of the Company in accordance with this
Agreement. It is expressly understood and agreed that to the extent that any
such activities have been conducted by the Employee prior to the Effective Date,
the continued conduct of such activities (or the conduct of activities similar
in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Employee's
responsibilities to the Company.

                    (iii) During the Employment Period, the Employee shall be
subject to, and shall comply with, the Company's policies regarding sexual
harassment, insider trading, confidentiality, non-disclosure, non-competition,
non-disparagement, substance abuse, and conflicts of interest and any other
written policy of the Company, the violation of which could result in
termination of employment.

               (b) COMPENSATION.

                    (i) Base Salary. During the Employment Period, the Employee
shall receive a base salary ("Base Salary") at a monthly rate at least equal to
the highest monthly base salary paid or payable to the Employee by the Company
during the twelve-month period immediately preceding the month in which the
Effective Date occurs. During the Employment Period, the Base Salary shall be
reviewed at least annually and shall be increased at any time and from time to
time as shall be substantially consistent with increases in base salary awarded
in the ordinary course of business to other key employees of the Company and its
subsidiaries in the same salary grade (or, if there are no salary grades, to
other key employees of the Company and its subsidiaries in comparable
positions). Any increase in Base


                                       5



Salary shall not serve to limit or reduce any other obligation to the Employee
under this Agreement. Base Salary shall not be reduced after any such increase.

                    (ii) Annual Bonus. In addition to Base Salary, the Employee
shall be awarded, for each fiscal year ending during the Employment Period, an
annual bonus (an "Annual Bonus"), either pursuant to the Company's Management
Incentive Plan or otherwise, in cash at least equal to the average Annual Bonus
paid to the Employee for each of the three fiscal years immediately preceding
the Effective Date (or for such fewer number of such years as the Employee has
been employed by the Company, with the bonus for any partial year in such period
being annualized), but not less than the target bonus for the Employee under the
Company's Management Incentive Plan for the fiscal year during which the
Effective Date occurs, provided that the Employee is employed as of the last day
of the fiscal year in respect of which such Annual Bonus is paid.

                    (iii) Incentive, Savings and Retirement Plans. In addition
to Base Salary and Annual Bonus payable as hereinabove provided, the Employee
shall be entitled to participate during the Employment Period in all incentive,
savings and retirement plans, practices, policies and programs applicable to
other key employees of the Company and its subsidiaries (including the 2005
Long-Term Incentive Plan or any successor thereto). Such plans, practices,
policies and programs, in the aggregate, shall provide the Employee with
compensation, benefits and reward opportunities at least as favorable as the
most favorable of such compensation, benefits and reward opportunities provided
by the Company to the Employee under such plans, practices, policies and
programs as in effect at any time during the 90-day period immediately preceding
the Effective Date or, if more favorable to the Employee, as provided at any
time thereafter with respect to other key employees of the Company and its


                                       6


subsidiaries in the same salary grade (or, if there are no salary grades, to
other key employees of the Company and its subsidiaries in comparable
positions).

                    (iv) Welfare Benefit Plans. During the Employment Period,
the Employee and/or the Employee's covered dependents, as the case may be, shall
be eligible for participation in and shall receive all benefits under welfare
benefit plans, practices, policies and programs provided by the Company and its
subsidiaries (including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs), at least as favorable as the most
favorable of such plans, practices, policies and programs of the Company and its
subsidiaries in effect at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Employee and/or the
Employee's covered dependents, as applicable, as in effect at any time
thereafter with respect to other key employees of the Company and its
subsidiaries in the same salary grade (or, if there are no salary grades, to
other key employees of the Company and its subsidiaries in comparable
positions).

                    (v) Expenses. During the Employment Period, the Employee
shall be entitled to receive prompt reimbursement for all reasonable business
expenses incurred by the Employee in accordance with the most favorable
policies, practices and procedures of the Company and its subsidiaries in effect
at any time during the 90-day period immediately preceding the Effective Date
or, if more favorable to the Employee, as in effect at any time thereafter with
respect to other key employees of the Company and its subsidiaries in the same
salary grade (or, if there are no salary grades, to other key employees of the
Company and its subsidiaries in comparable positions). Notwithstanding anything
to the contrary in the preceding sentence, the amount of expenses eligible for
reimbursement during a calendar year may not


                                       7



affect the expenses eligible for reimbursement in any other calendar year and
all reimbursements must be made on or before the last day of the calendar year
following the calendar year in which the expense was incurred.

                    (vi) Fringe Benefits. During the Employment Period, the
Employee shall be entitled to fringe benefits in accordance with the most
favorable plans, practices, programs and policies of the Company and its
subsidiaries in effect at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Employee, as in effect
at any time thereafter with respect to other key employees of the Company and
its subsidiaries in the same salary grade (or, if there are no salary grades, to
other key employees of the Company and its subsidiaries in comparable
positions).

                    (vii) Vacation. During the Employment Period, the Employee
shall be entitled to paid holidays and vacation in accordance with the most
favorable plans, policies, programs and practices of the Company and its
subsidiaries as in effect at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Employee, as in effect
at any time thereafter with respect to other key employees of the Company and
its subsidiaries in the same salary grade (or, if there are no salary grades, to
other key employees of the Company and its subsidiaries in comparable
positions).

          5. TERMINATION.

               (a) DEATH OR DISABILITY. This Agreement shall terminate
automatically upon the Employee's death. If the Company determines in good faith
that the Disability of the Employee has occurred (pursuant to the definition of
"Disability" set forth below), it may give to the Employee written notice of its
intention to terminate, or its intention to cause its subsidiary to terminate,
the Employee's employment. In such event, the Employee's employment with the


                                       8



Company shall terminate effective on the 30th day after receipt of such notice
by the Employee (the "Disability Effective Date"), provided that, within 30 days
after such receipt, the Employee shall not have returned to full-time
performance of the Employee's duties. For purposes of this Agreement, a
"Disability" shall occur if the Employee, by reason of any medically
determinable physical or mental impairment, is determined to be disabled and
eligible for benefits under the terms of the Company's long-term disability plan
or policy applicable to the Employee. Such determination of Disability shall be
made by the plan administrator or insurer with respect to such Company long-term
disability plan or policy.

               (b) CAUSE. The Company may terminate the Employee's employment
for "Cause." For purposes of this Agreement, "Cause" means (i) an act or acts of
personal dishonesty taken by the Employee and intended to result in substantial
personal enrichment of the Employee at the expense of the Company, (ii) repeated
violations by the Employee of the Employee's obligations under Section 4(a) of
this Agreement or illegal conduct or gross misconduct by the Employee which is
materially injurious to the Company and which violations, conduct or misconduct
are demonstrably willful and deliberate on the Employee's part and which are not
remedied within thirty (30) days after receipt of written notice from the
Company, (iii) violation by the Employee of any of the Company's policies,
including, but not limited to, policies regarding sexual harassment, insider
trading, confidentiality, non-disclosure, non-competition, non-disparagement,
substance abuse and conflicts of interest and any other written policy of the
Company, which violation could result in the termination of the Employee's
employment; or (iv) the conviction of the Employee of a felony which is
materially injurious to the Company or a plea by the Employee of guilty or no
contest to a charge of a felony which is materially injurious to the Company.


                                       9



               (c) GOOD REASON. The Employee's employment may be terminated by
the Employee for Good Reason. For purposes of this Agreement, "Good Reason"
means

                    (i) the assignment to the Employee of any duties
inconsistent in any respect with the Employee's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 4(a) of this Agreement, or any other
action by the Company which results in a material diminution in such position,
authority, duties or responsibilities;

                    (ii) any failure by the Company to comply with any of the
provisions of Section 4(b) of this Agreement;

                    (iii) the Company's requiring the Employee to be based at
any office or location other than that described in Section 4(a)(i)(B) hereof,
except for travel reasonably required in the performance of the Employee's
responsibilities;

                    (iv) any purported termination by the Company of the
Employee's employment otherwise than as expressly permitted by this Agreement;
or

                    (v) any failure by the Company to comply with and satisfy
Section 11(c) of this Agreement;

provided that within ninety (90) days after the occurrence of any of the events
listed in clauses (i), (ii), (iii), (iv) or (v) above the Employee delivers
written notice to the Company of his intention to terminate for Good Reason
specifying in reasonable detail the facts and circumstances claimed to give rise
to the Employee's right to terminate his employment for Good Reason and the
Company shall not have cured such facts and circumstances within thirty (30)
days after delivery of such notice by the Employee to the Company (unless the
Company shall have waived its right to cure by written notice to the Employee),
and provided further that


                                       10



within thirty (30) days after the expiration of such thirty (30) day period or
the date of receipt of such waiver notice, if earlier, the Employee delivers a
Notice of Termination to the Company under Section 5(d) based on the same Good
Reason specified in the notice of intent to terminate delivered to the Company
under this Section 5(c).

          For purposes of this Section 5(c), any good faith determination of the
facts and circumstances giving rise to "Good Reason" made by the Employee shall
be conclusive, subject to the Company's right to cure such facts and
circumstances as described above.

               (d) NOTICE OF TERMINATION. Any termination by the Company for
Cause or by the Employee for Good Reason shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 14(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Employee's
employment under the provision so indicated and (iii) if the Date of Termination
(as defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall not be prior to the date of receipt of
such notice). The failure by the Employee to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of Good
Reason shall not waive any right of the Employee hereunder or preclude the
Employee from asserting such fact or circumstance in enforcing his rights
hereunder.

               (e) DATE OF TERMINATION. "Date of Termination" means the date of
receipt of the Notice of Termination or any later date specified therein as
permitted by Section 5(d), as the case may be; provided, however, that (i) if
the Employee's employment is terminated by the Company or a subsidiary of the
Company other than for Cause, death or Disability, the


                                       11



Date of Termination shall be the date on which the Employee receives notice from
the Company or such subsidiary of such termination and (ii) if the Employee's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Employee or the Disability
Effective Date, as the case may be.

          6. OBLIGATIONS OF THE COMPANY UPON TERMINATION.

               (a) DEATH. If the Employee's employment is terminated during the
Employment Period by reason of the Employee's death, this Agreement shall
terminate without further obligations to the Employee's legal representatives
under this Agreement, other than (i) those obligations accrued or earned and
vested (if applicable) by the Employee as of the Date of Termination, including,
for this purpose (i) the Employee's full Base Salary through the Date of
Termination at the rate in effect on the Date of Termination and (ii) accrued
vacation pay not yet paid by the Company (such amounts are collectively
hereinafter referred to as "Accrued Obligations"). All such Accrued Obligations
shall be paid to the Employee's estate or beneficiary, as applicable, in a lump
sum in cash within 30 days after the Date of Termination.

               (b) DISABILITY. If the Employee's employment is terminated during
the Employment Period by reason of the Employee's Disability, this Agreement
shall terminate without further obligations to the Employee, other than Accrued
Obligations and such obligations as may exist under the terms of the Company's
long term disability plan or policy applicable to the Employee. All such Accrued
Obligations shall be paid to the Employee in a lump sum in cash within 30 days
after the Date of Termination.

               (c) TERMINATION FOR CAUSE; TERMINATION BY EMPLOYEE OTHER THAN FOR
GOOD REASON. If, during the Employment Period, the Employee's employment is
terminated for Cause or the Employee terminates employment other than for Good
Reason, this Agreement


                                       12



shall terminate without further obligations to the Employee, other than Accrued
Obligations. All such Accrued Obligations shall be paid to the Employee in a
lump sum in cash within 30 days after the Date of Termination.

               (d) TERMINATION FOR GOOD REASON; TERMINATION BY THE COMPANY OTHER
THAN FOR CAUSE, DISABILITY OR DEATH. If, during the Employment Period, the
Company terminates the Employee's employment other than for Cause, Disability,
or Death, or if the Employee terminates his employment for Good Reason:

                    (i) the Company shall pay to the Employee the Accrued
Obligations;

                    (ii) the Company shall pay as a severance benefit to the
Employee in a lump sum in cash (less applicable withholdings) the aggregate of
the following amounts:

                         (A) the product of the average Annual Bonus paid to the
Employee for each of the three full fiscal years immediately preceding the Date
of Termination (or for such fewer number of such years as the Employee has been
employed by the Company, with the bonus for any partial year in such period
being annualized), but not less than the greater of the target bonus for the
Employee for the fiscal year during which the Effective Date occurs and the
target bonus for the Employee for the fiscal year during which the Date of
Termination occurs, and a fraction, the numerator of which is the number of days
in the current fiscal year through the Date of Termination, and the denominator
of which is 365; and

                         (B) two times the sum of (1) the Employee's annual Base
Salary at the highest rate in effect at any time during the period beginning 90
days before the Effective Date through the Date of Termination and (2) the
average Annual Bonus paid to the


                                       13



Employee for each of the three full fiscal years immediately preceding the Date
of Termination (or for such fewer number of such years as the Employee has been
employed by the Company, with the bonus for any partial year in such period
being annualized), but not less than the greater of the target bonus for the
Employee for the fiscal year during which the Effective Date occurs and the
target bonus for the Employee for the fiscal year during which the Date of
Termination occurs.

                    Payment of the lump sum amount described in this clause (ii)
shall be made within 30 days after the Date of Termination, provided however,
that if the Employee is a "specified employee" within the meaning of Section
409A(a)(2)(B)(i) of the Internal Revenue Code ("Code"), payment shall be made
within 30 days following the date which is six (6) months following the
Employee's separation from service following a Notice of Termination. In the
event that payment is delayed for six months pursuant to the preceding sentence,
not later than 30 days following the Date of Termination, the Company shall
establish a grantor trust that qualifies as a grantor trust or trust fund within
the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the
Code (a "Rabbi Trust") and deposit in the Rabbi Trust an amount equal to the
lump sum payable to the Employee, plus interest for the six-month delay period
at the applicable Federal rate on the Employee's separation from service. The
Employee shall remain during such time a general unsecured creditor of the
Company and amounts held in the Rabbi Trust shall remain subject to the claims
of the Company's creditors in the event of the Company's insolvency.

                    (iii) for a period of two years after the Date of
Termination, or such longer period as any plan, program, practice or policy may
provide, the Company shall continue group medical, prescription, dental,
disability, salary continuance, group life, accidental


                                       14



death and dismemberment and travel accident insurance benefits (each, a "Welfare
Benefit" and, together "Welfare Benefits") to the Employee and/or the Employee's
covered dependents, as applicable, at levels substantially equal to those which
would have been provided to them in accordance with the Company's plans,
programs, practices and policies with respect to such benefits if the Employee's
employment had not been terminated, in accordance with the most favorable plans,
practices, programs or policies of the Company and its subsidiaries in effect
during the 90-day period immediately preceding the Date of Termination or, if
more favorable to the Employee, as in effect at any time thereafter with respect
to other key employees in the same salary grade (or, if there are no salary
grades, to other key employees of the Company and its subsidiaries in comparable
positions) and their dependents. To the extent that a Welfare Benefit is taxable
to the Employee, the following rules shall apply to the provision of such
benefits pursuant to this paragraph: (1) the benefits provided during any
calendar year shall not affect the benefits provided in any other calendar year
and (2) if the Employee is a "specified employee" within the meaning of Section
409A(a)(2)(B)(i) of the Code, the Employee shall pay the cost of such benefit
for the first six months following the Date of Termination and shall be
reimbursed by the Company for such costs, with interest at the applicable
federal rate, within thirty days of the end of such six month period, provided
that the amount of such expenses eligible for reimbursement in any calendar year
shall not affect the expenses eligible for reimbursement in any other calendar
year. For purposes of eligibility for post-retirement benefits pursuant to such
plans, practices, programs and policies and for purposes of health benefit
continuation coverage pursuant to Section 601 et seq of ERISA ("COBRA"), the
Employee shall be considered to have remained employed until the end of the
Employment Period and to have retired on the last day of such period.


                                       15



                    (iv) in the event that the Employee has not, as of the Date
of Termination, earned sufficient vesting service to have earned (A) a
nonforfeitable interest in his matching contribution account under the P.H.
Glatfelter Company 401(k) Retirement Savings Plan (the "401(k) Plan"), and (B) a
nonforfeitable interest in his accrued benefit under the terms of the P.H.
Glatfelter Company Retirement Plan for Salaried Employees (the "Retirement
Plan") (or any successors to those plans), the Company shall pay to the Employee
a lump sum in cash (less applicable withholdings) in an amount equal to the sum
of:

                         (A) the Employee's unvested matching contribution
account under the 401(k) Plan, valued as of the Date of Termination; and

                         (B) the actuarial present value of the Employee's
unvested normal retirement pension under the Retirement Plan, based on the
Employee's accrued benefit under the terms of the Retirement Plan as determined
by the Company's actuary utilizing actuarial equivalency factors for determining
single sum amounts under the terms of the Retirement Plan.

          Payment of the lump sum amount described in this clause (iv) shall be
made within 30 days after the Date of Termination, provided however, that if the
Employee is a "specified employee" within the meaning of Section
409A(a)(2)(B)(i) of the Code, payment shall be made within 30 days following the
date which is six (6) months following the Employee's separation from service
following a Notice of Termination (or, if earlier, the Employee's death).

          In the event that the Employee should return to employment with the
Company and acquire a vested, nonforfeitable interest in any of the plans with
respect to which the payment in this clause (iv) is determined, the Employee
shall return an amount equal to the payment made under this subsection, within
30 days of demand by the Company.


                                       16




                    (v) If the Employee is, as of the Date of Termination, a
participant in the Restoration Pension (the "Restoration Pension") or the Final
Average Compensation Pension ("FAC Pension") under the terms of the P.H.
Glatfelter Company Supplemental Early Retirement Plan (the "SERP"), the Employee
will become fully vested in his accrued benefit under the terms of the
Restoration Pension or FAC Pension, as applicable, and the Employee's vested
benefit thereunder shall be paid to the Employee in accordance with the terms of
the SERP subject to the applicable requirements of Section 409A of the Code and
its implementing regulations ("Section 409A"). In addition, the Company shall be
obligated to contribute funds, to the extent it has not already done so, to the
Trust serving as a funding vehicle for the SERP (the P.H. Glatfelter Company
Nonqualified Plans Master Trust), in sufficient amount to pay the Employee's
accrued benefit under the Restoration Pension or the FAC Pension, as
appropriate, within five days of the Date of Termination.

                    (vi) If the Employee is, as of the Date of Termination, a
participant in the P.H. Glatfelter Company Supplemental Management Pension Plan
(the "SMPP") with at least five years of vesting service (as measured for
purposes of the Retirement Plan), then the Company shall be obligated to
contribute funds, to the extent it has not already done so, to the Trust serving
as a funding vehicle for that plan (the P.H. Glatfelter Company Nonqualified
Plans Master Trust) as follows:

                         (A) If the Employee is a participant in the MIP
Adjustment Supplement under the SMPP, the Company shall fund the Trust with
sufficient assets to pay the Employee's accrued benefit under the MIP Adjustment
Supplement within five days of the Date of Termination.


                                       17



                         (B) If the Employee is eligible to receive the Early
Retirement Supplement under the SMPP, the Company shall fund the Trust with
sufficient assets to pay the Employee's accrued benefit under the Early
Retirement Supplement, within five days following the later to occur of (1) the
Date of Termination or (2) the benefit commencement date with respect to the
Employee's Early Retirement Supplement.

                    (vii) Amounts contributed to the P.H. Glatfelter
Nonqualified Plans Master Trust pursuant to paragraphs 6(d)(iv) or (v) above
shall in no event be invested in assets located outside the United States or
otherwise violate the requirements of Section 409A(b).

                    (viii) If the Employee has previously deferred compensation
under a plan or arrangement not described above which has not yet been paid by
the Company, the Employee's right to payment of such compensation shall be
considered vested and nonforfeitable as of the Date of Termination. Such
deferred compensation shall be paid to the Employee in accordance with the terms
of the deferred compensation plan or arrangement subject to the applicable
requirements of Section 409A.

                    (ix) Notwithstanding the foregoing, the Company shall have
no obligation under this Section 6(d) unless the Employee executes and delivers
to the Company a valid general release agreement in a form reasonably acceptable
to the Company in which the Employee releases the Company from any and all
possible liability, including, without limitation, any and all liability based
on the Employee's employment or the termination of his employment; provided,
however, that nothing in such release shall include any release of the Company's
indemnification obligations to or for the benefit of the Employee.


                                       18



                    (x) Notwithstanding the foregoing, any benefit or payment
that is due upon termination of Employee's employment under this Agreement and
that represents a "deferral of compensation" within the meaning of Section 409A
shall only be paid or provided to Employee upon a "separation from service" as
defined in Section 409A. For purposes of this Agreement, amounts payable under
this Agreement shall be deemed not to be a "deferral of compensation" subject to
Section 409A to the extent provided in the exceptions in Treasury Regulation
Sections 1.409A-1(b)(4) ("short-term deferrals") and (b)(9) ("separation pay
plans," including the exception under subparagraph (iii)) and other applicable
provisions of Treasury Regulation Section 1.409A-1 through A-6 (or any successor
to any of the foregoing provisions). To the extent that any provision of this
Agreement would, if enforced as written, cause adverse tax consequences to
either party under Section 409A, the parties shall work together in good faith
to seek to avoid, or minimize, such consequences.

          7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent
or limit the Employee's continuing or future participation in any benefit,
bonus, incentive or other plans, programs, policies or practices provided by the
Company or its subsidiaries and for which the Employee may qualify, nor shall
anything herein limit or otherwise affect such rights as the Employee may have
under any stock option, restricted stock, restricted stock unit, performance
share or other agreements with the Company or any of its subsidiaries. Amounts
which are vested benefits or which the Employee is otherwise entitled to receive
under any plan, policy, practice or program of the Company or any of its
subsidiaries at or subsequent to the Date of Termination shall be payable in
accordance with such plan, policy, practice or program.

          8. FULL SETTLEMENT. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be


                                       19



affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Employee or others. In no event
shall the Employee be obligated to seek other employment or take any other
action by way of mitigation of the amounts payable to the Employee under any of
the provisions of this Agreement.

          9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.

               (a) Anything in this Agreement to the contrary notwithstanding,
in the event it shall be determined that any payment or distribution by the
Company to or for the benefit of the Employee (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise) (a "Payment") would be subject to the excise tax imposed by Section
4999 of the Code or any interest or penalties with respect to such excise tax
(such excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Employee shall be
entitled to receive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by the Employee of all taxes (including any interest or
penalties imposed with respect to such taxes), including any Excise Tax, imposed
upon the Gross-Up Payment, the Employee retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payment.

               (b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether a Gross-Up Payment
is required and the amount of such Gross-Up Payment, shall be made by a firm of
independent accountants selected by the Audit Committee of the Board, which firm
may, if consistent with applicable securities laws, be the firm of independent
accountants engaged to audit the Company's financial statements (the "Accounting
Firm") which shall provide detailed supporting calculations both to the Company
and the Employee within 15 business days after the Date of Termination or such


                                       20



earlier time as is requested by the Company. The initial Gross-Up Payment, if
any, as determined pursuant to this Section 9(b), shall be paid to the Employee
within five days of the receipt of the Accounting Firm's determination. If the
Accounting Firm determines that no Excise Tax is payable by the Employee, it
shall furnish the Employee with an opinion that he has substantial authority not
to report any Excise Tax on his federal income tax return. Any determination by
the Accounting Firm shall be binding upon the Company and the Employee. As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that a Gross-Up Payment which will not have been made by the Company
should have been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 9(c) and the Employee thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such Underpayment shall be paid by
the Company to or for the benefit of the Employee promptly thereafter, but in no
event later than the end of the calendar year following the calendar year in
which the Employee pays the Excise Tax to which the Gross-Up Payment relates.

               (c) The Employee shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten business days after the Employee knows of
such claim and shall apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid. The Employee shall not pay
such claim prior to the expiration of the thirty-day period following the date
on which it gives such notice to the Company (or such shorter period ending on
the date that any


                                       21



payment of taxes with respect to such claim is due). If the Company notifies the
Employee in writing prior to the expiration of such period that it desires to
contest such claim, the Employee shall:

                    (i) give the Company any information reasonably requested by
the Company relating to such claim,

                    (ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company,

                    (iii) cooperate with the Company in good faith in order
effectively to contest such claim,

                    (iv) permit the Company to participate in any proceedings
relating to such claim;

provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest during the lifetime of the Employee (the "Contest Expenses")
and shall indemnify and hold the Employee harmless, on an after-tax basis, for
any Excise Tax or income tax, including interest and penalties with respect
thereto, imposed as a result of such representation and payment of costs and
expenses ("Tax Expenses"). The Company's obligation for the Contest Expenses
shall be subject to the following restrictions: (1) the Contest Expenses borne
and paid by the Company in one calendar year shall not affect the Contest
Expenses borne and paid by the Company in another calendar year and (2) the
Company's obligation to bear and pay the Contest Expenses is not subject to
liquidation or exchange for another benefit. The Company's reimbursement to the


                                       22



Employee of the Tax Expenses shall be subject to the following restrictions:
such reimbursement must be made by the end of the calendar year following the
calendar year in which the Employee pays the taxes to which the reimbursement
relates.

Without limitation on the foregoing provisions of this Section 9(c), the Company
shall control all proceedings taken in connection with such contest and, at its
sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect of
such claim and may, at its sole option, if in compliance with applicable
securities laws, either direct the Employee to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Employee agrees
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the Company directs the
Employee to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to the Employee, on an interest-free basis, and shall
indemnify and hold the Employee harmless, on an after-tax basis, from any Excise
Tax or income tax, including interest or penalties with respect thereto, imposed
with respect to such advance or with respect to any imputed income with respect
to such advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Employee
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Any tax reimbursement payment made by the
Company to the Employee with respect to the preceding sentence will be made by
the Company to the Employee no later than the end of the second calendar year
following the calendar year in which the Employee pays the taxes to which the
reimbursement relates. Furthermore, the Company's control of the contest shall
be limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and the


                                       23



Employee shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.

               (d) If, after the receipt by the Employee of an amount advanced
by the Company pursuant to Section 9(c), the Employee becomes entitled to
receive any refund with respect to such claim, the Employee shall (subject to
the Company's complying with the requirements of Section 9(c)) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Employee of an amount advanced by the Company pursuant to Section 9(c), a
determination is made that the Employee shall not be entitled to any refund with
respect to such claim and the Company does not notify the Employee in writing of
its intent to contest such denial of refund prior to the expiration of thirty
days after such determination, then such advance shall be forgiven and shall not
be required to be repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.

          10. CONFIDENTIAL INFORMATION. The Employee shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its subsidiaries, and their
respective businesses, which shall have been obtained by the Employee during the
Employee's employment by the Company or any of its subsidiaries and which shall
not be or become public knowledge (other than by acts by the Employee or his
representatives in violation of this Agreement). After termination of the
Employee's employment with the Company, the Employee shall not, without the
prior written consent of the Company, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted


                                       24



violation of the provisions of this Section 10 constitute a basis for deferring
or withholding any amounts otherwise payable to the Employee under this
Agreement.


          11. SUCCESSORS.

               (a) This Agreement is personal to the Employee and without the
prior written consent of the Company shall not be assignable by the Employee
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Employee's legal
representatives.

               (b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.

               (c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company (whether such
assets are held directly or indirectly) to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.

          12. ARBITRATION.

                    (a) Any controversy or claim arising out of or relating to
this Agreement, or any breach hereof, shall be settled in accordance with the
terms of this Section 12. All claims by the Employee for benefits under this
Agreement shall first be directed to and determined by the Board and shall be in
writing. Any denial by the Board of a claim for benefits under this Agreement
shall be delivered to the Employee in writing within thirty (30) days and


                                       25



shall set forth the specific reasons for the denial and the specific provisions
of this Agreement relied upon. The Board shall afford a reasonable opportunity
to the Employee for a review of the decision denying a claim and shall further
allow the Employee to appeal to the Board a decision of the Board within thirty
(30) days after notification by the Board that the Employee's claim has been
denied. Any further dispute, controversy or claim arising out of or relating to
this Agreement, or the interpretation or alleged breach hereof, shall be settled
by arbitration in accordance with Employment Dispute Resolution Rules of the
American Arbitration Association (or such other rules as may be agreed upon by
the Employee and the Company). The place of the arbitration shall be
Philadelphia, Pennsylvania and judgment upon the award rendered by the
arbitrator(s) may be entered by any court having jurisdiction thereof. Such an
award shall be binding and conclusive upon the parties hereto.

               (b) Judgment may be entered on the arbitrator's award in any
court having jurisdiction; provided, however, that the Employee shall be
entitled to seek specific performance of his or her right to be paid until the
Date of Termination during pendency of any dispute arising out of this
Agreement.

          13. LEGAL EXPENSES. The Company agrees to reimburse the Employee, to
the full extent permitted by law, for all costs and expenses (including without
limitation reasonable attorneys' fees) which the Employee may reasonably incur
as a result of any contest of the validity or enforceability of, or the
Company's liability under, any provision of this Agreement, plus in each case
interest at the applicable Federal rate provided for in Section 7872(f)(2) of
the Code; provided, however, that such payment shall be made only if the
Employee prevails on at least one material issue provided, further, (1) that the
amount of such expenses eligible for reimbursement in any calendar year shall
not affect the expenses eligible for reimbursement in


                                       26




any other calendar year and (2) all such reimbursements must be made on or
before the last day of the calendar year following the calendar year in which
the expense was incurred.

          14. MISCELLANEOUS.

               (a) This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania without reference
to principles of conflict of laws. The captions of this Agreement are not part
of the provisions hereof and shall have no force or effect. This Agreement may
not be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.

               (b) Any notices required or permitted to be given hereunder shall
be sufficient if in writing, and if delivered by hand, or sent by registered or
certified mail, return receipt requested, or overnight delivery using a national
courier service, or by facsimile or electronic transmission, with confirmation
as to receipt, to the Company at the address set forth below and to the Employee
at the address set forth in the personnel records of the Company, or such other
address as either party may from time to time designate in writing to the other,
and shall be deemed given as of the date of the delivery or mailing:

               P.H. Glatfelter Company
               96 South George Street
               York, PA 17401
               Attention: General Counsel

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.

               (c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.


                                       27



               (d) The Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.

               (e) The Employee's failure to insist upon strict compliance with
any provision hereof shall not be deemed to be a waiver of such provision or any
other provision hereof.

               (f) No material provisions of this Agreement may be waived or
discharged, unless such waiver or discharge is in writing signed by the party
who is making the waiver or discharge.

               (g) This Agreement shall be binding upon and enforceable by the
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributes, devisees and legatees and shall be binding upon
and enforceable by the Company's successors.

               (h) This Agreement contains the entire understanding of the
Company and the Employee with respect to the subject matter hereof and
supersedes (i) all prior change in control employment agreements and (ii) all
other agreements or understandings between the Company and the Employee relating
to the subject matter hereof, but only during the two-year period commencing on
the Effective Date, if the Employee remains employed by the Company at the end
of such two-year period.


                                       28


          IN WITNESS WHEREOF, the Employee has hereunto set his hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name and on its behalf, all as of
the day and year first above written.


                                        ----------------------------------------
                                        [Employee]


                                        P.H. GLATFELTER COMPANY


                                        By
                                           -------------------------------------


                                       29

EX-10.(J)(A)

                                                                EXHIBIT 10(J)(A)

               SCHEDULE OF CHANGE IN CONTROL EMPLOYMENT AGREEMENTS

          In accordance with the Instructions to Item 601 of Regulation S-K, the
Registrant has omitted filing Change in Control Employment Agreements by and
between P. H. Glatfelter Company and the following employees as exhibits to this
Form 10-K because they are identical to the Form of Change in Control Employment
Agreement by and between P. H. Glatfelter Company and certain employees, which
is filed as Exhibit 10 (j) to our Form 10-K for the year ended December 31,
2007.

                                 David C. Elder
                                Timothy R. Hess
                                John P. Jacunski
                               Jeffrey J. Norton
                                Dante C. Parrini
                                  Martin Rapp
                                Mark A. Sullivan
                            William T. Yanavitch II

EX-10.(N)(A)

                                                                Exhibit 10 n (A)

                     FIRST AMENDMENT TO TERM LOAN AGREEMENT
                     --------------------------------------

     THIS FIRST AMENDMENT TO TERM LOAN AGREEMENT (this "AMENDMENT"), is made and
entered into as of January 31, 2008, by and among GPW TIMBERLANDS, LLC, a
Delaware limited liability company (the "Borrower"), P.H. GLATFELTER COMPANY, a
Maryland corporation (the "PARENT"), the several banks and other financial
institutions from time to time party to the Term Loan Agreement referenced below
(the "Lenders"), and SUNTRUST BANK, in its capacity as Administrative Agent for
the Lenders (in such capacity, the "ADMINISTRATIVE AGENT").


                              W I T N E S S E T H:
                              - - - - - - - - - -

     WHEREAS, the Borrower, the Lenders and the Administrative Agent are parties
to a certain Term Loan Agreement, dated as of March 21, 2003 (as amended,
restated, supplemented or otherwise modified from time to time, the "TERM LOAN
AGREEMENT"; capitalized terms used herein and not otherwise defined shall have
the meanings assigned to such terms in the Term Loan Agreement), pursuant to
which the Lenders have made a certain Term Loan to the Borrower;

     WHEREAS, the Borrower has requested that the Lenders and the Administrative
Agent amend certain provisions of the Term Loan Agreement to extend the Maturity
Date of the Term Loan from March 26, 2008 to March 26, 2013 and to modify the
interest rate applicable to the Term Loan, and subject to the terms and
conditions hereof, the Lenders and the Administrative Agent are willing to do
so;

     NOW, THEREFORE, for good and valuable consideration, the sufficiency and
receipt of all of which are acknowledged, the Borrower, the Parent, the Lenders
and the Administrative Agent agree as follows:

1. AMENDMENTS.
   ----------

     (a) Section 1.1 of the Term Loan Agreement is hereby amended by replacing
the definition of "Maturity Date" in its entirety with the following definition:

          ""MATURITY DATE" shall mean the earlier of (i) March 26, 2013, or (ii)
     the date on which the outstanding principal amount of the Term Loan has
     been declared, or automatically has become, due and payable (whether by
     acceleration or otherwise)."

     (b) Section 2.5 of the Term Loan Agreement is hereby amended by replacing
subsection (a) thereof in its entirety with the following subsection (a):


            Signature Page to First Amendment to Term Loan Agreement


"(a) Subject to subsections (b) and (c) of this Section 2.5, to but excluding
the date that is five (5) days after the fifth (5th) anniversary of the Closing
Date, the Borrower shall pay interest on the Term Loan at the rate of 3.82% per
annum. Thereafter, the Borrower shall pay interest on the Term Loan at a per
annum rate (fixed for the remaining term of the Term Loan) equal to LIBOR plus
0.50%. As used herein "LIBOR" shall mean, the rate per annum (rounded upwards,
if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBOR01
Page (or any successor page) as the London interbank offered rate for deposits
in Dollars at approximately 11:00 a.m. (London, England time) as of two Business
Days prior to the fifth (5th) anniversary of the Closing Date for a term of
three months.


     2. CONDITIONS TO EFFECTIVENESS OF THIS AMENDMENT. Notwithstanding any other
provision of this Amendment and without affecting in any manner the rights of
the Lenders or the Administrative Agent under the Term Loan Agreement, this
Amendment shall not become effective, and the Borrower shall have no rights
under this Amendment, until each of the following conditions have been satisfied
to the satisfaction of the Administrative Agent:

          (a) the Administrative Agent shall have received executed counterparts
to this Amendment from the Borrower and the Lenders;

          (b) the Administrative Agent shall have received an amendment to the
Conservation Fund Letter of Credit, in form and substance satisfactory to the
Administrative Agent, which amendment shall extend the stated expiration date of
the Conservation Fund Letter of Credit from July 5, 2008 to July 5, 2013;

          (c) the Administrative Agent shall have received a written
reaffirmation by Sustainable Conservation, Inc. of the Consent, Waiver and
Agreement, which written reaffirmation shall be in form and substance
satisfactory to the Administrative Agent;

          (d) the Administrative Agent shall have received a written opinion of
outside counsel to the Parent and the Borrower with respect to this Amendment
and such other matters as the Administrative Agent shall request;

          (e) all of the representations and warranties of the Parent and the
Borrower set forth in the Term Loan Agreement and the other Loan Documents shall
be true and correct as of the date hereof;

          (f) no Default or Event of Default shall have occurred and be
continuing as of the date hereof; and

          (g) the Administrative Agent shall have received payment from the
Borrower of an extension fee in the amount of $50,000.

     3. REPRESENTATIONS AND WARRANTIES. To induce the Lenders and the
Administrative Agent to enter into this Amendment, the Borrower hereby
represents and warrants to the Lenders and the Administrative Agent that:

          (h) The Borrower (i) is validly existing limited liability company
under the laws of the State of Delaware, and (ii) has all requisite limited
liability company power and authority to carry on its business as now conducted
and to own its properties and other assets.

          (i) The execution, delivery and performance by the Borrower of this
Amendment are within the Borrower's legal organizational powers and have been
duly authorized by all necessary action. This Amendment has been duly executed
and delivered by the Borrower, and constitutes the valid and binding obligation
of the Borrower, enforceable against it in accordance with its terms, except as
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
or similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity.

          (j) The execution, delivery and performance by the Borrower of this
Amendment (a) do not require any consent or approval of, registration or filing
with, or action by, any Governmental Authority, (b) will not violate any
applicable law, rule or regulation or the certificate of formation or limited
liability company agreement of the Borrower or any judgment, order or ruling of
any Governmental Authority, (c) will not violate or result in a default under
any indenture, agreement or instrument binding on the Borrower or any of its
assets or give rise to a right thereunder to require any payment to be made by
the Borrower and (d) will not result in the creation or imposition of any Lien
on any asset of the Borrower, except Liens (if any) created under the Loan
Documents.

          (k) As of the date hereof the Borrower has no outstanding Indebtedness
other than the Indebtedness created pursuant to the Term Loan Agreement and the
other Loan Documents.

          (l) No litigation, investigation or proceeding of or before any
arbitrators or Governmental Authority is pending against or, to the knowledge of
the Borrower, threatened against or affecting the Borrower.

          (m) The Borrower is in compliance with (a) all applicable laws, rules,
regulations, judgments and orders of any Governmental Authority, and (b) all
indentures, agreements or other instruments binding upon it or its properties.

          (n) The Borrower has timely filed or caused to be filed all Federal
income tax returns and all other material tax returns that are required to be
filed by it, and has paid all taxes shown to be due and payable on such returns
or on any assessments made against it or its property and all other taxes, fees
or other charges imposed on it or any of its property by any Governmental
Authority.

          (o) None of the proceeds of the Term Loan have been or will be used in
any manner that violates any rule or regulation of the Board of Governors of the
Federal Reserve System, including Regulations T, U or X.

          (p) The Borrower has good title to all of its property, free and clear
of any Liens except Permitted Liens.


          (q) After giving effect to this Amendment, the representations and
warranties contained in the Term Loan Agreement and the other Loan Documents are
true and correct, and no Default or Event of Default has occurred and is
continuing as of the date hereof.

     4. REAFFIRMATION OF GUARANTY AND INDEMNIFICATION AGREEMENT. The Parent
hereby consents to the execution and delivery by the Borrower of this Amendment,
ratifies and confirms each of the terms of the Guaranty and Indemnification
Agreement, and agrees that each of its representations, warranties, covenants
and other obligations under the Guaranty and Indemnification Agreement shall
remain in full force and effect and shall not be diminished or impaired in any
manner or respect by the execution and delivery of this Amendment, the extension
of the Maturity Date pursuant hereto, or the modification of the interest rate
applicable to the Term Loan as provided herein. Without limitation to the
foregoing, the Parent hereby acknowledges and confirms that, notwithstanding
anything to the contrary contained in this Amendment or any other Loan Document
or otherwise, or any actions now or hereafter taken by the Lenders or the
Administrative Agent with respect to the Term Loan, the Guaranty and
Indemnification Agreement (i) is and shall continue to be a primary obligation
of the Parent, (ii) is and shall continue to be an absolute, unconditional,
continuing and irrevocable guaranty of payment, and (iii) is and shall continue
to be in full force and effect in accordance with its terms. Nothing contained
in this Amendment shall release, discharge, modify, change or affect the terms
and provisions of the Guaranty and Indemnification Agreement or the obligations
and liability of the Parent thereunder. The Parent hereby restates each of the
representations and warranties set forth in Section 3 of the Guaranty and
Indemnification Agreement as if fully set forth herein, and hereby confirms that
each of such representations and warranties set forth in Section 3 of the
Guaranty and Indemnification Agreement are true and correct as of the date
hereof.

     5. EFFECT OF AMENDMENT. Except as set forth expressly herein, all terms of
the Term Loan Agreement and the other Loan Documents shall be and remain in full
force and effect and shall constitute the legal, valid, binding and enforceable
obligations of the Borrower and the Parent, respectively, to the Lenders and the
Administrative Agent. The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a waiver of
any right, power or remedy of the Lenders or the Administrative Agent, nor
constitute a waiver of any provision of the Term Loan Agreement or any other
Loan Document. This Amendment shall constitute a Loan Document.

     6. GOVERNING LAW. (a) This Amendment shall be construed in accordance with
and shall be governed by the law (without giving effect to the conflict of law
principles thereof) of the State of Georgia.

     (b) Each of the Borrower and the Parent hereby irrevocably and
unconditionally submits, for itself and its property, to the exclusive
jurisdiction of the United States District Court of the Northern District of
Georgia, and Superior Court of Fulton County, Georgia and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Amendment or any other Loan Document or the transactions contemplated hereby or
thereby, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be

heard and determined in such Georgia state court or, to the extent permitted by
applicable law, such Federal court. Each of the parties hereto agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Amendment or any other Loan Document shall
affect any right that the Administrative Agent or any Lender may otherwise have
to bring any action or proceeding relating to this Amendment or any other Loan
Document against the Borrower or the Parent or any of their respective
properties in the courts of any jurisdiction.

     (c) Each of the Borrower and the Parent irrevocably and unconditionally
waives any objection which it may now or hereafter have to the laying of venue
of any such suit, action or proceeding described in paragraph (b) of this
Section and brought in any court referred to in paragraph (b) of this Section.
Each of the parties hereto irrevocably waives, to the fullest extent permitted
by applicable law, the defense of an inconvenient forum to the maintenance of
such action or proceeding in any such court.

     (d) Each party to this Amendment irrevocably consents to the service of
process in the manner provided for notices in Section 9.1 of the Term Loan
Agreement and Section 12 of the Guaranty and Indemnification Agreement. Nothing
in this Amendment or in any other Loan Document will affect the right of any
party hereto to serve process in any other manner permitted by law.

     7. WAIVER OF JURY TRIAL. EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF THIS
AMENDMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT,
TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER, AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AMENDMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

     8. NO NOVATION. This Amendment is not intended by the parties to be, and
shall not be construed to be, a novation of the Term Loan Agreement or an accord
and satisfaction in regard thereto.

     9. COSTS AND EXPENSES. The Borrower agrees to pay on demand all costs and
expenses of the Administrative Agent in connection with the preparation,
execution and delivery of this Amendment, including, without limitation, the
reasonable fees and out-of-pocket expenses of outside counsel for the
Administrative Agent with respect thereto.

     10. COUNTERPARTS. This Amendment may be executed by one or more of the
parties hereto in any number of separate counterparts, each of which shall be
deemed an original and all

of which, taken together, shall be deemed to constitute one and the same
instrument. Delivery of an executed counterpart of this Amendment by facsimile
transmission or by electronic mail in pdf form shall be as effective as delivery
of a manually executed counterpart hereof.

     11. BINDING NATURE. This Amendment shall be binding upon and inure to the
benefit of the parties hereto, their respective successors,
successors-in-titles, and assigns.

     12. ENTIRE UNDERSTANDING. This Amendment sets forth the entire
understanding of the parties with respect to the matters set forth herein, and
shall supersede any prior negotiations or agreements, whether written or oral,
with respect thereto.

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

                                      GPW TIMBERLANDS, LLC


                                      By /s/ George B. Amoss, Jr. (Seal)
                                        -------------------------
                                      Name: George B. Amoss, Jr.
                                      Title: President



                                      P.H. GLATFELTER COMPANY


                                      By /s/ Jeffrey J. Norton   (Seal)
                                        -------------------------
                                      Name: Jeffrey J. Norton
                                      Title: Vice President, General Counsel &
                                             Secretary



                                      SUNTRUST BANK
                                      AS ADMINISTRATIVE AGENT AND AS SOLE LENDER

                                      By /s/ Mark A. Flatin      (Seal)
                                        -------------------------
                                      Name: Mark A. Flatin
                                      Title: Managing Director

EX-10.(O)(A)

                                                                Exhibit 10(o)(A)

                          UNITED STATES DISTRICT COURT
                      FOR THE EASTERN DISTRICT OF WISCONSIN

UNITED STATES OF AMERICA
and the STATE OF WISCONSIN
                                               CIVIL ACTION NO. 03-C-0949

             Plaintiffs,

                  v.

                                               The Honorable Lynn Adelman

P. H. GLATFELTER COMPANY
and
WTM I COMPANY
(f/k/a Wisconsin Tissue Mills Inc.),

             Defendants.

                       AGREED SUPPLEMENT TO CONSENT DECREE

     The Plaintiffs and Defendants in this action have entered into this Agreed
Supplement to Consent Decree (the "Agreed Supplement") in order to memorialize
an agreement reached in accordance with Subparagraph 98.d of the existing
Consent Decree. As explained below, this Agreed Supplement sets forth the
Defendants' agreement to commit additional funds for performance of their
obligations under the Consent Decree, as envisioned by Decree Subparagraph 98.d.
The United States is filing this Agreed Supplement with the Court to make it
part of the public record concerning the Consent Decree, but the Court need not
take any action on this filing.

     1. The Plaintiffs filed this action on October 1, 2003, alleging that the
Defendants are among the parties liable for environmental contamination at the
Lower Fox River and Green Bay Site (the "Site") pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. Sections
9601-9675. At the same time, the United States lodged with the



Court a proposed Consent Decree between the Plaintiffs and Defendants. After a
public comment period, the Court approved and entered the Consent Decree in a
Decision and Order dated April 12, 2004.

     2. The Consent Decree requires the Defendants to perform sediment
remediation work at the portion of the Site that has been designated as Operable
Unit 1 ("OU1"). The Defendants began remedial work, including removing sediment
from OU1, in 2004, and the active remediation phase of that response work has
not yet been completed. The work is being overseen by the U.S. Environmental
Protection Agency ("EPA") and the Wisconsin Department of Natural Resources
("WDNR").

     3. The Defendants are paying for the response work that they are performing
in OU1 using funds deposited in a dedicated escrow account established under the
Consent Decree (the "Escrow Account"). If EPA, in consultation with WDNR,
determines at any time that the funds remaining in that Escrow Account are not
sufficient to finance the completion of the response work, EPA has certain
rights that can lead to termination of the Consent Decree. As an alternative to
that course of action, Consent Decree Subparagraph 98.d affords the Defendants
an opportunity to "deposit additional funds in the Escrow Account, in order to
avoid an Insufficiency Determination."

     4. The Plaintiffs recently notified the Defendants that EPA was considering
making a formal finding that the fund balance remaining in Escrow Account was
likely to be insufficient to fund the completion of the response work. The
parties have agreed to address that potential shortfall in the Escrow Account as
set forth in the following Paragraph.


                                        2



     5. In accordance with Consent Decree Subparagraph 98.d, the parties hereby
agree that the Defendants shall deposit additional funds in the Escrow Account
established under the Consent Decree, as follows:

          a. Defendant WTM I Company ("WTM I") shall deposit an additional $6
     million in the Escrow Account. That total amount shall be paid in three
     equal installments: (i) $2 million shall be payable on or before April 10,
     2007; (ii) an additional $2 million shall be payable on or before July 10,
     2007; and (iii) the final $2 million shall be payable on or before January
     10, 2008. All three payments shall be deposited in a separate sub-account
     within the Escrow Account (the "WTM I Sub-account"), so that those funds
     can be distinguished from the other funds in the Escrow Account (the
     "Existing Funds").

          b. By no later than April 10, 2007, Defendant P.H. Glatfelter Company
     ("Glatfelter") shall obtain a $6 million irrevocable letter of credit
     payable to the Escrow Account. The irrevocable letter of credit shall be
     issued by a financial institution that has the authority to issue letters
     of credit and whose letter of credit operations are regulated and examined
     by an agency of the United States Government. The financial institution
     shall have surplus and reserves in excess of $500 million. The irrevocable
     letter of credit shall identify EPA as the beneficiary and the full $6
     million shall immediately be payable to the Escrow Account: (i) at any time
     before April 10, 2008, upon EPA's written certification that the Existing
     Funds balance in the Escrow Account is below $2 million (by a letter in the
     form attached hereto as Exhibit A); or (ii) on April 10, 2008, if payment
     has not already been made by that date. The payment under the irrevocable
     letter of credit shall be deposited in a separate sub-account within the
     Escrow Account (the


                                        3



     "Glatfelter Sub-account"), so that those funds can be distinguished from
     the Existing Funds. At least five business days before finalizing the
     letter of credit, Glatfelter shall afford the Plaintiffs and WTM I an
     opportunity to review the proposed letter of credit to assess whether it
     conforms to the requirements of this Subparagraph. Notwithstanding the
     requirement that the letter of credit be irrevocable, at any time prior to
     payment under the irrevocable letter of credit, Glatfelter may deposit $6
     million into the Glatfelter Sub-account," at which time, Glatfelter may
     cancel the letter of credit.

          c. The Defendants shall direct the Escrow Account manager as follows:
     All Existing Funds shall be exhausted before disbursement of any amounts
     from the separate sub-accounts established and funded under the preceding
     Subparagraphs of this Agreed Supplement. After the Existing Funds are
     exhausted, the WTM I and Glatfelter Sub-accounts shall each be drawn upon
     in equal amounts, on a 50/50 basis, to pay for response work.

          d. The parties hereby agree that the additional funds to be paid into
     the Escrow Account under the preceding Subparagraphs of this Agreed
     Supplement fall within the definition of the "OU1 Response Activities and
     Costs" specified by Consent Decree Subparagraph 83.b.

     6. Pursuant to Consent Decree Section XXX (Retention of Jurisdiction), the
Court has jurisdiction to enforce compliance with the terms of this Agreed
Supplement because the Court retained jurisdiction over both the subject matter
of the Consent Decree and the Settling Defendants for the duration of the
performance of the terms and provisions of the Consent Decree for the purpose of
enabling any of the parties to apply to the Court at any time for such further
order, direction, and relief as may be necessary or appropriate for the
construction or


                                        4



modification of the Consent Decree, or to effectuate or enforce compliance with
its terms, or to resolve disputes in accordance with Consent Decree Section XX
(Dispute Resolution).

     IT IS SO STIPULATED AND AGREED.


                                        5



Signature Page for Agreed Supplement to Consent Decree in United States and the
State of Wisconsin v. P.H. Glatfelter Company and WTM I Company, Case No.
03-C-0949 (E.D. Wis.)

                                       FOR THE UNITED STATES OF AMERICA

                                       MATTHEW J. McKEOWN
                                       Acting Assistant Attorney General
                                       Environment and Natural Resources
                                       Division


3/28/07                                /s/ Randall M. Stone
Date                                   -----------------------------------------
                                       RANDALL M. STONE
                                       Senior Attorney
                                       Environmental Enforcement Section
                                       U.S. Department of Justice
                                       P.O. Box 7611
                                       Washington, DC 20044-7611

                                       Phone: (202) 514-1308
                                       Fax: (202) 616-6584
                                       E-Mail: Randall.Stone@USDOJ.GOV

                                       STEVEN M. BISKUPIC
                                       United States Attorney

                                       MATTHEW V. RICHMOND
                                       Assistant United States Attorney
                                       Eastern District of Wisconsin
                                       U.S. Courthouse and Federal Building -
                                       Room 530
                                       517 E. Wisconsin Avenue
                                       Milwaukee, WI 53202


3/26/07                                /s/ Richard Murawski
Date                                   -----------------------------------------
                                       RICHARD MURAWSKI
                                       Associate Regional Counsel
                                       U.S. Environmental Protection Agency
                                       Region 5
                                       77 West Jackson Boulevard
                                       Chicago, IL 60604


                                        6



Signature Page for Agreed Supplement to Consent Decree in United States and the
State of Wisconsin v. P.H. Glatfelter Company and WTM I Company, Case No.
03-C-0949 (E.D. Wis.)

                                       FOR THE STATE OF WISCONSIN


3/26/07                                /s/ Bruce Baker
Date                                   -----------------------------------------
                                       BRUCE BAKER
                                       Deputy Administrator, Division of Water
                                       Wisconsin Department of Natural Resources
                                       101 South Webster Street
                                       Madison, WI  53703


3/27/07                                /s/ Jerry L. Hancock
Date                                   -----------------------------------------
                                       JERRY L. HANCOCK
                                       Assistant Attorney General
                                       Wisconsin Department of Justice
                                       17 West Main Street
                                       Madison, WI 53702


                                        7



Signature Page for Agreed Supplement to Consent Decree in United States and the
State of Wisconsin v. P.H. Glatfelter Company and WTM I Company, Case No.
03-C-0949 (E.D. Wis.)


                                       FOR P. H. GLATFELTER COMPANY


3/28/07                                Signature: /s/ Jeffrey J. Norton
Date                                              ------------------------------
                                       Name (print): Jeffrey J. Norton
                                       Title: Vice President, General Counsel
                                              and Secretary
                                       Address:
                                                --------------------------------
                                                --------------------------------
                                                --------------------------------
                                                --------------------------------


                                        8



Signature Page for Agreed Supplement to Consent Decree in United States and the
State of Wisconsin v. P.H. Glatfelter Company and WTM I Company, Case No.
03-C-0949 (E.D. Wis.)

                                       FOR WTM I COMPANY


March 27, 2007                         Signature: /s/ J.P. Causey Jr.
Date                                              ------------------------------
                                       Name (print): J.P. Causey Jr.
                                       Title: Vice President
                                       Address: WTM I Company
                                                Box 2350
                                                Richmond, VA 23218-2350


                                        9



EXHIBIT A TO AGREED SUPPLEMENT TO CONSENT DECREE
(PRESCRIBED FORM OF LETTER DIRECTING PAYMENT UNDER LETTER OF CREDIT BEFORE APRIL
10, 2008)

                                     [Date]

[Name and Address of Letter of Credit Issuer]

     Payment Directive Under Letter of Credit No. ________________

Sir or Madam:

     I am writing in my capacity as the authorized representative of the U.S.
Environmental Protection Agency ("EPA"), the designated beneficiary under the
above-referenced letter of credit. The letter of credit was established pursuant
to an "Agreed Supplement to Consent Decree" in the case captioned United States
and the State of Wisconsin v. P.H. Glatfelter Co. and WTM I Co., Case No.
03-C-949 (E.D. Wis.), and Subparagraph 5.b of that Agreed Supplement to Consent
Decree specified certain conditions for requesting payment under the letter of
credit before April 10, 2008.

     EPA hereby certifies that the conditions for payment under Subparagraph 5.b
of the Agreed Supplement to Consent Decree have been satisfied, and EPA
therefore directs your institution to pay the full amount due under the letter
of credit ($6,000,000.00), as specified herein. Payment should be made by wire
transfer in accordance with the following payment instructions:

     Payment Amount: $6,000,000.00

     Payee:          Fox River OU1 Escrow Account
                     c/o Deutsche Bank Trust Company Americas
                     Account No. 252080

     [insert wire transfer instructions]


                                       -----------------------------------------
                                       Superfund Division Director
                                       U.S. Environmental Protection Agency,
                                       Region 5



                             CERTIFICATE OF SERVICE

     Pursuant to Paragraph 124 of the Consent Decree in this action, I hereby
certify that copies of the foregoing Agreed Supplement to Consent Decree were
served on this date by first-class mail, postage prepaid, upon the following
individuals:

Nancy K. Peterson
Quarles & Brady LLP
411 East Wisconsin Avenue, Suite 2040
Milwaukee, WI 53202-4497

J.P. Causey Jr.
Vice President & Corporate Secretary
WTM I Company
c/o Chesapeake Corporation
1021 E. Gary Street
Box 2350
Richmond, VA 23218-2350

Patrick H. Zaepfel
Meyer, Unkovic & Scott, LLP
110 East King Street
Lancaster, PA 17602

David G. Mandelbaum
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, PA 19103-7599

Jerry L. Hancock
Assistant Attorney General
Wisconsin Department of Justice
P.O. Box 7857
Madison, WI 53707-7857

Matthew V. Richmond
Assistant United States Attorney
Eastern District of Wisconsin
U.S. Courthouse and Federal Building - Room 530
517 E. Wisconsin Avenue
Milwaukee, WI 53202

Richard Murawski
Associate Regional Counsel (C-14J)
U.S. Environmental Protection Agency
77 W. Jackson Blvd.
Chicago, IL 60604

Douglas P. Dixon and Joshua Epstein
U.S. Environmental Protection Agency
Ariel Rios Building - Mail Code 2272A
1200 Pennsylvania Avenue, N.W.
Washington, DC 20460


Dated: March 29, 2007                    s/ Randall M.  Stone
                                         ---------------------------------------

EX-10.(Q)

                                                                  EXHIBIT 10(Q)

            COMPENSATORY ARRANGEMENTS WITH CERTAIN EXECUTIVE OFFICERS

     Set forth below are the base salaries of the individuals who will be
identified as named executive officers(1) of the Company in the Company's 2008
proxy statement. The salary increases for Messrs. Parrini, Jacunski, Norton and
Rapp were effective February 1, 2008. Mr. Glatfelter's salary increase was
effective March 5, 2008.



           NAME AND TITLE              SALARY
           --------------              ------
                                    
George H. Glatfelter II                 $660,800
Chairman and Chief Executive Officer

John P. Jacunski                        $333,426
Senior Vice President and Chief
Financial Officer

Dante C. Parrini                        $505,025
Executive Vice President and Chief
Operating Officer

Jeffrey J. Norton                       $248,250
Vice President, General Counsel and
Secretary

Martin Rapp                             $328,666
Vice President and General Manager,
Composite Fibers Business Unit


     The annual base salaries are subject to adjustment pursuant to the
Company's employee compensation policies in effect from time to time. Each of
the above executive officers has a change in control employment agreement, which
is included as exhibits to this Form 10-K. Also, each executive officer
participates in the Company's 2005 Long-Term Incentive Plan and in its
Management Incentive Plan, each of which are incorporated by reference as
exhibits to this Form 10-K.

EX-10.(R)

                                                                   EXHIBIT 10(R)

                    NON-EMPLOYEE DIRECTOR COMPENSATION POLICY

P.H. Glatfelter Company (the "Company") pays fees to each non employee director
of the Company. Each non-employee director receives an annual retainer fee of
$27,000 (two-thirds in shares of Glatfelter common stock and one-third in cash)
and an additional $5,000 annual retainer if the non-employee director serves as
chairperson of a committee of the board of directors. Each non-employee director
will also receive $2,000 for attending the annual board retreat, $1,500 for each
attended board meeting and $1,000 for each attended committee meeting. In
addition, each non-employee director will receive an annual Restricted Stock
Unit award valued at $15,500 that will vest ratably over a three-year period.

EX-10.(T)

                                                                  Exhibit 10(t)
Between

     GLATFELTER VERWALTUNGSGESELLSCHAFT MBH,
     hereby represented by its sole proprietor,

     ____________________________________________________,

     hereby represented by

     ____________________________________________________

and

     Mr
     MARTIN RAPP

the following

                           RETIREMENT PENSION CONTRACT

is concluded.

I. RETIREMENT PENSION PROVISION

1.   As Managing Director of Glatfelter Verwaltungsgesellschaft mbH Mr Martin
     Rapp acquires benefit entitlements according to this agreement.

2.   Benefits become due without fail

     2.1. on Mr Martin Rapp's 65th birthday;

     2.2. should Mr Martin Rapp become permanently incapable to work before that
          date, either alleged by himself or by Glatfelter
          Verwaltungsgesellschaft mbH and supported by a medical referee's
          doctor's certificate;

     2.3. upon Mr Martin Rapp's death with regard to his surviving dependants'
          entitlements to widow's and orphan's benefits;



                                      -2-


3.   Should Glatfelter Verwaltungsgesellschaft mbH terminate the employment
     (ordinary or extraordinary dismissal) for reasons other than breach of
     trust of contractual obligation by Mr Martin Rapp himself, he will, after
     his 65th birthday, receive benefit payments, arising from this agreement
     and calculated on the basis of benefit entitlements accrued up to
     termination of employment. The value of these entitlements depends on
     Section 2 of the Company Pension Law.

4.   If Mr Martin Rapp's employment with Glatfelter Verwaltungsgesellschaft mbH
     ceases for other reasons or upon completion of the vesting periods before
     his 65th birthday, he retains any benefit entitlements arising from this
     retirement pension provision accrued up to that date in accordance with
     Company Pension Law regulations.

     In this case benefit payments based on entitlements accrued up to
     termination of employment become due after his 65th birthday, or should Mr
     Martin Rapp become permanently incapable of working, or upon his death with
     regard to widow's and orphan's benefits.

     Vesting periods are deemed completed on 31/07/2007.

5.   From his 60th birthday, Mr Martin Rapp is entitled to receive early
     retirement benefit in the form of a reduced old-age pension. To this end
     the attained retirement benefit according to II.1 (below) is reduced by
     2.5% for each year by which the start of pension payments is brought
     forward. Any started years count pro-rata.

II.  BENEFIT PAYMENTS

1.   From his 65th birthday or in case of permanent incapacity Mr Martin Rapp
     receives an annual (old-age) pension payment of 1.5% per year of service of
     his average pensionable income paid over the last 5 years. Pensionable are
     his gross salary according to Section ......... as well as any bonus
     payments/variable pay paid in the respective 12-months period in accordance
     with the ,,Variable Pay Plan" as per Section ..... of the Managing
     Director's Employment Contract. The retirement pension percentage also
     applies to any pre-service periods from 01/08/2002. Any started years count
     pro rata temporis.

2.   In case of Mr Martin Rapp's death, provided the marriage had existed for at
     least 5 years prior to the claim date, his widow receives 60% of the
     retirement pension Mr Martin Rapp was paid or, in case of death before the
     retirement date, would have received if he had been incapable to work.



                                      -3-


3.   In case of Mr Martin Rapp's death his legitimate children and any of his
     children of equivalent legal status receive the following orphan's benefit
     until their 18th birthday:

     3.1. If the mother is alive and was entitled to receive widow's benefit at
          her husband's death, each child receives 20 % of the widow's benefit.

          However, the amount of benefit paid to the widow and children shall
          not exceed the amount of benefit Mr Martin Rapp would have received.

     3.2. If the mother is no longer alive or was not entitled to receive
          widow's benefit at her husband's death, each child receives 33 1/3 %
          of the widow's benefit. However, the combined amount shall not exceed
          60 % of the benefit Mr Martin Rapp would have received.

     3.3. If, at 18, any legitimate children are still in further education or
          undertaking vocational training, orphan's benefit will continue to be
          paid until their 24th birthday, provided the child's income from the
          age of 18 does not exceed the amount of the intended orphan's benefit.

4.   Any increase in benefits after pension payments have become due is subject
     to the legal regulations and any arising company pension law specific
     legislation.

     Benefits paid under the state pension scheme or an exempting private life
     insurance cannot be offset against these benefit payments.

5.   In case of a divorce settlement in accordance with Sections 1587 f BGB
     (German Civil Code) calculations will be based on the same benefits as
     would have been payable had the divorce settlement not taken place. The
     divorce settlement is deemed non-existent if it would entail an increase in
     company pension provisions.

     In case of a lawful extension of the divorce settlement in accordance with
     Section 3a of the German Law for the Regulation of Hardship Cases in
     Divorce Settlements (VersorgAusglHarteG) the amount of benefit paid to the
     surviving widow will be reduced in accordance with Section 3a para. 4 of
     the VersorgAusglHarteG by the value of compensation benefit in accordance
     with Section 3a para. 1 of the VersorgAusglHarteG, which is paid to or
     payable to the divorced (former) wife.



                                      -4-


III. MATURITY OF BENEFIT PAYMENTS

1.   The entitlement to receive benefit payments starts in the month after any
     payments became due, at the earliest upon termination of the employment
     contract and a twelfth of the amount specified in II. is payable on the
     15th day of each month.

2.   The entitlement is suspended as long as a claim to salary or salary
     compensation payments exists and the salary continues to be paid as death
     benefit.

3.   Payment of benefit ends at the end of the month in which the respective
     beneficiary dies or in which the other conditions for receipt of benefit
     payment become void.

IV.  EXTINCTION OF BENEFIT ENTITLEMENTS

Any entitlements to benefit provision arising from this contract become extinct,

1.   if Mr Martin Rapp caused his incapacity to work either deliberately or
     through gross negligence;

2.   if Glatfelter Verwaltungsgesellschaft mbH would be entitled to terminate
     the service provisions without notice for an important reason constituting
     breach of duty of good faith caused by the respective beneficiary;



                                      -5-


3.   if the respective beneficiary would act against the interests of Glatfelter
     Verwaltungsgesellschaft mbH or against the interests of associated
     companies including the KG to such an extent, that it would in the case of
     an existing service provision entitle the company concerned to terminate
     the service provision without notice for an important reason constituting a
     breach of duty of good faith;

4.   If the widow remarries. In this case the widow is only entitled to receive
     widow's benefit for three months following her remarriage.

     This clause does not affect the orphans' benefit provision regulations.

V.   DUTY OF DISCLOSURE

1.   Any respective beneficiary has the duty to inform Glatfelter
     Verwaltungsgesellschaft mbH of any change that impacts on the contractual
     obligations of the Glatfelter Verwaltungsgesellschaft mbH. If necessary,
     relevant valid proof of personal status must be provided.

2.   Any respective beneficiary has the duty to repay possible benefit
     overpayments of any kind to the Glatfelter Verwaltungsgesellschaft mbH,
     including any demands arising from submission of incorrect tax returns,
     social security payments or similar, even if there was no personal gain.

VI.  FINAL CLAUSES

1.   This contract comes into force upon signature. There are no other verbal
     agreements.

2.   Changes and additions to this contract have to be made in writing.



                                      -6-


3.   Part invalidity of this contract does not affect the remaining contractual
     clauses.

4.   A court of arbitration at the seat of the Glatfelter
     Verwaltungsgesellschaft mbH will decide any disputes arising from this
     contract including its validity and interpretation. The judge's decision is
     final. To this end a separate arbitration agreement will be made.

              York, PA USA                                Gernsbach
Place, Date:  February 5, 2008            Place, Date:    31-01-2008
            --------------------                      --------------------

/s/ Dante C. Parrini                      /s/ Martin Rapp
- ---------------------------------------   --------------------------------------
Glatfelter Verwaltungsgesellschaft mbH    Martin Rapp
represented by its shareholder/partner,

- ---------------------------------------
by: Dante C. Parrini

EX-10.(X)

                                                                   Exhibit 10(x)



                                                               EXECUTION VERSION

                               TERM LOAN AGREEMENT

                          dated as of January 15, 2008

                                     between

                          GPW VIRGINIA TIMBERLANDS LLC
                                   as Borrower

                   THE LENDERS FROM TIME TO TIME PARTY HERETO

                                       AND

                                  SUNTRUST BANK
                                    as Agent



                                TABLE OF CONTENTS

                                                                           
ARTICLE I.    DEFINITIONS; CONSTRUCTION....................................    1
SECTION 1.01  DEFINITIONS..................................................    1
SECTION 1.02  ACCOUNTING TERMS AND DETERMINATION...........................   14
SECTION 1.03  TERMS GENERALLY..............................................   14

ARTICLE II.   AMOUNT AND TERMS OF THE COMMITMENT...........................   15
SECTION 2.01  TERM LOAN COMMITMENT.........................................   15
SECTION 2.02  INTEREST ELECTION............................................   15
SECTION 2.03  TERMINATION OF COMMITMENTS...................................   15
SECTION 2.04  REPAYMENT OF TERM LOAN.......................................   16
SECTION 2.05  OPTIONAL PREPAYMENTS.........................................   16
SECTION 2.06  MANDATORY PREPAYMENTS........................................   16
SECTION 2.07  INTEREST ON TERM LOAN........................................   16
SECTION 2.08  FEES.........................................................   17
SECTION 2.09  COMPUTATION OF INTEREST......................................   17
SECTION 2.10  INABILITY TO DETERMINE INTEREST RATES........................   17
SECTION 2.11  ILLEGALITY...................................................   18
SECTION 2.12  INCREASED COSTS..............................................   18
SECTION 2.13  FUNDING INDEMNITY............................................   19
SECTION 2.14  TAXES........................................................   19
SECTION 2.15  PAYMENTS GENERALLY; PRO RATA TREATMENT; SHARING OF SET-OFFS..   21

ARTICLE III.  CONDITIONS PRECEDENT.........................................   23
SECTION 3.01  REPRESENTATIONS AND WARRANTIES...............................   23
SECTION 3.02  PERFORMANCE; NO DEFAULT......................................   23
SECTION 3.03  COMPLIANCE CERTIFICATES......................................   23
SECTION 3.04  OPINIONS OF COUNSEL..........................................   23
SECTION 3.05  INSTALLMENT SALE TRANSACTION; INITIAL CAPITALIZATION
              TRANSACTION..................................................   24
SECTION 3.06  TRANSACTION DOCUMENTS........................................   24
SECTION 3.07  COLLATERAL...................................................   25
SECTION 3.08  INTEREST RESERVE ACCOUNT AND COLLECTION ACCOUNT..............   25
SECTION 3.09  INTEREST RESERVE AMOUNT......................................   25
SECTION 3.10  TERM LOAN PERMITTED BY APPLICABLE LAW, ETC...................   25
SECTION 3.11  PAYMENT OF SPECIAL COUNSEL FEES..............................   26
SECTION 3.12  FUNDING INSTRUCTIONS.........................................   26
SECTION 3.13  PROCEEDINGS AND DOCUMENTS....................................   26

ARTICLE IV.   REPRESENTATIONS AND WARRANTIES...............................   26
SECTION 4.01  ORGANIZATION; POWER AND AUTHORITY............................   26
SECTION 4.02  AUTHORIZATION, ETC...........................................   26
SECTION 4.03  DISCLOSURE...................................................   27
SECTION 4.04  ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES.........   27
SECTION 4.05  CLOSING DATE BALANCE SHEET; LIABILITIES......................   27
SECTION 4.06  COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.................   27
SECTION 4.07  GOVERNMENTAL AUTHORIZATIONS, ETC.............................   27
SECTION 4.08  LITIGATION; OBSERVANCE OF STATUTES AND ORDERS................   28
SECTION 4.09  TAXES........................................................   28
SECTION 4.10  TITLE TO PROPERTY............................................   28
SECTION 4.11  LICENSES, PERMITS, ETC.......................................   28
SECTION 4.12  COMPLIANCE WITH ERISA........................................   28
SECTION 4.13  [Reserved]...................................................   29
SECTION 4.14  USE OF PROCEEDS; MARGIN REGULATIONS..........................   29




                                        i



                                                                           
SECTION 4.15  INDEBTEDNESS.................................................   30
SECTION 4.16  SOLVENCY.....................................................   30
SECTION 4.17  ACTIVITIES...................................................   30
SECTION 4.18  FOREIGN ASSETS CONTROL REGULATIONS, ETC......................   30
SECTION 4.19  INVESTMENT COMPANY ACT.......................................   31

ARTICLE V.    AFFIRMATIVE COVENANTS........................................   31
SECTION 5.01  FINANCIAL AND BUSINESS INFORMATION...........................   31
SECTION 5.02  OFFICER'S CERTIFICATE........................................   32
SECTION 5.03  VISITATION...................................................   32
SECTION 5.04  COMPLIANCE WITH LAW..........................................   33
SECTION 5.05  INSURANCE....................................................   33
SECTION 5.06  MAINTENANCE OF PROPERTIES....................................   33
SECTION 5.07  PAYMENT OF TAXES.............................................   33
SECTION 5.08  CORPORATE EXISTENCE, ETC.....................................   33
SECTION 5.09  PAYMENT OF OBLIGATIONS.......................................   33
SECTION 5.10  BOOKS AND RECORDS............................................   34
SECTION 5.11  ACTIVITIES...................................................   34
SECTION 5.12  CHARACTERIZATION OF BORROWER FOR TAX PURPOSES................   34

ARTICLE VI.   NEGATIVE COVENANTS...........................................   34
SECTION 6.01  INDEBTEDNESS.................................................   34
SECTION 6.02  LIENS........................................................   34
SECTION 6.03  TRANSACTIONS WITH AFFILIATES.................................   34
SECTION 6.04  MERGER, CONSOLIDATION, ETC...................................   35
SECTION 6.05  LINE OF BUSINESS.............................................   35
SECTION 6.06  TERRORISM SANCTIONS REGULATIONS..............................   35
SECTION 6.07  INVESTMENTS..................................................   35
SECTION 6.08  DISTRIBUTIONS................................................   35
SECTION 6.09  CAPITAL EXPENDITURES.........................................   36
SECTION 6.10  BANKRUPTCY, INSOLVENCY.......................................   36
SECTION 6.11  AMENDMENTS AND MODIFICATIONS TO ORGANIZATIONAL DOCUMENTS
              AND COLLATERAL...............................................   36

ARTICLE VII.  EVENTS OF DEFAULT............................................   37
SECTION 7.01  EVENTS OF DEFAULT............................................   37
SECTION 7.02  REMEDIES ON DEFAULT, ETC.....................................   38

ARTICLE VIII. THE AGENT....................................................   39
SECTION 8.01  APPOINTMENT OF AGENT.........................................   39
SECTION 8.02  NATURE OF DUTIES OF AGENT....................................   40
SECTION 8.03  LACK OF RELIANCE ON THE AGENT................................   40
SECTION 8.04  CERTAIN RIGHTS OF THE AGENT..................................   40
SECTION 8.05  RELIANCE BY AGENT............................................   41
SECTION 8.06  THE AGENT IN ITS INDIVIDUAL CAPACITY.........................   41
SECTION 8.07  SUCCESSOR AGENT..............................................   41
SECTION 8.08  AUTHORIZATION TO EXECUTE OTHER LOAN DOCUMENTS................   42

ARTICLE IX.   MISCELLANEOUS................................................   42
SECTION 9.01  NOTICES......................................................   42
SECTION 9.02  WAIVER; AMENDMENTS...........................................   43
SECTION 9.03  EXPENSES; INDEMNIFICATION....................................   44
SECTION 9.04  SUCCESSORS AND ASSIGNS.......................................   45
SECTION 9.05  GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS...   49
SECTION 9.06  WAIVER OF JURY TRIAL.........................................   49
SECTION 9.07  RIGHT OF SETOFF..............................................   50
SECTION 9.08  COUNTERPARTS; INTEGRATION....................................   50
SECTION 9.09  SURVIVAL.....................................................   50
SECTION 9.10  SEVERABILITY.................................................   51
SECTION 9.11  CONFIDENTIALITY..............................................   51




                                       ii



                                                                           
SECTION 9.12  INTEREST RATE LIMITATION.....................................   51
SECTION 9.13  QUALIFIED PURCHASER..........................................   52



Schedules
   Schedule 4.05 - Closing Date Balance Sheet
   Schedule 4.15 - Other Indebtedness

Exhibits
   Exhibit A     - Term Note
   Exhibit B     - Form of Glatfelter Note
   Exhibit C     - Form of Assignment and Acceptance


                                       iii



                               TERM LOAN AGREEMENT

          THIS TERM LOAN AGREEMENT (this "Agreement") is made and entered into
as of January 15, 2008, by and between GPW VIRGINIA TIMBERLANDS LLC, a Delaware
limited liability company (the "Borrower") the several banks and other financial
institutions from time to time party hereto (the "Lenders"), and SUNTRUST BANK,
in its capacity as Agent for the Lenders (in such capacity, the "Agent").

                                   WITNESSETH:

          WHEREAS, the Borrower has requested that the Lender make a term loan
in a principal amount equal to $36,694,500.00 to the Borrower;

          WHEREAS, subject to the terms and conditions of this Agreement, the
Lender is willing to make the term loan to the Borrower.

          NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Agent, the Borrower and the Lenders agree as
follows:

                      ARTICLE I. DEFINITIONS; CONSTRUCTION

          SECTION 1.01 DEFINITIONS.

     In addition to the other terms defined herein, the following terms used
herein shall have the meanings herein specified (to be equally applicable to
both the singular and plural forms of the terms defined):

          "ADJUSTED LIBO RATE" shall mean, with respect to each Interest Period
for a Eurodollar Loan, the rate per annum obtained by dividing (i) LIBOR for
such Interest Period by (ii) a percentage equal to 1.00 minus the Eurodollar
Reserve Percentage.

          "ADMINISTRATIVE QUESTIONNAIRE" shall mean, with respect to each
Lender, an administrative questionnaire in the form prepared by the Agent and
submitted to the Agent duly completed by such Lender.

          "AFFILIATE" means, at any time, and with respect to any Person, any
other Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person. As used in this definition, "Control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting



securities, by contract or otherwise. Unless the context otherwise clearly
requires, any reference to an "Affiliate" is a reference to an Affiliate of the
Borrower.

          "AGENT" shall have the meaning set forth in the introductory paragraph
hereof.

          "ANTI-TERRORISM ORDER" means Executive Order No. 13,224 of September
24, 2001, Blocking Property and Prohibiting Transactions with Persons Who
Commit, Threaten to Commit or Support Terrorism, 66 U.S. Fed. Reg. 49, 079
(2001), as amended.

          "APPLICABLE LENDING OFFICE" shall mean, for each Lender the "Lending
Office" of such Lender (or an Affiliate of such Lender) designated in the
Administrative Questionnaire submitted by such Lender or such other office of
such Lender (or an Affiliate of such Lender) as such Lender may from time to
time specify to the Agent and the Borrower as the office by which its Term Loan
is to be made and maintained.

          "APPLICABLE MARGIN" shall mean 0.00% per annum on a Base Rate Loan and
1.20% per annum on a Eurodollar Loan.

          "APPROVED FUND" means any Person (other than a natural Person) that is
(or will be) engaged in making, purchasing, holding or otherwise investing in
commercial loans and similar extensions of credit in the ordinary course of its
business and that is administered or managed by (a) the Lender, (b) an Affiliate
of the Lender or (c) an entity or an Affiliate of an entity that administers or
manages the Lender.

          "ASSIGNMENT AND ACCEPTANCE" shall mean an assignment and acceptance
entered into by a Lender and an assignee (with the consent of any party whose
consent is required by Section 9.04(b)) and accepted by the Agent, in the form
of Exhibit C attached hereto or any other form approved by the Agent.

          "AVAILABLE FUNDS" means, as of any date of determination, the amount
by which cash on deposit in the Interest Reserve Account and the Collection
Account, and Permitted Investments standing to the credit of the Interest
Reserve Account or the Collection Account or otherwise subject to a perfected,
first priority Lien in favor of the Collateral Trustee, exceeds the sum of (a)
the amount of principal, interest and other sums in respect of the Term Loan
that is due and payable within the 45 days following such date of determination,
plus (b) the Interest Reserve Amount, plus (c) the amount of expenses projected
by the Borrower in good faith to be due and payable on or prior to the last day
of the immediately succeeding Interest Period as certified by a Responsible
Officer of the Borrower to the Collateral Trustee.

          "BASE RATE" shall mean the higher of (i) the per annum rate which the
Agent publicly announces from time to time to be its prime lending rate, as in
effect from time to time, and (ii) the Federal Funds Rate, as in effect from
time to time, plus one-half of one percent (0.50%). The Agent's prime lending
rate is a reference rate and does not necessarily represent the lowest or best
rate charged to customers. The Agent may make commercial loans or other loans at
rates of interest at, above or below the Agent's prime lending rate. Each change
in the Agent's prime lending rate shall be effective from and including the date
such change is publicly


                                        2



announced as being effective. When used in reference to the Term Loan, "Base
Rate" refers to whether the Term Loan bears interest at a rate determined by
reference to the Base Rate (e.g., a "Base Rate Loan").

          "BORROWER" shall have the meaning in the introductory paragraph
hereof.

          "BUSINESS DAY" shall mean (i) any day other than a Saturday, Sunday or
other day on which commercial banks in Atlanta, Georgia or Richmond, Virginia
are authorized or required by law to close and (ii) if such day relates to a
borrowing of, a payment or prepayment of principal or interest on, a conversion
of, or an Interest Period for, a Eurodollar Loan or a notice with respect to any
of the foregoing, any London Business Day.

          "CAPITALIZATION TRANSACTION" means, collectively, (a) the Initial
Capitalization Transaction, (b) the purchase by the Borrower from Glatfelter on
the date of Closing of a Glatfelter Note in the principal amount of
$3,377,000.00 for a purchase price equal to 100% of the principal amount
thereof, paid by the Borrower with proceeds of the Term Loan, and (c) the
contribution by the Parent on the date of Closing of a Glatfelter Note in the
principal amount of $5,781,000.00.

          "CHANGE IN LAW" shall mean (i) the adoption of any applicable law,
rule or regulation after the date of this Agreement, (ii) any change in any
applicable law, rule or regulation, or any change in the interpretation or
application thereof, by any Governmental Authority after the date of this
Agreement, or (iii) compliance by the Lender (or by the Lender's holding
company, if applicable) with any request, guideline or directive (whether or not
having the force of law) of any Governmental Authority made or issued after the
date of this Agreement.

          "CLOSING DATE" or the "CLOSING" shall mean the date on which the
conditions precedent set forth in Article III have been satisfied or waived.

          "CLOSING DATE BALANCE SHEET" means the balance sheet of the Borrower
as of the date of Closing, after giving effect and fully reflecting all of the
transactions contemplated to occur on or prior to Closing, including, without
limitation, the Capitalization Transaction, the Term Loan and the Closing Date
Distribution.

          "CLOSING DATE DISTRIBUTION" means a cash distribution made by the
Borrower to the Parent on the date of Closing in the amount of $32,377,500.

          "CODE" shall mean the Internal Revenue Code of 1986, as amended and in
effect from time to time.

          "COLLATERAL" means (a) the Installment Note, (b) the Letter of Credit,
(c) the Glatfelter Securities, (d) the Interest Reserve Account and all cash and
other items from time to time standing to the credit of the Interest Reserve
Account, (e) the Collection Account and all cash and other items from time to
time standing to the credit of the Collection Account, (f) all rights of the
Borrower under the Contribution Agreement, (g) all other assets of the Borrower,
and (h) any and all proceeds of any of the foregoing.


                                        3



          "COLLATERAL TRUSTEE" means SunTrust Bank, in its capacity as
Collateral Trustee pursuant to the Collateral Trust Indenture.

          "COLLATERAL TRUST INDENTURE" means that certain Collateral Trust
Indenture dated as of January 15, 2008 between the Collateral Trustee and the
Borrower.

          "COMMITMENT" shall mean the Term Loan Commitment.

          "CONTRIBUTION AGREEMENT" means the Contribution Agreement, dated as of
January 14, 2008, between the Parent and the Borrower.

          "CONTRIBUTION AGREEMENT EVENT" means (a) any representation or
warranty made by the Parent in the Contribution Agreement proves to have been
false or incorrect in any material respect on the date as of which made or (b)
the Parent defaults in the performance of or compliance with any term in the
Contribution Agreement to be performed by or complied with by the Parent and
such defaults are not remedied within 30 days after the earlier of (i) a
responsible officer of the Parent obtaining actual knowledge of such default and
(ii) the Parent receiving written notice of such default.

          "DEFAULT" shall mean any condition or event that, with the giving of
notice or the lapse of time or both, would constitute an Event of Default.

          "DEFAULT INTEREST" shall have the meaning set forth in Section
2.07(b).

          "DOLLAR(S)" and the sign "$" shall mean lawful money of the United
States of America.

          "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.

          "ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Borrower
under section 414 of the Code.

          "EURODOLLAR" when used in reference to the Term Loan, refers to
whether the Term Loan bears interest at a rate determined by reference to the
Adjusted LIBO Rate (e.g., a "Eurodollar Loan").

          "EURODOLLAR RESERVE PERCENTAGE" shall mean the aggregate (without
duplication) of the maximum reserve percentages (including, without limitation,
any emergency, supplemental, special or other marginal reserves) expressed as a
decimal (rounded upwards to the next 1/100th of 1%) in effect on any day to
which the Lender is subject with respect to the Adjusted LIBO Rate pursuant to
regulations issued by the Board of Governors of the Federal Reserve System (or
any Governmental Authority succeeding to any of its principal functions) with
respect to eurocurrency funding (currently referred to as "eurocurrency
liabilities" under


                                        4



Regulation D). Any Eurodollar Loan shall be deemed to constitute eurocurrency
funding and to be subject to such reserve requirements without benefit of or
credit for proration, exemptions or offsets that may be available from time to
time to the Lender under Regulation D. The Eurodollar Reserve Percentage shall
be adjusted automatically on and as of the effective date of any change in any
reserve percentage.

          "EVENT OF DEFAULT" shall have the meaning provided in Section 7.01.

          "EXCLUDED TAXES" shall mean with respect to the Agent, any Lender or
any other recipient of any payment to be made by or on account of any obligation
of the Borrower hereunder, (a) Taxes imposed on or measured by such recipient's
overall net income (however denominated), franchise Taxes imposed on such
recipient (in lieu of net income Taxes), and branch profits or similar Taxes
imposed on it by any jurisdiction (or any political subdivision thereof) as a
result of such recipient being organized or having its principal office or, in
the case of any Lender, its Applicable Lending Office located in such
jurisdiction or as a result of a present or former connection with such
jurisdiction (other than any such connection arising from such recipient having
executed, delivered or performed its obligations or received a payment under, or
enforced, or otherwise with respect to, any of the Loan Documents), and (b) any
withholding or backup withholding Tax that (i) is imposed under the law in
effect at the time such recipient becomes a party to this Agreement, except to
the extent of any additional amounts to which such Lender's assignor (if any)
was entitled at the time of assignment, or designates a new lending office
(unless such re-designation was at the request of the Borrower), other than
Taxes that have accrued prior to the designation of such lending office that are
otherwise not Excluded Taxes, or (ii) is attributable to such Foreign Lender's
failure (or unreasonable delay) to comply (other than as a result of a change in
law, rule, regulation or treaty or treaty or in the administration,
interpretation or application thereof by a Governmental Authority) with Section
2.14(e).

          "FEDERAL FUNDS RATE" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the next 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with member banks
of the Federal Reserve System arranged by Federal funds brokers, as published by
the Federal Reserve Bank of New York on the next succeeding Business Day or if
such rate is not so published for any Business Day, the Federal Funds Rate for
such day shall be the average rounded upwards, if necessary, to the next 1/100th
of 1% of the quotations for such day on such transactions received by the Agent
from three Federal funds brokers of recognized standing selected by the Agent.

          "FEE LETTER" shall mean that certain fee letter, dated as of January
9, 2008, executed by SunTrust Robinson Humphrey, Inc. and SunTrust Bank and
accepted by the Borrower.

          "FOREIGN LENDER" shall mean any Lender that is not a United States
person under Section 7701(a)(30) of the Code.

          "GAAP" shall mean generally accepted accounting principles in the
United States applied on a consistent basis and subject to the terms of Section
1.02.


                                        5



          "GLATFELTER" means P.H. Glatfelter Company, a Pennsylvania
corporation.

          "GLATFELTER NOTE" means any note issued by Glatfelter in favor of the
Borrower in the form of Exhibit B.

          "GLATFELTER SECURITIES" means, collectively, (a) the Glatfelter Note
in the principal amount of $5,781,000.00 contributed by the Parent to the
Borrower on the date of Closing, and (b) the Glatfelter Note in the principal
amount of $3,377,000.00 purchased by the Borrower from Glatfelter on the date of
Closing with proceeds from the Term Loan.

          "GOVERNMENTAL AUTHORITY" means (a) the government of (i) the United
States of America or any State or other political subdivision thereof, or (ii)
any other jurisdiction in which the Borrower conducts all or any part of its
business, or which asserts jurisdiction over any properties of the Borrower, or
(b) any entity exercising executive, legislative, judicial, regulatory or
administrative functions of, or pertaining to, any such government

          "GUARANTEE" means, with respect to any Person, any obligation (except
the endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person:

          (a) to purchase such indebtedness or obligation or any property
constituting security therefor;

          (b) to advance or supply funds (i) for the purchase or payment of such
indebtedness or obligation, or (ii) to maintain any working capital or other
balance sheet condition or any income statement condition of any other Person or
otherwise to advance or make available funds for the purchase or payment of such
indebtedness or obligation;

          (c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such indebtedness or
obligation of the ability of any other Person to make payment of the
indebtedness or obligation; or

          (d) otherwise to assure the owner of such indebtedness or obligation
against loss in respect thereof.

          In any computation of the indebtedness or other liabilities of the
obligor under any Guarantee, the indebtedness or other obligations that are the
subject of such Guarantee shall be assumed to be direct obligations of such
obligor.

          "INDEBTEDNESS" with respect to any Person means, at any time, without
duplication,


                                        6



     (a) its liabilities for borrowed money and its redemption obligations in
respect of mandatorily redeemable Preferred Stock;

     (b) its liabilities for the deferred purchase price of property acquired by
such Person (excluding accounts payable arising in the ordinary course of
business but including all liabilities created or arising under any conditional
sale or other title retention agreement with respect to any such property);

     (c) (i) all liabilities appearing on its balance sheet in accordance with
GAAP in respect of Capital Leases and (ii) all liabilities which would appear on
its balance sheet in accordance with GAAP in respect of Synthetic Leases
assuming such Synthetic Leases were accounted for as Capital Leases;

     (d) all liabilities for borrowed money secured by any Lien with respect to
any property owned by such Person (whether or not it has assumed or otherwise
become liable for such liabilities);

     (e) all its liabilities in respect of letters of credit or instruments
serving a similar function issued or accepted for its account by banks and other
financial institutions (whether or not representing obligations for borrowed
money);

     (f) all Swap Contracts of such Person; and

     (g) any Guaranty of such Person with respect to liabilities of a type
described in any of clauses (a) through (f) hereof.

          "INDEMNIFIED TAXES" shall mean Taxes other than Excluded Taxes.

          "INITIAL CAPITALIZATION TRANSACTION" means the contribution by the
Parent to the Borrower prior to the Closing of the Installment Note and the
Letter of Credit with respect to membership interests constituting 100% of the
issued and outstanding equity capital of the Borrower, pursuant to a
Contribution Agreement and the operating agreement of the Borrower.

          "INSTALLMENT NOTE" means that certain Purchase Note No. P-1 in the
principal amount of $43,170,000, dated November 15, 2007, issued by the
Installment Note Issuer, originally made payable to the order of the Parent, and
conveyed and transferred by the Parent to the Borrower pursuant to the
Contribution Agreement.

          "INSTALLMENT NOTE ISSUER" means GIC Investments LLC, a Delaware
limited liability company.

          "INSTALLMENT SALE TRANSACTION" means the sale by the Parent on
November 16, 2007 of its equity interests in two limited liability companies
formed to hold certain timberlands to the Installment Note Issuer, the purchase
price for which the Installment Note Issuer delivered to the Parent (a) the
Installment Note and (b) the Letter of Credit.


                                        7



          "INSTALLMENT NOTE TRIGGER EVENT" means any of (a) a default in the
payment of any amount when due (whether on a scheduled payment date, upon
acceleration or otherwise) under the Installment Note that has not been cured
with the proceeds of a drawing under the Letter of Credit within 5 days
following such default; (b) failure of the Borrower to direct the Collateral
Trustee to accelerate the maturity of the Installment Note within 5 days
following the delivery by the L/C Bank of a Timely Reimbursement Failure Notice
(as such term is defined in the Letter of Credit); and (c) an insolvency event
relating to the L/C Bank.

          "INTEREST PERIOD" means (i) initially, the period commencing on the
date hereof and ending on June 15, 2008 and (ii) thereafter, each period
commencing on the last day of the immediately preceding Interest Period and
ending on the 15th day of the sixth consecutive month ending after the month in
which such immediately preceding Interest Period ended. The determination of
Interest Periods shall be subject to the following provisions:

     (i) if any Interest Period would otherwise expire on a day that is not a
     Business Day, such Interest Period shall expire on the immediately
     succeeding Business Day; provided, however, that if any Interest Period
     would otherwise expire on a day that is not a Business Day but is a day of
     the month after which no further Business Day occurs in such month, such
     Interest Period shall expire on the immediately preceding Business Day; and

     (ii) no Interest Period shall extend beyond the stated maturity date
     hereof.

          "INTEREST RESERVE AMOUNT" means $350,000.

          "INTEREST RESERVE ACCOUNT" means a trust account established by the
Collateral Trustee to hold certain amounts to be used to make payments on the
Term Loan.

          "INVESTMENT COMPANY ACT" shall mean the United States Investment
Company Act of 1940, as amended.

          "LC BANK" means the Royal Bank of Scotland plc, together with any
issuer of a substitute Letter of Credit.

          "LETTER OF CREDIT" means that certain Irrevocable Standby Letter of
Credit No. LCA11020701586NY, in the initial "Base Amount" (as defined in said
letter of credit) of $43,170,000 issued by the LC Bank, together with any
substitute letter of credit that replaces such letter of credit pursuant to the
terms of the Installment Note.

          "LIBOR" means, (i) 4.110625% per annum for the first Interest Period,
and (ii) for any subsequent Interest Period:

          (a) an interest rate per annum appearing on page BBAM on the Bloomberg
Terminal ("Page BBAM") (or any other page that may replace such page from time
to time for the purpose of displaying offered rates of leading banks for London
interbank deposits in United States dollars) at approximately 11:00 a.m. (London
time) on the day that is two London


                                        8



Business Days prior to the commencement of such Interest Period for United
States dollar deposits having a tenor equal to the duration of such Interest
Period;

          (b) if a rate is not available, the rate per annum determined by the
Collateral Trustee to be the arithmetic mean (rounded, if necessary, to the
nearest fifth decimal place (with 5's being rounded up)) of the respective rates
of interest communicated by each of the Reference Banks to the Collateral
Trustee as the rates at which such Reference Banks would offer a United States
dollar deposit having a tenor equal to the duration of such Interest Period and
an amount at least equal to US$100 million to prime banks in the London
interbank market at approximately 11:00 a.m. (London time) on the day that is
two London Business Days prior to the commencement of such Interest Period;
provided, however, that if less than all Reference Banks provide such rate
quotations, then the Collateral Trustee shall determine the above-mentioned
arithmetic mean based on the rates quoted by those Reference Banks that provide
such a quotation, and if only one Reference Bank provides such a rate quotation,
then the Collateral Trustee shall use such sole Reference Bank's quoted rate; or

          (c) if a rate cannot be determined pursuant to the foregoing
provisions, the LIBO Rate for such Interest Period shall be the rate per annum
determined by the Collateral Trustee to be the arithmetic mean (rounded, if
necessary, to the nearest fifth decimal place (with 5's being rounded up)) of
the respective rates of interest communicated by each of the Reference Banks to
the Collateral Trustee as the rates at which such Reference Banks would offer a
United States dollar deposit having a tenor equal to the duration of such
Interest Period and an amount at least equal to US$100 million to prime banks in
the New York interbank market at approximately 11:00 a.m. (New York City time)
on the first day of such Interest Period; provided, however, that if less than
all Reference Banks provide such rate quotations, then the Collateral Trustee
shall determine the above-mentioned arithmetic mean based on the rates quoted by
those Reference Banks that provide such a quotation, and if only one Reference
Bank provides such a rate quotation, then the Collateral Trustee shall use such
sole Reference Bank's quoted rate.

     In respect of any Interest Period having a tenor other than six months, the
LIBO Rate shall be determined through the use of straight-line interpolation by
reference to two rates calculated in accordance with clauses (a), (b) and (c)
above, one of which shall be determined as if the maturity of the Dollar
deposits referred to therein were the period of time for which rates are
available next shorter than the Interest Period and the other of which shall be
determined as if the maturity were the period of time for which rates are
available next longer than the Interest Period; provided that, if an Interest
Period is less than or equal to seven days, then the LIBO Rate shall be
determined by reference to a rate calculated in accordance with clauses (a), (b)
and (c) above as if the maturity of the Dollar deposits referred to therein were
a period of time equal to seven days.

          "LENDERS" shall have the meaning set forth in the introductory
paragraph of this Agreement.

          "LIEN" shall mean any mortgage, pledge, security interest, lien
(statutory or otherwise), charge, encumbrance, hypothecation, assignment,
deposit arrangement, or other


                                        9



arrangement having the practical effect of the foregoing or any preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including any conditional sale or other title retention
agreement and any capital lease having the same economic effect as any of the
foregoing).

          "LOAN" shall have the meaning set forth in Section 2.01

          "LOAN DOCUMENTS" shall mean, collectively, (a) this Agreement, (b) the
Term Note, (c) the Pledge and Security Agreement, (d) the Collateral Trust
Indenture, (e) any deposit account control agreement or securities account
control agreement, if any, governing the Interest Reserve Account, Collection
Account or any investments made with the proceeds of any cash or other items
standing to the credit of the Interest Reserve Account or Collection Account and
(f) any other certificate, instrument, document or agreement executed or
delivered by the Borrower to the Collateral Trustee, the Agent or any Lender.

          "LONDON BUSINESS DAY" shall mean a day on which dealings in Dollars
are carried on in the London interbank market.

          "MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Borrower, or (b) the ability of the Borrower to perform its obligations under
this Agreement, the Term Note and the other Loan Documents, or (c) the validity
or enforceability of this Agreement, the Term Note or the other Loan Documents.

          "MATURITY DATE" shall mean, with respect to the Term Loan, the earlier
of (i) January 15, 2013 or (ii) the date on which the principal amount of the
Term Loan has been declared or automatically have become due and payable
(whether by acceleration or otherwise).

          "MEMBER" means the Parent in its capacity as the sole member of the
Borrower.

          "MOODY'S" shall mean Moody's Investors Service, Inc.

          "MULTIEMPLOYER PLAN" means any Plan that is a "multiemployer plan" (as
such term is defined in section 4001(a)(3) of ERISA).

          "NOTE" shall mean the Term Note.

          "OBLIGATIONS" shall mean all amounts owing by the Borrower to the
Agent or any Lender pursuant to or in connection with this Agreement or any
other Loan Document, including without limitation, all principal, interest
(including any interest accruing after the filing of any petition in bankruptcy
or the commencement of any insolvency, reorganization or like proceeding
relating to the Borrower, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding), all reimbursement
obligations, fees, expenses, indemnification and reimbursement payments, costs
and expenses (including all fees and expenses of counsel to the Agent and any
Lender incurred pursuant to this Agreement or any other Loan Document), whether
direct or indirect, absolute or contingent, liquidated or


                                       10



unliquidated, now existing or hereafter arising hereunder or thereunder, and all
obligations to the Lender or any of its Affiliates, together with all renewals,
extensions, modifications or refinancings thereof.

          "OFFICER'S CERTIFICATE" means a certificate of a Senior Financial
Officer or of another officer of the Borrower whose responsibilities extend to
the subject matter of such certificate.

          "OTHER TAXES" shall mean any and all present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies arising from any payment made hereunder or from the execution, delivery
or enforcement of, or otherwise with respect to, this Agreement or any other
Loan Document.

          "PARENT" means Glatfelter Pulp Wood Company, a Maryland corporation
and a wholly-owned subsidiary of Glatfelter.

          "PARTICIPANT" shall have the meaning set forth in Section 9.04(d).

          "PAYMENT OFFICE" shall mean the office of the Agent located at
SunTrust Plaza, 303 Peachtree Street, Atlanta, Georgia 30303 or such other
location as to which the Agent shall have given written notice to the Borrower
and the Lenders.

          "PERMITTED INVESTMENTS" means (a) marketable direct obligations issued
by, or unconditionally guaranteed by, the United States Government or issued by
any agency thereof and backed by the full faith and credit of the United States,
in each case maturing within one year from the date of acquisition; (b)
certificates of deposit, time deposits, eurocurrency time deposits or overnight
bank deposits having maturities of six months or less from the date of
acquisition issued by any commercial bank organized under the laws of the United
States or any state thereof having combined capital and surplus and undivided
profits of not less than $1,000,000,000; (c) commercial paper of an issuer rated
at least A-1 by S&P or P-1 by Moody's, or carrying an equivalent rating by a
nationally recognized rating agency, if both of the two named rating agencies
cease publishing ratings of commercial paper issuers generally, and maturing
within six months from the date of acquisition; (d) repurchase obligations of
any commercial bank satisfying the requirements of clause (b) of this
definition, having a term of not more than 30 days, with respect to securities
issued or fully guaranteed or insured by the United States government; (e)
securities with maturities of one year or less from the date of acquisition
issued or fully guaranteed by any state, commonwealth or territory of the United
States, by any political subdivision or taxing authority of any such state,
commonwealth or territory or by any foreign government, the securities of which
state, commonwealth, territory, political subdivision, taxing authority or
foreign government (as the case may be) are rated at least A+ by S&P or A1 by
Moody's; (f) securities with maturities of six months or less from the date of
acquisition backed by standby letters of credit issued by any commercial bank
satisfying the requirements of clause (b) of this definition; (g) money market
mutual or similar funds that invest exclusively in assets satisfying the
requirements of clauses (a) through (f) of this definition; (h) money market
funds that (1) comply with the criteria set forth in SEC Rule 2a-7 under the
Investment Company


                                       11



Act of 1940, as amended and (2) are rated A+ by S&P and A1 by Moody's and (iii)
have portfolio assets of at least $100,000,000.

          "PERSON" shall mean any individual, partnership, firm, corporation,
association, joint venture, limited liability company, trust or other entity, or
any Governmental Authority.

          "PLAN" means an "employee benefit plan" (as defined in section 3(3) of
ERISA) subject to Title I of ERISA that is or has been established or
maintained, or to which contributions are or have been made or required to be
made, by the Borrower or any ERISA Affiliate with respect to which the Borrower
or any ERISA Affiliate may have any liability.

          "PLEDGE AND SECURITY AGREEMENT" means that certain Pledge and Security
Agreement, dated as of January 15, 2008, between the Borrower and the Collateral
Trustee.

          "PREFERRED STOCK" means any class of capital stock of a Person that is
preferred over any other class of capital stock (or similar equity interests) of
such Person as to the payment of dividends or the payment of any amount upon
liquidation or dissolution of such Person.

          "PRO RATA SHARE" shall mean, with respect to any Lender at any time, a
percentage the numerator of which shall be the outstanding principal amount of
such Lender's portion of the Term Loan, and the denominator of which shall be
the outstanding principal amount of the Term Loan.

          "PROPERTY" or "PROPERTIES" means, unless otherwise specifically
limited, real or personal property of any kind, tangible or intangible, choate
or inchoate.

          "QUALIFIED PURCHASER" shall mean a "qualified purchaser" for purposes
of Section 3(c)(7) of the Investment Company Act and as defined in Section
2(a)(51) of the Investment Company Act.

          "REGULATION D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System, as the same may be in effect from time to time, and
any successor regulations.

          "REFERENCE BANKS" means The Royal Bank of Scotland plc, SunTrust Bank,
JPMorgan Chase Bank N.A. and The Bank of New York.

          "RELATED PARTIES" shall mean, with respect to any specified Person,
such Person's Affiliates and the respective directors, officers, employees,
agents and advisors of such Person and such Person's Affiliates.

          "REQUIRED LENDERS" means, at any time, Lenders holding greater than
50% of the principal amount of the Term Loan then outstanding.


                                       12



          "RESPONSIBLE OFFICER" shall mean the President, any Vice-President,
the Treasurer, the Secretary, any Senior Financial Officer and any other officer
of the Borrower with responsibility for the administration of the relevant
portion of this Agreement.

          "SENIOR FINANCIAL OFFICER" means the chief financial officer,
principal accounting officer, treasurer or comptroller of the Borrower.

          "S&P" shall mean Standard & Poor's.

          "SUBSIDIARY" shall mean, as to any Person, any other Person in which
such first Person or one or more of its Subsidiaries or such first Person and
one or more of its Subsidiaries owns sufficient equity or voting interests to
enable it or them (as a group) ordinarily, in the absence of contingencies, to
elect a majority of the directors (or Persons performing similar functions) of
such second Person, and any partnership or joint venture if more than a 50%
interest in the profits or capital thereof is owned by such first Person or one
or more of its Subsidiaries or such first Person and one or more of its
Subsidiaries (unless such partnership or joint venture can and does ordinarily
take major business actions without the prior approval of such Person or one or
more of its Subsidiaries). Unless the context otherwise clearly requires, any
reference to a "Subsidiary" is a reference to a Subsidiary of the Borrower.

          "SWAP CONTRACT" means (a) any and all interest rate swap transactions,
basis swap transactions, basis swaps, credit derivative transactions, forward
rate transactions, commodity swaps, commodity options, forward commodity
contracts, equity or equity index swaps or options, bond or bond price or bond
index swaps or options or forward foreign exchange transactions, cap
transactions, floor transactions, currency options, spot contracts or any other
similar transactions or any of the foregoing (including, but without limitation,
any options to enter into any of the foregoing), and (b) any and all
transactions of any kind, and the related confirmations, which are subject to
the terms and conditions of, or governed by, any form of master agreement
published by the International Swaps and Derivatives Association, Inc., any
International Foreign Exchange Master Agreement.

          "SYNTHETIC LEASE" means, at any time, any lease (including leases that
may be terminated by the lessee at any time) of any property (a) that is
accounted for as an operating lease under GAAP and (b) in respect of which the
lessee retains or obtains ownership of the property so leased for United States
federal income tax purposes, other than any such lease under which such Person
is the lessor.

          "TAXES" means any income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or hereafter imposed,
levied, collected, withheld or assessed by any Governmental Authority, excluding
net income taxes and franchise taxes (imposed in lieu of net income taxes)
imposed on any Lender as a result of a present or former connection between such
holder and the jurisdiction of the Governmental Authority imposing such tax or
any political subdivision or taxing authority thereof or therein (other than any
such connection arising solely from such holder having executed, delivered or
received a payment under, or enforced, this Agreement or any other Loan
Document).


                                       13



          "TERM LOAN" shall have the meaning set forth in Section 2.01.

          "TERM LOAN COMMITMENT" shall mean, with respect to the Lender, the
obligation of the Lender to make the Term Loan hereunder on the Closing Date, in
a principal amount equal to $36,694,500.00.

          "TERM NOTE" shall mean a Term Note of the Borrower payable to the
order of a Lender, in substantially the form of Exhibit A attached hereto.

          "TYPE", when used in reference to the Term Loan, refers to whether the
rate of interest on such Loan is determined by reference to the Adjusted LIBO
Rate or the Base Rate.

          "U.S. GOVERNMENT OBLIGATIONS" means marketable direct obligations
issued by, or unconditionally guaranteed by, the United States Government or
issued by any agency thereof and backed by the full faith and credit of the
United States.

          "USA PATRIOT ACT" means United States Public Law 107-56, Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, as amended from time to time,
and the rules and regulations promulgated thereunder from time to time in
effect.

          SECTION 1.02 ACCOUNTING TERMS AND DETERMINATION

     Unless otherwise defined or specified herein, all accounting terms used
herein shall be interpreted, all accounting determinations hereunder shall be
made, and all financial statements required to be delivered hereunder shall be
prepared, in accordance with GAAP as in effect from time to time, applied on a
basis consistent (except for such changes approved by the Borrower's independent
public accountants) with the most recent audited consolidated financial
statement of the Borrower delivered pursuant to Section 5.01(a).

          SECTION 1.03 TERMS GENERALLY.

     The definitions of terms herein shall apply equally to the singular and
plural forms of the terms defined. Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms. The words
"include", "includes" and "including" shall be deemed to be followed by the
phrase "without limitation". The word "will" shall be construed to have the same
meaning and effect as the word "shall". In the computation of periods of time
from a specified date to a later specified date, the word "from" means "from and
including" and the word "to" means "to but excluding". Unless the context
requires otherwise (i) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as it was originally executed or as it
may from time to time be amended, supplemented or otherwise modified (subject to
any restrictions on such amendments, supplements or modifications set forth
herein), (ii) any reference herein to any Person shall be construed to include
such Person's successors and permitted assigns, (iii) the words "hereof",
"herein" and "hereunder" and words of similar import shall be construed to refer
to this Agreement as a whole and not to any particular provision


                                       14



hereof, (iv) all references to Articles, Sections, Exhibits and Schedules shall
be construed to refer to Articles, Sections, Exhibits and Schedules to this
Agreement and (v) all references to a specific time shall be construed to refer
to the time in the city and state of the Agent's principal office, unless
otherwise indicated.

                 ARTICLE II. AMOUNT AND TERMS OF THE COMMITMENT

          SECTION 2.01 TERM LOAN COMMITMENT.

          (a) Subject to the terms and conditions set forth herein, the Lenders
agree to make a single loan (the "TERM LOAN" or the "LOAN") to the Borrower on
the Closing Date in a principal amount not to exceed the Term Loan Commitment;
provided, that if for any reason the full amount of the Term Loan Commitment is
not fully drawn on the Closing Date, the undrawn portion thereof shall
automatically be cancelled. Subject to Section 2.10 and Section 2.11, the Term
Loan shall be a Eurodollar Loan. The execution and delivery of this Agreement by
the Borrower and the satisfaction of all conditions precedent pursuant to
Article III shall be deemed to constitute the Borrower's request to borrow the
Term Loan on the Closing Date. The Term Loan (net of the Agent's fees and
expenses) shall be deposited in the Collection Account.

          (b) The Borrower's obligation to pay the principal of, and interest
on, the Term Loan shall be evidenced by the records of the Agent and the Lenders
and by the Term Notes. The entries made in such records and on the schedule
annexed to the Term Notes shall be prima facie evidence of the existence and
amounts of the obligations of the Borrower therein recorded; provided, that the
failure or delay of the Agent or any Lender in maintaining or making entries
into any such record or on such schedule or any error therein shall not in any
manner affect the obligation of the Borrower to repay the Term Loan (both
principal and unpaid accrued interest) in accordance with the terms of this
Agreement.

          SECTION 2.02 INTEREST ELECTION.

          If, following the conversion of the Term Loan into a Base Rate Loan
pursuant to Section 2.10 or 2.11, the Agent determines (which determination
shall be conclusive and binding upon the Borrower) that it is possible to
ascertain LIBOR or that it is no longer unlawful to maintain or continue the
Term Loan as a Eurodollar Loan, as the case may be, then the Agent shall
promptly notify the Borrower and the Lenders of such determination. Following
such determination and notice, the Borrower shall have the right to convert the
Term Loan from a Base Rate Loan to a Eurodollar Loan in accordance with the
provisions of this Section 2.02. To make an election pursuant to this Section
2.02, the Borrower shall give the Agent prior written notice (or telephonic
notice promptly confirmed in writing) that the Term Loan is to be converted into
a Eurodollar Loan prior to 2:00 p.m. (Atlanta, Georgia time) three (3) Business
Days prior to such conversion. Such notice of conversion shall be irrevocable
and shall specify the effective date of the election.

          SECTION 2.03 TERMINATION OF COMMITMENTS.


                                       15



          Unless previously terminated, the Term Loan Commitment shall terminate
on the Closing Date upon the making of the Term Loan pursuant to Section 2.01.

          SECTION 2.04 REPAYMENT OF TERM LOAN.

          The Borrower unconditionally promises to pay to the Agent for the
account of the Lenders the principal amount of the Term Loan on the Maturity
Date.

          SECTION 2.05 OPTIONAL PREPAYMENTS.

          (a) The Borrower shall have the right at any time and from time to
time to prepay the Term Loan, in whole or in part, without premium or penalty,
by giving irrevocable written notice (or telephonic notice promptly confirmed in
writing) to the Agent no later than 11:00 a.m. not less than three (3) Business
Days prior to any such prepayment. Each such notice shall be irrevocable and
shall specify the proposed date of such prepayment and the principal amount of
the Term Loan or portion thereof to be prepaid. Upon receipt of any such notice,
the Agent shall promptly notify each Lender of the contents thereof and of such
Lender's Pro Rata Share of any such prepayment. Such amount shall be due and
payable on the date designated in such notice, together with accrued interest to
such date on the amount so prepaid in accordance with Section 2.07; provided,
that if the Term Loan is prepaid on a date other than the last day of an
Interest Period applicable thereto, the Borrower shall also pay all amounts
required pursuant to Section 2.13.

          (b) Unless a Default or an Event of Default has occurred and is
continuing, any prepayments made by the Borrower pursuant to Section 2.05(a)
above shall be applied as follows: first, to the Agent's fees and reimbursable
expenses then due and payable pursuant to any of the Loan Documents; second, to
all fees and reimbursable expenses of the Lenders then due and payable pursuant
to any of the Loan Documents, pro rata to the Lenders based on their respective
Pro Rata Shares of such expenses; third, to interest then due and payable on the
Term Loan, pro rata to the Lenders based on their respective Pro Rata Shares of
the Term Loan; and fourth, to the principal balance of the Term Loan, until the
same shall have been paid in full, pro rata to the Lenders based on their
respective Pro Rata Shares of the Term Loan.

          SECTION 2.06 MANDATORY PREPAYMENTS.

     In the event the Installment Note shall become immediately due and payable
for any reason, the Borrower shall prepay, within two Business Days following
such event, the entire principal amount of the Term Loan then outstanding, plus
all amounts required pursuant to Section 2.13. The Borrower will give the Agent
and each Lender written notice of a mandatory prepayment under this Section
2.06. Each such notice shall specify such date (which shall be a Business Day),
the aggregate principal amount of the Term Loan to be prepaid on such date, and
the interest to be paid on the prepayment date with respect to such principal
amount being prepaid, and shall be accompanied by a certificate of a Responsible
Officer as to all amounts required pursuant to Section 2.13 in connection with
such prepayment, setting forth the details of such computation.

          SECTION 2.07 INTEREST ON TERM LOAN.


                                       16



          (a) The Borrower shall pay to the Agent interest on any Base Rate Loan
at the Base Rate in effect from time to time and on any Eurodollar Loan at the
Adjusted LIBO Rate for the applicable Interest Period in effect, plus, in each
case, the Applicable Margin in effect from time to time.

          (b) While an Event of Default exists, the Borrower shall pay interest
("DEFAULT INTEREST") at the rate otherwise applicable plus an additional 2% per
annum.

          (c) Interest on the principal amount of the Term Loan shall accrue
from and including the date made to but excluding the date of any repayment
thereof.

          (d) Interest on any outstanding Base Rate Loan shall be payable
semi-annually in arrears on the fifteenth day of each June and December, and on
the Maturity Date. Interest on any outstanding Eurodollar Loan shall be payable
on the last day of each Interest Period applicable thereto, and on the Maturity
Date. If the Term Loan is converted into a Loan of another Type or repaid or
prepaid, interest shall be payable on the date of such conversion or on the date
of any such repayment or prepayment (on the amount repaid or prepaid) thereof.
All Default Interest shall be payable on demand.

          (e) The Agent shall determine each interest rate applicable to the
Term Loan hereunder and shall promptly notify the Borrower of such rate in
writing (or by telephone, promptly confirmed in writing). Any such determination
shall be conclusive and binding for all purposes, absent manifest error.

          SECTION 2.08 FEES.

          The Borrower shall pay to the Agent the fees set forth in the Fee
Letter.

          SECTION 2.09 COMPUTATION OF INTEREST.

          All computations of interest hereunder (other than interest based on
the Base Rate) shall be made on the basis of a year of 360 days for the actual
number of days (including the first day but excluding the last day) occurring in
the period for which such interest or fees are payable (to the extent computed
on the basis of days elapsed). Interest based on the Base Rate shall be
calculated on the basis of a 365-day year (or 366-day year, as the case may be)
for the actual days elapsed. Each determination by the Agent of an interest
amount hereunder shall be made in good faith and, except for manifest error,
shall be final, conclusive and binding for all purposes.

          SECTION 2.10 INABILITY TO DETERMINE INTEREST RATES.

          If prior to the commencement of any Interest Period, the Agent shall
have determined (which determination shall be conclusive and binding upon the
Borrower) that, by reason of circumstances affecting the relevant interbank
market, adequate means do not exist for ascertaining LIBOR for such Interest
Period, the Agent shall give written notice (or telephonic


                                       17



notice, promptly confirmed in writing) to the Borrower and to the Lenders as
soon as practicable thereafter. Until the Agent shall notify the Borrower and
the Lenders that the circumstances giving rise to such notice no longer exist,
(i) the obligations of the Lenders to maintain the Term Loan as a Eurodollar
Loan shall be suspended and (ii) the Term Loan shall be converted into a Base
Rate Loan on the last day of the then current Interest Period applicable thereto
unless the Borrower prepays the Term Loan in accordance with this Agreement.

          SECTION 2.11 ILLEGALITY.

     If any Change in Law shall make it unlawful or impossible for any Lender to
make, maintain or fund any Eurodollar Loan and such Lender shall so notify the
Agent, the Agent shall promptly give notice thereof to the Borrower and the
other Lenders, whereupon until such Lender notifies the Agent and the Borrower
that the circumstances giving rise to such suspension no longer exist, the
obligation of the Lenders to continue the Term Loan as a Eurodollar Loan, shall
be suspended. The Term Loan shall be converted to a Base Rate Loan either (i) on
the last day of the then current Interest Period applicable to such Eurodollar
Loan if such Lender may lawfully continue to maintain the Term Loan to such date
or (ii) immediately if such Lender shall determine that it may not lawfully
continue to maintain such Eurodollar Loan to such date. Notwithstanding the
foregoing, the affected Lender shall, prior to giving such notice to the Agent,
designate a different Applicable Lending Office if such designation would avoid
the need for giving such notice and if such designation would not otherwise be
disadvantageous to such Lender in the good faith exercise of its discretion.

          SECTION 2.12 INCREASED COSTS.

          (a) If any Change in Law shall:

               (i) impose, modify or deem applicable any reserve, special
deposit or similar requirement that is not otherwise included in the
determination of the Adjusted LIBO Rate hereunder against assets of, deposits
with or for the account of, or credit extended by, any Lender (except any such
reserve requirement reflected in the Adjusted LIBO Rate); or

               (ii) impose on any Lender or the eurodollar interbank market any
other condition affecting this Agreement or any Eurodollar Loan made by such
Lender or any participation therein;

and the result of either of the foregoing is to increase the cost to such Lender
of making or maintaining a Eurodollar Loan or to reduce the amount received or
receivable by such Lender hereunder (whether of principal, interest or any other
amount), then the Borrower shall promptly pay, as set forth in paragraph (c)
below, to the Agent for the account of such Lender, additional amount or amounts
sufficient to compensate such Lender for such additional costs incurred or
reduction suffered.

          (b) If any Lender shall have determined that on or after the date of
this Agreement any Change in Law regarding capital requirements has or would
have the effect of reducing the rate of return on such Lender's capital (or on
the capital of such Lender's parent corporation) as


                                       18



a consequence of its obligations hereunder to a level below that which such
Lender or such Lender's parent corporation could have achieved but for such
Change in Law (taking into consideration such Lender's policies or the policies
of such Lender's parent corporation with respect to capital adequacy) then, from
time to time, as set forth in paragraph (c) below, the Borrower shall pay to
such Lender such additional amounts as will compensate such Lender or such
Lender's parent corporation for any such reduction suffered.

          (c) A certificate of a Lender setting forth the amount or amounts
necessary to compensate such Lender or such Lender's parent corporation, as the
case may be, specified in paragraph (a) or (b) of this Section 2.12 shall be
delivered to the Borrower (with a copy to the Agent) and shall be conclusive,
absent manifest error. The Borrower shall pay any such Lender such amount or
amounts within 10 days after receipt thereof; provided that the Borrower shall
not be required to make any such payment prior to the last day of the then
current Interest Period if Borrower does not have funds available to make such
payment.

          (d) Failure or delay on the part of any Lender to demand compensation
pursuant to this Section 2.12 shall not constitute a waiver of such Lender's
right to demand such compensation.

          (e) If any Lender shall seek any additional amount or amounts under
this Section 2.12, at the written request of the Borrower, such Lender shall
designate a different Applicable Lending Office if such designation would avoid
the need for or would reduce such amount or amounts and if such designation
would not otherwise be disadvantageous to such Lender in the good faith exercise
of its discretion.

          SECTION 2.13 FUNDING INDEMNITY.

     In the event of (a) the payment of any principal of a Eurodollar Loan other
than on the last day of the Interest Period applicable thereto (including as a
result of an Event of Default), or (b) the conversion of a Eurodollar Loan other
than on the last day of the Interest Period applicable thereto, or (c) the
failure by the Borrower to prepay any Eurodollar Loan on the date specified in
any applicable notice (regardless of whether such notice is withdrawn or
revoked), then, in any such event, the Borrower shall compensate each Lender,
within five (5) Business Days after written demand from such Lender, for any
loss, cost or expense attributable to such event. In the case of a Eurodollar
Loan, such loss, cost or expense shall be deemed to include an amount determined
by such Lender to be the excess, if any, of (A) the amount of interest that
would have accrued on the principal amount of such Eurodollar Loan if such event
had not occurred at the Adjusted LIBO Rate applicable to such Eurodollar Loan
for the period from the date of such event to the last day of the then current
Interest Period therefor over (B) the amount of interest that would accrue on
the principal amount of such Eurodollar Loan for the same period if the Adjusted
LIBO Rate were set on the date such Eurodollar Loan was prepaid or converted. A
certificate as to any additional amount payable under this Section 2.13
submitted to the Borrower by any Lender (with a copy to the Agent) shall be
conclusive, absent manifest error.

          SECTION 2.14 TAXES.


                                       19



          (a) Any and all payments by or on account of any obligation of the
Borrower hereunder shall be made free and clear of and without deduction for any
Indemnified Taxes or Other Taxes; provided, that if the Borrower shall be
required to deduct any Indemnified Taxes or Other Taxes from such payments, then
(i) the sum payable shall be increased as necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 2.14) the Agent or any Lender (as the case may be) shall
receive an amount equal to the sum it would have received had no such deductions
been made, (ii) the Borrower shall make such deductions and (iii) the Borrower
shall pay the full amount deducted to the relevant Governmental Authority in
accordance with applicable law.

          (b) In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.

          (c) The Borrower shall indemnify the Agent and each Lender, within ten
(10) Business Days after written demand therefor, for the full amount of any
Indemnified Taxes or Other Taxes paid by the Agent or such Lender, as the case
may be, on or with respect to any payment by or on account of any obligation of
the Borrower hereunder (including Indemnified Taxes or Other Taxes imposed or
asserted on or attributable to amounts payable under this Section 2.14) and any
penalties, interest and any reasonable expenses arising therefrom or with
respect thereto, whether or not such Indemnified Taxes or Other Taxes were
correctly or legally imposed or asserted by the relevant Governmental Authority.
A certificate as to the amount of such payment or liability delivered to the
Borrower by a Lender or by the Agent on its own behalf or on behalf of a Lender,
shall be conclusive absent manifest error.

          (d) As soon as practicable after any payment of Indemnified Taxes or
Other Taxes by the Borrower to a Governmental Authority, the Borrower shall
deliver to the Agent the original or a certified copy of a receipt issued by
such Governmental Authority evidencing such payment, a copy of the return
reporting such payment or other evidence of such payment reasonably satisfactory
to the Agent.

          (e) Any Foreign Lender that is entitled to an exemption from or
reduction of withholding tax under the Code or any treaty to which the United
States is a party, with respect to payments under this Agreement shall deliver
to the Borrower (with a copy to the Agent), at the time or times prescribed by
applicable law, such properly completed and executed documentation prescribed by
applicable law or reasonably requested by the Borrower as will permit such
payments to be made without withholding or at a reduced rate. Without limiting
the generality of the foregoing, each Foreign Lender agrees that it will deliver
to the Agent and the Borrower (or in the case of a Participant, to the Lender
from which the related participation shall have been purchased), as appropriate,
two (2) duly completed copies of (i) Internal Revenue Service Form W-8 ECI, or
any successor form thereto, certifying that the payments received from the
Borrower hereunder are effectively connected with such Foreign Lender's conduct
of a trade or business in the United States; or (ii) Internal Revenue Service
Form W-8 BEN, or any successor form thereto, certifying that such Foreign Lender
is entitled to benefits under an income tax treaty to which the United States is
a party which reduces the rate of withholding tax on payments of interest; or
(iii) Internal Revenue Service Form W-8 BEN, or any successor form


                                       20



prescribed by the Internal Revenue Service, together with a certificate (A)
establishing that the payment to the Foreign Lender qualifies as "portfolio
interest" exempt from U.S. withholding tax under Code Section 871(h) or 881(c),
and (B) stating that (1) the Foreign Lender is not a bank for purposes of Code
Section 881(c)(3)(A), or the obligation of the Borrower hereunder is not, with
respect to such Foreign Lender, a loan agreement entered into in the ordinary
course of its trade or business, within the meaning of that section; (2) the
Foreign Lender is not a 10% shareholder of the Borrower within the meaning of
Code Section 871(h)(3) or 881(c)(3)(B); and (3) the Foreign Lender is not a
controlled foreign corporation that is related to the Borrower within the
meaning of Code Section 881(c)(3)(C); or (iv) such other Internal Revenue
Service forms as may be applicable to the Foreign Lender, including Forms W-8
IMY or W-8 EXP. Each such Foreign Lender shall deliver to the Borrower and the
Agent such forms on or before the date that it becomes a party to this Agreement
(or in the case of a Participant, on or before the date such Participant
purchases the related participation) and periodically thereafter at the time or
times prescribed by applicable laws, including without limitation, promptly upon
the obsolescence or invalidity of any form previously delivered by such Foreign
Lender. Each such Foreign Lender shall promptly notify the Borrower and the
Agent at any time that it determines that it is no longer in a position to
provide any previously delivered certificate to the Borrower (or any other form
of certification adopted by the Internal Revenue Service for such purpose).

          (f) If a Lender or the Agent determines in its sole discretion that it
is entitled to claim a refund from a taxing authority in respect of amounts paid
by a Borrower pursuant to this Section 2.14, such Lender or Agent shall promptly
notify Borrower and Agent (as applicable) of the availability of such claim and,
if the Lender or the Agent (as applicable) determines in its sole discretion
that making such refund claim could not reasonably be expected to have an
adverse effect on its Taxes or business operations, shall make such claim. If
the Agent or a Lender determines, in its sole discretion, that it has received a
refund against any Taxes (including without limitation by way of offset) as to
which it has been indemnified by the Borrower or with respect to which Borrower
has paid additional amounts pursuant to this Section 2.14, it shall pay over
such refund or credit to Borrower (but only to the extent of amounts paid by
Borrower under this Section 2.14), net of all out-of-pocket expenses of such
Lender or the Agent and without interest (other than any interest paid by the
relevant taxing authority with respect to such refund); provided, however, that
the Borrower, upon the request of the Agent or such Lender, agrees to repay the
amount paid over to the Borrower to such Lender or the Agent in the event such
Lender or the Agent is required to repay such refund to such taxing authority.
This Section shall not be construed to require the Agent or any Lender to make
available its Tax returns (or any other information relating to its Taxes that
it deems confidential) to the Borrower or any other Person.

          (g) If any Lender shall seek any additional amount or amounts under
this Section 2.14, at the written request of the Borrower, such Lender shall
designate a different Applicable Lending Office if such designation would avoid
the need for or would reduce such amount or amounts and if such designation
would not otherwise be disadvantageous to such Lender in the good faith exercise
of its discretion.

          SECTION 2.15 PAYMENTS GENERALLY; PRO RATA TREATMENT; SHARING OF
SET-OFFS.


                                       21



          (a) The Borrower shall make each payment required to be made by it
hereunder (whether of principal, interest, fees or otherwise) to the Agent prior
to noon (Atlanta, Georgia time) on the date when due, in immediately available
funds, free and clear of any rights of set-off or counterclaim. Any amounts
received after such time on any date may, in the discretion of the Agent, be
deemed to have been received on the next succeeding Business Day for purposes of
calculating interest thereon. All such payments shall be made to the Agent at
the Payment Office. The Agent shall distribute any such payments received by it
for the account of any other Person to the appropriate recipient promptly
following receipt thereof. If any payment hereunder shall be due on a day that
is not a Business Day, the date for payment shall be extended to the next
succeeding Business Day, and, in the case of any payment accruing interest,
interest thereon shall be made payable for the period of such extension. All
payments hereunder shall be made in Dollars.

          (b) If at any time insufficient funds are received by and available to
the Agent to pay fully all amounts of principal, interest and other amounts then
due hereunder, such funds shall be applied (i) first, towards payment of
interest and other amounts then due hereunder, ratably among the parties
entitled thereto in accordance with the amounts of interest and other amounts
then due to such parties, and (ii) second, towards payment of principal then due
hereunder, ratably among the parties entitled thereto in accordance with the
amounts of principal then due to such parties.

          (c) If any Lender shall, by exercising any right of set-off or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on the Term Loan that would result in such Lender receiving payment of
a greater proportion of the aggregate amount of its Pro Rata Share of the Term
Loan and accrued interest thereon than the proportion received by any other
Lender, then the Lender receiving such greater proportion shall purchase (for
cash at face value) participations in the Pro Rata Shares of the Term Loan of
other Lenders to the extent necessary so that the benefit of all such payments
shall be shared by the Lenders ratably in accordance with the aggregate amount
of principal of and accrued interest on their respective Pro Rata Shares of the
Term Loan; provided, that (i) if any such participations are purchased and all
or any portion of the payment giving rise thereto is recovered, such
participations shall be rescinded and the purchase price restored to the extent
of such recovery, without interest, and (ii) the provisions of this paragraph
shall not be construed to apply to any payment made by the Borrower pursuant to
and in accordance with the express terms of this Agreement or any payment
obtained by a Lender as consideration for the assignment of or sale of a
participation in the Term Loan to any assignee or participant, other than to the
Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of
this paragraph shall apply). The Borrower consents to the foregoing and agrees,
to the extent it may effectively do so under applicable law, that any Lender
acquiring a participation pursuant to the foregoing arrangements may exercise
against the Borrower rights of set-off and counterclaim with respect to such
participation as fully as if such Lender were a direct creditor of the Borrower
in the amount of such participation.

          (d) Unless the Agent shall have received notice from the Borrower
prior to the date on which any payment is due to the Agent for the account of
the Lenders hereunder that the Borrower will not make such payment, the Agent
may assume that the Borrower has made such payment on such date in accordance
herewith and may, in reliance upon such assumption,


                                       22



distribute to the Lenders the amount or amounts due. In such event, if the
Borrower has not in fact made such payment, then each of the Lenders severally
agrees to repay to the Agent forthwith on demand the amount so distributed to
such Lender with interest thereon, for each day from and including the date such
amount is distributed to it to but excluding the date of payment to the Agent,
at the greater of the Federal Funds Rate and a rate determined by the Agent in
accordance with banking industry rules on interbank compensation.

          (e) If any Lender shall fail to make any payment required to be made
by it, then the Agent may, in its discretion (notwithstanding any contrary
provision hereof), apply any amounts thereafter received by the Agent for the
account of such Lender to satisfy such Lender's obligations under such Sections
until all such unsatisfied obligations are fully paid.

                        ARTICLE III. CONDITIONS PRECEDENT

     The obligations of the Lenders to make the Term Loan are subject to the
fulfillment to such Lenders' satisfaction, prior to or at the Closing, of the
following conditions:

          SECTION 3.01 REPRESENTATIONS AND WARRANTIES.

     The representations and warranties of the Borrower in this Agreement and
the other Loan Documents shall be correct when made and at the time of the
Closing.

          SECTION 3.02 PERFORMANCE; NO DEFAULT.

     The Borrower shall have performed and complied with all agreements and
conditions contained in this Agreement required to be performed or complied with
by it prior to or at the Closing, and after giving effect to the making of the
Term Loan (and the application of the proceeds thereof as contemplated by
Section 4.14) no Default or Event of Default shall have occurred and be
continuing.

          SECTION 3.03 COMPLIANCE CERTIFICATES.

          (a) Officer's Certificate. The Borrower shall have delivered to such
Lender an Officer's Certificate, dated the date of the Closing, certifying that
the conditions specified in Sections 3.01, 3.02, 3.05 and 3.09 have been
fulfilled.

          (b) Secretary's Certificate. The Borrower shall have delivered to such
Lender a certificate of its Secretary or other Responsible Officer, dated the
date of Closing, certifying as to the resolutions attached thereto and other
company proceedings relating to the authorization, execution and delivery of
this Agreement and the other Loan Documents.

          SECTION 3.04 OPINIONS OF COUNSEL.

          (a) Such Lender shall have received opinions in form and substance
reasonably satisfactory to such Lender, dated the date of the Closing:


                                       23



          (i) from Saul & Ewing LLP, counsel to the Borrower, the Parent and
Glatfelter, covering such Delaware, Maryland and Pennsylvania law matters
incident to the entry into this Agreement, the Capitalization Transaction, the
issuance of the Glatfelter Securities and the other transactions contemplated
hereby as such Lender or its counsel may reasonably request (and the Borrower
hereby instructs its counsel to deliver such opinion to the Lenders);

          (ii) from Debevoise & Plimpton LLP, counsel for the Borrower, the
Parent and Glatfelter, covering such New York and Federal law matters incident
to the entry into this Agreement, the Capitalization Transaction, the issuance
of the Glatfelter Securities and the other transactions contemplated hereby as
such Lender or its counsel may reasonably request (and the Borrower hereby
instructs its counsel to deliver such opinion to the Lenders);

          (iii) from Debevoise & Plimpton LLP, counsel for the Borrower,
regarding the nonconsolidation of the Borrower in a bankruptcy of Glatfelter or
any of its Subsidiaries and the true sale or true contribution of the assets of
the Parent sold or contributed pursuant to the Capitalization Transaction.

          (b) Such Lender shall have received copies of the following opinions
dated the date of issuance of the Installment Note and Letter of Credit:

          (i) from Dundas & Wilson CS LLP, counsel to the LC Issuer, covering
certain Scottish law matters relating to the LC Issuer and the Letter of Credit;

          (ii) from Latham & Watkins LLP, counsel to the LC Issuer, covering
certain New York and Federal law matters relating to the LC Issuer and the
Letter of Credit;

          (iii) from Sutherland, Asbill & Brennan LLP, counsel to the
Installment Note Issuer, covering certain matters relating to the Installment
Note Issuer and the Installment Note; and

          (iv) from Sutherland, Asbill & Brennan LLP, counsel to the Installment
Note Issuer, regarding the nonconsolidation of the Installment Note Issuer in a
bankruptcy of its parent company or of its Subsidiaries.

          SECTION 3.05 INSTALLMENT SALE TRANSACTION; INITIAL CAPITALIZATION
TRANSACTION.

     The Installment Sale Transaction and the Initial Capitalization Transaction
shall have been consummated.

          SECTION 3.06 TRANSACTION DOCUMENTS.

     The Collateral Trustee shall have received (i) this Agreement, executed by
the Borrower and each Lender, (ii) the Pledge and Security Agreement, executed
by the Borrower and the Collateral Trustee, (iii) the Collateral Trust
Indenture, executed by the Borrower and the Collateral Trustee and (iv) the
other Loan Documents.


                                       24



          SECTION 3.07 COLLATERAL.

          (a) Installment Note. The Collateral Trustee shall have received the
Installment Note, together with a transfer instrument executed by the Borrower
naming the Collateral Trustee as transferee. The Installment Note and instrument
of transfer shall have been submitted to the "Paying Agent" referenced in the
Installment Note for registration of transfer, and such Paying Agent shall have
registered such transfer, recorded the transfer on the Installment Note and
delivered the Installment Note to the Collateral Trustee.

          (b) Letter of Credit. The Collateral Trustee shall have received the
Letter of Credit, together with a "Request for Full Transfer" referenced therein
executed by the Borrower naming the Collateral Trustee as transferee. The Letter
of Credit and such Request for Full Transfer shall have been submitted to the LC
Bank, and the LC Bank shall have delivered to the Collateral Trustee the Letter
of Credit duly endorsed for transfer and accompanied by the LC Bank's customary
letter of transfer to the Collateral Trustee.

          (c) Glatfelter Securities. The Collateral Trustee shall have received
the Glatfelter Securities, together with undated transfer instruments executed
by the Borrower.

          (d) Contribution Agreement. The Collateral Trustee shall have received
a fully executed copy of the Contribution Agreement, certified by a Responsible
Officer of the Borrower as a true and complete copy thereof.

          (e) Evidence of Perfection; Uniform Commercial Code Financing
Statement. The Collateral Trustee shall have received such evidence (including,
without limitation, evidence of the filing of appropriate UCC-1 financing
statements) as the Collateral Trustee may require as to the perfection of the
security interest created by the Pledge and Security Agreement in the
Collateral.

          (f) Lien Searches. The Collateral Trustee shall have received written
reports of Uniform Commercial Code, judgment and tax lien searches of the Parent
and the Borrower in all appropriate jurisdictions, showing the absence of any
liens attaching to any of the Collateral.

          SECTION 3.08 INTEREST RESERVE ACCOUNT AND COLLECTION ACCOUNT.

     The Collateral Trustee shall have received evidence of (a) the
establishment of the Interest Reserve Account, and (b) the establishment of the
Collection Account.

          SECTION 3.09 INTEREST RESERVE AMOUNT.

     The Collateral Trustee shall have received evidence, in the form of a
certification by the Borrower pursuant to Section 3.03(a), that the Interest
Reserve Amount will be deposited into the Interest Reserve Account immediately
following the Closing.

          SECTION 3.10 TERM LOAN PERMITTED BY APPLICABLE LAW, ETC.


                                       25



     On the date of the Closing such Lender's making of the Term Loan shall (a)
be permitted by the laws and regulations of each jurisdiction to which such
Lender is subject, (b) not violate any applicable law or regulation (including,
without limitation, Regulation T, U or X of the Board of Governors of the
Federal Reserve System) and (c) not subject such Lender to any tax, penalty or
liability under or pursuant to any applicable law or regulation, which law or
regulation was not in effect on the date hereof. If requested by such Lender,
such Lender shall have received an Officer's Certificate certifying as to such
matters of fact as such Lender may reasonably specify to enable such Lender to
determine whether such purchase is so permitted.

          SECTION 3.11 PAYMENT OF SPECIAL COUNSEL FEES.

     The Borrower shall have paid on or before the Closing or made provision for
the payment on or before the Closing of the fees, charges and disbursements of
the Lender's special counsel to the extent reflected in a statement of such
counsel rendered to the Borrower at least two Business Days prior to the
Closing.

          SECTION 3.12 FUNDING INSTRUCTIONS.

     At least three Business Days prior to the date of the Closing, the Agent
shall have received written instructions signed by a Responsible Officer
providing wire instructions for the disbursement of the proceeds of the Term
Loan.

          SECTION 3.13 PROCEEDINGS AND DOCUMENTS.

     All corporate and other proceedings in connection with the transactions
contemplated by this Agreement and all documents and instruments incident to
such transactions shall be satisfactory to such Lender, and such Lender shall
have received all such counterpart originals or certified or other copies of
such documents as such Lender may reasonably request.

                   ARTICLE IV. REPRESENTATIONS AND WARRANTIES

          The Borrower represents and warrants to the Agent and each Lender as
follows:

          SECTION 4.01 ORGANIZATION; POWER AND AUTHORITY.

     The Borrower is a limited liability company duly formed, validly existing
and in good standing under the laws of its jurisdiction of formation, and is
duly qualified as a foreign limited liability company and is in good standing in
each jurisdiction in which such qualification is required by law. The Borrower
has the limited liability company power and authority to own or hold under lease
the properties it purports to own or hold under lease, to transact the business
it transacts and proposes to transact, to execute and deliver this Agreement,
the Note and the other Loan Documents and to perform the provisions hereof and
thereof.

          SECTION 4.02 AUTHORIZATION, ETC.


                                       26



     This Agreement, the Note and the other Loan Documents have been duly
authorized by all necessary limited liability company action on the part of the
Borrower, and this Agreement and the other Loan Documents (other than the Note)
constitute, and upon execution and delivery thereof the Note will constitute,
legal, valid and binding obligations of the Borrower enforceable against the
Borrower in accordance with their terms, except as such enforceability may be
limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally and
(ii) general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).

          SECTION 4.03 DISCLOSURE.

     This Agreement, the other Loan Documents and the Closing Date Balance Sheet
(this Agreement, the other Loan Documents, and such Closing Date Balance Sheet
being referred to, collectively, as the "Disclosure Documents"), taken as a
whole, do not contain any material misstatement of fact or omit to state any
material fact necessary to make the statements therein not misleading in light
of the circumstances under which they were made.

          SECTION 4.04 ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES.

     The Borrower has no Subsidiaries.

          SECTION 4.05 CLOSING DATE BALANCE SHEET; LIABILITIES.

     The Borrower has delivered to each Lender a copy of the Closing Date
Balance Sheet. The Closing Date Balance Sheet fairly presents in all material
respects the financial position of the Borrower as of the Closing Date and has
been prepared in accordance with GAAP. The Borrower does not have any
liabilities that are not disclosed on Closing Date Balance Sheet or otherwise
disclosed in the Disclosure Documents.

          SECTION 4.06 COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.

     The execution, delivery and performance by the Borrower of this Agreement
and the other Loan Documents will not (i) contravene, result in any breach of,
or constitute a default under, or result in the creation of any Lien in respect
of any property of the Borrower under, any indenture, mortgage, deed of trust,
loan, purchase or credit agreement, lease, the Borrower's certificate of
formation or operating agreement, or any other agreement or instrument to which
the Borrower is bound or by which the Borrower or any of its properties may be
bound or affected, (ii) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree, or ruling of any court,
arbitrator or Governmental Authority applicable to the Borrower or (iii) violate
any provision of any statute or other rule or regulation of any Governmental
Authority applicable to the Borrower.

          SECTION 4.07 GOVERNMENTAL AUTHORIZATIONS, ETC.


                                       27



     No consent, approval or authorization of, or registration, filing or
declaration with, any Governmental Authority is required in connection with the
execution, delivery or performance by the Borrower of this Agreement or the
other Loan Documents.

          SECTION 4.08 LITIGATION; OBSERVANCE OF STATUTES AND ORDERS.

          (a) There are no actions, suits, investigations or proceedings pending
or, to the knowledge of the Borrower, threatened against or affecting the
Borrower or any property of the Borrower in any court or before any arbitrator
of any kind or before or by any Governmental Authority.

          (b) The Borrower is not in default under any order, judgment, decree
or ruling of any court, arbitrator or Governmental Authority or is in violation
of any applicable law, ordinance, rule or regulation (including without
limitation the USA Patriot Act) of any Governmental Authority.

          SECTION 4.09 TAXES.

     The Borrower has filed all income tax returns that are required to have
been filed in any jurisdiction, and has paid all taxes shown to be due and
payable on such returns and all other taxes and assessments payable by it, to
the extent such taxes and assessments have become due and payable and before
they have become delinquent. The Borrower has been and will be characterized and
treated as an entity disregarded as separate for income tax purposes.

          SECTION 4.10 TITLE TO PROPERTY.

     The Borrower has good and sufficient title to its properties, including all
such properties reflected in the Closing Date Balance Sheet, in each case free
and clear of Liens.

          SECTION 4.11 LICENSES, PERMITS, ETC.

     The Borrower owns or possesses all licenses, permits, franchises,
authorizations, patents, copyrights, proprietary software, service marks,
trademarks and trade names, or rights thereto, required for the conduct of its
business, without known conflict with the rights of others.

          SECTION 4.12 COMPLIANCE WITH ERISA.

          (a) The Borrower and each ERISA Affiliate have operated and
administered each Plan in compliance in all material respects with all
applicable laws. Neither the Borrower nor any ERISA Affiliate has any material
liability pursuant to Title I or IV of ERISA with respect to a Plan or any
material liability under the penalty or excise tax provisions of the Code
relating to employee benefit plans (as defined in section 3 of ERISA), and no
event, transaction or condition has occurred or exists that would reasonably be
expected to result in the incurrence of any such material liability by the
Borrower or any ERISA Affiliate, or in the imposition of any Lien on any of the
rights, properties or assets of the Borrower or any ERISA Affiliate, in either


                                       28



case pursuant to Title I or IV of ERISA or to such penalty or excise tax
provisions or to section 401(a)(29) or 412 of the Code or section 4068 of ERISA.

          (b) The present value of the aggregate benefit liabilities under each
of the Plans subject to Title IV of ERISA (other than Multiemployer Plans),
determined as of the end of such Plan's most recently ended plan year on the
basis of the actuarial assumptions specified for funding purposes in such Plan's
most recent actuarial valuation report, did not exceed the aggregate current
value of the assets of such Plan allocable to such benefit liabilities, in each
case as set forth in such most recent actuarial valuation report. In addition,
if each of the Plans were to terminate as of such Plan's most recently ended
plan year in a "standard termination" (within the meaning of Section 4041 of
ERISA), the additional contributions required to be made by the contributing
sponsor of such Plan in connection with such termination would not reasonably be
expected to be material.

          (c) The Borrower and its ERISA Affiliates have not incurred withdrawal
liabilities under section 4201 or 4204 of ERISA in respect of any Multiemployer
Plan which have not been satisfied in full, and no event, transaction or
condition has occurred or exists that would reasonably be expected to result in
the assessment of any additional material withdrawal liabilities under section
4201 or section 4204 of ERISA in respect of any Multiemployer Plan, and neither
the Borrower nor its ERISA Affiliates has any material contingent withdrawal
liabilities under section 4204 of ERISA in respect of any Multiemployer Plan.

          (d) The Borrower does not have any expected postretirement benefit
obligation determined as of the last day of the Borrower's most recently ended
fiscal year in accordance with Financial Accounting Standards Board Statement
No. 106, without regard to liabilities attributable to continuation coverage
mandated by section 4980B of the Code.

          (e) Assuming that no Lender funds any portion of the Term Loan with
"plan assets" (within the meaning of Section 3(42) of ERISA), the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby will not involve any transaction that is subject to the prohibitions of
section 406 of ERISA or in connection with which a tax could be imposed pursuant
to section 4975(c)(1)(A) (D) of the Code.

          SECTION 4.13 [Reserved]

          SECTION 4.14 USE OF PROCEEDS; MARGIN REGULATIONS.

     No part of the proceeds from the Term Loan hereunder will be used, directly
or indirectly, for the purpose of buying or carrying any margin stock within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System
(12 CFR 221), or for the purpose of buying or carrying or trading in any
securities under such circumstances as to involve the Borrower in a violation of
Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a
violation of Regulation T of said Board (12 CFR 220). None of the assets of the
Borrower constitute margin stock, and the Borrower does not have any present
intention that margin stock will constitute more any portion of such assets. As
used in this Section, the terms


                                       29



"margin stock" and "purpose of buying or carrying" shall have the meanings
assigned to them in said Regulation U.

          SECTION 4.15 INDEBTEDNESS.

          (a) The Borrower has no outstanding Indebtedness other than the Term
Loan.

          (b) The Borrower is not a party to, or otherwise subject to any
provision contained in, any instrument or agreement (other than its certificate
of formation, its operating agreement and this Agreement) which limits the
amount of, or otherwise imposes restrictions on the incurring of, Indebtedness
of the Borrower, except as disclosed on Schedule 4.15.

          SECTION 4.16 SOLVENCY.

     After giving effect to the Term Loan pursuant to this Agreement, the
Borrower will be "solvent" and for purposes hereof, the term "solvent" shall
mean that (a) the fair value of the property of the Borrower is greater than the
total amount of its liabilities (including contingent liabilities), (b) the
present fair saleable value of its property is not less than the amount that
will be required to pay the probable liability on its debts as they become
absolute and matured, (c) the Borrower does not intend to, and does not believe
that it will, incur debts or liabilities beyond its ability to pay as such debts
and liabilities mature, and (d) the Borrower is not engaged in a business for
which its property would constitute an unreasonably small capital.

          SECTION 4.17 ACTIVITIES.

     Since the date of formation of the Borrower, the Borrower has taken all
steps reasonably required by its certificate of formation and limited liability
company agreement to continue its identity as a separate legal entity and to
make it apparent to other Persons that the Borrower is an entity with assets and
liabilities distinct from those of any other Person. Without limiting the
foregoing, since the date of formation of the Borrower, the Borrower has (i)
been a limited purpose company whose activities have been restricted in its
certificate of formation and operating agreement, (ii) maintained books,
records, accounts, assets and financial statements separate from any other
Person and otherwise held itself out as an entity separate from any other
Person, (iii) not identified itself as a division of any other person or
commingled its funds with any other person, (iv) conducted its own business and
held its own assets in its own name, (v) observed all formalities required by
its certificate of formation and operating agreement, (vi) paid its own
employees and liabilities out of its own funds, (vii) allocated fairly and
reasonably overhead for any shared office space, (viii) maintained adequate
capital, to the extent necessary in light of its business operations, and (ix)
been treated as an entity disregarded as separate for income tax purposes.

          SECTION 4.18 FOREIGN ASSETS CONTROL REGULATIONS, ETC.

          (a) Neither the entry into this Agreement, the making of the Term Loan
nor its use of the proceeds thereof will violate the Trading with the Enemy Act,
as amended, or any of


                                       30



the foreign assets control regulations of the United States Treasury Department
(31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or
executive order relating thereto.

          (b) The Borrower (i) is not a Person described or designated in the
Specially Designated Nationals and Blocked Persons List of the Office of Foreign
Assets Control or in Section 1 of the Anti Terrorism Order and (ii) does not
engage in any dealings or transactions with any such Person. The Borrower is in
compliance, in all material respects, with the USA Patriot Act.

          (c) No part of the proceeds from the Term Loan will be used, directly
or indirectly, for any payments to any governmental official or employee,
political party, official of a political party, candidate for political office,
or anyone else acting in an official capacity, in order to obtain, retain or
direct business or obtain any improper advantage, in violation of the United
States Foreign Corrupt Practices Act of 1977, as amended, assuming in all cases
that such Act applies to the Borrower.

          SECTION 4.19 INVESTMENT COMPANY ACT.

     The Borrower is not subject to regulation under the Investment Company Act
of 1940, as amended.

                        ARTICLE V. AFFIRMATIVE COVENANTS

          The Borrower covenants and agrees that so long as the principal of and
interest on any Loan or any fee remains unpaid:

          SECTION 5.01 FINANCIAL AND BUSINESS INFORMATION.

     The Borrower shall deliver to the Agent:

          (a) Semi-Annual Statements -- not later 30 days following the close of
each six-month period ending June 30 and December 31 of each year, duplicate
copies of,

          (i)  a balance sheet of the Borrower, as at the end of such period,
               and

          (ii) statements of cash flows of the Borrower, for such period,

     in reasonable detail, prepared in accordance with GAAP, and accompanied by
a certificate of a Responsible Officer, which certificate shall state that such
financial statements present fairly, in all material respects, the financial
position of the Borrower and its cash flows and have been prepared in conformity
with GAAP;

          (b) Notice of Default or Event of Default -- promptly, and in any
event within five days after a Responsible Officer becoming aware of the
existence of any Default or


                                       31



Event of Default, a written notice specifying the nature and period of existence
thereof and what action the Borrower is taking or proposes to take with respect
thereto;

          (c) [Reserved]

          (d) Communications Regarding Collateral -- with reasonable promptness
following the Borrower's receipt thereof, any and all notices and other
communications received by the Borrower under or in connection with the
Installment Note or the Letter of Credit (including, without limitation, any
"Event of Default" under the Installment Note);

          (e) Litigation -- promptly, and in any event within five days after
the filing or commencement thereof, a written notice of action, suit or
proceeding by or before any arbitrator or Governmental Authority against or
affecting the Borrower; and

          (f) Requested Information -- with reasonable promptness, such other
data and information relating to the business, operations, affairs, financial
condition, assets or properties of the Borrower or relating to the ability of
the Borrower to perform its obligations under this Agreement and the other Loan
Documents as from time to time may be reasonably requested by the Agent.

          SECTION 5.02 OFFICER'S CERTIFICATE.

     Each set of financial statements delivered to the Agent pursuant to Section
5.01(a) shall be accompanied by a certificate of a Responsible Officer setting
forth a statement that a Responsible Officer reviewed the relevant terms hereof
and has made, or caused to be made, under his or her supervision, a review of
the transactions and conditions of the Borrower from the beginning of the
semi-annual period covered by the statements then being furnished to the date of
the certificate and that such review shall not have disclosed the existence
during such period of any condition or event that constitutes a Default or an
Event of Default or, if any such condition or event existed or exists,
specifying the nature and period of existence thereof and what action the
Borrower shall have taken or proposes to take with respect thereto.

          SECTION 5.03 VISITATION.

     The Borrower shall permit the Agent:

          (a) No Default -- if no Default or Event of Default then exists, at
the expense of the Lenders and upon reasonable prior notice to the Borrower, to
discuss the affairs, finances and accounts of the Borrower with the Borrower's
officers at such reasonable times and as often as may be reasonably requested in
writing; and

          (b) Default -- if a Default or Event of Default then exists, at the
expense of the Borrower to examine the Borrower's books of account, records,
reports and other papers, to make copies and extracts therefrom, and to discuss
the affairs, finances and accounts of the Borrower with its officers and
independent public accountants (and by this provision the


                                       32



Borrower authorizes said accountants to discuss the affairs, finances and
accounts of the Borrower), all at such times and as often as may be requested.

          SECTION 5.04 COMPLIANCE WITH LAW.

     The Borrower will comply with all laws, ordinances or governmental rules or
regulations to which it is subject, including, without limitation, ERISA and the
USA Patriot Act, and will obtain and maintain in effect all licenses,
certificates, permits, franchises and other governmental authorizations
necessary to the ownership of its properties or to the conduct of its
businesses, except where the failure to do so, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect.

          SECTION 5.05 INSURANCE.

     The Borrower will maintain, with financially sound and reputable insurers,
insurance with respect to its properties and businesses against such casualties
and contingencies, of such types, on such terms and in such amounts (including
deductibles, co-insurance and self-insurance, if adequate reserves are
maintained with respect thereto) as is customary in the case of entities engaged
in the same or a similar business and similarly situated, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.

          SECTION 5.06 MAINTENANCE OF PROPERTIES.

     The Borrower will maintain and keep, or cause to be maintained and kept,
its properties in good repair, working order and condition (other than ordinary
wear and tear), so that the business carried on in connection therewith may be
properly conducted at all times.

          SECTION 5.07 PAYMENT OF TAXES.

     The Borrower will file all income tax or similar tax returns required to be
filed in any jurisdiction and pay and discharge all taxes shown to be due and
payable on such returns and all other taxes, assessments, governmental charges,
or levies payable by it, to the extent the same have become due and payable and
before they have become delinquent, provided that the Borrower need not pay any
such tax, assessment, charge or levy if the amount, applicability or validity
thereof is contested by the Borrower on a timely basis in good faith and in
appropriate proceedings, and the Borrower has established adequate reserves
therefor in accordance with GAAP on the books of the Borrower.

          SECTION 5.08 CORPORATE EXISTENCE, ETC.

     The Borrower will at all times preserve and keep in full force and effect
its existence. The Borrower will at all times preserve and keep in full force
and effect all rights and franchises of the Borrower material to the conduct of
its business.

          SECTION 5.09 PAYMENT OF OBLIGATIONS.


                                       33



     The Borrower will pay and discharge all of its obligations and liabilities
before the same shall become delinquent or in default; provided that the
Borrower need not pay any obligations or liabilities if the amount or validity
thereof is contested by the Borrower on a timely basis in good faith and in
appropriate proceedings, and the Borrower has established adequate reserves
therefor in accordance with GAAP on the books of the Borrower.

          SECTION 5.10 BOOKS AND RECORDS.

     The Borrower will maintain proper books of record and account in conformity
with GAAP and all applicable requirements of any Governmental Authority having
legal or regulatory jurisdiction over the Borrower, except where the failure to
do so, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect.

          SECTION 5.11 ACTIVITIES.

     The Borrower shall comply in all respects with Section 6.1 of its Amended
and Restated Limited Liability Company Agreement dated as of the Closing Date.

          SECTION 5.12 CHARACTERIZATION OF BORROWER FOR TAX PURPOSES.

     The Borrower will execute and caused to be filed such returns and make and
cause to be made such elections as may from time to time be required or
appropriate so as to maintain the Borrower's characterization, and will at all
times be characterized and treated, as an entity disregarded as separate for
income tax purposes.

                         ARTICLE VI. NEGATIVE COVENANTS

          The Borrower covenants and agrees that so long as the principal of or
interest on any Loan remains unpaid or any fee remains unpaid:

          SECTION 6.01 INDEBTEDNESS.

     The Borrower will not incur, assume or suffer to exist any Indebtedness
other than the Term Loan.

          SECTION 6.02 LIENS.

     The Borrower will not create, incur, assume or suffer to exist any Lien
other than those Liens expressly permitted by the Loan Documents.

          SECTION 6.03 TRANSACTIONS WITH AFFILIATES.

     The Borrower will not enter into, directly or indirectly, any transaction
(including without limitation the purchase, lease, sale or exchange of
properties of any kind or the rendering of any


                                       34



service) with any Affiliate, except (i) the Capitalization Transaction and (ii)
the making of distributions to the Parent to the extent permitted under Section
6.08.

          SECTION 6.04 MERGER, CONSOLIDATION, ETC.

     The Borrower will not consolidate with or merge with any other Person or
convey, transfer or lease any of its assets to any Person, except that the
Borrower may convey cash, the Installment Note and the Letter of Credit to the
Parent as a distribution to its sole member to the extent permitted under
Section 6.08.

          SECTION 6.05 LINE OF BUSINESS.

     The Borrower will not engage in any business other than (i) acquiring,
owning, managing, protecting, conserving and selling or otherwise dispose of the
Installment Note, the Letter of Credit, the Glatfelter Securities and Permitted
Investments, (ii) enter into and perform its obligations under the Loan
Documents to which the Borrower is a party, and (iii) engage in activities
related or incidental to the foregoing and necessary or appropriate therefor.

          SECTION 6.06 TERRORISM SANCTIONS REGULATIONS.

     The Borrower will not (a) become a Person described or designated in the
Specially Designated Nationals and Blocked Persons List of the Office of Foreign
Assets Control or in Section 1 of the Anti Terrorism Order or (b) engage in any
dealings or transactions with any such Person.

          SECTION 6.07 INVESTMENTS.

     The Borrower will not acquire any business or property, any equity interest
of any other Person, or any Indebtedness of any other Person, or otherwise make
or permit to remain outstanding any investment, other than the Borrower's
investment in the Installment Note, the Letter of Credit, the Glatfelter
Securities, any cash on deposit in the Interest Reserve Account or the
Collection Account, and Permitted Investments if such Permitted Investments
stand to the credit of the Interest Reserve Account or the Collection Account or
otherwise are subject to a perfected, first priority Lien in favor of the
Collateral Trustee.

          SECTION 6.08 DISTRIBUTIONS.

     The Borrower will not declare or make, or agree to pay or make, directly or
indirectly, any dividend payment or other distribution in respect of its
membership interests, except that (a) the Borrower may make the Closing Date
Distribution, (b) provided that, both before and after giving effect to such
distribution, no Default or Event of Default shall have occurred and be
continuing, the Borrower may make distributions to the Parent on each Interest
Payment Date to the extent provided in Section 6 of the Collateral Trust
Indenture in an amount equal to the amount of cash on hand of the Borrower in
excess of the sum of (x) the Interest Reserve Amount and (y) the amount of
expenses projected by the Borrower in good faith to be due and payable on or
prior to the immediately succeeding Interest Payment Date as certified by a
Responsible


                                       35



Officer of the Borrower to the Collateral Trustee, and (c) upon any release by
the Collateral Trustee of its Lien on the Installment Note and Letter of Credit
in accordance with Section 8(f) of the Collateral Trust Indenture, the Borrower
may distribute the Installment Note and the Letter of Credit to the Parent. The
Borrower will not redeem or repurchase any of its membership interests.

          SECTION 6.09 CAPITAL EXPENDITURES.

     The Borrower will not make any capital expenditures.

          SECTION 6.10 BANKRUPTCY, INSOLVENCY.

     The Borrower will not (i) voluntarily commence any proceeding or file any
petition seeking liquidation, reorganization or other similar relief under any
Federal, state or foreign bankruptcy, insolvency, receivership or similar law
now or hereafter in effect, (ii) consent to the institution of, or fail to
contest in a timely and appropriate manner, any proceeding or petition seeking
liquidation, reorganization or similar relief in respect of the Borrower or its
debts or of a substantial part of its assets, under any Federal, state or
foreign bankruptcy, insolvency, receivership or similar law now or hereafter in
effect, (iii) apply for or consent to the appointment of a receiver, trustee,
custodian or similar official for the Borrower or a substantial part of its
assets under any Federal, state or foreign bankruptcy, insolvency, receivership
or similar law now or hereafter in effect, (iv) file an answer admitting the
material allegations of a petition filed against it in any such proceeding, (v)
make a general assignment for the benefit of creditors or (vi) take any action
for the purpose of effecting any of the foregoing.

          SECTION 6.11 AMENDMENTS AND MODIFICATIONS TO ORGANIZATIONAL DOCUMENTS
AND COLLATERAL.

          (a) The Borrower will not without the prior written consent of the
Required Lenders (i) make any changes to its business objectives, purpose or
operations, (ii) make any change to its capital structure, including without
limitation the issuance of any membership interests or economic rights or units
or securities convertible into or exercisable for membership interests or
economic rights of the Borrower to any Person other than the Parent, (iii)
reorganize itself under the laws of any jurisdiction other than the jurisdiction
in which it is organized as of the date of the Closing, or (iv) amend or modify,
and will not authorize, consent to or permit the amendment or modification of,
its Amended and Restated Limited Liability Company Agreement dated as of the
Closing Date.

          (b) The Borrower will not amend or modify, and will not authorize,
consent to or permit the amendment or modification of, the Installment Note, the
Letter of Credit, the Glatfelter Securities or the Contribution Agreement
without the prior written consent of the Required Lenders, provided that this
provision shall not limit the ability of the Borrower to request a substitution
of the Letter of Credit and take all steps and actions to implement such
substitution (including the replacement of the Letter of Credit by a substitute
Letter of Credit) in circumstances where the holder of the Installment Note is
permitted to request such a substitution pursuant to the terms of the
Installment Note.


                                       36



                         ARTICLE VII. EVENTS OF DEFAULT

          SECTION 7.01 EVENTS OF DEFAULT.

     The following events are each an "Event of Default":

          (a) the Borrower defaults in the payment of any principal or amount
required pursuant to Section 2.13 in connection with a prepayment of principal,
if any, on the Term Loan when the same becomes due and payable, whether at
maturity or at a date fixed for prepayment or by declaration or otherwise; or

          (b) the Borrower defaults in the payment of any interest on the Term
Loan or any other amount payable under this Agreement or any other Loan Document
for more than three Business Days after the same becomes due and payable; or

          (c) the Borrower defaults in the performance of or compliance with any
term contained in Section 5.01(b), Section 5.08, Section 5.12 or Article VI; or

          (d) the Borrower defaults in the performance of or compliance with any
term contained herein or any other Loan Document (other than those referred to
in Sections 7.01(a), (b) and (c)) and such default is not remedied within 30
days after the earlier of (i) a Responsible Officer obtaining actual knowledge
of such default and (ii) the Borrower receiving written notice of such default
from the Agent (any such written notice to be identified as a "notice of
default" and to refer specifically to this Section 7.01(d)); or

          (e) any representation or warranty made in writing by or on behalf of
the Borrower or by a Responsible Officer or any other representative of the
Borrower in this Agreement or any other Loan Document or in any writing
furnished in connection with the transactions contemplated hereby proves to have
been false or incorrect in any material respect on the date as of which made; or

          (f) the Borrower (i) is generally not paying, or admits in writing its
inability to pay, its debts as they become due, (ii) files, or consents by
answer or otherwise to the filing against it of, a petition for relief or
reorganization or arrangement or any other petition in bankruptcy, for
liquidation or to take advantage of any bankruptcy, insolvency, reorganization,
moratorium or other similar law of any jurisdiction, (iii) makes an assignment
for the benefit of its creditors, (iv) consents to the appointment of a
custodian, receiver, trustee or other officer with similar powers with respect
to it or with respect to any substantial part of its property, (v) is
adjudicated as insolvent or to be liquidated, or (vi) takes any organizational
action for the purpose of any of the foregoing; or

          (g) a court or Governmental Authority of competent jurisdiction enters
an order appointing, without consent by the Borrower, a custodian, receiver,
trustee or other officer with similar powers with respect to it or with respect
to any substantial part of its property, or


                                       37



constituting an order for relief or approving a petition for relief or
reorganization or any other petition in bankruptcy or for liquidation or to take
advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering
the dissolution, winding-up or liquidation of the Borrower, or any such petition
shall be filed against the Borrower and such petition shall not be dismissed
within 60 days; or

          (h) the Borrower is dissolved or liquidated or takes any
organizational action for the purpose of dissolving or liquidating; or

          (i) a final judgment or judgments for the payment of money are
rendered against the Borrower and which judgments are not, within 30 days after
entry thereof, bonded, discharged or stayed pending appeal, or are not
discharged within 30 days after the expiration of such stay; or

          (j) the L/C Bank is replaced with a substitute L/C Bank that is not a
commercial bank organized under the laws of the United States or any state
thereof or a branch located in the United States of any commercial bank
organized under the laws of any other country that is a member of the
Organization for Economic Cooperation and Development, in each case having a
long-term debt rating assigned by S&P of at least A+ and Moody's of at least A1;
or

          (k) the LC Bank ceases to be rated at least "A+" by S&P and "A1" by
Moody's, and the LC Bank is not replaced within 60 days thereof with a
substitute LC Bank that (i) is a commercial bank organized under the laws of the
United States or any state thereof or a branch located in the United States of
any commercial bank organized under the laws of any other country that is a
member of the Organization for Economic Cooperation and Development, and (ii)
has a long-term debt rating assigned by S&P of at least "A+" and by Moody's of
at least "A1"; or

          (l) an Installment Note Trigger Event shall have occurred; or

          (m) an "Event of Default" (as such term is defined in the Glatfelter
Securities) shall have occurred and be continuing; or

          (n) Glatfelter shall cease to own, directly or indirectly, one hundred
percent (100%) of the issued and outstanding membership interests of the
Borrower; or

          (o) a Contribution Agreement Event shall have occurred;

          SECTION 7.02 REMEDIES ON DEFAULT, ETC.

          (a) Acceleration.

          (i) If an Event of Default with respect to the Borrower described in
Section 7.01(f), (g) or (h) (other than an Event of Default described in clause
(i) of Section 7.01(f) or described in clause (vi) of Section 7.01(f) by virtue
of the fact that such clause encompasses clause (i) of Section 7.01(f)) has
occurred, the principal of the Term Loan then outstanding,


                                       38



together with accrued interest thereon, and all other Obligations shall
automatically become due and payable.

          (ii) If any other Event of Default has occurred and is continuing, the
Agent may, and upon the written request of the Required Lenders shall, by notice
to the Borrower, take any or all of the following actions, at the same or
different times: (i) declare the principal of and any accrued interest on the
Term Loan and all other Obligations owing hereunder to be, whereupon the same
shall become, due and payable immediately; (ii) exercise all remedies contained
in any other Loan Document; and (iii) exercise any other remedies available at
law or in equity.

Upon the Term Loan becoming due and payable under this Section 7.02, whether
automatically or by declaration, all Obligations will forthwith mature and the
entire unpaid principal amount of the Term Loan, plus (x) all accrued and unpaid
interest thereon (including, but not limited to, interest accrued thereon at the
Default Rate) and (y) all amounts required pursuant to Section 2.13 determined
in respect of such principal amount (to the full extent permitted by applicable
law), shall all be immediately due and payable, in each and every case without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower.

          (b) Enforcement of Collateral. Upon the Term Loan becoming due and
payable, whether automatically or by declaration, the Required Lenders may
direct the Collateral Trustee to take any and all action with respect to the
Collateral permitted under the Loan Documents, at law, in equity or otherwise,
including, without limitation, to foreclose upon any or all of the Collateral
and to draw under the Letter of Credit to the extent permitted to do so under
the terms thereof.

          (c) Rescission. At any time after the Term Loan has been declared due
and payable pursuant to Section 7.02(a)(ii), the Required Lenders, by written
notice to the Borrower, may rescind and annul any such declaration and its
consequences.

                             ARTICLE VIII. THE AGENT

          SECTION 8.01 APPOINTMENT OF AGENT.

Each Lender irrevocably appoints SunTrust Bank as the Agent and authorizes it to
take such actions on its behalf and to exercise such powers as are delegated to
the Agent under this Agreement and the other Loan Documents, together with all
such actions and powers that are reasonably incidental thereto. The Agent may
perform any of its duties hereunder or under the other Loan Documents by or
through any one or more sub-agents or attorneys-in-fact appointed by the Agent.
The Agent and any such sub-agent or attorney-in-fact may perform any and all of
its duties and exercise its rights and powers through their respective Related
Parties. The exculpatory provisions set forth in this Article shall apply to any
such sub-agent or attorney-in-fact and the Related Parties of the Agent, any
such sub-agent and any such attorney-in-fact and


                                       39



shall apply to their respective activities in connection with the syndication of
the credit facilities provided for herein as well as activities as Agent.

          SECTION 8.02 NATURE OF DUTIES OF AGENT.

The Agent shall not have any duties or obligations except those expressly set
forth in this Agreement and the other Loan Documents. Without limiting the
generality of the foregoing, (a) the Agent shall not be subject to any fiduciary
or other implied duties, regardless of whether a Default or an Event of Default
has occurred and is continuing, (b) the Agent shall not have any duty to take
any discretionary action or exercise any discretionary powers, except those
discretionary rights and powers expressly contemplated by the Loan Documents
that the Agent is required to exercise in writing by the Required Lenders (or
such other number or percentage of the Lenders as shall be necessary under the
circumstances as provided herein), and (c) except as expressly set forth in the
Loan Documents, the Agent shall not have any duty to disclose, and shall not be
liable for the failure to disclose, any information relating to the Borrower
that is communicated to or obtained by the Agent or any of its Affiliates in any
capacity. The Agent shall not be liable for any action taken or not taken by it,
its sub-agents or attorneys-in-fact with the consent or at the request of the
Required Lenders (or such other number or percentage of the Lenders as shall be
necessary under the circumstances as provided herein) in the absence of its own
gross negligence or willful misconduct. The Agent shall not be responsible for
the negligence or misconduct of any sub-agents or attorneys-in-fact selected by
it with reasonable care. The Agent shall not be deemed to have knowledge of any
Default or Event of Default unless and until written notice thereof is given to
the Agent by the Borrower or any Lender, and the Agent shall not be responsible
for or have any duty to ascertain or inquire into (i) any statement, warranty or
representation made in or in connection with any Loan Document, (ii) the
contents of any certificate, report or other document delivered hereunder or
thereunder or in connection herewith or therewith, (iii) the performance or
observance of any of the covenants, agreements, or other terms and conditions
set forth in any Loan Document, (iv) the validity, enforceability, effectiveness
or genuineness of any Loan Document or any other agreement, instrument or
document, or (v) the satisfaction of any condition set forth in Article III or
elsewhere in any Loan Document, other than to confirm receipt of items expressly
required to be delivered to the Agent. The Agent may consult with legal counsel
(including counsel for the Borrower) concerning all matters pertaining to such
duties.

          SECTION 8.03 LACK OF RELIANCE ON THE AGENT.

Each of the Lenders acknowledges that it has, independently and without reliance
upon the Agent or any other Lender and based on such documents and information
as it has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement. Each of the Lenders also acknowledges that it will,
independently and without reliance upon the Agent or any other Lender and based
on such documents and information as it has deemed appropriate, continue to make
its own decisions in taking or not taking of any action under or based on this
Agreement, any related agreement or any document furnished hereunder or
thereunder.

          SECTION 8.04 CERTAIN RIGHTS OF THE AGENT.


                                       40



If the Agent shall request instructions from the Required Lenders with respect
to any action or actions (including the failure to act) in connection with this
Agreement, the Agent shall be entitled to refrain from such act or taking such
act, unless and until it shall have received instructions from such Lenders; and
the Agent shall not incur liability to any Person by reason of so refraining.
Without limiting the foregoing, no Lender shall have any right of action
whatsoever against the Agent as a result of the Agent acting or refraining from
acting hereunder in accordance with the instructions of the Required Lenders
where required by the terms of this Agreement.

          SECTION 8.05 RELIANCE BY AGENT.

The Agent shall be entitled to rely upon, and shall not incur any liability for
relying upon, any notice, request, certificate, consent, statement, instrument,
document or other writing believed by it to be genuine and to have been signed,
sent or made by the proper Person. The Agent may also rely upon any statement
made to it orally or by telephone and believed by it to be made by the proper
Person and shall not incur any liability for relying thereon. The Agent may
consult with legal counsel (including counsel for the Borrower), independent
public accountants and other experts selected by it and shall not be liable for
any action taken or not taken by it in accordance with the advice of such
counsel, accountants or experts.

          SECTION 8.06 THE AGENT IN ITS INDIVIDUAL CAPACITY.

The bank serving as the Agent shall have the same rights and powers under this
Agreement and any other Loan Document in its capacity as a Lender as any other
Lender and may exercise or refrain from exercising the same as though it were
not the Agent; and the terms "Lenders", "Required Lenders", "holders of Notes",
or any similar terms shall, unless the context clearly otherwise indicates,
include the Agent in its individual capacity. The bank acting as the Agent and
its Affiliates may accept deposits from, lend money to, and generally engage in
any kind of business with the Borrower or Affiliate of the Borrower as if it
were not the Agent hereunder.

          SECTION 8.07 SUCCESSOR AGENT.

          (a) The Agent may resign at any time by giving at least 30 days' prior
notice thereof to the Lenders and the Borrower. Upon any such resignation, the
Required Lenders shall have the right to appoint a successor Agent, subject to
the approval by the Borrower (such approval not to be unreasonably withheld or
delayed) provided that no Default or Event of Default shall exist at such time.
If no successor Agent shall have been so appointed, and shall have accepted such
appointment within 30 days after the retiring Agent gives notice of resignation,
then the retiring Agent may, on behalf of the Lenders, appoint a successor
Agent, which shall be a commercial bank, insurance company or other financial
institution organized under the laws of the United States of America or any
state thereof or a bank, insurance company or other financial institution which
maintains an office in the United States, having a combined capital and surplus
of at least $500,000,000.

          (b) Upon the acceptance of its appointment as the Agent hereunder by a
successor, such successor Agent shall thereupon succeed to and become vested
with all the


                                       41



rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations under this Agreement
and the other Loan Documents. If within 45 days after written notice is given of
the retiring Agent's resignation under this Section 8.07 no successor Agent
shall have been appointed and shall have accepted such appointment, then on such
45th day (i) the retiring Agent's resignation shall become effective, (ii) the
retiring Agent shall thereupon be discharged from its duties and obligations
under the Loan Documents and (iii) the Required Lenders shall thereafter perform
all duties of the retiring Agent under the Loan Documents until such time as the
Required Lenders appoint a successor Agent as provided above. After any retiring
Agent's resignation hereunder, the provisions of this Article VIII shall
continue in effect for the benefit of such retiring Agent and its
representatives and agents in respect of any actions taken or not taken by any
of them while it was serving as the Agent.

          SECTION 8.08 AUTHORIZATION TO EXECUTE OTHER LOAN DOCUMENTS.

Each Lender hereby authorizes the Agent to execute on behalf of all Lenders all
Loan Documents other than this Agreement.

                            ARTICLE IX. MISCELLANEOUS

          SECTION 9.01 NOTICES.

          (a) Except in the case of notices and other communications expressly
permitted to be given by telephone, all notices and other communications to any
party herein to be effective shall be in writing and shall be delivered by hand
or overnight courier service, mailed by certified or registered mail or sent by
telecopy, as follows:

          To the Borrower:       GPW Virginia Timberlands LLC
                                 c/o P.H. Glatfelter Company
                                 96 South George Street Suite 400
                                 York, PA 17401
                                 Attention: Donald Gross
                                 Facsimile: 717-812-8964
                                 Attention: Thomas Bosley, VP & General Manager
                                 Facsimile: 717-225-4711

          To the Agent:          SunTrust Bank
                                 303 Peachtree Street, N. E.
                                 Atlanta, Georgia 30308
                                 Attention: Mark Flatin
                                 Telecopy Number: 804.782.5413

          To any other Lender:   the address set forth in the Administrative
                                 Questionnaire


                                       42



Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All such notices
and other communications shall, when transmitted by overnight delivery, or
faxed, be effective when delivered for overnight (next-day) delivery, or
transmitted in legible form by facsimile machine, respectively, or if mailed,
upon the third Business Day after the date deposited into the mail or if
delivered, upon delivery.

          (b) Any agreement of the Agent and the Lenders herein to receive
certain notices by telephone or facsimile is solely for the convenience and at
the request of the Borrower. The Agent and the Lenders shall be entitled to rely
on the authority of any Person purporting to be a Person authorized by the
Borrower to give such notice and the Agent and Lenders shall not have any
liability to the Borrower or other Person on account of any action taken or not
taken by the Agent or the Lenders in reliance upon such telephonic or facsimile
notice. The obligation of the Borrower to repay the Term Loan and all other
Obligations hereunder shall not be affected in any way or to any extent by any
failure of the Agent or the Lenders to receive written confirmation of any
telephonic or facsimile notice or the receipt by the Agent and the Lenders of a
confirmation which is at variance with the terms understood by the Agent and the
Lenders to be contained in any such telephonic or facsimile notice.

          SECTION 9.02 WAIVER; AMENDMENTS.

          (a) No failure or delay by the Agent or any Lender in exercising any
right or power hereunder or any other Loan Document, and no course of dealing
between the Borrower and the Agent or any Lender, shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power or
any abandonment or discontinuance of steps to enforce such right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power hereunder or thereunder. The rights and remedies of the Agent and
the Lenders hereunder and under the other Loan Documents are cumulative and are
not exclusive of any rights or remedies provided by law. No waiver of any
provision of this Agreement or any other Loan Document or consent to any
departure by the Borrower therefrom shall in any event be effective unless the
same shall be permitted by paragraph (b) of this Section 9.02, and then such
waiver or consent shall be effective only in the specific instance and for the
purpose for which given. Without limiting the generality of the foregoing, the
making of a Loan shall not be construed as a waiver of any Default or Event of
Default, regardless of whether the Agent or any Lender may have had notice or
knowledge of such Default or Event of Default at the time.

          (b) No amendment or waiver of any provision of this Agreement or the
other Loan Documents, nor consent to any departure by the Borrower therefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Borrower and the Required Lenders or the Borrower and the Agent with the
consent of the Required Lenders and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, that no amendment or waiver shall: (i) increase the Commitment
of any Lender without the written consent of such Lender, (ii) reduce the
principal amount of any Loan or reduce the rate of interest thereon, or reduce
any fees payable hereunder, without the written


                                       43



consent of each Lender affected thereby, (iii) postpone the date fixed for any
payment of any principal of, or interest on, any Loan or interest thereon or any
fees hereunder or reduce the amount of, waive or excuse any such payment, or
postpone the scheduled date for the termination or reduction of any Commitment,
without the written consent of each Lender affected thereby, (iv) change Section
2.15(b) or (c) in a manner that would alter the pro rata sharing of payments
required thereby, without the written consent of each Lender, (v) change any of
the provisions of this Section 9.02 or the definition of "Required Lenders" or
any other provision hereof specifying the number or percentage of Lenders which
are required to waive, amend or modify any rights hereunder or make any
determination or grant any consent hereunder, without the consent of each
Lender; (vi) release any guarantor or limit the liability of any such guarantor
under any guaranty agreement, without the written consent of each Lender; (vii)
release all or substantially all collateral (if any) securing any of the
Obligations or agree to subordinate any Lien in such collateral to any other
creditor, without the written consent of each Lender; provided further, that no
such agreement shall amend, modify or otherwise affect the rights, duties or
obligations of the Agent or the Collateral Trustee without the prior written
consent of the such Person. Notwithstanding anything contained herein to the
contrary, this Agreement may be amended and restated without the consent of any
Lender (but with the consent of the Borrower and the Agent) if, upon giving
effect to such amendment and restatement, such Lender shall no longer be a party
to this Agreement (as so amended and restated), the Commitments of such Lender
shall have terminated (but such Lender shall continue to be entitled to the
benefits of Sections 2.12, 2.13, 2.14 and 9.03), such Lender shall have no other
commitment or other obligation hereunder and shall have been paid in full all
principal, interest and other amounts owing to it or accrued for its account
under this Agreement.

          SECTION 9.03 EXPENSES; INDEMNIFICATION.

          (a) The Borrower shall pay (i) all reasonable, out-of-pocket costs and
expenses of the Agent and its Affiliates, including, without limitation, the
reasonable fees, charges and disbursements of outside counsel and allocated cost
of inside counsel for the Agent and its Affiliates, in connection with the
preparation and administration of the Loan Documents and any amendments,
modifications or waivers of the Loan Documents (whether or not the transactions
contemplated in this Agreement or any other Loan Document shall be consummated),
and (ii) all out-of-pocket costs and expenses (including, without limitation,
the reasonable fees, charges and disbursements of outside counsel and the
allocated cost of inside counsel) incurred by the Agent or any Lender in
connection with the enforcement or protection of its rights in connection with
this Agreement, including its rights under this Section 9.03, or in connection
with the Term Loan, including all such out-of-pocket expenses incurred during
any workout, restructuring or negotiations in respect of the Term Loan.

          (b) The Borrower shall indemnify the Agent (and any sub-agent thereof)
and each Lender and each Related Party of any of the foregoing Persons (each
such Person being called an "Indemnitee") against, and hold each Indemnitee
harmless from, any and all costs, losses, liabilities, claims, damages and
related expenses (including the fees, charges and disbursements of any counsel
for any Indemnitee), incurred by any Indemnitee or asserted against any
Indemnitee by any third party or by the Borrower or any Affiliate thereof
arising out of, in connection with, or as a result of (i) the execution or
delivery of this Agreement, any other Loan


                                       44



Document or any agreement or instrument contemplated hereby or thereby, the
performance by the parties hereto of their respective obligations hereunder or
thereunder or the consummation of any of the transactions contemplated hereby or
thereby, (ii) any Loan or the use or proposed use of the proceeds therefrom or
(iii) any actual or prospective claim, litigation, investigation or proceeding
relating to any of the foregoing, whether based on contract, tort or any other
theory, whether brought by a third party or by the Borrower or any Affiliate
thereof, and regardless of whether any Indemnitee is a party thereto, provided
that such indemnity shall not, as to any Indemnitee, be available to the extent
that such losses, claims, damages, liabilities or related expenses are
determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of
such Indemnitee or any Related Party of such Indemnitee.

          (c) The Borrower shall pay, and hold the Agent and each of the Lenders
harmless from and against, any and all present and future stamp, documentary,
and other similar taxes with respect to this Agreement and any other Loan
Documents, any collateral described therein, or any payments due thereunder, and
save the Agent and each Lender harmless from and against any and all liabilities
with respect to or resulting from any delay or omission to pay such taxes.

          (d) To the extent that the Borrower fails to pay any amount required
to be paid to the Agent, each Lender severally agrees to pay to the Agent such
Lender's Pro Rata Share (determined as of the time that the unreimbursed expense
or indemnity payment is sought) of such unpaid amount; provided, that the
unreimbursed expense or indemnified payment, claim, damage, liability or related
expense, as the case may be, was incurred by or asserted against the Agent in
its capacity as such.

          (e) To the extent permitted by applicable law, the Borrower shall not
assert, and hereby waives, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to actual or direct damages) arising out of, in connection with or as a result
of, this Agreement or any agreement or instrument contemplated hereby, the
transactions contemplated therein, any Loan or the use of proceeds thereof.

          (f) All amounts due under this Section 9.03 shall be payable promptly
after written demand therefor.

          SECTION 9.04 SUCCESSORS AND ASSIGNS.

          (a) The provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and assigns
permitted hereby, except that the Borrower may not assign or otherwise transfer
any of its rights or obligations hereunder without the prior written consent of
the Agent and each Lender, and no Lender may assign or otherwise transfer any of
its rights or obligations hereunder except (i) to an assignee in accordance with
the provisions of paragraph (b) of this Section, (ii) by way of participation in
accordance with the provisions of paragraph (d) of this Section or (iii) by way
of pledge or assignment of a security interest subject to the restrictions of
paragraph (f) of this Section (and any other attempted assignment or transfer by
any party hereto shall be null and void). Nothing in this Agreement, expressed
or implied, shall be construed to confer upon any Person (other


                                       45



than the parties hereto, their respective successors and assigns permitted
hereby, Participants to the extent provided in paragraph (d) of this Section
and, to the extent expressly contemplated hereby, the Related Parties of each of
the Agent and the Lenders) any legal or equitable right, remedy or claim under
or by reason of this Agreement.

          (b) Any Lender may at any time assign to one or more assignees all or
a portion of its rights and obligations under this Agreement (including all or a
portion of the Term Loan at the time owing to it); provided that any such
assignment shall be subject to the following conditions:

          (i) Minimum Amounts.

               (A) in the case of an assignment of the entire remaining amount
of the assigning Lender's portion of the Term Loan at the time owing to it or in
the case of an assignment to a Lender, an Affiliate of a Lender or an Approved
Fund, no minimum amount need be assigned; and

               (B) in any case not described in paragraph (b)(i)(A) of this
Section, the outstanding principal balance of the Term Loan of the assigning
Lender subject to each such assignment (determined as of the date the Assignment
and Acceptance with respect to such assignment is delivered to the Agent or, if
"Trade Date" is specified in the Assignment and Acceptance, as of the Trade
Date) shall not be less than $1,000,000, unless each of the Agent and, so long
as no Event of Default has occurred and is continuing, the Borrower otherwise
consents (each such consent not to be unreasonably withheld or delayed).

          (ii) Proportionate Amounts. Each partial assignment shall be made as
an assignment of a proportionate part of all the assigning Lender's rights and
obligations under this Agreement with respect to the Term Loan assigned.

          (iii) Required Consents. No consent shall be required for any
assignment except to the extent required by paragraph (b)(i)(B) of this Section
and, in addition:

               (A) the consent of the Borrower (such consent not to be
unreasonably withheld or delayed) shall be required unless (x) an Event of
Default has occurred and is continuing at the time of such assignment or (y)
such assignment is to a Lender, an Affiliate of a Lender or an Approved Fund;
and

               (B) the consent of the Agent (such consent not to be unreasonably
withheld or delayed) shall be required for assignments to a Person that is not a
Lender.

          (iv) Assignment and Acceptance. The parties to each assignment shall
deliver to the Agent (A) a duly executed Assignment and Acceptance, which shall
include a representation for the benefit of the Borrower that the assignee is a
Qualified Purchaser, (B) a processing and recordation fee of $3,500, (C) an
Administrative Questionnaire unless the assignee is already a Lender, and (D)
the documents required under Section 2.15 if such assignee is a Foreign Lender.


                                       46



          (v) No Assignment to Borrower. No such assignment shall be made to the
Borrower or any of the Borrower's Affiliates or Subsidiaries.

          (vi) No Assignment to Natural Persons; Qualified Purchaser. No such
assignment shall be made to a natural person or to a Person that is not a
Qualified Purchaser.

     Subject to acceptance and recording thereof by the Agent pursuant to
paragraph (c) of this Section 9.04, from and after the effective date specified
in each Assignment and Acceptance, the assignee thereunder shall be a party to
this Agreement and, to the extent of the interest assigned by such Assignment
and Acceptance, have the rights and obligations of a Lender under this
Agreement, and the assigning Lender thereunder shall, to the extent of the
interest assigned by such Assignment and Acceptance, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all of the assigning Lender's rights and obligations under
this Agreement, such Lender shall cease to be a party hereto) but shall continue
to be entitled to the benefits of Sections 2.12, 2.13, 2.14 and 9.03 with
respect to facts and circumstances occurring prior to the effective date of such
assignment. Any assignment or transfer by a Lender of rights or obligations
under this Agreement that does not comply with this paragraph shall be treated
for purposes of this Agreement as a sale by such Lender of a participation in
such rights and obligations in accordance with paragraph (d) of this Section
9.04. If the consent of the Borrower to an assignment is required hereunder
(including a consent to an assignment which does not meet the minimum assignment
thresholds specified above), the Borrower shall be deemed to have given its
consent five Business Days after the date notice thereof has actually been
delivered by the assigning Lender (through the Agent) to the Borrower, unless
such consent is expressly refused by the Borrower prior to such fifth Business
Day.

          (c) The Agent, acting solely for this purpose as an agent of the
Borrower, shall maintain at one of its offices in Atlanta, Georgia a copy of
each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, the principal amount of
the Term Loan owing to, each Lender pursuant to the terms hereof from time to
time (the "Register"). Information contained in the Register with respect to any
Lender shall be available for inspection by such Lender at any reasonable time
and from time to time upon reasonable prior notice; information contained in the
Register shall also be available for inspection by the Borrower at any
reasonable time and from time to time upon reasonable prior notice. In
establishing and maintaining the Register, the Agent shall serve as the
Borrower's agent solely for tax purposes and solely with respect to the actions
described in this Section, and the Borrower hereby agrees that, to the extent
SunTrust Bank serves in such capacity, SunTrust Bank and its officers,
directors, employees, agents, sub-agents and affiliates shall constitute
"Indemnitees."

          (d) Any Lender may at any time, without the consent of, or notice to,
the Borrower or the Agent sell participations to any Person (other than a
natural person, the Borrower or any of the Borrower's Affiliates or
Subsidiaries) (each, a "PARTICIPANT") in all or a portion of such Lender's
rights and/or obligations under this Agreement (including all or a portion of
the Term Loan owing to it); provided that (i) such Lender's obligations under
this Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other


                                       47



parties hereto for the performance of such obligations and (iii) the Borrower,
the Agent and the Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement.

          (e) Any agreement or instrument pursuant to which a Lender sells such
a participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement; provided that such agreement or instrument may
provide that such Lender will not, without the consent of the Participant, agree
to any amendment, modification or waiver with respect to the following to the
extent affecting such Participant: (i) increase the Commitment of any Lender
without the written consent of such Lender, (ii) reduce the principal amount of
any Loan or reduce the rate of interest thereon, or reduce any fees payable
hereunder, without the written consent of each Lender affected thereby, (iii)
postpone the date fixed for any payment of any principal of, or interest on, any
Loan or any fees hereunder or reduce the amount of, waive or excuse any such
payment, or postpone the scheduled date for the termination or reduction of any
Commitment, without the written consent of each Lender affected thereby, (iv)
change Section 2.15(b) or (c) in a manner that would alter the pro rata sharing
of payments required thereby, without the written consent of each Lender, (v)
change any of the provisions of this Section 9.04 or the definition of "Required
Lenders" or any other provision hereof specifying the number or percentage of
Lenders which are required to waive, amend or modify any rights hereunder or
make any determination or grant any consent hereunder, without the consent of
each Lender; (vi) release any guarantor or limit the liability of any such
guarantor under any guaranty agreement without the written consent of each
Lender except to the extent such release is expressly provided under the terms
of such guaranty agreement; or (vii) release all or substantially all collateral
(if any) securing any of the Obligations. Subject to paragraph (f) of this
Section 9.04, the Borrower agrees that each Participant shall be entitled to the
benefits of (and shall have the related obligations under) Sections 2.12, 2.13,
and 2.14 to the same extent as if it were a Lender and had acquired its interest
by assignment pursuant to paragraph (b) of this Section 9.04. To the extent
permitted by law, each Participant also shall be entitled to the benefits of
Section 9.07 as though it were a Lender, provided such Participant agrees to be
subject to Section 2.15 as though it were a Lender.

          (f) A Participant shall not be entitled to receive any greater payment
under Section 2.12 and Section 2.14 than the applicable Lender would have been
entitled to receive with respect to the participation sold to such Participant,
unless the sale of the participation to such Participant is made with the
Borrower's prior written consent. A Participant that would be a Foreign Lender
if it were a Lender shall not be entitled to the benefits of Section 2.14 unless
the Borrower is notified of the participation sold to such Participant and such
Participant agrees, for the benefit of the Borrower, to comply with Section
2.14(e) as though it were a Lender.

          (g) Any Lender may at any time pledge or assign a security interest in
all or any portion of its rights under this Agreement to secure obligations of
such Lender, including without limitation any pledge or assignment to secure
obligations to a Federal Reserve Bank; provided that no such pledge or
assignment shall release such Lender from any of its obligations hereunder or
substitute any such pledgee or assignee for such Lender as a party hereto.


                                       48



          SECTION 9.05 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF
PROCESS.

          (a) This Agreement and the other Loan Documents shall be construed in
accordance with and be governed by the law (without giving effect to the
conflict of law principles thereof) of the State of New York.

          (b) The Borrower hereby irrevocably and unconditionally submits, for
itself and its property, to the non-exclusive jurisdiction of any New York state
court or federal court sitting in the County of New York and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement or any other Loan Document or the transactions contemplated hereby or
thereby, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in such New
York state court or, to the extent permitted by applicable law, such Federal
court. Each of the parties hereto agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement or any other Loan Document shall affect any right that
the Agent and the Lenders may otherwise have to bring any action or proceeding
relating to this Agreement or any other Loan Document against the Borrower or
its properties in the courts of any jurisdiction.

          (c) The Borrower irrevocably and unconditionally waives any objection
which it may now or hereafter have to the laying of venue of any such suit,
action or proceeding described in paragraph (b) of this Section and brought in
any court referred to in paragraph (b) of this Section. Each of the parties
hereto irrevocably waives, to the fullest extent permitted by applicable law,
the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.

          (d) Each party to this Agreement irrevocably consents to the service
of process in the manner provided for notices in Section 9.01. Nothing in this
Agreement or in any other Loan Document will affect the right of any party
hereto to serve process in any other manner permitted by law.

          SECTION 9.06 WAIVER OF JURY TRIAL.

     EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING
DIRECTLY OR INDIRECTLY ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT,
TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER, AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN


                                       49



DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.

          SECTION 9.07 RIGHT OF SETOFF.

     In addition to any rights now or hereafter granted under applicable law and
not by way of limitation of any such rights, the Agent and each Lender shall
have the right, at any time or from time to time upon the occurrence and during
the continuance of an Event of Default, without prior notice to the Borrower,
any such notice being expressly waived by the Borrower to the extent permitted
by applicable law, to set off and apply against all deposits (general or
special, time or demand, provisional or final) of the Borrower at any time held
or other obligations at any time owing by the Agent or any Lender to or for the
credit or the account of the Borrower against any and all Obligations held by
the Agent or any Lender, irrespective of whether the Agent or such Lender shall
have made demand hereunder and although such Obligations may be unmatured. The
Agent and Lenders agree promptly to notify the Borrower after any such set-off
and any application made by the Agent or any Lender; provided, that the failure
to give such notice shall not affect the validity of such set-off and
application.

          SECTION 9.08 COUNTERPARTS; INTEGRATION.

     This Agreement may be executed by one or more of the parties to this
Agreement on any number of separate counterparts (including by telecopy), and
all of said counterparts taken together shall be deemed to constitute one and
the same instrument. This Agreement, the Fee Letter and the other Loan Documents
constitute the entire agreement among the parties hereto and thereto regarding
the subject matters hereof and thereof and supersede all prior agreements and
understandings, oral or written, regarding such subject matters.

          SECTION 9.09 SURVIVAL.

     All covenants, agreements, representations and warranties made by the
Borrower herein and in the certificates or other instruments delivered in
connection with or pursuant to this Agreement shall be considered to have been
relied upon by the other parties hereto and shall survive the execution and
delivery of this Agreement and the making of the Term Loan, regardless of any
investigation made by any such other party or on its behalf and notwithstanding
that the Agent or the Lenders may have had notice or knowledge of any Default or
incorrect representation or warranty at the time any credit is extended
hereunder, and shall continue in full force and effect as long as the principal
of or any accrued interest on any Loan or any fee or any other amount payable
under this Agreement is outstanding and unpaid. The provisions of Sections 2.11,
2.12, and 9.03 shall survive and remain in full force and effect regardless of
the consummation of the transactions contemplated hereby, the repayment of the
Term Loan, the expiration or termination of the Commitments or the termination
of this Agreement or any provision hereof. All representations and warranties
made herein, in the certificates, reports, notices, and other documents
delivered pursuant to this Agreement shall survive the execution and delivery of
this Agreement and the other Loan Documents, and the making of the Term Loan.


                                       50



          SECTION 9.10 SEVERABILITY.

     Any provision of this Agreement or any other Loan Document held to be
illegal, invalid or unenforceable in any jurisdiction, shall, as to such
jurisdiction, be ineffective to the extent of such illegality, invalidity or
unenforceability without affecting the legality, validity or enforceability of
the remaining provisions hereof or thereof; and the illegality, invalidity or
unenforceability of a particular provision in a particular jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.

          SECTION 9.11 CONFIDENTIALITY.

     The Agent and the Lenders agree to take normal and reasonable precautions
to maintain the confidentiality of (i) any information designated in writing as
confidential and (ii) any and all information relating to the Installment Sale
Transaction and provided to it by the Borrower or any Subsidiary, except that
such information may be disclosed (i) to any Related Party of the Agent or the
Lenders, including without limitation accountants, legal counsel and other
advisors; provided that the Agent or the Lender disclosing such information
first advises the party receiving such information that it is confidential as
per the provisions of this Section and that the Agent or Lender shall be
responsible for compliance by the party receiving the information with the
provisions of this Section, (ii) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (iii) to the extent
requested by any regulatory agency or authority, (iv) to the extent that such
information becomes publicly available other than as a result of a breach of
this Section, or which becomes available to the Agent or a Lender or any Related
Party of the Agent or a Lender on a nonconfidential basis from a source other
than the Borrower, (v) in connection with the exercise of any remedy hereunder
or any suit, action or proceeding relating to this Agreement or the enforcement
of rights hereunder, and (ix) subject to provisions substantially similar to
this Section 9.11, to any actual or prospective assignee or Participant, or (vi)
with the consent of the Borrower. Any Person required to maintain the
confidentiality of any information as provided for in this Section shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
information as such Person would accord its own confidential information.

          SECTION 9.12 INTEREST RATE LIMITATION.

     Notwithstanding anything herein to the contrary, if at any time the
interest rate applicable to the Term Loan, together with all fees, charges and
other amounts which may be treated as interest on such Loan under applicable law
(collectively, the "CHARGES"), shall exceed the maximum lawful rate of interest
(the "MAXIMUM RATE") which may be contracted for, charged, taken, received or
reserved by the Agent and the Lenders in accordance with applicable law, the
rate of interest payable in respect of the Term Loan hereunder, together with
all Charges payable in respect thereof, shall be limited to the Maximum Rate
and, to the extent lawful, the interest and Charges that would have been payable
in respect of such Loan but were not payable as a result of the operation of
this Section shall be cumulated and the interest and Charges payable to the
Agent on behalf of the Lenders in respect of other periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the


                                       51



Federal Funds Rate to the date of repayment, shall have been received by the
Agent on behalf of the Lenders.

          SECTION 9.13 QUALIFIED PURCHASER.

     Each Lender severally represents that it is a Qualified Purchaser.

                  (remainder of page left intentionally blank)


                                       52



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

                                        GPW VIRGINIA TIMBERLANDS LLC


                                        By /s/ George B. Amoss, Jr.
                                           -------------------------------------
                                        Name: George B. Amoss, Jr.
                                        Title: President


                                        SUNTRUST BANK


                                        By /s/ Mark A. Flatin
                                           -------------------------------------
                                        Name: Mark A. Flatin

                                        Title: Managing Director

                     [SIGNATURE PAGE TO TERM LOAN AGREEMENT]

EX-21

                                                                               .
                                                                               .
                                                                               .

                                                                      EXHIBIT 21

LIST OF SUBSIDIARIES



                                                            State or Country of
                                                               Incorporation
                                                            --------------------
                                                         
PHG Tea Leaves, Inc.                                           Delaware
GLT International Finance LLC                                  Delaware
The Glatfelter Pulp Wood Company                               Maryland
Glatfelter Holdings, LLC                                       Delaware
GPW Virginia Timberlands LLC                                   Delaware
GPW Timberlands, LLC                                           Delaware
GW Partners, LLC (50% partnership interest)                    Wisconsin
Mollanvick, Inc.                                               Delaware
Glatfelter Composite Fibers NA, Inc.                           Delaware
Glatfelter Holdings II, LLC                                    Delaware
Glatfelter Gernsbach GmbH & Co.KG                              Germany
Papcel-Papier und Cellulose, Technologie und Handels-GmbH      Germany
Glatfelter Auslandsbeteiligungen GmbH                          Germany
PHG Verwaltungsgesellschaft mbH                                Germany
Glatfelter Verwaltungsgesellschaft mbH                         Germany
TL Verwaltungsgesellschaft mbH                                 Germany
Unicon-Papier-und Kunststoffhandels GmbH                       Germany
Glatfelter Scaer SAS                                           France
Glatfelter-Lydney, LTD                                         England & Wales
Glatfelter Caerphilly Ltd.                                     England & Wales
Balo-I Industrial, Inc.                                        Philippines
Newtech Pulp Inc.                                              Philippines

EX-23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statements Nos.
33-49660, 33-62331, 333-12089, 333-26587 and 333-124485 on Forms S-8 of our
reports dated March 12, 2008, relating to the consolidated financial statements
and financial statement schedule of P. H. Glatfelter Company and subsidiaries
(which report expresses an unqualified opinion and includes an explanatory
paragraph relating to the adoption of Financial Accounting Standards Board
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes -- an
Interpretation of FASB No. 109") and on the effectiveness of P.H. Glatfelter
Company and subsidiaries' internal control over financial reporting appearing in
this Annual Report on Form 10-K of P. H. Glatfelter Company and subsidiaries for
the year ended December 31, 2007.


/s/ Deloitte & Touche LLP
Philadelphia, Pennsylvania


March 12, 2008

EX-31.1

CERTIFICATION PURSUANT TO SECTION 302 (a) OF THE SARBANES-OXLEY ACT OF 2002

   I, George H. Glatfelter II, certify that:

1.	I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2007 of P. H. Glatfelter Company (“Glatfelter”);
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.
4.	Glatfelter’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for Glatfelter and have:

(a)  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to Glatfelter, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)  Evaluated the effectiveness of Glatfelter’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)  Disclosed in this report any change in Glatfelter’s internal control over financial reporting that occurred during Glatfelter’s most recent fiscal quarter (the fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, Glatfelter’s internal control over financial reporting; and

5.  Glatfelter’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to Glatfelter’s auditors and the audit committee of the Glatfelter’s board of directors:

(a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Glatfelter’s ability to record, process, summarize and report financial information; and

(b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in Glatfelter’s internal control over financial reporting.

Date: March 13, 2008

By:  /s/  George H. Glatfelter II

George H. Glatfelter II

Chairman and Chief Executive Officer

-60-

GLATFELTER

EX-31.2

CERTIFICATION PURSUANT TO SECTION 302 (a) OF THE SARBANES-OXLEY ACT OF 2002

   I, John P. Jacunski, certify that:

1.	I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2007 of P. H. Glatfelter Company (“Glatfelter”);
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	Glatfelter’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for Glatfelter and have:

(a)  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to Glatfelter, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)  Evaluated the effectiveness of Glatfelter’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)  Disclosed in this report any change in Glatfelter’s internal control over financial reporting that occurred during Glatfelter’s most recent fiscal quarter (the fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, Glatfelter’s internal control over financial reporting; and

5.  Glatfelter’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to Glatfelter’s auditors and the audit committee of the Glatfelter’s board of directors:

(a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Glatfelter’s ability to record, process, summarize and report financial information; and

(b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in Glatfelter’s internal control over financial reporting.

Date: March 13, 2008

By:  /s/  John P. Jacunski

John P. Jacunski

Senior Vice President and

  Chief Financial Officer

-61-

GLATFELTER

EX-32.1

                                                                    EXHIBIT 32.1

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 18
U.S.C. SECTION 1350

         In connection with the Annual Report on Form 10-K for the year ended
         December 31, 2007 of P. H. Glatfelter Company (the "Company") as filed
         with the Securities and Exchange Commission on the date hereof (the
         "Report"), I, George H. Glatfelter II, Chairman and Chief Executive
         Officer of the Company, certify to the best of my knowledge, pursuant
         to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section
         1350, that:

1)    The Report fully complies with the requirements of section 13(a) or 15(d)
      of the Securities Exchange Act of 1934, as amended; and

2)    The information contained in the Report fairly presents, in all material
      respects, the financial condition and results of operations of the
      Company.

A signed original of this written statement required by Section 906 has been
provided to Glatfelter and will be retained by Glatfelter and furnished to the
Securities and Exchange Commission or its staff upon request.

                     Date: March 13, 2008  By:  /s/ George H. Glatfelter II
                                               ---------------------------------
                                                    George H. Glatfelter II
                                                    Chairman and Chief Executive
                                                   Officer

EX-32.2

                                                                    EXHIBIT 32.2

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 18
U.S.C. SECTION 1350

         In connection with the Annual Report on Form 10-K for the year ended
         December 31, 2007 of P. H. Glatfelter Company (the "Company") as filed
         with the Securities and Exchange Commission on the date hereof (the
         "Report"), I, John P. Jacunski, Senior Vice President and Chief
         Financial Officer of the Company, certify to the best of my knowledge,
         pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C.
         Section 1350, that:

1)    The Report fully complies with the requirements of section 13(a) or 15(d)
      of the Securities Exchange Act of 1934, as amended; and

2)    The information contained in the Report fairly presents, in all material
      respects, the financial condition and results of operations of the
      Company.

A signed original of this written statement required by Section 906 has been
provided to Glatfelter and will be retained by Glatfelter and furnished to the
Securities and Exchange Commission or its staff upon request.

                 Date: March 13, 2008       By:  /s/ John P. Jacunski
                                                --------------------------------
                                                    John P. Jacunski
                                                    Senior Vice President and
                                                       Chief Financial Officer