10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2013

or

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from             to             

96 South George Street, Suite 520

York, Pennsylvania 17401

(Address of principal executive offices)

(717) 225-4711

(Registrant’s telephone number, including area code)

Commission file number	Exact name of registrant as specified in its charter	IRS Employer Identification No.	State or other jurisdiction of incorporation or organization
1-03560	P. H. Glatfelter Company	23-0628360	Pennsylvania

N/A

(Former name or former address, if changed since last report)

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 the past 90 days.    Yes  x    No  ¨.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨.

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

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨  (Do not check if a smaller reporting company).	Small 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  x.

Common Stock outstanding on April 30, 2013 totaled 42,917,912 shares.

P. H. GLATFELTER COMPANY AND

SUBSIDIARIES

REPORT ON FORM 10-Q

For the QUARTERLY PERIOD ENDED

MARCH 31, 2013

Table of Contents

		Page
PART I – FINANCIAL INFORMATION
Item 1	Financial Statements
	Condensed Consolidated Statements of Income for the three months ended March 31, 2013 and 2012 (unaudited)		2
	Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2013 and 2012 (unaudited)		3
	Condensed Consolidated Balance Sheets as of March 31, 2013 and December 31, 2012 (unaudited)		4
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2013 and 2012 (unaudited)		5
	Notes to Condensed Consolidated Financial Statements (unaudited)		6
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		24
Item 3	Quantitative and Qualitative Disclosures About Market Risks		30
Item 4	Controls and Procedures		30
PART II – OTHER INFORMATION
Item 6	Exhibits		31
SIGNATURES			32

PART I

Item  1 – Financial Statements

P. H. GLATFELTER COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

	Three months ended March 31
In thousands, except per share	2013			2012
Net sales	$	405,189		$	397,352
Energy and related sales, net		1,101			1,861
Total revenues		406,290			399,213
Costs of products sold		348,915			338,243
Gross profit		57,375			60,970
Selling, general and administrative expenses		33,487			29,967
Gains on dispositions of plant, equipment and timberlands, net		(73	)		(37	)
Operating income		23,961			31,040
Non-operating income (expense)
Interest expense		(3,841	)		(4,269	)
Interest income		102			123
Other, net		247			196
Total non-operating income (expense)		(3,492	)		(3,950	)
Income before income taxes		20,469			27,090
Income tax provision		4,840			8,212
Net income	$	15,629		$	18,878
Earnings per share
Basic	$	0.36		$	0.44
Diluted		0.36			0.43
Cash dividends declared per common share	$	0.10		$	0.09
Weighted average shares outstanding
Basic		42,966			42,751
Diluted		43,921			43,467

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

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GLATFELTER

3.31.13 Form 10-Q

P. H. GLATFELTER COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

	Three months ended March 31
In thousands	2013			2012
Net income	$	15,629		$	18,878
Foreign currency translation adjustments		(11,957	)		9,454
Net change in:
Deferred gains (losses) on cash flow hedges, net of taxes of $(170) and $320, respectively		441			(820	)
Unrecognized retirement obligations, net of taxes of $(2,313) and $(1,864), respectively		3,827			3,017
Other comprehensive income (loss)		(7,689	)		11,651
Comprehensive income	$	7,940		$	30,529

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

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GLATFELTER

3.31.13 Form 10-Q

P. H. GLATFELTER COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

In thousands	March 31 2013			December 31 2012
Assets
Current assets
Cash and cash equivalents	$	76,440		$	97,679
Accounts receivable, net		157,094			139,904
Inventories		221,108			222,366
Prepaid expenses and other current assets		46,137			58,909
Total current assets		500,779			518,858
Plant, equipment and timberlands, net		617,655			621,186
Other assets		106,187			102,941
Total assets	$	1,224,621		$	1,242,985
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable	$	125,815		$	133,389
Dividends payable		4,341			3,905
Environmental liabilities		125			125
Other current liabilities		98,840			113,489
Total current liabilities		229,121			250,908
Long-term debt		250,000			250,000
Deferred income taxes		59,253			62,046
Other long-term liabilities		141,624			140,352
Total liabilities		679,998			703,306
Commitments and contingencies		—			—
Shareholders’ equity
Common stock		544			544
Capital in excess of par value		52,074			52,492
Retained earnings		830,885			819,593
Accumulated other comprehensive loss		(171,655	)		(163,966	)
		711,848			708,663
Less cost of common stock in treasury		(167,225	)		(168,984	)
Total shareholders’ equity		544,623			539,679
Total liabilities and shareholders’ equity	$	1,224,621		$	1,242,985

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

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GLATFELTER

3.31.13 Form 10-Q

P. H. GLATFELTER COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Three months ended March 31
In thousands	2013			2012
Operating activities
Net income	$	15,629		$	18,878
Adjustments to reconcile to net cash provided by operations:
Depreciation, depletion and amortization		15,358			17,086
Amortization of debt issue costs and original issue discount		327			304
Pension expense, net of unfunded benefits paid		3,577			2,787
Deferred income tax provision (benefit)		906			(955	)
Gains on dispositions of plant, equipment and timberlands, net		(73	)		(37	)
Share-based compensation		1,878			1,632
Change in operating assets and liabilities
Accounts receivable		(19,475	)		(13,333	)
Inventories		(2,100	)		(9,726	)
Prepaid and other current assets		8,885			2,710
Accounts payable		2,331			(1,985	)
Environmental matters		(13	)		(13	)
Accruals and other current liabilities		(16,428	)		(14,511	)
Cellulosic biofuel and alternative fuel mixture credits		5,690			7,403
Other		(697	)		(497	)
Net cash provided by operating activities		15,795			9,743
Investing activities
Expenditures for purchases of plant, equipment and timberlands		(31,391	)		(14,152	)
Proceeds from disposals of plant, equipment and timberlands, net		73			49
Other		(175	)		—
Net cash used by investing activities		(31,493	)		(14,103	)
Financing activities
Net repayments of revolving credit facility		—			(5,000	)
Payments of note offering costs		(108	)		—
Repurchase of common stocks		—			(1,204	)
Payments of dividends		(3,905	)		(3,898	)
(Payments) proceeds from share-based compensation awards and other		(586	)		629
Net cash used by financing activities		(4,599	)		(9,473	)
Effect of exchange rate changes on cash		(942	)		455
Net decrease in cash and cash equivalents		(21,239	)		(13,378	)
Cash and cash equivalents at the beginning of period		97,679			38,277
Cash and cash equivalents at the end of period	$	76,440		$	24,899
Supplemental cash flow information
Cash paid (received) for:
Interest, net of amounts capitalized	$	145		$	232
Income taxes, net		(3,742	)		5,616

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

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GLATFELTER

3.31.13 Form 10-Q

P. H. GLATFELTER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. ORGANIZATION

P. H. Glatfelter Company and subsidiaries (“Glatfelter”) is a manufacturer of specialty papers and fiber-based engineered materials. Headquartered in York, Pennsylvania, our manufacturing facilities are located in Spring Grove, Pennsylvania; Chillicothe and Freemont, Ohio; Gatineau, Quebec, Canada; Lydney, England; Caerphilly, Wales; Gernsbach and Falkenhagen, Germany; Scaër, France; and the Philippines. Our products are marketed worldwide, either through wholesale paper merchants, brokers and agents, or directly to customers.

2. ACCOUNTING POLICIES

Basis of Presentation The unaudited condensed consolidated financial statements (“financial statements”) include the accounts of Glatfelter and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.

We prepared these financial statements in accordance with accounting principles generally accepted in the United States of America (“generally accepted accounting principles” or “GAAP”). In our opinion, the financial statements reflect all normal, recurring adjustments needed to present fairly our results for the interim periods. When preparing these financial statements, we have assumed that you have read the audited consolidated financial statements included in our 2012 Annual Report on Form 10-K (“2012 Form 10-K”).

Accounting Estimates The preparation of financial statements in conformity with GAAP 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 financial statements are reasonable, based upon currently available facts and known circumstances, but recognizes that actual results may differ from those estimates and assumptions.

Recently Issued Accounting Pronouncements In February 2013, the FASB issued ASU 2013-02 – “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” which requires new disclosures about items reclassified out of accumulated other

comprehensive income. We adopted the requirements of this standard in the first quarter of 2013.

3. GAINS ON DISPOSITIONS OF PLANT, EQUIPMENT AND TIMBERLANDS, NET

During the first quarters of 2013 and 2012, we completed sales of assets as summarized in the following table:

Dollars in thousands	Acres		Proceeds		Gain
2013
Other		n/a	$	73	$	73
Total			$	73	$	73
2012
Other		n/a	$	49	$	37
Total			$	49	$	37

4. EARNINGS PER SHARE

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

	Three months ended March 31
In thousands, except per share	2013		2012
Net income	$	15,629	$	18,878
Weighted average common shares outstanding used in basic EPS		42,966		42,751
Common shares issuable upon exercise of dilutive stock options and PSAs / RSUs		955		716
Weighted average common shares outstanding and common share equivalents used in diluted EPS		43,921		43,467
Earnings per share
Basic	$	0.36	$	0.44
Diluted		0.36		0.43

The following table sets forth 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:

	March 31
In thousands	2013		2012
Potential common shares		—		589

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GLATFELTER

3.31.13 Form 10-Q

5. ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table sets details of the changes in accumulated other comprehensive income (losses) for the three months ended March 31, 2013 and 2012.

in thousands	Currency Translation Adjustments			Unrealized gain (loss) on derivatives			Change in pensions			Change in other postretirement defined benefit plans			Total
Balance at January 1, 2013	$	316		$	(425	)	$	(159,560	)	$	(4,297	)	$	(163,966	)
Other comprehensive income before reclassifications (net of tax)		(11,957	)		390			—			—			(11,567	)
Amounts reclassified from accumulated other comprehensive income (net of tax)		—			51			3,779			48			3,878
Net current period other comprehensive income (loss)		(11,957	)		441			3,779			48			(7,689	)
Balance at March 31, 2013	$	(11,641	)	$	16		$	(155,781	)	$	(4,249	)	$	(171,655	)
Balance at January 1, 2012	$	(11,043	)	$	1,185		$	(153,002	)	$	(3,881	)	$	(166,741	)
Other comprehensive income before reclassifications (net of tax)		9,454			(409	)		—			—			9,045
Amounts reclassified from accumulated other comprehensive income (net of tax)		—			(411	)		3,051			(34	)		2,606
Net current period other comprehensive income (loss)		9,454			(820	)		3,051			(34	)		11,651
Balance at March 31, 2012	$	(1,589	)	$	365		$	(149,951	)	$	(3,915	)	$	(155,090	)

The following table sets forth reclassifications out of accumulated other comprehensive income for the three months ended March 31, 2013 and 2012.

	Three months ended March 31
In thousands	2013			2012
Description							Line Item in Statements of Income
Cash Flow Hedges (Note 13)
Gains (losses) on cash flow hedges	$	70		$	(572	)	Costs of products sold
		(19	)		161		Income tax provision
Net of tax		51			(411	)
Retirement Plans and Other Post Retirement Benefits (Note 8)
Amortization of deferred benefit pension plan items
Prior service costs		613			506		Costs of products sold
		161			107		Selling, general and administrative
Actuarial losses		4,114			3,490		Costs of products sold
		1,175			833		Selling, general and administrative
		6,063			4,936
		(2,284	)		(1,885	)	Income tax provision
Net of tax		3,779			3,051
Amortization of deferred benefit other plan items
Prior service costs		(100	)		(190	)	Costs of products sold
		(25	)		(44	)	Selling, general and administrative
Actuarial losses		155			138		Costs of products sold
		47			41		Selling, general and administrative
		77			(55	)
		(29	)		21		Income tax provision
Net of tax		48			(34	)
Total reclassifications, net of tax	$	3,878		$	2,606

6. 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.

As of March 31, 2013 and December 31, 2012, we had $26.5 million and $30.4 million of gross unrecognized tax benefits. As of March 31, 2013, if such benefits were to be recognized, approximately $26.5 million would be recorded as a component of income tax expense, thereby affecting our effective tax rate.

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, by major jurisdiction, tax years that remain subject to examination:

	Open Tax Years
Jurisdiction	Examinations not yet initiated		Examination in progress
United States
Federal		2009 - 2012	N/A
State		2008 - 2012	2009
Canada (1)		2010 - 2012	2007 - 2011
Germany (1)		2007, 2010 - 2012	2008 - 2011
France		2010 - 2012	N/A
United Kingdom		2009 - 2012	N/A
Philippines		2011 - 2012	2010

(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

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GLATFELTER

3.31.13 Form 10-Q

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 decrease within the next twelve months by a range of zero to $14.0 million. Substantially all of this range relates to tax positions taken in the U.S., the U.K. and Germany

We recognize interest and penalties related to uncertain tax positions as income tax expense. During the first quarter of 2013, we recorded a $0.2 million benefit from a reduction in the amount of interest payable. For the first quarter of 2012, we recognized $0.1 million of interest expense. As of March 31, 2013 and December 31, 2012, we had recognized a liability for interest of $1.2 million and $1.4 million, respectively. We did not record any penalties associated with uncertain tax positions during the first quarters of 2013 or 2012.

7. STOCK-BASED COMPENSATION

The P. H. Glatfelter Amended and Restated Long Term Incentive Plan (the “LTIP”) provides for the issuance of up to 5,500,000 shares of Glatfelter common stock to eligible participants in the form of restricted stock units, restricted stock awards, non-qualified stock options, performance shares, incentive stock options and performance units.

Since the approval of the LTIP, we have issued to eligible participants restricted stock units, performance share awards and stock only stock appreciation rights (“SOSARs”).

Restricted Stock Units (“RSU”) and Performance Share Awards (“PSAs”) Awards of RSUs and PSAs are made under our LTIP. The vesting of RSUs is based solely on the passage of time, generally on a graded scale over a three, four, and five-year period. PSAs are issued annually and cliff vest on December 31 of the third year following the grant assuming the achievement of predetermined, three-year cumulative performance targets. The performance measures include a minimum, target and maximum performance level providing the grantees an opportunity to receive more or less shares than targeted depending on actual financial performance. For both RSUs and PSAs, the grant date fair value of the awards, which is equal to the closing price per common share on the date of the award, is used to determine the amount of expense to be recognized over the applicable service period. Settlement of RSUs and PSAs will be made in shares of our common stock currently held in treasury.

The following table summarizes RSU and PSA activity during the first three months of 2013 and 2012:

Units	2013			2012
Balance January 1,		847,679			788,088
Granted		153,265			162,217
Forfeited		(9,313	)		(17,100	)
Shares delivered		(97,681	)		(72,080	)
Balance March 31,		893,950			861,125

The amount granted in 2013 and 2012 includes PSAs of 151,955 and 161,083, respectively, exclusive of reinvested dividends. The following table sets forth aggregate RSU and PSA compensation expense for the periods indicated:

	Three months ended March 31
Dollars in thousands	2013		2012
Compensation expense	$	720	$	576

Stock Only Stock Appreciation Rights (SOSARs) Under terms of the SOSAR, a recipient receives the right to 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 exercise price. The SOSARs vest ratably over a three year period and have a term of ten years.

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GLATFELTER

3.31.13 Form 10-Q

The following table sets forth information related to outstanding SOSARS.

	2013					2012
SOSARS	Shares			Wtd Avg Exercise Price		Shares			Wtd Avg Exercise Price
Outstanding at January 1,		2,121,454		$	12.93		2,298,288		$	12.35
Granted		361,923			18.36		371,812			15.61
Exercised		(40,986	)		13.90		(65,637	)		(10.57	)
Canceled / forfeited		(23,920	)		15.61		(10,000	)		(14.96	)
Outstanding at March 31,		2,418,471		$	13.70		2,594,463		$	12.85
SOSAR Grants
Weighted average grant date fair value per share	$	5.64				$	4.98
Aggregate grant date fair value (in thousands)	$	2,042				$	1,850
Black-Scholes assumptions
Dividend yield		2.18	%				2.31	%
Risk free rate of return		0.99	%				1.05	%
Volatility		39.62	%				41.51	%
Expected life		6 yrs					6 yrs

The following table sets forth SOSAR compensation expense for the periods indicated:

	March 31
In thousands	2013		2012
Three months ended	$	385	$	354

8. RETIREMENT PLANS AND OTHER POST-RETIREMENT BENEFITS

The following table provides information with respect to the net periodic costs of our pension and post retirement medical benefit plans.

	Three months ended March 31
In thousands	2013			2012
Pension Benefits
Service cost	$	3,211		$	2,931
Interest cost		5,520			5,772
Expected return on plan assets		(10,903	)		(10,563	)
Amortization of prior service cost		774			613
Amortization of unrecognized loss		5,289			4,323
Subtotal	$	3,891		$	3,076
Other Benefits
Service cost	$	789		$	710
Interest cost		545			609
Expected return on plan assets		—			(113	)
Amortization of prior service cost		(125	)		(234	)
Amortization of unrecognized loss		202			179
Net periodic benefit cost	$	1,411		$	1,151

9. INVENTORIES

Inventories, net of reserves, were as follows:

In thousands	March 31 2013		December 31 2012
Raw materials	$	57,689	$	61,084
In-process and finished		103,605		102,331
Supplies		59,814		58,951
Total	$	221,108	$	222,366

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GLATFELTER

3.31.13 Form 10-Q

10. LONG-TERM DEBT

Long-term debt is summarized as follows:

In thousands	March 31 2013		December 31 2012
Revolving credit facility, due Nov. 2016	$	—	$	—
5.375% Notes, due Oct. 2020		250,000		250,000
Total long-term debt		250,000		250,000
Less current portion		—		—
Long-term debt, net of current portion	$	250,000	$	250,000

On November 21, 2011, we entered into an amendment to our revolving credit agreement with a consortium of banks (the “Revolving Credit Facility”) which increased the amount available for borrowing to $350 million, extended the maturity of the facility to November 21, 2016, and instituted a lower interest rate pricing grid.

For all U.S. dollar denominated borrowings under the Revolving Credit Facility, the borrowing rate is, at our option, (a) the bank’s base rate which is equal to the greater of i) the prime rate; ii) the federal funds rate plus 50 basis points plus an applicable spread ranging from 25 basis points to 125 basis points based on our corporate credit ratings determined by Standard & Poor’s Rating Services and Moody’s Investor Service, Inc. (the “Corporate Credit Rating”); or iii) the daily Euro-rate plus 100 basis points; or (b) the daily Euro-rate plus an applicable margin ranging from 125 basis points to 225 basis points based on the Corporate Credit Rating. For non-US dollar denominated borrowings, interest is based on (b) above.

The Revolving Credit Facility 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, limit certain intercompany financing arrangements, make acquisitions and engage in mergers or consolidations. We are also required to comply with specified financial tests and ratios including: i) maximum net debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) ratio; ii) a consolidated EBITDA to interest expense ratio; and iii) beginning December 31, 2015, a minimum liquidity ratio. A breach of these requirements would give rise to certain remedies under the Revolving Credit Facility, among which are the termination of the agreement and accelerated repayment of the outstanding borrowings plus accrued and unpaid interest under the credit facility.

On October 3, 2012, we completed a private placement offering of $250.0 million aggregate principal amount of 5.375% Senior Notes due 2020 (the “5.375% Notes”). The 5.375% Notes are fully and unconditionally

guaranteed, jointly and severally, by PHG Tea Leaves, Inc., Mollanvick, Inc., The Glatfelter Pulp Wood Company, and Glatfelter Holdings, LLC (the “Guarantors”).

Unamortized deferred debt issuance costs related to the offering of the 5.375% Notes totaled $4.7 million and $4.8 million as of March 31, 2013 and December 31, 2012, respectively, and are reported under the caption “Other assets” in the accompanying condensed consolidated balance sheets. The deferred costs are being amortized on a straight line basis over the life of the 5.375% Notes.

Interest on the 5.375% Notes is payable semiannually in arrears on April 15 and October 15.

The 5.375% Notes are redeemable, in whole or in part, at anytime on or after October 15, 2016 at the redemption prices specified in the applicable Indenture. Prior to October 15, 2016, we may redeem some or all of the Notes at a “make-whole” premium as specified in the Indenture. These Notes and the guarantees of the notes are senior obligations of the Company and the Guarantors, respectively, rank equally in right of payment with future senior indebtedness of the Company and the Guarantors and will mature on October 15, 2020.

The 5.375% Notes contain cross default provisions that could result in all such notes becoming due and payable in the event of a failure to repay debt outstanding under the Revolving Credit Agreement at maturity or a default under the Revolving Credit Agreement that accelerates the debt outstanding thereunder. As of March 31, 2013, we met all of the requirements of our debt covenants.

As of March 31, 2013 and December 31, 2012, we had $5.2 million of letters of credit issued to us by certain financial institutions. The letters of credit, which reduce amounts available under our revolving credit facility, primarily provide financial assurances for the benefit of certain state workers compensation insurance agencies in conjunction with our self-insurance program. We bear the credit risk on this amount to the extent that we do not comply with the provisions of certain agreements. No amounts are outstanding under the letters of credit.

11. ASSET RETIREMENT OBLIGATION

During 2008, we recorded $11.5 million, net present value, of asset retirement obligations related to the legal requirement to close several lagoons at the Spring Grove, PA facility. Historically, lagoons were used to dispose of residual waste material. Closure of the lagoons, which is expected to be completed in 2016, will be accomplished by filling the lagoons, installing a non-permeable liner

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GLATFELTER

3.31.13 Form 10-Q

which will be covered with soil to construct the required cap over the lagoons. The amount referred to above, in addition to upward revisions, were accrued with a corresponding increase in the carrying value of the property, equipment and timberlands caption on the consolidated balance sheet. The amount capitalized is being amortized as a charge to operations on the straight-line basis in relation to the expected closure period. Following is a summary of activity recorded during the first quarters of 2013 and 2012:

In thousands	2013			2012
Balance at January 1,	$	8,882		$	9,679
Accretion		82			122
Payments		(662	)		(207	)
Balance at March 31,	$	8,302		$	9,594

At March 31, 2013 and December 31, 2012, $3.0 million and $3.6 million, respectively, is recorded in the accompanying condensed consolidated balance sheets under the caption “Other current liabilities” and the balance is recorded under the caption “Other long-term liabilities.”

12. FAIR VALUE OF FINANCIAL INSTRUMENTS

The amounts reported on the condensed consolidated balance sheets for cash and cash equivalents and accounts receivable approximate fair value. The following table sets forth carrying value and fair value of long-term debt:

	March 31, 2013				December 31, 2012
In thousands	Carrying Value		Fair Value		Carrying Value		Fair Value
Fixed-rate bonds	$	250,000	$	263,750	$	250,000	$	260,340
Variable rate debt		—		—		—		—
Total	$	250,000	$	263,750	$	250,000	$	260,340

As of March 31, 2013, and December 31, 2012, we had $250.0 million of 5.375% fixed rate debt. These bonds are publicly registered, but thinly traded. Accordingly, the values set forth above are based on debt instruments with similar characteristics (Level 2). The fair value of financial derivatives is set forth below in Note 13.

13. FINANCIAL DERIVATIVES AND HEDGING ACTIVITIES

As part of our overall risk management practices, we enter into financial derivatives primarily designed to either i) hedge foreign currency risks associated with forecasted transactions – “cash flow hedges”; or ii) mitigate the impact that changes in currency exchange rates have on intercompany financing transactions and

foreign currency denominated receivables and payables – “foreign currency hedges.”

Derivatives Designated as Hedging Instruments – Cash Flow Hedges We use currency forward contracts as cash flow hedges to manage our exposure to fluctuations in the currency exchange rates on certain forecasted production costs expected to be incurred over a maximum of twelve months. Currency forward contracts involve fixing the EUR-USD exchange rate or USD-CAD for delivery of a specified amount of foreign currency on a specified date.

We designate certain currency forward contracts as cash flow hedges of forecasted raw material purchases or certain production costs with exposure to changes in foreign currency exchange rates. The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges of foreign exchange risk is deferred as a component of accumulated other comprehensive income in the accompanying condensed consolidated balance sheets and is subsequently reclassified into costs of products sold in the period that inventory produced using the hedged transaction affects earnings. The ineffective portion of the change in fair value of the derivative is recognized directly to earnings and reflected in the accompanying condensed consolidated statements of income as non-operating income (expense) under the caption “Other-net.”

We had the following outstanding derivatives that were used to hedge foreign exchange risks associated with forecasted transactions and designated as hedging instruments:

In thousands	March 31 2013		December 31 2012
Derivative	Buy Notional
Sell / Buy
Euro / U.S. dollar		25,929		27,003
U.S. dollar / Canadian dollar		12,528		12,369

These contracts have maturities of twelve months or less.

Derivatives Not Designated as Hedging Instruments – Foreign Currency Hedges We also enter into forward foreign exchange contracts to mitigate the impact changes in currency exchange rates have on balance sheet monetary assets and liabilities. None of these contracts are designated as hedges for financial accounting purposes and, accordingly, changes in value of the foreign exchange forward contracts and in the offsetting underlying on-balance-sheet transactions are reflected in the accompanying condensed consolidated statements of income under the caption “Other – net.”

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GLATFELTER

3.31.13 Form 10-Q

The following sets forth derivatives used to mitigate the impact changes in currency exchange rates have on balance sheet monetary assets and liabilities:

In thousands	March 31 2013		December 31 2012
Derivative	Sell Notional
Sell / Buy
Euro / U.S. dollar		13,000		13,000
Euro / British Pound		4,000		4,000
Canadian dollar / U.S. dollar		2,000		2,000
U.S. dollar / Euro		—		2,000
U.S. dollar / British Pound		2,000		—

These contracts have maturities of one month from the date originally entered into.

Fair Value Measurements The following table summarizes the fair values of derivative instruments for the period indicated and the line items in the accompanying condensed consolidated balance sheets where the instruments are recorded:

In thousands	March 31 2013		December 31 2012		March 31 2013		December 31 2012
Balance sheet caption	Prepaid Expenses and Other Current Assets				Other Current Liabilities
Designated as hedging:
Forward foreign currency exchange contracts	$	293	$	107	$	230	$	751
Not designated as hedging:
Forward foreign currency exchange contracts	$	50	$	159	$	18	$	16

The amounts set forth in the table above represent the net asset or liability giving effect to rights of offset with each counterparty.

The following table summarizes the amount of income or (loss) from derivative instruments recognized in our results of operations for the periods indicated and the line items in the accompanying condensed consolidated statements of income where the results are recorded:

	Three months ended March 31
In thousands	2013			2012
Designated as hedging:
Forward foreign currency exchange contracts:
Effective portion – cost of products sold	$	(70	)	$	572
Ineffective portion – other – net		79			140
Not designated as hedging:
Forward foreign currency exchange contracts:
Other – net	$	304		$	(1,070	)

The impact of activity not designated as hedging was substantially all offset by the remeasurement of the underlying on-balance sheet item.

The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

The fair values of the foreign exchange forward contracts are considered to be Level 2. Foreign currency forward contracts are valued using foreign currency forward and interest rate curves. The fair value of each contract is determined by comparing the contract rate to the forward rate and discounting to present value. Contracts in a gain position are recorded in the condensed consolidated balance sheets under the caption “Prepaid expenses and other current assets” and the value of contracts in a loss position is recorded under the caption “Other current liabilities.”

A rollforward of fair value amounts recorded as a component of accumulated other comprehensive income is as follows:

In thousands	2013			2012
Balance at January 1,	$	(599	)	$	1,649
Deferred (losses) gains on cash flow hedges		541			(568	)
Reclassified to earnings		70			(572	)
Balance at March 31,	$	12		$	509

We expect substantially all of the amounts recorded as a component of accumulated other comprehensive income will be realized in results of operations within the next twelve months and the amount ultimately recognized will vary depending on actual market rates.

Credit risk related to derivative activity arises in the event a counterparty fails to meet its obligations to us. This exposure is generally limited to the amounts, if any, by which the counterparty’s obligations exceed our obligation to them. Our policy is to enter into contracts only with financial institutions which meet certain minimum credit ratings.

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GLATFELTER

3.31.13 Form 10-Q

14. SHARE REPURCHASES

In May 2012, our Board of Directors authorized a new share repurchase program for up to $25.0 million of our outstanding common stock, exclusive of commissions. The following table summarizes share repurchases through March 31, 2013, made under this program:

	shares		(thousands)
Authorized amount		n/a	$	25,000
Repurchases		291,120		(4,462	)
Remaining authorization			$	20,538

During the first quarter of 2013, no shares were repurchased.

15. COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS

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, on which our former Neenah facility was located, and in the Bay of Green Bay Wisconsin (collectively, the “Site”). The United States, the State of Wisconsin, and two Indian tribes (collectively, the “Governments”) seek to require (a) a cleanup of the Site (“response actions”), (b) reimbursement of cleanup costs (“response costs”), and (c) natural resource damages (“NRDs”). They claim that we, together with seven other entities that have been formally notified that they are potentially responsible parties (“PRPs”) under CERCLA for response costs or NRDs, are jointly and severally responsible under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA” or “Superfund”) for those response actions, response costs, and NRDs, all of which may total in excess of $1 billion.

The PRPs consist of us, Appleton Papers Inc. (“API”), CBC Coating, Inc. (formerly known as Riverside Paper Corporation), Georgia-Pacific Consumer Products, L.P. (formerly known as Fort James Operating Company), Menasha Corporation, NCR Corporation (“NCR”), U.S. Paper Mills Corp., and WTM I Company.

The Governments have identified manufacturing and recycling of NCR^®-brand carbonless copy paper as the principal source of the PCBs in sediments at the Site. Our predecessor, the Bergstrom Paper Company, and later we, operated a deinking paper mill in Neenah, Wisconsin. This mill received NCR^®-brand carbonless copy paper in its furnish and discharged PCBs to Little Lake Butte des Morts, an impoundment of the river at the upstream end of the Site.

The United States Environmental Protection Agency (the “EPA”) has divided the Site into five “operable units”, including the most upstream (“OU1”) and four downstream reaches of the river and bay (“OU2-5”). OU1 extends from primarily Lake Winnebago to the dam at Appleton, and is comprised of Little Lake Butte des Morts. The Neenah Facility discharged its wastewater into this portion of the site.

We have resolved our liability for response actions and response costs associated with the permanent cleanup of Little Lake Butte des Morts through a consent decree, and amendments, entered in United States v. P.H. Glatfelter Co., No. 2:03-cv-949-LA (E.D. Wis.). Together with WTM I Company and with assistance from Menasha Corporation, we have completed that cleanup except for on-going operation and maintenance.

In November 2007, the EPA issued a unilateral administrative order for remedial action (“UAO”) to us and to seven other respondents directing us to implement the cleanup of the Site downstream of Little Lake Butte des Morts. Since that time, the district court has held that one of the respondents, Appleton Papers Inc., is not liable for this Site. In addition, the United States and the State of Wisconsin have entered into a settlement with another respondent, Georgia-Pacific LLP (“GP”), limiting GP’s responsibility to the downstream-most three miles of the river. Work has proceeded to implement the UAO, mostly funded by NCR and its indemnitors.

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GLATFELTER

3.31.13 Form 10-Q

In January 2008, two of the UAO respondents, NCR and Appleton Papers Inc., brought two actions, consolidated under the caption Appleton Papers Inc. v. George A. Whiting Paper Co., No. 2:08-cv-16-WCG (E.D. Wis.) (“Whiting Litigation”), that ultimately involved us and more than two dozen parties in litigation, to allocate among the parties the responsibility for response actions, response costs, and NRDs for this Site. Most of the parties responsible for relatively small discharges of PCBs settled with the Governments, resolving their liability. As the result of a series of rulings on summary judgment and after trial, the Court has so far determined that (a) neither NCR nor Appleton Papers may pursue any other party for contribution, (b) NCR owes us and the other non-settling parties “full contribution” for any amounts we may have to pay on account of response actions or response costs downstream of Little Lake Butte des Morts or of NRDs, and (c) NCR is not liable for response costs, response actions, or NRDs in Little Lake Butte des Morts. A single issue remains concerning set off of our insurance coverage litigation settlement proceeds against our recovery from NCR of $4.28 million in costs we incurred in the past. Upon resolution of that issue, we anticipate entry of a final judgment and appeals by NCR and others of those portions of the rulings with which those parties disagree. Until the Whiting Litigation judgment becomes final and is affirmed on appeal, all past and future costs or damages incurred by any person remain the subject of litigation against us.

In October 2010, the United States and the State of Wisconsin sued us and thirteen other defendants to recover an injunction requiring the UAO respondents to complete the response actions required by the UAO and all parties to reimburse past and future response costs incurred by the Governments as well as to pay NRDs. That case is captioned United States v. NCR Corp., No. 1:10-cv-910-WCG (E.D. Wis.) (“Government Action”). To date, litigation of the Government Action has been limited to the United States’ claim against the UAO respondents for a mandatory injunction to require implementation of the remaining work under the UAO, that is, completion of the remedy in the 33 miles of the river downstream of Little Lake Butte des Morts. Following a trial in December 2012, on May 1, 2013, the district court granted that injunction (“May 2013 Order”). The May 2013 Order directs the Company “jointly and severally” along with three other defendants that are also enjoined (NCR, WTM I Company, and Menasha Corporation) to comply with the UAO. An accompanying declaratory judgment declares the Company and those three defendants jointly and severally liable with three additional defendants (Georgia-Pacific, LLP, U.S. Paper Mills, Inc., and CBC Coatings, Inc.) that have entered into agreements with the United States governing those parties’ compliance with the UAO. We have not yet determined whether we will appeal the May 2013 Order.

Cost estimates. Estimates of the Site remediation change over time as we, or others, gain additional data and experience at the Site. In addition, disagreement exists over the likely costs for some of this work. Based upon estimates made by the Governments and independent estimates commissioned by various potentially responsible parties, we have no reason to disagree with the Governments’ assertion that total past and future response costs and NRDs at this site may exceed $1 billion and that $1.5 billion is a reasonable “outside estimate.” Much of that amount has already been incurred. As described below, some of that amount is NRDs. The parties implementing the response action under the UAO in the downstream part of the river estimate the future cost of work yet to be done totals approximately $360 million. The Governments seek to have that work done at a rate estimated to cost approximately $70 million each year from 2013 through 2016, and at lower rate afterward.

NRDs. The Governments’ NRD assessment documents claimed that we are jointly and severally responsible for NRDs with a value between $176 million and $333 million. The Governments now claim that this range should be inflated to 2009 dollars and then certain unreimbursed past assessment costs should be added, so that the range of their claim would be $287 million to $423 million. We deny liability for most of these NRDs and believe that even if anyone is liable, that we are not jointly and severally liable for the full amount. The May 2013 Order does not determine whether liability for NRDs would be joint and several. Moreover, we believe that the Natural Resource Trustees may not legally pursue this claim at this late date, as the limitations period for NRD claims is three years from discovery.

Reserves for the Site. As of March 31, 2013, our reserve for the Site, including our remediation and ongoing monitoring obligations in Little Lake Butte des Morts, our share of remediation of the rest of the Site, NRDs associated with PCB contamination at the Site and all pending, threatened or asserted and unasserted claims against us relating to PCB contamination at the Site totaled $16.4 million. Of our total reserve for the Fox River, $0.1 million is recorded in the accompanying condensed consolidated balance sheets under the caption “Environmental liabilities” and the remainder is recorded under the caption “Other long term liabilities.”

Although we believe that amounts already funded by us and WTM I to implement the Little Lake Butte des Morts remedy are adequate and no payments have been required since January 2009, there can be no assurance that these amounts will in fact suffice. WTM I has filed a bankruptcy petition in the Bankruptcy Court in Richmond; accordingly, there can be no assurance that WTM I will be able to fulfill its obligation to pay half of any additional costs, if required.

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GLATFELTER

3.31.13 Form 10-Q

We do not believe that we will be allocated a significant percentage share of liability in any final equitable allocation of the response costs and NRDs. The accompanying consolidated financial statements do not include reserves for defense costs for the Whiting Litigation, the Government Action, or any future defense costs related to our involvement at the Site, which could be significant.

In setting our reserve for the Site, we have assessed our legal defenses, including our successful defenses to the allegations made in the Whiting Litigation and the determination in the Whiting Litigation that NCR owes us “full contribution” for response costs and NRDs that we may become obligated to pay except in OU1, and assumed that we will not bear the entire cost of remediation or damages to the exclusion of other known parties at the Site, who are also potentially jointly and severally liable. The existence and ability of other parties to participate has also been taken into account in setting our reserve, and is generally based on our evaluation of recent publicly available financial information on certain of the responsible parties and any known insurance, indemnity or cost sharing agreements between responsible parties 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 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 Site.

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 Governments have published studies estimating the amount of PCBs discharged by each identified potentially responsible party’s (“PRP’s”) facility to the lower Fox River and Green Bay. These reports estimate our Neenah mill’s share of the mass of PCBs discharged to be as high as 27%. We do not believe the discharge mass estimates used in these studies are accurate because (a) the studies themselves disclose that they are not accurate and (b) the PCB mass estimates contained in the studies are based on assumptions that are unsupported by existing data regarding the Site. We believe that the Neenah mill’s absolute and relative contribution of PCB mass is significantly lower than the estimates set forth in these studies. The trial court in the Government Action has found that the Neenah mill discharged an unknown amount of PCBs.

In any event, based upon the rulings in the Whiting Litigation and the Government Action, neither of which endorsed an equitable allocation in proportion to the mass of PCBs discharged, we continue to believe that an allocation in proportion to mass of PCBs discharged would not constitute an equitable allocation of the potential liability for the contamination at the Fox River. We contend that 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.

In the 1990s, we entered into interim cost-sharing agreements with six of the other PRPs, which provided for those PRPs to share certain costs relating to scientific studies of PCBs discharged at the Site (“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 rulings in the Whiting Litigation as well as 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.

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GLATFELTER

3.31.13 Form 10-Q

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 decisions of the courts, official documents such as records of decision, discussions with the United States and other parties, as well as legal counsel and engineering consultants. Based on our analysis of the current records of decision and cost estimates for work to be performed at the Site, we believe that it is reasonably possible that our costs associated with the Fox River matter may exceed our cost estimates and the aggregate amounts accrued for the Fox River matter by amounts that are insignificant or that could range up to $275 million over an undeterminable period that could range beyond 10 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. The rulings in our favor in the Whiting Litigation, if sustained on appeal, suggest that outcomes in the upper end of the monetary range have become somewhat less likely, while adverse rulings on some issues in the Whiting Litigation and the Government Action and increases in cost estimates for some of the work may make an outcome in the upper end of the range more likely. The Company also believes that the effect of reading the Whiting Litigation decisions together with the May 2013 Order requires the ongoing compliance with the UAO to be funded by NCR, or to the extent that the Company is required to provide any such funding, that NCR will be required to reimburse the Company. There can be no assurance, however, that the May 2013 Order will not have a material adverse effect on the Company’s consolidated financial position, liquidity or results of operation.

Summary. Our current assessment is that we will be able to manage this environmental matter without a long-term, material adverse impact on the Company. This matter 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 debt covenants. Moreover, there can be no assurance that our reserves will be adequate to provide for future obligations related to this matter, that our share of costs and/or damages will not exceed our available resources, or that those obligations will not have a long-term, material adverse effect on our consolidated financial position, liquidity or results of operations. Should a court grant the United States or the State of Wisconsin relief that requires us individually either to perform directly or to contribute significant amounts towards remedial action downstream of Little Lake Butte des Morts or to NRDs, those developments could have a material adverse effect on our consolidated financial position, liquidity and results of operations and might result in a default under our loan covenants.

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GLATFELTER

3.31.13 Form 10-Q

16. SEGMENT INFORMATION

The following table sets forth financial and other information by business unit for the period indicated:

Three months ended March 31 In millions	Specialty Papers				Composite Fibers				Advanced Airlaid Materials				Other and Unallocated						Total
	2013		2012		2013		2012		2013		2012		2013			2012			2013			2012
Net sales	$	227.1	$	223.8	$	111.8	$	111.9	$	66.2	$	61.6		—			—		$	405.2		$	397.4
Energy and related sales, net		1.1		1.9		—		—		—		—		—			—			1.1			1.9
Total revenue		228.2		225.7		111.8		111.9		66.2		61.6		—			—			406.3			399.2
Cost of products sold		195.5		188.7		90.4		91.5		59.5		55.1		3.5			2.9			348.9			338.2
Gross profit (loss)		32.7		37.0		21.5		20.4		6.7		6.5		(3.5	)		(2.9	)		57.4			61.0
SG&A		14.5		13.3		9.8		9.5		2.2		2.6		7.0			4.5			33.5			30.0
Gains on dispositions of plant, equipment and timberlands, net		—		—		—		—		—		—		(0.1	)		—			(0.1	)		—
Total operating income (loss)		18.3		23.7		11.6		10.9		4.5		3.8		(10.5	)		(7.4	)		24.0			31.0
Non-operating expense		—		—		—		—		—		—		(3.5	)		(4.0	)		(3.5	)		(4.0	)
Income (loss) before income taxes	$	18.3	$	23.7	$	11.6	$	10.9	$	4.5	$	3.8	$	(13.9	)	$	(11.4	)	$	20.5		$	27.1
Supplementary Data
Net tons sold		202.3		195.8		22.5		22.7		23.9		22.3		—			—			248.8			240.8
Depreciation, depletion and amortization	$	8.3	$	8.9	$	4.6	$	6.0	$	2.2	$	2.2		0.2			—		$	15.4		$	17.1
Capital expenditures		8.6		4.6		17.5		9.1		2.1		0.5		3.2			—			31.4			14.2

The sum of individual amounts set forth above may not agree to the consolidated financial statements included herein due to rounding.

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 Business Unit Performance table.

Management evaluates results of operations of the business units before pension expense, certain corporate level costs, and the effects of certain gains or losses not considered to be related to the core business operations. Management believes that this is a more meaningful representation of the operating performance of its core businesses, the profitability of business units and the extent of cash flow generated from these core operations. Such amounts are presented under the caption “Other and Unallocated.” This presentation is 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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GLATFELTER

3.31.13 Form 10-Q

17. GUARANTOR FINANCIAL STATEMENTS

Our 5.375% Notes are 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, and Glatfelter Holdings, LLC. The guarantees are subject to certain customary release provisions including i) the designation of such subsidiary as an unrestricted or excluded subsidiary; (ii) in connection with any sale or disposition of the capital stock of the subsidiary guarantor; and (iii) upon our exercise of our legal defeasance option or our covenant defeasance option, all of which are more fully described in the Indenture dated as of October 3, 2012 among us, the Guarantors and US Bank National Association, as Trustee, relating to the 5.375% Notes. The following presents our condensed consolidating statements of income, including comprehensive income, and cash flows for the three months ended March 31, 2013 and 2012 and our condensed consolidating balance sheets as of March 31, 2013 and December 31, 2012. 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 Statements of Income and Comprehensive Income for the

three months ended March 31, 2013

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	227,116		$	15,016		$	178,072		$	(15,015	)	$	405,189
Energy and related sales, net		1,101			—			—			—			1,101
Total revenues		228,217			15,016			178,072			(15,015	)		406,290
Costs of products sold		200,469			13,407			149,968			(14,929	)		348,915
Gross profit		27,748			1,609			28,104			(86	)		57,375
Selling, general and administrative expenses		20,602			540			12,345			—			33,487
Gains on dispositions of plant, equipment and timberlands, net		—			(73	)		—			—			(73	)
Operating income		7,146			1,142			15,759			(86	)		23,961
Other non-operating income (expense)
Interest expense		(3,841	)		—			—			—			(3,841	)
Interest income		(760	)		1,658			(796	)		—			102
Other, net		12,934			60			740			(13,487	)		247
Total other non-operating income (expense)		8,333			1,718			(56	)		(13,487	)		(3,492	)
Income (loss) before income taxes		15,479			2,860			15,703			(13,573	)		20,469
Income tax provision (benefit)		(150	)		772			4,255			(37	)		4,840
Net income (loss)		15,629			2,088			11,448			(13,536	)		15,629
Other comprehensive income		(7,689	)		(4,608	)		(7,978	)		12,586			(7,689	)
Comprehensive income	$	7,940		$	(2,520	)	$	3,470		$	(950	)	$	7,940

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GLATFELTER

3.31.13 Form 10-Q

Condensed Consolidating Statements of Income and Comprehensive Income for the

three months ended March 31, 2012

In thousands	Parent Company			Guarantors		Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	223,802		$	15,370	$	173,561		$	(15,381	)	$	397,352
Energy and related sales, net		1,861			—		—			—			1,861
Total revenues		225,663			15,370		173,561			(15,381	)		399,213
Costs of products sold		192,876			13,948		146,742			(15,323	)		338,243
Gross profit		32,787			1,422		26,819			(58	)		60,970
Selling, general and administrative expenses		17,036			739		12,192			—			29,967
Gains on dispositions of plant, equipment and timberlands, net		(26	)		—		(11	)		—			(37	)
Operating income		15,777			683		14,638			(58	)		31,040
Other non-operating income (expense)
Interest expense		(4,305	)		—		36			—			(4,269	)
Interest income		(650	)		1,642		(869	)		—			123
Other, net		11,189			89		473			(11,555	)		196
Total other non-operating income (expense)		6,234			1,731		(360	)		(11,555	)		(3,950	)
Income (loss) before income taxes		22,011			2,414		14,278			(11,613	)		27,090
Income tax provision (benefit)		3,133			1,093		4,011			(25	)		8,212
Net income (loss)		18,878			1,321		10,267			(11,588	)		18,878
Other comprehensive income		11,651			—		8,634			(8,634	)		11,651
Comprehensive income	$	30,529		$	1,321	$	18,901		$	(20,222	)	$	30,529

- 19 -

GLATFELTER

3.31.13 Form 10-Q

Condensed Consolidating Balance Sheet as of

March 31, 2013

In thousands	Parent Company		Guarantors		Non Guarantors		Adjustments/ Eliminations			Consolidated
Assets
Cash and cash equivalents	$	40,149	$	5,786	$	30,505	$	—		$	76,440
Other current assets		237,981		401,248		227,565		(442,455	)		424,339
Plant, equipment and timberlands, net		240,695		6,089		370,871		—			617,655
Other assets		793,462		158,225		44,005		(889,505	)		106,187
Total assets	$	1,312,287	$	571,348	$	672,946	$	(1,331,960	)	$	1,224,621
Liabilities and Shareholders’ Equity
Current liabilities	$	359,376	$	27,364	$	279,633	$	(437,252	)	$	229,121
Long-term debt		250,000		—		—		—			250,000
Deferred income taxes		36,734		2,207		39,976		(19,664	)		59,253
Other long-term liabilities		121,554		6,442		10,105		3,523			141,624
Total liabilities		767,664		36,013		329,714		(453,393	)		679,998
Shareholders’ equity		544,623		535,335		343,232		(878,567	)		544,623
Total liabilities and shareholders’ equity	$	1,312,287	$	571,348	$	672,946	$	(1,331,960	)	$	1,224,621

Condensed Consolidating Balance Sheet as of

December 31, 2012

In thousands	Parent Company		Guarantors		Non Guarantors		Adjustments/ Eliminations			Consolidated
Assets
Cash and cash equivalents	$	43,748	$	4,311	$	49,620	$	—		$	97,679
Other current assets		204,961		387,627		214,568		(385,977	)		421,179
Plant, equipment and timberlands, net		241,969		6,204		373,013		—			621,186
Other assets		787,348		160,741		45,133		(890,281	)		102,941
Total assets	$	1,278,026	$	558,883	$	682,334	$	(1,276,258	)	$	1,242,985
Liabilities and Shareholders’ Equity
Current liabilities	$	337,761	$	6,041	$	291,547	$	(384,441	)	$	250,908
Long-term debt		250,000		—		—		—			250,000
Deferred income taxes		34,604		3,691		40,972		(17,221	)		62,046
Other long-term liabilities		115,982		10,602		11,093		2,675			140,352
Total liabilities		738,347		20,334		343,612		(398,987	)		703,306
Shareholders’ equity		539,679		538,549		338,722		(877,271	)		539,679
Total liabilities and shareholders’ equity	$	1,278,026	$	558,883	$	682,334	$	(1,276,258	)	$	1,242,985

- 20 -

GLATFELTER

3.31.13 Form 10-Q

Condensed Consolidating Statement of Cash Flows for the three

months ended March 31, 2013

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net cash provided (used) by
Operating activities	$	7,688		$	1,713		$	6,394		$	—		$	15,795
Investing activities
Expenditures for plant, equipment and timberlands		(11,763	)		(57	)		(19,571	)		—			(31,391	)
Proceeds from disposal plant, equipment and timberlands, net		—			73			—			—			73
Repayments from (advances of) intercompany loans, net and other		(1,100	)		(1,264	)		—			2,364			—
Intercompany capital contributed		—			(90	)		—			90			—
Other		(175	)		—			—			—			(175	)
Total investing activities		(13,038	)		(1,338	)		(19,571	)		2,454			(31,493	)
Financing activities
Payments of note offering costs		(108	)		—			—			—			(108	)
Payment of dividends to shareholders		(3,905	)		—			—			—			(3,905	)
(Repayments) borrowings of intercompany loans, net		6,350			1,100			(5,086	)		(2,364	)		—
Intercompany capital received		—			—			90			(90	)		—
Payments for share based compensation awards and other		(586	)		—			—			—			(586	)
Total financing activities		1,751			1,100			(4,996	)		(2,454	)		(4,599	)
Effect of exchange rate on cash		—			—			(942	)		—			(942	)
Net increase (decrease) in cash		(3,599	)		1,475			(19,115	)		—			(21,239	)
Cash at the beginning of period		43,748			4,311			49,620			—			97,679
Cash at the end of period	$	40,149		$	5,786		$	30,505		$	—		$	76,440

- 21 -

GLATFELTER

3.31.13 Form 10-Q

Condensed Consolidating Statement of Cash Flows for the three

months ended March 31, 2012

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net cash provided (used) by
Operating activities	$	(2,148	)	$	1,797		$	10,094		$	—		$	9,743
Investing activities
Expenditures for plant, equipment and timberlands		(4,597	)		—			(9,555	)		—			(14,152	)
Proceeds from disposal plant, equipment and timberlands, net		26			—			23			—			49
Repayments from (advances of) intercompany loans, net		3,373			(1,383	)		—			(1,990	)		—
Total investing activities		(1,198	)		(1,383	)		(9,532	)		(1,990	)		(14,103	)
Financing activities
Net (repayments of) proceeds from indebtedness		(5,000	)		—			—			—			(5,000	)
Payment of dividends to shareholders		(3,898	)		—			—			—			(3,898	)
Repurchases of common stock		(1,204	)		—			—			—			(1,204	)
(Repayments) borrowings of intercompany loans, net		10,400			—			(12,390	)		1,990			—
Proceeds from stock options exercised and other		602			—			27			—			629
Total financing activities		900			—			(12,363	)		1,990			(9,473	)
Effect of exchange rate on cash		—			—			455			—			455
Net increase (decrease) in cash		(2,446	)		414			(11,346	)		—			(13,378	)
Cash at the beginning of period		3,007			2,894			32,376			—			38,277
Cash at the end of period	$	561		$	3,308		$	21,030		$	—		$	24,899

- 22 -

GLATFELTER

3.31.13 Form 10-Q

18. SUBSEQUENT EVENTS

IKB Loan On April 11, 2013, Glatfelter Gernsbach GmbH & Co. KG (“Gernsbach”), a wholly-owned subsidiary of ours, entered into an agreement with IKB Deutsche Industriebank AG, Düsseldorf (“IKB”), pursuant to which Gernsbach borrowed from IKB approximately €42.7 million aggregate principal amount (the “IKB Loan”).

The IKB Loan is repayable in 32 quarterly installments beginning on June 30, 2015 and ending on March 31, 2023 and will bear interest at a rate of 2.05% per annum. Interest on the IKB Loan or portion thereof is payable quarterly in each year of the term of the loan with interest accruing from the date the loan or portion thereof is drawn.

Gernsbach is permitted to use borrowings under the Loan Contract to finance certain capital expenditures and to make other related investments at its manufacturing facility.

The IKB Loan provides for representations, warranties and covenants customary for financings of this type. The financial covenants contained in the IBK Loan, which relate to the minimum ratio of consolidated EBITDA to consolidated interest expense and the maximum ratio of consolidated total net debt to consolidated adjusted EBITDA, will be calculated by reference to our Amended and Restated Credit Agreement, dated November 21, 2011.

Acquisition On April 30, 2013, we completed the acquisition of Dresden Papier GmbH (“Dresden”) from Fortress Paper Ltd. for approximately $210 million, subject to post-closing working capital adjustments. Dresden, based in Heidenau, Germany, is the leading global supplier of nonwoven wallpaper base materials, and is a major supplier to most of the world’s largest wallpaper manufacturers. In 2012, Dresden’s revenues were $149.7 million and it employs approximately 146 people at its state-of-the-art, 60,000 metric-ton-capacity manufacturing facility. We financed the acquisition through a combination of cash on hand and borrowings under our Revolving Credit Facility.

Disclosure of additional quantitative financial information is not practicable due to the timing of the closing of the acquisition.

Dresden now operates as part of our Composite Fibers business unit, which manufactures fiber-based products for growing global niche markets, including filtration papers for tea and single serve coffee applications, metallized papers, composite laminates, and technical specialties.

- 23 -

GLATFELTER

3.31.13 Form 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the information in the unaudited condensed consolidated financial statements and notes thereto included herein and Glatfelter’s Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2012 Annual Report on Form 10-K.

Forward-Looking Statements This Quarterly Report on Form 10-Q 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-Q 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, non-cash pension expense, 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. variations in demand for our products including the impact of any unplanned market-related downtime, or variations in product pricing;

ii. changes in the cost or availability of raw materials we use, in particular pulpwood, pulp, pulp substitutes, caustic soda and abaca fiber;

iii. changes in energy-related costs and commodity raw materials with an energy component;

iv. our ability to develop new, high value-added products;

v. the impact of exposure to volatile market-based pricing for sales of excess electricity;

vi. the impact of competition, changes in industry production capacity, including the construction of new mills, the closing of mills and incremental changes due to capital expenditures or productivity increases;

vii. the gain or loss of significant customers and/or on-going viability of such customers;

viii. 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;

ix. risks associated with our international operations, including local economic and political environments and fluctuations in currency exchange rates;

x. geopolitical events, including war and terrorism;

xi. disruptions in production and/or increased costs due to labor disputes;

xii. the impact of unfavorable outcomes of audits by various state, federal or international tax authorities;

xiii. enactment of adverse state, federal or foreign tax or other legislation or changes in government policy or regulation;

xiv. adverse results in litigation in the Fox River matter;

xv. our ability to finance, consummate and integrate acquisitions; and

xvi. the cost, and successful design and construction, of the Composite Fibers capacity expansion project.

We manufacture a wide array of specialty papers and fiber-based engineered materials. We manage our company along three business units:

• Specialty Papers with revenue from the sale of carbonless papers and forms, book publishing, envelope & converting papers, and fiber-based engineered products;

• Composite Fibers with revenue from the sale of single-serve coffee and tea filtration papers, metallized papers, composite laminates used for decorative furniture and flooring applications, and other technical specialty papers; and

• Advanced Airlaid Materials with revenue from the sale of airlaid non-woven fabric like materials used in feminine hygiene products, adult incontinence products, cleaning pads, wipes, food pads, napkins, tablecloths, and baby wipes.

- 24 -

GLATFELTER

3.31.13 Form 10-Q

RESULTS OF OPERATIONS

Three months ended March 31, 2013 versus the Three months ended March 31, 2012

Overview For the first quarter of 2013, net income was $15.6 million, or $0.36 per diluted share, compared with $18.9 million, or $0.43 per diluted share, in the first quarter of 2012.

Although our growth-oriented fiber-based materials businesses reported improved results, total operating income from our business units declined $4.0 million. Overall, shipping volumes increased 3.3% in the year-over-year comparison.

Specialty Papers’ operating income totaled $18.3 million and $23.7 million for the first quarters of 2013 and 2012, respectively. Although shipping volumes increased 3.3%, this unit’s profitability was unfavorably impacted by lower selling prices and cost inflation.

Our Composite Fibers business unit’s first quarter of 2013 operating income increased to $11.6 million from $10.9 million in the first quarter of 2012 primarily due to lower depreciation and improved operating efficiencies. Volumes shipped were essentially unchanged.

Advanced Airlaid Materials’ operating income increased to $4.5 million compared with $3.8 million for the first quarter of 2012, primarily reflecting higher shipping volumes.

The increase in consolidated net income and earnings per share also benefited from a favorable tax rate in the current quarter compared to the same quarter a year ago.

The following table sets forth summarized results of operations:

	Three months ended March 31
In thousands, except per share	2013		2012
Net sales	$	405,189	$	397,352
Gross profit		57,375		60,970
Operating income		23,961		31,040
Net income		15,629		18,878
Earnings per diluted share		0.36		0.43

The consolidated results of operations for the three months ended March 31, 2013 include the following significant items:

In thousands, except per share	After-tax Gain (loss)			Diluted EPS
2013
Acquisition and integration related costs	$	(1,761	)	$	(0.04	)
Timberland sales and related costs		282			0.01
International legal entity restructuring costs		(260	)		(0.01	)

The above items decreased earnings by $1.7 million, or $0.04 per diluted share, in first quarter of 2013.

Business Unit Performance

Three months ended March 31 In millions	Specialty Papers				Composite Fibers				Advanced Airlaid Materials				Other and Unallocated						Total
	2013		2012		2013		2012		2013		2012		2013			2012			2013			2012
Net sales	$	227.1	$	223.8	$	111.8	$	111.9	$	66.2	$	61.6		—			—		$	405.2		$	397.4
Energy and related sales, net		1.1		1.9		—		—		—		—		—			—			1.1			1.9
Total revenue		228.2		225.7		111.8		111.9		66.2		61.6		—			—			406.3			399.2
Cost of products sold		195.5		188.7		90.4		91.5		59.5		55.1		3.5			2.9			348.9			338.2
Gross profit (loss)		32.7		37.0		21.5		20.4		6.7		6.5		(3.5	)		(2.9	)		57.4			61.0
SG&A		14.5		13.3		9.8		9.5		2.2		2.6		7.0			4.5			33.5			30.0
Gains on dispositions of plant, equipment and timberlands, net		—		—		—		—		—		—		(0.1	)		—			(0.1	)		—
Total operating income (loss)		18.3		23.7		11.6		10.9		4.5		3.8		(10.5	)		(7.4	)		24.0			31.0
Non-operating expense		—		—		—		—		—		—		(3.5	)		(4.0	)		(3.5	)		(4.0	)
Income (loss) before income taxes	$	18.3	$	23.7	$	11.6	$	10.9	$	4.5	$	3.8	$	(13.9	)	$	(11.4	)	$	20.5		$	27.1
Supplementary Data
Net tons sold		202.3		195.8		22.5		22.7		23.9		22.3		—			—			248.8			240.8
Depreciation, depletion and amortization	$	8.3	$	8.9	$	4.6	$	6.0	$	2.2	$	2.2		0.2			—		$	15.4		$	17.1
Capital expenditures		8.6		4.6		17.5		9.1		2.1		0.5		3.2			—			31.4			14.2

The sum of individual amounts set forth above may not agree to the consolidated financial statements included herein due to rounding.

- 25 -

GLATFELTER

3.31.13 Form 10-Q

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 Business Unit Performance table.

Management evaluates results of operations of the business units before pension expense, certain corporate level costs, and the effects of certain gains or losses not considered to be related to the core business operations. Management believes that this is a more meaningful representation of the operating performance of its core businesses, the profitability of business units and the extent of cash flow generated from these core operations. Such amounts are presented under the caption “Other and Unallocated.” This presentation is 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.

Sales and Costs of Products Sold

	Three months ended March 31
In thousands	2013			2012			Change
Net sales	$	405,189		$	397,352		$	7,837
Energy and related sales – net		1,101			1,861			(760	)
Total revenues		406,290			399,213			7,077
Costs of products sold		348,915			338,243			10,672
Gross profit	$	57,375		$	60,970		$	(3,595	)
Gross profit as a percent of Net sales		14.2	%		15.3	%

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

	Three months ended March 31
Percent of Total	2013			2012
Business Unit
Specialty Papers		56.1	%		56.3	%
Composite Fibers		27.6			28.2
Advanced Airlaid Material		16.3			15.5
Total		100.0	%		100.0	%

Net sales for the first quarter of 2013 totaled $405.2 million, a 2.0% increase compared with $397.4 million in the first quarter of 2012. The translation of foreign currencies favorably impacted net sales by $0.7 million in the comparison.

In the Specialty Papers business unit, 2013 first quarter net sales increased $3.3 million, or 1.5%, primarily due to a 3.4% increase in shipping volumes. Average selling prices were $1.8 million lower in the comparison to the first quarter of 2012.

Specialty Papers’ 2013 first quarter operating income totaled $18.3 million, which was $5.4 million lower than the same quarter of 2012. As expected, operating income was adversely impacted by lower average selling prices, and higher maintenance spending and other cost inflation.

We sell excess power generated by the Spring Grove, PA facility. The following table summarizes this activity for the first quarters of 2013 and 2012:

	Three months ended March 31
In thousands	2013			2012			Change
Energy sales	$	1,575		$	1,039		$	536
Costs to produce		(1,394	)		(1,010	)		(384	)
Net		181			29			152
Renewable energy credits		920			1,832			(912	)
Total	$	1,101		$	1,861		$	(760	)

Renewable energy credits (“RECs”) represent sales of certified credits earned related to burning renewable sources of energy such as black liquor and wood waste. We sell RECs into an emerging and somewhat illiquid market. The extent and value of future revenues from REC sales is dependent on many factors outside of management’s control. Therefore, we may not be able to generate consistent additional sales of RECs in future periods.

- 26 -

GLATFELTER

3.31.13 Form 10-Q

Composite Fibers’ net sales totaled $111.8 million in the first quarter of 2013, essentially unchanged from the same quarter a year ago, on slightly lower shipping volumes. Lower average selling prices adversely affected the comparison to the year-earlier quarter by $0.9 million and foreign currency translation favorably affected the comparison by $0.4 million.

First quarter 2013 operating income increased $0.7 million, or 6.6%, primarily due to lower depreciation expense and improved operating efficiencies. Foreign currency translation unfavorably impacted operating income by $0.5 million compared with the prior-year quarter.

In Advanced Airlaid Materials, net sales increased $4.6 million, or 7.5%, primarily due to a 7.1% increase in shipping volumes, partially offset by $1.0 million from lower average selling prices. Foreign currency translation favorably affected the comparison by $0.3 million

First quarter 2013 operating income increased $0.7 million, or 17.0%, compared with the year-ago quarter primarily due to the increase in shipping volumes and a $0.6 million benefit from lower raw material and energy costs.

Other and Unallocated The amount of net operating expenses not allocated to a business unit and reported as “Other and Unallocated” in our table of Business Unit Performance, totaled $10.5 million in the first quarter of 2013 compared with $7.4 million in the first quarter of 2012. The increase is primarily due to acquisition and integration related costs and higher pension expense.

Pension Expense The following table summarizes the amounts of pension expense recognized for the periods indicated:

	Three months ended March 31
In thousands	2013		2012		Change
Recorded as :
Costs of products sold	$	3,250	$	2,623	$	627
SG&A expense		641		453		188
Total	$	3,891	$	3,076	$	815

The amount of pension expense recognized each year is dependent on various actuarial assumptions and certain other factors, including discount rates and the fair value of our pension assets.

Income taxes For the first three months of 2013, we recorded a provision for income taxes of $4.8 million on $20.5 million of pretax income, or 23.6%. The comparable amounts in the first quarter of 2012 were income tax expense of $8.2 million on $27.1 million of pretax income, or 30.3%. The lower tax rate in the first quarter of 2013 was due to the impact of research and development credits recorded in the quarter. Since the applicable U.S. Federal legislation was not signed into law until after year end 2012, the 2013 first quarter effective tax rate includes a $1.2 million benefit from 2012 research and development tax credits in addition to those earned in the current quarter. During 2012, no such research and development credits were recorded.

Foreign Currency We own and operate facilities in Canada, Germany, France, the United Kingdom and the Philippines. The functional currency of our Canadian operations is the U.S. dollar. However, in Germany and France it is the Euro, in the UK, it is the British Pound Sterling, and in the Philippines the functional currency is the Peso. During the first three months of 2013, Euro functional currency operations generated approximately 25.8% of our sales and 25.2% of operating expenses and British Pound Sterling operations represented 7.0% of net sales and 6.8% of operating expenses. The translation of the results from international operations into U.S. dollars is subject to changes in foreign currency exchange rates. The table below summarizes the translation impact on reported results that changes in currency exchange rates had on our non-U.S. based operations from the conversion of these operation’s results for first three months of 2013 compared to the first three months 2012:

In thousands	Three months ended March 31
	Favorable (unfavorable)
Net sales	$	669
Costs of products sold		(943	)
SG&A expenses		(52	)
Income taxes and other		(21	)
Net income	$	(347	)

The above table only presents the financial reporting impact of foreign currency translations assuming currency exchange rates in 2013 were the same as 2012. It does not present the impact of certain competitive advantages or disadvantages of operating or competing in multi-currency markets.

- 27 -

GLATFELTER

3.31.13 Form 10-Q

LIQUIDITY AND CAPITAL RESOURCES

Our business is capital intensive and requires significant expenditures for new or enhanced equipment, to support our research and development efforts, for environmental compliance matters including, but not limited to, the Clean Air Act, and to support our business strategy. In addition, we have mandatory debt service requirements of both principal and interest. The following table summarizes cash flow information for each of the periods presented:

	Three months ended March 31
In thousands	2013			2012
Cash and cash equivalents at beginning of period	$	97,679		$	38,277
Cash provided (used) by
Operating activities		15,795			9,743
Investing activities		(31,493	)		(14,103	)
Financing activities		(4,599	)		(9,473	)
Effect of exchange rate changes on cash		(942	)		455
Net cash provided (used)		(21,239	)		(13,378	)
Cash and cash equivalents at end of period	$	76,440		$	24,899

As of March 31, 2013, we had $76.4 million in cash and cash equivalents and $344.8 million available under our revolving credit agreement, which matures in November 2016.

Operating cash flow increased by $6.1 million in the year-over-year comparison primarily due a reduction in cash used for working capital.

Net cash used by investing activities increased by $17.4 million including the use of cash to fund the Composite Fibers capacity expansion project. Capital expenditures totaled $31.4 million in 2013 compared with $14.2 million in 2012 and are expected to approximate $90 million to $100 million in 2013, including $30 million to expand capacity to serve Composite Fibers’ growth markets.

Net cash used by financing activities decreased $4.9 million in the year over year comparison. During the first quarter of 2012, we used $5.0 million to reduce amounts outstanding on our revolving credit facility and $1.2 million to repurchase common stock. The following table sets forth our outstanding long-term indebtedness:

In thousands	March 31 2013		December 31 2012
Revolving credit facility, due Nov. 2016	$	—	$	—
5.375% Notes, due Oct 2020		250,000		250,000
Total long-term debt		250,000		250,000
Less current portion		—		—
Long-term debt, net of current portion	$	250,000	$	250,000

Our revolving credit facility contains a number of customary compliance covenants. In addition, the 5.375% Notes contain cross default provisions that could result in all such notes becoming due and payable in the event of a failure to repay debt outstanding under the credit agreement at maturity, or a default under the credit agreement, that accelerates the debt outstanding thereunder. As of March 31, 2013, we met all of the requirements of our debt covenants. The significant terms of the debt instruments are more fully discussed in Item 1—Financial Statements – Note 10. As more fully discussed in Item 1 – Financial Statements – Note 18, in April 2013 we entered into a new ten year, fixed rate loan agreement in the amount of €42.7 million.

In addition, on April 30, 2013 we completed the acquisition of Dresden Papier GmbH for approximately $210 million. The acquisition was financed using a combination of cash on hand and borrowings under our revolving credit facility.

Cash dividends paid on common stock totaled $3.9 million in both the first quarters of 2013 and 2012. Our Board of Directors determines what, if any, dividends will be paid to our shareholders. In March 2013, the quarterly dividend was increased by 11%, to $0.10 per common share. 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.

In May 2012, our Board of Directors authorized a share repurchase program for up to $25.0 million, exclusive of commissions, of our outstanding common stock. The following table summarizes share repurchases made under this program through March 31, 2013:

	shares		(thousands)
Authorized amount		n/a	$	25,000
Repurchases		291,120		(4,462	)
Remaining authorization			$	20,538

No shares were repurchased under this program during the first quarter of 2013.

- 28 -

GLATFELTER

3.31.13 Form 10-Q

We are subject to various federal, state and local laws and regulations intended to protect the environment as well as human health and safety. At various times, we have incurred significant costs to comply with these regulations and we could incur additional costs as new regulations are developed or regulatory priorities change. As a result of new air quality regulations including the U.S. EPA Best Available Retrofit Technology rule (BART; otherwise known as the Regional Haze Rule) and the Boiler Maximum Achievable Control Technology rule (Boiler MACT), we anticipate that we could incur material capital and operating costs. For example, on December 20, 2012, the Administrator of the U. S. Environmental Protection Agency signed new rules which could require process modifications and/or installation of air pollution controls on power boilers at two of our facilities. We are currently reviewing these rules to understand the effect they may have on our operations, such as reducing or curtailing boiler usage or modifying the types of boilers operated or fuel consumed. The cost of compliance is likely to be significant. Our current estimates to implement viable options could result in additional capital spending of approximately $45 million to $60 million. The amount ultimately incurred may differ depending on our successful implementation of appropriate available options. In addition, the timing of any additional capital spending is uncertain, although we currently expect to incur the majority of expenditures generally in 2015 and 2016. Enactment of new environmental laws or regulations or changes in existing laws or regulations could significantly change our estimates.

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 1 – Financial Statements – Note 15 for a summary of significant environmental matters.

We expect to meet all of our near- and longer-term cash needs from a combination of operating cash flow, cash and cash equivalents, our credit facility or other bank lines of credit and other long-term debt. However, as discussed in Item 1 – Financial Statements – Note 15, an unfavorable outcome of various environmental matters could have a material adverse impact on our consolidated financial position, liquidity and/or results of operations.

Off-Balance-Sheet Arrangements As of March 31, 2013 and December 31, 2012, 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 1 – Financial Statements.

Outlook For Specialty Papers, we expect shipping volumes, overall selling prices and input costs in the second quarter to be in line with the first quarter. We also plan to complete the annually scheduled maintenance outages at these facilities in the second quarter of 2013. The outages are expected to adversely impact second quarter operating profit by approximately $19 million, pre-tax.

Before giving effect to the Dresden acquisition, Composite Fibers’ shipping volumes are anticipated to be approximately 5% higher in the second quarter of 2013 compared to the first quarter of 2013 primarily from seasonal growth in metalized products, while selling prices and input costs are expected to be generally in line with the first quarter levels. We are in the process of completing the previously announced upgrade of a machine at our Gernsbach facility. The machine was taken offline on February 24, 2013 and is expected to be re-started in May 2013. The downtime associated with the upgrade is expected to negatively impact operating profit by approximately $2 million in the second quarter of 2013.

In addition, on April 30, 2013, we completed the acquisition of Dresden Papier GmbH and will operate this facility as part of the Composite Fibers business unit. Dresden’s results of operations will be included prospectively from the date of the acquisition. The acquisition is expected to be accretive to earnings by approximately $0.25 per share on an annual basis. In connection with this transaction, we expect to incur acquisition and integration costs of approximately $2 million to $3 million, after tax, in the second quarter and approximately $5 million to $6 million, after tax, for the full year 2013.

Shipping volumes for the Advanced Airlaid Materials business unit in the second quarter of 2013 are expected to be generally in line with the first quarter of 2013. Higher input costs are expected to be offset by increased selling prices.

- 29 -

GLATFELTER

3.31.13 Form 10-Q

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

	Year Ended December 31															At March 31, 2013
Dollars in thousands	2013			2014			2015			2016			2017			Carrying Value		Fair Value
Long-term debt
Average principal outstanding
At fixed interest rates – Bond	$	250,000		$	250,000		$	250,000		$	250,000		$	250,000		$	250,000	$	263,750
At variable interest rates		—			—			—			—			—			—		—
																$	250,000	$	263,750
Weighted-average interest rate
On fixed rate debt – Bond		5.375	%		5.375	%		5.375	%		5.375	%		5.375	%
On variable rate debt		—			—			—			—			—

The table above presents the average principal outstanding and related interest rates for the next five years for debt outstanding as of March 31, 2013. 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 March 31, 2013, we had long-term debt outstanding of $250.0 million, all of which is at fixed interest rates.

As part of our overall risk management practices, we enter into financial derivatives primarily designed to either i) hedge foreign currency risks associated with forecasted transactions – “cash flow hedges”; or ii) mitigate the impact that changes in currency exchange rates have on intercompany financing transactions and foreign currency denominated receivables and payables – “foreign currency hedges.” For a more complete discussion of this activity, refer to Item 1 – Financial Statements – Note 13.

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 the first three months of 2013, Euro functional currency operations generated approximately 25.8% of our sales and 25.2% of operating expenses and British Pound Sterling operations represented 7.0% of net sales and 6.8% of operating expenses.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures Our chief executive officer and our principal 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 March 31, 2013, have concluded that, as of the evaluation date, our disclosure controls and procedures are effective.

Changes in Internal Controls There were no changes in our internal control over financial reporting during the three months ended March 31, 2013, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

- 30 -

GLATFELTER

3.31.13 Form 10-Q

PART II

ITEM 6. EXHIBITS

The following exhibits are filed herewith or incorporated by reference as indicated.

2.1	Share Purchase Agreement, dated March 13, 2013, by and among Glatfelter Gernsbach GmbH & Co. KG. (as purchaser), P H. Glatfelter Company (as purchaser guarantor), Fortress Security Papers AG (as vendor) and Fortress Paper Ltd. (as vendor guarantor). Certain immaterial schedules to this exhibit have been omitted pursuant to the provisions of Regulation S-K, Item 601(b)(2). A copy of any of the omitted schedules will be furnished to the Securities and Exchange Commission upon request.
10.1	Loan Agreement, dated April 11, 2013, by and among Glatfelter Gernsbach GmbH & Co. KG. and IKB Deutsche Industriebank AG, Düsseldorf.
10.2	Guaranty, dated April 17, 2013, executed by P. H. Glatfelter Company (as Guarantor) in favor of IKB Deutsche Industriebank AG.
31.1	Certification of Dante C. Parrini, Chairman and Chief Executive Officer of Glatfelter, pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.
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.
32.1	Certification of Dante C. Parrini, Chairman and Chief Executive Officer of Glatfelter, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.
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.
101.INS	XBRL Instance Document *
101.SCH	XBRL Taxonomy Extension Schema *
101.CAL	XBRL Extension Calculation Linkbase *
101.DEF	XBRL Extension Defiinition Linkbase *
101.LAB	XBRL Extension Label Linkbase *
101.PRE	XBRL Extension Presentation Linkbase *

* Furnished herewith.

- 31 -

GLATFELTER

3.31.13 Form 10-Q

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)
May 9, 2013
	By	/s/ David C. Elder
		David C. Elder
		Vice President, Finance

- 32 -

GLATFELTER

3.31.13 Form 10-Q

EXHIBIT INDEX

Exhibit Number	Description
2.1	Share Purchase Agreement, dated March 13, 2013, by and among Glatfelter Gernsbach GmbH & Co. KG. (as purchaser), P H. Glatfelter Company (as purchaser guarantor), Fortress Security Papers AG (as vendor) and Fortress Paper Ltd. (as vendor guarantor). Certain immaterial schedules to this exhibit have been omitted pursuant to the provisions of Regulation S-K, Item 601(b)(2). A copy of any of the omitted schedules will be furnished to the Securities and Exchange Commission upon request.
10.1	Loan Agreement, dated April 11, 2013, by and among Glatfelter Gernsbach GmbH & Co. KG. and IKB Deutsche Industriebank AG, Düsseldorf.
10.2	Guaranty, dated April 17, 2013, executed by P. H. Glatfelter Company (as Guarantor) in favor of IKB Deutsche Industriebank AG.
31.1	Certification of Dante C. Parrini, Chairman and Chief Executive Officer of Glatfelter, pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350 – Chief Executive Officer, 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 – Chief Financial Officer, filed herewith.
32.1	Certification of Dante C. Parrini, Chairman and Chief Executive Officer of Glatfelter, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Chief Executive Officer, 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 – Chief Financial Officer, filed herewith.
101.INS	XBRL Instance Document *
101.SCH	XBRL Taxonomy Extension Schema *
101.CAL	XBRL Extension Calculation Linkbase *
101.DEF	XBRL Extension Defiinition Linkbase *
101.LAB	XBRL Extension Label Linkbase *
101.PRE	XBRL Extension Presentation Linkbase *

* Furnished herewith.

- 33 -

GLATFELTER

3.31.13 Form 10-Q

EX-2.1

Exhibit 2.1

Execution Copy

FOR NOTARIZATION

SHARE PURCHASE AGREEMENT

for all of the shares

of

Dresden Papier GmbH

TABLE OF CONTENTS

ARTICLE 1 INTERPRETATION		2
1.1	Definitions	2
1.2	Headings	8
1.3	Gender and Number	8
1.4	Currency	8
1.5	Accounting Principles	8
1.6	Severability	8
1.7	Entire Agreement	8
1.8	Waiver, Amendment	8
1.9	Governing Law	8
1.10	Successors and Assigns	9
1.11	Conflict	9
1.12	Knowledge	9
1.13	Interpretation	9
1.14	Schedules	9
1.15	Disclosure Letter	10
1.16	Payments to Vendor or Purchaser	10
1.17	Interest	10
ARTICLE 2 PURCHASE AND SALE		10
2.1	Sale and Transfer of Purchased Shares	10
2.2	Purchase Price and Purchase Price Adjustment	11
2.3	Guarantor’s Obligations	13
2.4	Purchaser Guarantor’s Obligations	13
ARTICLE 3 REPRESENTATIONS AND WARRANTIES		13
3.1	By the Vendor	13
3.2	By the Purchaser	24
3.3	By the Guarantor	25
3.4	By the Purchaser Guarantor	26
ARTICLE 4 MERGER CONTROL		26
4.1	Merger Control Procedures	26
ARTICLE 5 COVENANTS		27
5.1	Access to Information	27
5.2	Conduct of Business Until Time of Closing	28
5.3	Vendor’s Negative Covenant	28

II

5.4	Intercompany Accounts; Intercompany Loan Agreements	29
5.5	Payment of Patent Renewal Fees and Trademark Register Corrections	29
5.6	Release of Security Interests under Loan Agreements	30
5.7	Release under Guarantee Agreements	30
5.8	Confidential Information	30
5.9	Non-Competition	30
5.10	Non-Solicitation	31
5.11	Injunctive Relief	31
5.12	Termination of Managing Director	31
5.13	Cooperation	32
5.14	Breach of Vendor’s Obligations	32
5.15	Breach of Purchaser’s Obligations	32
ARTICLE 6 CLOSING		32
6.1	Closing / Closing Date	32
6.2	Closing Conditions	32
6.3	Waiver of Closing Conditions	34
6.4	Closing Actions	34
6.5	Terms of Closing	36
6.6	Books and Records	36
6.7	Further Assurances	36
ARTICLE 7 LEGAL CONSEQUENCES IN CASE OF BREACH		37
7.1	General	37
7.2	Limitation of Liability	37
7.3	Liability Floor	38
7.4	Maximum Liability	39
7.5	Time Limitations	39
7.6	Third Party Claims	40
7.7	Limitation of Vendor’s Liability for Breach of Environmental Guarantee	40
7.8	Specific Exclusions and Waivers	40
7.9	Payments Deemed to be Adjustment of Purchase Price	41
7.10	Breach of Purchaser’s Guarantees	41
7.11	Breach of Guarantor’s Guarantees	41
7.12	Breach of Purchaser Guarantor’s Guarantees	41
ARTICLE 8 TAXES		41
8.1	Taxes	41
8.2	Indemnification	41
8.3	Tax Releases, Tax Benefits	42

III

8.4	Information of Vendor	43
8.5	Tax Returns	43
8.6	Cooperation in Tax Matters	43
8.7	No Indemnity	43
8.8	Time Limitations	43
8.9	Tax Audit Costs	44
ARTICLE 9 SPECIFIC INDEMNITY		44
9.1	Specific Indemnity by the Vendor and the Guarantor	44
9.2	Specific Indemnity by the Purchaser and the Purchaser Guarantor	44
ARTICLE 10 TERMINATION OF THIS AGREEMENT		44
10.1	Obligations of the Vendor and the Purchaser	44
10.2	Liability on Termination	45
ARTICLE 11 DISPUTE RESOLUTION		45
11.1	Negotiation	45
11.2	Arbitration; Place of Jurisdiction	45
11.3	Costs and Fees	46
ARTICLE 12 GENERAL MATTERS		46
12.1	Public Notices	46
12.2	Expenses	46
12.3	Notices	47
12.4	Further Assurances	48
12.5	Set-Off etc.	48
12.6	No Third Party Beneficiaries	48
12.7	Language	48

IV

SHARE PURCHASE AGREEMENT

THIS AGREEMENT is made as of this 13th day of March, 2013,

AMONG:

FORTRESS SECURITY PAPERS AG, a company incorporated under the laws of Switzerland

(the “Vendor”)

AND:

GLATFELTER GERNSBACH GMBH & CO. KG, a limited partnership established under the laws of Germany

(the “Purchaser”)

AND:

FORTRESS PAPER LTD., a corporation incorporated under the laws of British Columbia, Canada

(the “Guarantor”)

AND:

P.H. GLATFELTER CO., a corporation incorporated under the laws of Pennsylvania, United States of America

(the “Purchaser Guarantor”)

WHEREAS:

A. The Vendor is the owner of the Purchased Shares; and

B. The Vendor wishes to sell to the Purchaser, and the Purchaser wishes to purchase from the Vendor, the Purchased Shares, subject to and on the terms and conditions set out herein.

1

NOW, THEREFORE, in consideration of the covenants, representations, warranties and agreements contained herein, and for other good and valuable consideration (the receipt and sufficiency of which are acknowledged by each of the parties hereto), the parties hereto covenant and agree as follows:

ARTICLE 1

INTERPRETATION

1.1 Definitions

In this Agreement,

(a) “Accountants” means Ernst & Young LLP or such other internationally recognized, independent auditing firm;

(b) “Accounts Payable” means, without duplication: (i) all trade accounts payable to suppliers, including all trade accounts payable representing amounts payable in respect of the purchase of raw materials and other services and supplies needed for production; and (ii) all other accounts payable related to the Business;

(c) “Accounts Receivable” means, without duplication: (i) all trade accounts receivable from customers, including all trade accounts receivable representing amounts receivable in respect of the sale of finished goods and raw materials; and (ii) all other accounts receivable, including advances to contractors of the Company;

(d) “Action” means any claim, action, suit, arbitration, inquiry, proceeding or investigation by or before any Governmental Authority;

(e) “Affiliate” means, with respect to any Person, any Person directly or indirectly controlling, controlled by or under direct or indirect common control with such other Person;

(f) “Agreement” means this agreement and the Disclosure Letter, in each case as they may be amended or supplemented from time to time, and the expressions “hereof”, “herein”, “hereto”, “hereunder”, “hereby” and similar expressions refer to this agreement; and unless otherwise indicated, references to Articles and Sections are to Articles and Sections in this agreement;

(g) “Annual Financial Statements 2010” means the audited financial statements of the Company for the year ended December 31, 2010, copies of which are included in Section 3.1(bb) of the Disclosure Letter;

(h) “Annual Financial Statements 2011” means the audited financial statements of the Company for the year ended December 31, 2011, copies of which are included in Section 3.1(bb) of the Disclosure Letter;

(i) “Annual Financial Statements 2012” means the audited financial statements of the Company for the year ended December 31, 2012, copies of which are included in Section 3.1(bb) of the Disclosure Letter;

(j) “Assets” has the meaning attributed to such term in Section 3.1(k);

(k) “Business” means the business of the Company which includes the ownership, operation and use of the Mill, the development, production and sale of non-woven wallpaper base and all complementary, incidental and ancillary activities relating thereto at the Mill;

(l) “Business Day” means any day, other than Saturday, Sunday or any statutory holiday in the Province of British Columbia, Canada, the United States of America or Germany;

(m) “Cash” means cash, Restricted Cash and cash equivalents of the Company as at Closing Date;

2

(n) “Claim Notice” has the meaning attributed to such term in Section 7.1;

(o) “Closing” has the meaning attributed to such term in Section 6.1;

(p) “Closing Actions” has the meaning attributed to such term in Section 6.4;

(q) “Closing Conditions” has the meaning attributed to such term in Section 6.2;

(r) “Closing Date” has the meaning attributed to such term in Section 6.1;

(s) “Closing Date Payment Amount” has the meaning attributed to such term in Section 2.2(a)(ii);

(t) “Closing Memorandum” has the meaning attributed to such term in Section 6.4(e);

(u) “Collective Agreements” has the meaning attributed to such term in Section 3.1(w);

(v) “Company” means Dresden Papier GmbH, a corporation incorporated under the laws of Germany;

(w) “Contract” means any written or oral agreement, indenture, contract, lease, deed of trust, option instrument or other commitment;

(x) “Debt” means the collective debt of the Company (including the third party financial debt but excluding intercompany debt, which is assumed to be nil, and Accounts Payable) as at the Effective Time;

(y) “De Minimis Amount” has the meaning attributed to such term in Section 7.3;

(z) “Disclosure Letter” means the statement dated as of the date hereof provided by the Vendor to the Purchaser;

(aa) “Dispute” has the meaning attributed to such term in Section 11.1;

(bb) “Dispute Notice” has the meaning attributed to such term in Section 11.1;

(cc) “Effective Time” has the meaning attributed to such term in Section 2.1(d);

(dd) “Employees” means all employees of the Business;

(ee) “Employee Bonus Obligations” means any bonus payment obligation of the Company towards Employees related to bonuses or any incentive compensation in connection with the transactions contemplated by this Agreement;

(ff) “Employee Plans” has the meaning attributed to such term in Section 3.1(v);

(gg) “Encumbrance” means any encumbrance, lien, charge, hypothec, pledge, mortgage, title retention agreement, security interest of any nature, adverse claim, exception, reservation, easement, right of occupation, any matter capable of registration against title, option, privilege or any Contract to create any of the foregoing;

(hh) “Environmental Law” means all applicable European Union, federal, provincial, municipal or local statutes, regulations, by-laws, permits, orders or rules, and any policies or guidelines of

3

any governmental or regulatory body or agency and any requirements or obligations arising under the Law relating to the environment, the transportation of dangerous goods and occupational health and safety;

(ii) “Environmental Permits” means all permits, licences, approvals, consents, authorizations, registrations and certificates issued by or provided to, as the case may be, any government, governmental or regulatory body or agency pursuant to an Environmental Law;

(jj) “Estimated Closing Working Capital” means the Working Capital as at the Closing Date estimated by the Vendor;

(kk) “Factoring Agreement” means the factoring agreement entered into between the Company and CommerzFactoring GmbH (Mainz) dated January 8, 2013, as amended from time to time;

(ll) “Final Closing Working Capital” has the meaning attributed to such term in Section 2.2(b)(ii)(4);

(mm) “Final Working Capital Adjustment Payment” has the meaning attributed to such term in Section 2.2(b)(ii)(5);

(nn) “Financial Statements” means, collectively, the Annual Financial Statements 2010, the Annual Financial Statements 2011 and the Annual Financial Statements 2012;

(oo) “German GAAP” has the meaning attributed to such term in Section 1.5;

(pp) “Governmental Authority” means any legislative, executive, judicial or administrative body, court or Person whether European Union, federal, provincial, state, local or municipal and any governmental authority, governmental tribunal or governmental commission of any kind whatever having, or purporting to have, jurisdiction in the relevant circumstances;

(qq) “Governmental Charges” means all taxes, levies, fees, imports, duties, tariffs, assessments, reassessments and other charges of any kind, together with all related penalties, interest and fines or additional amounts imposed by and due and payable to any Governmental Authority or imposed by any court or any other Law, regulation or rulemaking entity having jurisdiction in relevant circumstances;

(rr) “Guarantee Agreements” means the guarantee facility agreement in the amount of €12,000,000 between Landqart AG and Commerzbank Aktiengesellschaft dated May 24, 2011 pursuant to which the Company agreed to act as co-debtor, together with all security agreements relating thereto, as amended from time to time;

(ss) “Guarantor’s Guarantees” has the meaning attributed to such term in Section 3.3;

(tt) “Hazardous Substance” means any natural or artificial substance, preparation or article which, if generated, transported, stored, treated, used or disposed of (alone or combined with another substance, preparation or article) is harmful to water, air or land or any living organism, as defined and as prohibited or restricted pursuant to an Environmental Law;

(uu) “Information Technology” has the meaning attributed to such term in Section 3.1(q);

(vv) “Intellectual Property” means any trademarks, trade names, business names, service marks, brand names, patents, inventions, pending applications for patents, copyrights, industrial designs and process, dedicated computer software other than commercial off-the-shelf

4

software, (including licenses to use such computer software), proprietary engineering drawings and plans, proprietary technical specifications and ratings data, trade secrets, industrial and production technology, process control technology, and similar rights;

(ww) “Intercompany Accounts” has the meaning attributed to such term in Section 5.4;

(xx) “Inventories” means, at any time, all inventories wherever located, including (i) all finished goods (products held for sale), work in process (products at some stage of production) and raw materials, and (ii) all other maintenance, repair and operating materials and supplies, including spare parts, fuels, and packaging material;

(yy) “Law” means an applicable law, statute or ordinance, including an applicable rule or regulation thereunder existing as at the date hereof;

(zz) “Liability Floor” has the meaning attributed to such term in Section 7.3;

(aaa) “Licences and Permits” has the meaning attributed to such term in Section 3.1(t);

(bbb) “Loan Agreements” means, collectively: (i) the loan agreement in the amount of €25,000,000 entered into between the Company and Commerzbank Aktiengesellschaft dated March 29, 2012, (ii) the loan agreement in the amount of €1,346,624 and €576,600 between the Company and Commerzbank Aktiengesellschaft (as successor of Dresdner Bank) dated December 18, 2006, (iii) the credit facility agreement in the amount of €5,000,000 entered into between the Company and Commerzbank Aktiengesellschaft dated February 28, 2013, and (iv) the credit facility agreement in the amount of €10,000,000 entered into between the Company and Commerzbank Aktiengesellschaft dated February 28, 2013, together with all respective security agreements and interest rate derivatives relating thereto, as amended from time to time;

(ccc) “Material Adverse Change” or “Material Adverse Impact” means with respect to the Company, facts, circumstances or events that could, individually or collectively, reasonably be expected to affect materially and adversely the Company’s assets and liabilities (Vermögenslage), financial position (Finanzlage) or current earnings position (Ertragslage), other than any change, circumstance or effect which results from: (a) any change in domestic or international economic conditions, including fluctuations in currencies; (b) any change in the general market conditions for the wallpaper industry, including fluctuations in market demand; (c) any change in financial, banking or securities markets (including any disruption thereof and any decline in the price of any security or any market index); (d) any changes or developments resulting from any actions taken by the Purchaser or the Vendor or any of their respective representatives in accordance with the terms of this Agreement, including the announcement of the transactions contemplated by this Agreement, or resulting from the Purchaser’s withholding of consent to the Vendor’s request to take any action prohibited by Section 5.3 (but only to the extent such consent is unreasonably withheld or delayed on the part of the Purchaser); or (e) any changes or developments resulting from acts of terrorism or war (whether or not declared) except to the extent causing damage to the physical facilities of the Business; provided, however, that notwithstanding the foregoing, any destruction of or damage to the Mill which results in a material reduction of the production capacity of the Mill shall be deemed to be a Material Adverse Change.

(ddd) “Material Contract” has the meaning attributed to such term in Section 3.1(z);

(eee) “Material Employees” has the meaning attributed to such term in Section 3.1(x);

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(fff) “Material Personnel Contracts” has the meaning attributed to such term in Section 3.1(x);

(ggg) “Merger Clearances” has the meaning attributed to such term in Section 4.1(a);

(hhh) “Merger Filings” has the meaning attributed to such term in Section 4.1(a)(i);

(iii) “Mill” means the specialty paper processing facilities and related equipment, works and undertaking located in Heidenau, Germany, owned and operated by the Company;

(jjj) “Notary” means the German notary officiating the notarization of this Agreement;

(kkk) “Parties” means the Purchaser, the Vendor, the Purchaser Guarantor and the Guarantor, and “Party” means any one of them;

(lll) “Permitted Encumbrances” means:

(i) statutory title exceptions and restrictions under zoning by-laws, municipal by-laws and building regulations;

(ii) any Encumbrance which arises by operation of Law in the normal course of business or pursuant to equipment, machinery or vehicle lease agreements in the normal course of business;

(iii) any Encumbrance created or permitted under the Loan Agreements, Guarantee Agreements or Factoring Agreement, all such Encumbrances being disclosed in Section 1.1(lll) of the Disclosure Letter, and such Encumbrances to be discharged on Closing;

(iv) any Encumbrance that does not materially interfere with the use of the property and Assets of the Company as currently used or incurred in the normal course of business;

(v) any Encumbrance of warehousemen, mechanics and materialmen and other similar Encumbrances arising in the normal course of business; and

(vi) such other Encumbrances set forth in Section 1.1(lll) of the Disclosure Letter;

(mmm) “Person” means any individual, partnership, limited partnership, joint venture, syndicate, sole proprietorship, company or corporation with or without share capital, unincorporated association, trust, trustee, executor, administrator or other legal personal representative, regulatory body or agency or Governmental Authority however designated or constituted;

(nnn) “Pre-Closing Straddle Period” has the meaning attributed to such term in Section 8.2(b);

(ooo) “Proposed Final Closing Working Capital Statement” has the meaning attributed to such term in Section 2.2(b)(ii)(1);

(ppp) “Purchase Price” has the meaning attributed to such term in Section 2.2(a)(i);

(qqq) “Purchased Shares” means (i) the share No. 1 in the Company in the total nominal amount of €24,900; (ii) the share No. 2 in the Company in the total nominal amount of €100; and (iii) the share No. 3 in the Company in the total nominal amount of €475,000, constituting all the shares of the Company;

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(rrr) “Purchaser Closing Certificate” has the meaning attributed to such term in Section 6.4(d)(iii);

(sss) “Purchaser’s Guarantees” has the meaning attributed to such term in Section 3.2;

(ttt) “Purchaser Guarantor’s Guarantees” has the meaning attributed to such term in Section 3.4;

(uuu) “Real Property” has the meaning attributed to such term in Section 3.1(m);

(vvv) “Restricted Cash” shall mean the restricted cash relating to the guarantee issued in the amount of € 400,000 to NYK Line (Deutschland) GmbH by Commerzbank Aktiengesellschaft and the Company dated April 19, 2011;

(www) “Services Agreement” means the fourth amended and restated global management services agreement among the Vendor, the Company, Landqart AG, the Guarantor, Fortress Optical Features Ltd., Fortress Global Cellulose Ltd., Fortress Pulp Operations Inc. and Fortress Specialty Cellulose Inc. dated May 4, 2012;

(xxx) “Straddle Period” has the meaning attributed to such term in Section 8.2(b);

(yyy) “Target Working Capital” means €17,000,000 (Seventeen Million Euros) as calculated pursuant to Schedule A attached hereto;

(zzz) “Tax Authority” has the meaning attributed to such term in Section 8.1;

(aaaa) “Tax Claim” has the meaning attributed to such term in Section 8.4;

(bbbb) “Tax Consolidation” has the meaning attributed to such term in Section 3.1(dd)(vi);

(cccc) “Tax Indemnification Claim” has the meaning attributed to such term in Section 8.2(a);

(dddd) “Tax Returns” means all returns, declarations, reports, information returns and statements required to be filed with any Tax Authority relating to Governmental Charges (including any attached schedules), including without limitation, any information return, claim for refund, amended return and declaration of estimated Governmental Charge;

(eeee) “Taxes” has the meaning attributed to such term in Section 8.1;

(ffff) “Territory” has the meaning attributed to such term in Section 5.9;

(gggg) “Third Party Claim” has the meaning attributed to such term in Section 7.6;

(hhhh) “Time of Closing” means 5:00 p.m. (Dresden time) on the Closing Date or such other time on the Closing Date as may be agreed upon in writing by the Parties;

(iiii) “Vendor Closing Certificate” has the meaning attributed to such term in Section 6.4(a)(ii);

(jjjj) “Vendor’s Guarantees” has the meaning attributed to such term in Section 3.1; and

(kkkk) “Working Capital” means (i) Cash, Accounts Receivable, Inventories, deposits, prepaid items, prepaid expenses and deferred charges less (ii) Accounts Payable and accrued liabilities of the Company.

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1.2 Headings

The inclusion of headings in this Agreement is for convenience of reference only and shall not affect the construction or interpretation hereof.

1.3 Gender and Number

In this Agreement, unless the context otherwise requires, words importing the singular include the plural and vice versa and words importing gender include all genders.

1.4 Currency

Except where otherwise expressly provided, all amounts in this Agreement are stated and shall be paid in Euros.

1.5 Accounting Principles

Any reference in this Agreement to “German GAAP” refers to German Generally Accepted Accounting Principles as amended from time to time. All accounting terms not otherwise defined herein have the meanings attributable to them under German GAAP and all determinations of an accounting nature required to be made shall be made in accordance with German GAAP, applied consistently with prior periods.

1.6 Severability

Each of the provisions contained in this Agreement is distinct and severable and a declaration of invalidity or unenforceability of any such provision or part thereof, for the avoidance of doubt including any individual sentence, clause or subclause within a provision, by a court of competent jurisdiction shall not affect the validity or enforceability of any other provision hereof. To the extent permitted by applicable Law, the Parties waive any provision of Law which renders any provision of this Agreement invalid or unenforceable in any respect. The Parties shall engage in good faith negotiations to replace any provision (or any individual sentence, clause or subclause within a provision) which is declared invalid or unenforceable with a valid and enforceable provision, the economic effect of which comes as close as possible to that of the invalid or unenforceable provision which it replaces.

1.7 Entire Agreement

This Agreement constitutes the entire agreement between the Parties pertaining to the subject matter of this Agreement. There are no agreements in connection with such subject matter except as specifically set forth or referred to in this Agreement.

1.8 Waiver, Amendment

Except as expressly provided in this Agreement, no amendment or waiver of this Agreement shall be binding unless executed in writing, or in notarized form if so required by law, by the Parties to be bound thereby. No waiver of any provision of this Agreement shall constitute a waiver of any other provision nor shall any waiver of any provision of this Agreement constitute a continuing waiver unless otherwise expressly provided.

1.9 Governing Law

This Agreement shall be governed by, and construed in accordance with the Laws of the Federal Republic of Germany, excluding: (a) its conflict of laws provisions that may lead to the application of the Laws of another country; and (b) the United Nations Convention on Contracts for the International Sale of Goods (CISG).

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1.10 Successors and Assigns

This Agreement shall inure to the benefit of and shall be binding on and enforceable by the Parties and, where the context so permits, their respective successors and permitted assigns. No Party may assign any of its rights or obligations hereunder without the prior written consent of the other Party.

1.11 Conflict

In the event of any conflict between the provisions of the body of this Agreement, the Schedules hereto, the Disclosure Letter and any other document contemplated hereby, the provisions of this Agreement shall prevail.

1.12 Knowledge

All statements in this Agreement that are qualified “to the best knowledge of the Vendor”, “to the knowledge of the Vendor”, “its information and belief”, “aware” and terms of similar import shall mean to the actual knowledge, after reasonable inquiry, of Chadwick Wasilenkoff, Alfonso Ciotola, Frank Fetkenheuer, Ulrich Paris and Thomas Paproth.

1.13 Interpretation

For the purposes of this Agreement, except as otherwise expressly provided herein:

(a) the word “or” is not exclusive and the word “including” is not limiting (whether or not non-limiting language such as “without limitation” or “but not limited to” or other words of similar import are used with reference thereto);

(b) except as otherwise provided, any reference to a statute includes and is a reference to such statute and to the regulations made pursuant thereto with all amendments made thereto and in force from time to time, and to any statute or regulations that may be passed which have the effect of supplementing or superseding such statute or regulations;

(c) any reference to a corporate entity includes and is also a reference to any corporate entity that is a successor to such entity; and

(d) the Parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement.

1.14 Schedules

Appended hereto are the following schedules which are incorporated into this Agreement by reference and are deemed to be part hereof:

Schedule A	Calculation of Target Working Capital
Schedule B	Form of Closing Memorandum

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1.15 Disclosure Letter

The Disclosure Letter is integral to and forms part of this Agreement.

1.16 Payments to Vendor or Purchaser

Any payments to Vendor or Purchaser under this Agreement shall be made to the following bank accounts of Vendor or Purchaser, as the case may be, or to such other bank accounts of which Vendor or Purchaser has notified the respective other Party in writing at least three (3) Business Days prior to the instructions for the respective wire transfer being given:

Vendor’s bank account:
Bank:	UBS AG, P.O. Box, CH-9471 Buchs
BIC:	UBSWCHZH80A
IBAN CHF:	CH77 0022 0220 2231 3201 N
IBAN EUR:	CH30 0022 0220 2231 3260 D
Account Holder:	Fortress Security Papers AG
Purchaser’s bank account:
Bank:	Deutsche Bank AG, Baden Baden, Germany
Bank Code:	662 700 01
SWIFT #:	DEUTDESM662
Account No.:	3929858
IBAN:	DE39 6627 0001 0392 9858 00
Account Holder:	Glatfelter Gernsbach GmbH and Co. KG

1.17 Interest

Any payments due under this Agreement shall bear interest from and including the respective due date to, but not including, the date of receipt. The interest rate to be used during any given period of three months, starting on the date on which any payment is due, such as the date of determination by the Accountants, shall be 500 basis points over EURIBOR for three-month deposits as reported on the first day of such three-month period.

ARTICLE 2

PURCHASE AND SALE

2.1 Sale and Transfer of Purchased Shares

(a) The Vendor hereby sells the Purchased Shares to the Purchaser and the Purchaser hereby purchases the Purchased Shares from the Vendor upon the terms and conditions of this Agreement.

(b) The Vendor hereby assigns (tritt ab) to the Purchaser, and the Purchaser accepts the assignment of, the Purchased Shares subject to the conditions precedent (aufschiebende Bedingungen) of:

(i) the satisfaction (or with respect to Section 6.2(a)(i), the waiver by the Purchaser and the Vendor) of the Mutual Closing Conditions set forth in Section 6.2(a);

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(ii) the satisfaction (or waiver by the Purchaser) of the Closing Conditions for the Benefit of the Purchaser set forth in Section 6.2(b);

(iii) the satisfaction (or waiver by the Vendor) of the Closing Conditions for the Benefit of the Vendor set forth in Section 6.2(c); and

(iv) the payment of the Closing Date Payment Amount pursuant to Section 2.2(a)(ii).

Immediately following the Closing, the Vendor and the Purchaser shall provide evidence of such fulfillment to the acting notary by mutually executing the Closing Memorandum.

(c) The sale of the Purchased Shares shall include any and all rights associated with, or otherwise pertaining to, the Purchased Shares.

(d) The “Effective Time” shall be midnight (24:00) (Dresden time) on the Closing Date.

2.2 Purchase Price and Purchase Price Adjustment

(a) Purchase Price and Payment

(i) The total consideration for the Purchased Shares shall be €160,000,000 (One Hundred and Sixty Million Euros) on a Cash free and Debt free basis (the “Purchase Price”).

(ii) The Purchase Price, as adjusted pursuant to the “Closing Adjustment” set forth in Section 2.2(b)(i) below (the “Closing Date Payment Amount”) shall be paid by the Purchaser to the Vendor as follows:

(a) pursuant to the written notice by the Vendor to the Purchaser no later than three (3) Business Days prior to the Closing Date, payment as directed by the Vendor shall be made by the Purchaser: (1) on behalf of the Company on the Closing Date directly to the lenders under the Loan Agreements and the counterparty in the Factoring Agreement; and (2) on behalf of the Vendor on the Closing Date directly to Commerzbank Aktiengesellschaft; and

(b) the balance of the Purchase Price shall be paid by the Purchaser to the Vendor by wire transfer on the Closing Date in immediately available funds.

(iii) The Final Working Capital Adjustment Payment as determined pursuant to Section 2.2(b)(ii) below, shall be paid within three (3) Business Days of such determination.

(b) Purchase Price Adjustment

(i) Closing Adjustment

(1) Not less than five (5) Business Days prior to the Closing Date, the Vendor shall prepare and deliver to the Purchaser a statement of its good faith estimates of the Estimated Closing Working Capital, prepared and calculated on a basis consistent with the calculation of Target Working Capital.

(2) If the Estimated Closing Working Capital exceeds the Target Working Capital, the Purchase Price shall be increased by such difference. If the Estimated Closing Working Capital is less than the Target Working Capital, the Purchase Price shall be decreased by such difference.

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(ii) Post-Closing Adjustment

(1) Promptly following the Closing Date, but in no event later than forty-five (45) days after the Closing Date, the Purchaser shall prepare and submit to the Vendor a statement setting forth the Working Capital as of the Closing Date which shall be prepared and calculated on a basis consistent with the calculation of Target Working Capital (the “Proposed Final Closing Working Capital Statement”).

(2) As soon as reasonably practicable after delivery of the Proposed Final Closing Working Capital Statement (but not later than ten (10) Business Days thereafter), the Vendor shall notify the Purchaser if the Vendor disputes any aspect of the Proposed Final Closing Working Capital Statement and shall set forth, in writing and in reasonable detail, the reasons for the Vendor’s objections and the amounts involved (and shall include reasonable supporting documentation). If the Vendor fails to deliver a notice of objection within ten (10) Business Days after receipt of the Proposed Final Closing Working Capital Statement, the Vendor shall be deemed to have accepted the Proposed Final Closing Working Capital Statement prepared by the Purchaser and the Proposed Final Closing Working Capital Statement shall be final, conclusive and binding on the Parties.

(3) If any such notice of objections is timely delivered by the Vendor as set forth above, items as to which there is no disagreement shall be final, conclusive and binding on the Parties. If the disputed matters (i) involve an aggregate disputed amount of €50,000 or more, they shall be referred by the Vendor and the Purchaser to the Accountants, or (ii) if such remaining disputed matters involve an aggregate disputed amount of less than €50,000, the mid-point between the Purchaser’s and the Vendor’s positions with respect to such disputed items shall be final, conclusive and binding on the Parties.

(4) The Accountants shall review only those items in dispute and any determination of the Accountants shall be final, conclusive and binding on the Vendor and the Purchaser and shall be made within ten (10) Business Days of having received notification of the assignment. The Accountants shall be instructed that (x) with respect to each disputed item the Accountants shall either accept the position taken by the Vendor or the position taken by the Purchaser and (y) its review shall be limited to determining whether the Proposed Final Closing Working Capital Statement was calculated in a manner consistent with the calculation of Target Working Capital or was arrived at based on mathematical error. The Accountants shall prepare and deliver to the Vendor and the Purchaser a written report explaining its determination. The determination of the Accountants shall be based solely on written submissions by the Vendor and the Purchaser and shall not be based on any independent review by the Accountants. The fees of the Accountants will be paid by the party whose position the Accountants did not uphold. The Proposed Final Closing Working Capital Statement as finally determined (whether by failure of the Purchaser to deliver timely notice of objection as set forth above, by agreement of the Vendor and the Purchaser or by determination of the Accountants) is referred to herein as the “Final Closing Working Capital”.

(5) If the Final Closing Working Capital exceeds the Estimated Closing Working Capital, the Purchaser shall pay to Vendor the amount of such difference. If the Final Closing Working Capital is less than the Estimated Closing Working Capital, then the Vendor shall pay to the Purchaser the amount of such difference. Such payment shall be referred to as the “Final Working Capital Adjustment Payment”.

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2.3 Guarantor’s Obligations

The Guarantor shall act as guarantor (selbstschuldnerischer Bürge) to secure any and all obligations of the Vendor under this Agreement and hereby waives any defence of unexhausted remedies (Einrede der Vorausklage) pursuant to Section 773 of the German Civil Code (BGB).

2.4 Purchaser Guarantor’s Obligations

The Purchaser Guarantor shall act as guarantor (selbstschuldnerischer Bürge) to secure any and all obligations of the Purchaser under this Agreement and hereby waives any defence of unexhausted remedies (Einrede der Vorausklage) pursuant to Section 773 of the German Civil Code (BGB).

ARTICLE 3

REPRESENTATIONS AND WARRANTIES

3.1 By the Vendor

The Vendor hereby guarantees by way of independent guarantee undertakings (selbstständige Garantieversprechen), pursuant to § 311 of the German Civil Code (BGB), that the following statements (“Vendor’s Guarantees”) are true and correct, in each case as of the date hereof and as of the Closing Date, or as of such other date as is expressly stated in the relevant Vendor’s Guarantee, in which case the applicable Vendor’s Guarantee shall be correct as of such date:

(a) Organization. The Vendor is a company duly organized, validly existing and in good standing as a stock corporation (Aktiengesellschaft) under the laws of Switzerland and has the unrestricted right, power, authority and capacity to own and dispose of the Purchased Shares, and to enter into this Agreement and carry out its terms to the fullest extent. The Company is duly organized, validly existing and in good standing as a limited liability company (Gesellschaft mit beschränkter Haftung) under the laws of Germany and has the unrestricted right, power, authority and capacity to own or lease its property, to carry on the Business as now being conducted by it, to enter into this Agreement and perform its obligations hereunder.

(b) Authority Relative to this Agreement. This Agreement and each of the documents contemplated hereby has been, or will prior to the Time of Closing be, duly authorized, executed and delivered by the Vendor and constitutes, or will constitute, when executed, valid and binding obligations of the Vendor, enforceable in accordance with its terms, subject to the availability of equitable remedies and the enforcement of creditors’ rights generally.

(c) Corporate Approvals. All required approvals of any corporate bodies of the Vendor have been given prior to the signing of this Agreement. The execution and delivery by the Vendor of this Agreement and the performance by it of its obligations hereunder will not result in:

(i) a violation or breach of any provision of or constitute a default under its respective organizational documents or any other legal obligations of the Vendor or any material agreement, arrangement or understanding to which the Vendor is a party; or

(ii) the imposition of any Encumbrance upon the Company’s assets; or

(iii) to the knowledge of the Vendor, any challenge (Anfechtung) by any third party on any legal basis, including on the basis of any creditor protection laws.

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(d) No Other Agreements to Purchase. No Person other than the Purchaser has any written or oral agreement or option or any right or privilege capable of becoming an agreement or option for the purchase or acquisition of any of the Purchased Shares. The Purchased Shares are not pledged (verpfändet), attached (gepfändet), or otherwise encumbered (belastet) with any third party rights and are not subject to any: (i) trust arrangement (Treuhandverhältnis), silent partnership (stille Beteiligung), sub-participation (Unterbeteiligung) or similar arrangement; (ii) pending transfer or other disposition (Verfügung); (iii) sale, contribution or other contractual arrangement creating an obligation to transfer or encumber; or (iv) shareholders’ resolution providing for their redemption (Einziehung).

(e) Ownership of Purchased Shares. The Vendor is the sole legal and beneficial owner of the Purchased Shares, with full and unrestricted legal and beneficial title (uneingeschränkte rechtliche und wirtschaftliche Inhaberschaft) thereto, free and clear of all Encumbrances, and there are no agreements or restrictions which in any way limit or restrict the transfer to the Purchaser of any of the Purchased Shares, and there are no shareholder agreements, pooling agreements, voting trust agreements or other voting agreements with respect to the voting of the Purchased Shares. The Purchased Shares constitute all of the outstanding issued share capital of the Company. Neither the Vendor nor any third party has any pre-emptive right (Vorkaufsrecht), right of first refusal (Vorerwerbsrecht), subscription right (Bezugsrecht), option right (Optionsrecht), conversion right (Wandlungsrecht) or similar right in respect of the Purchased Shares.

(f) Corporate Documents. All facts and circumstances concerning the Company which are capable of being registered in the commercial register have been registered therein. The list of shareholders dated June 23, 2009 recorded in the commercial register is correct and complete. Section 3.1(f) of the Disclosure Letter contains complete and accurate copies of the commercial register excerpt, the shareholders list and the articles of association of the Company. No changes have been made or contemplated with respect to any of the foregoing.

(g) Approvals and Consents. Except as set out in Section 3.1(g) of the Disclosure Letter, no authorization, consent or approval of, or filing with or notice to, any Governmental Authority or other Person is necessary for the consummation by the Vendor of its obligations under this Agreement, except for such authorizations, consents, approvals and filings as to which the failure by the Vendor to obtain or make would not prevent or materially delay the consummation of this Agreement.

(h) No Interference. There is no action, suit, investigation or other proceeding pending or, to the knowledge of the Vendor, threatened before any court, arbitrator, governmental body, agency or official that in any manner challenges or seeks to prevent, enjoin, alter or materially delay the execution or consummation of this Agreement or the transactions contemplated herein, and, to the knowledge of the Vendor, there are no circumstances likely to give rise to any of the foregoing.

(i) No Insolvency. No insolvency or similar proceedings have been or, to the knowledge of the Vendor, have been threatened to be, commenced over the assets of the Vendor or the Company and, to the knowledge of the Vendor, there are no circumstances that would require or justify the opening of or application for such proceedings. The Vendor and the Company are not illiquid (zahlungsunfähig) or over-indebted (überschuldet).

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(j) Share Capital. The Purchased Shares have been fully paid up, are non-assessable (keine Nachschusspflicht) and no repayments of share capital, neither openly nor concealed nor direct or indirect (each within the meaning of Section 30 of the German Limited Liability Company Act, GmbHG), have been made to the Vendor.

(k) Business and Assets of the Company. The Business is the only business operation carried on by the Company. The Company does not possess or maintain any other place of business other than at the Mill and does not employ any employee other than the Employees. The Company is the unrestricted legal and beneficial owner of all fixed assets (Anlagevermögen) and of all current assets (Umlaufvermögen) (collectively the “Assets”), with good title thereto, free and clear of Encumbrances, except for the Assets: (i) which have been disposed of since the date of the Annual Financial Statements 2012 in the ordinary course of business consistent with past practice; or (ii) which have been assigned or disposed of in the course of granting a Permitted Encumbrance; or (iii) the loss of which has been disclosed in Section 3.1(k) of the Disclosure Letter. The Assets are not encumbered with any rights of any third party (including without limitation any rights of the Vendor or Vendor’s Affiliates) except for the Permitted Encumbrances. Subject to the discharge of the Encumbrances related to the Loan Agreements, the Guarantee Agreements and the Factoring Agreement, the Company is free to dispose of the Assets in any manner, and such dispositions do not violate any legal obligations of the Company. The Assets and any assets leased by the Company have been reasonably maintained since their acquisition by the Company, are in reasonable working order and repair (normal wear and tear excepted), are fit for the intended use, and are in a condition and quantity adequate to conduct the Business of the Company as currently conducted, except for the maintenance, repair and replacement required in the ordinary course of business. With the exception of Inventory in transit, all the tangible assets of the Company are situated at the locations set out in Section 3.1(k) of the Disclosure Letter.

(l) Restrictions on Doing Business. To the knowledge of the Vendor, there are no facts or circumstances which have or could have a Material Adverse Impact on the ability of the Company to continue to operate the Business as presently conducted following the Closing.

(m) Title to Real Property; Encumbrances. Section 3.1(m) of the Disclosure Letter sets forth the complete and accurate legal description of all the real property owned by the Company and all interests of the Company in such real property, and correctly states for each such piece of real estate the location, applicable land register or other identification data, size, use, type of legal title, co-owners, if any, and encumbrances (collectively, the “Real Property”). The Company does not own, lease or have interests in or occupy any real property or interest in real property other than the Real Property. The Real Property is all the real property that is used by the Business. The Company’s interest in the Real Property is free and clear of all Encumbrances other than the Permitted Encumbrances. The Real Property is not subject to any unregistered or otherwise pending transfer or other disposition or any sale, contribution or other contractual arrangement creating an obligation to transfer any real estate or to create or change any Encumbrances. All real estate Taxes, development charges and other public charges payable with respect to the Real Property which have become or will become due prior to the Closing Date have been fully paid, will be paid as they become due or reasonably reserved in the Annual Financial Statements 2012.

(n) Condition of the Real Property. The Real Property and the buildings and other fixtures thereon have been reasonably maintained since their acquisition by the Company, are in reasonable order and repair (normal wear and tear excepted), and are in a condition adequate to conduct the Business as currently conducted. The Real Property constitutes all real property upon which the Company conducts its operations. To the knowledge of the Vendor, there is no

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matter which would have a Material Adverse Impact on the value of the Real Property. No required material capital expenditures relating to environmental or health and safety matters regarding the Company’s Real Property and the buildings thereon have been deferred since January 1, 2013.

(o) Accounts Receivable. All Accounts Receivable (except for Accounts Receivable assigned pursuant to the Factoring Agreement), book debts and other debts due or accruing to the Company are bona fide, valid and subsisting claims of the Company and, subject to an allowance for doubtful accounts that has been reflected on the books of the Company and in the Annual Financial Statements 2012 in accordance with German GAAP and consistent with past practice of the Company, are, to the knowledge of the Vendor, collectible in the ordinary course of business without set-off or counterclaim.

(p) Intellectual Property. Section 3.1(p) of the Disclosure Letter contains a complete and accurate list of all material Intellectual Property owned and used by the Company in carrying on the Business, and correctly states for each such Intellectual Property the type, subject matter and Encumbrances, if any. Except as disclosed in Section 3.1(p) of the Disclosure Letter, the Company is the unrestricted legal and beneficial owner of the owned Intellectual Property, free and clear of all Encumbrances other than the Permitted Encumbrances, and is not a party to or bound by any Contract or other obligation whatsoever that limits or impairs its ability to sell, transfer, assign or convey the Intellectual Property. No Person has been granted any interest in or right to use all or any portion of the Intellectual Property owned by the Company, and the Company has not entered into any licence agreements as licensor with respect to any of the Intellectual Property owned by the Company. No intellectual property rights other than the Intellectual Property listed in Section 3.1(p) of the Disclosure Letter are currently used by or necessary for the Company to conduct the Business as currently conducted. All material licenced Intellectual Property used by the Company is pursuant to valid and enforceable license agreements, and to the Vendor’s knowledge, the Company is materially compliant with such licence agreements, nor, to the Vendor’s knowledge, are there facts or circumstances which would lead to the termination of such licence agreements. To the Vendor’s knowledge, there are no facts or circumstances which would lead to the termination of such licence agreements prior to the expiry of their terms. The Vendor is not aware of a claim or circumstance of any infringement or breach of any intellectual property rights of any other Person by the Company, nor is the Vendor aware that the conduct of the Business infringes upon any intellectual property rights of any other Person. To the Vendor’s knowledge, no Person (including without limitation Vendor and its Affiliates) infringes upon any of the Intellectual Property owned or used by the Company. The Company has reasonably maintained and shall continue until the Closing to reasonably maintain the Intellectual Property owned by the Company, in particular in relation to applications in a timely manner for renewals and the payment when due of all registration and renewal fees as well as all annuities. Without limiting any of the foregoing, to the Vendor’s knowledge, there are no pending or threatened claims regarding German patent application no. 10393420 with respect to the German Act on Employee Inventions (Arbeitnehmererfindungsgesetz) or similar foreign Law. To the Vendor’s knowledge, the Company has paid all remuneration to persons entitled to any compensation under the German Act on Employee Inventions or agreements entered into under such Act up to and including the Closing Date.

(q) Information Technology. The Company either owns or holds valid leases and/or licences to all computer hardware, software, networks and other information technology (collectively “Information Technology”) which is used by or necessary for the Company to conduct its Business as presently conducted. Since January 1, 2013 there have been no interruptions, data losses or similar incidents attributable to the Information Technology owned or used by the

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Company which had a Material Adverse Impact. The Information Technology owned or used by the Company has the capacity and performance necessary to meet the requirements of the Company as presently conducted.

(r) Litigation. Except as set out in Section 3.1(r) of the Disclosure Letter, there are no actions, investigations, suits or proceedings pending or, to the knowledge of the Vendor, threatened against or affecting the Company at Law or in equity, or before or by any federal, provincial, municipal or other governmental department, court, commission, board, agency or instrumentality, domestic or foreign, or by or before an arbitrator or arbitration board.

(s) Transactions with Related Parties. Except as described in Section 3.1(s) of the Disclosure Letter, the Company is not currently indebted to or is owed any amount by, any officer, director, employee, shareholder or any other related party of the Company, except for usual employee reimbursements and compensation paid in the ordinary and normal course of business and payment for services provided by the Vendor as recorded in the Annual Financial Statements 2012. Except as described in Section 3.1(s) of the Disclosure Letter, for the Services Agreement and for Contracts of employment, the Company is not a party to any Employee Bonus Obligations, any Contract with any officer, director, employee, shareholder or any other related party of the Company.

(t) Permits and Registrations. Section 3.1(t) of the Disclosure Letter sets out a complete and accurate list of all material permits (with the exception of Environmental Permits which are the subject of Section 3.1(u)(ii), below), licences, approvals, consents, authorizations, registrations and certificates (whether governmental, regulatory or otherwise) held by or granted to the Company (the “Licences and Permits”), and, with the exception of the Environmental Permits, there are no other licences and permits necessary to carry on the Business as presently conducted or to own or lease any of the property or assets utilized by the Company the absence of which would have a Material Adverse Impact. Other than as set out in Section 3.1(t) of the Disclosure Letter, to the knowledge of the Vendor, each Licence and Permit is valid, subsisting and in good standing and the Company is in material compliance with all the terms and conditions relating to the Licences and Permits, except for any non-compliance which would not have a Material Adverse Impact. There are no proceedings in progress, pending or, to the knowledge of the Vendor, threatened which may result in revocation, cancellation, suspension, rescission or any adverse modification of any of the Licences and Permits except for such revocation, cancellation, suspension, rescission or adverse modification which would not have a Material Adverse Impact. Except as disclosed in Section 3.1(t) of the Disclosure Letter, neither the terms and conditions relating to the Licences and Permits nor the legislation or regulations pursuant to which the same were issued require that any consent or approval of, or filing with or notice to, any Governmental Authority or other Person be made to assure the continued holding by the Company of the Licences and Permits after the Closing of the transactions contemplated by this Agreement, except for breaches of terms and conditions relating to the Licences and Permits which would not have a Material Adverse Impact.

(u) Environmental.

(i) Except as set forth in Section 3.1(u)(i) of the Disclosure Letter, the operation (past and present) of the Business by the Company does not and, to the Vendor’s knowledge, did not involve the use or storage of, or the material release or discharge into the environment of, any Hazardous Substance. Except as set forth in Section 3.1(u)(i) of the Disclosure Letter, to the Vendor’s knowledge, any land or other material asset owned, occupied or used (now or in the past) by the Company does not have now, and has never had, any Hazardous Substance on, at, in or under it. To the knowledge of

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the Vendor, all waste generated by the operation of the Business by the Company has been disposed of in accordance, in all material respects, with Environmental Laws and any relevant Environmental Permits. All treatment systems used by the Company to treat waste and emission generated by the operation of its business are in reasonable condition and comply in all material respects with all Environmental Laws and have a capacity that is sufficient for the Business of the Company as currently conducted;

(ii) All Environmental Permits obtained by the Company in connection with the Business are listed in Section 3.1(u)(ii) of the Disclosure Letter and are valid and in full force and effect and, other than as set forth in the Section 3.1(u)(ii) of the Disclosure Letter, no proceeding is pending or, to the knowledge of the Vendor, threatened to revoke any material Environmental Permit or which allege the violation of, or material non-compliance with, any Environmental Law. To the knowledge of the Vendor, there are no circumstances requiring any other Environmental Permits to be obtained in connection with the Business of the Company, and, to the knowledge of the Vendor, there are no circumstances which require material works, remediation or additional expenditure to ensure compliance with any Environmental Permits obtained by the Company; and

(iii) Except as disclosed in Section 3.1(u)(iii) of the Disclosure Letter, to the Vendor’s knowledge, the Company is in material compliance with respect to all applicable Environmental Laws. To the knowledge of the Vendor, there are no circumstances in relation to the Company which give rise to any civil, criminal, administrative or other action, claim, suit, complaint, proceeding, investigation, decontamination, remediation or expenditure by any Person or Governmental Authority under Environmental Law in relation to any matter including properties now owned or used by the Company. All assessments, reviews, reports, returns, information and audits required by applicable Environmental Law or any Environmental Permit have been carried out in all material respects and submitted to the appropriate Governmental Authorities and any requirements of Governmental Authorities have been implemented in all material respects where required by applicable Environmental Law.

(v) Employee Plans.

(i) Section 3.1(v) of the Disclosure Letter identifies, as applicable, each retirement, pension, bonus, stock purchase, profit sharing, stock option, deferred compensation, time bank account (Arbeitszeitkonto), part-time early retirement (Altersteilzeit), severance or termination pay, insurance, medical, hospital, dental, vision care, drug, sick leave, disability, salary continuation, legal benefits, unemployment benefits, vacation, anniversary, incentive or other compensation plan or arrangement or other employee benefit that is maintained or otherwise contributed to, or required to be contributed to, by the Company, including commitments based on work custom (betriebliche Übung) or to which the Company has contributed, for the benefit of employees or former employees of the Company, except any mandatory contribution of the Company to German compulsory social security (i.e. old age pension, health insurance, nursing care insurance and unemployment insurance) and to compulsory worker’s compensation system or Employers Insurance Association (Berufsgenossenschaft) (the “Employee Plans”);

(ii) All contributions to, and payments from, each Employee Plan that may have been required to be made in accordance with the terms of any such Employee Plan and, where applicable, the Laws of the jurisdiction that governs such Employee Plan, have

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been made and each such Employee Plan is fully funded as required by Law. The Company has set aside book reserves for each Employee Plan as required by Law and the applicable Employee Plan; all present obligations under or in connection with pensions as stated in the Employee Plans, be it vis-à-vis employees, a support fund (Unterstützungskasse), a pension fund (Pensionsfond, Pensionskasse), or any other entity being entitled to any payments in connection with pensions, including obligations arising by operation of law, pertaining to periods prior to the Closing Date have either been fulfilled or are fully funded, or have been reasonably accrued on the basis of applicable German GAAP, in each case based on the most recent biometric data, and the Company has fully complied with all terms and conditions of the pension commitments and no set-off (Saldierung) of pension obligations against certain dedicated assets has been applied in the Annual Financial Statements 2012. In the past all pensions provided by the Company have been regularly checked as required by Section 16 of the German Company Pension Act (Betriebsrentengesetz – “BetrAVG”) and, to the extent required, adjusted, and no backlog adjustments (nachholdende Anpassungen) must be made for periods up to the Closing Date or, where applicable, by equivalent legal provisions or contractual provisions;

(iii) All material reports, returns and similar documents with respect to any Employee Plan required to be filed with any Governmental Authority or distributed to any Employee Plan participant have been filed or distributed;

(iv) To the knowledge of the Vendor, there are no pending investigations by any Governmental Authority involving or relating to an Employee Plan, no threatened or pending claims (except for claims for benefits payable in the normal operation or the Employee Plans), suits or proceedings against any Employee Plan or asserting any rights or claims to benefits under the Employee Plan that could give rise a material liability, and all pending investigations, threatened or pending claims, suits or proceedings are disclosed in Section 3.1(v) of the Disclosure Letter; and

(v) No notice has been received by the Company of any complaints or other proceedings of any kind involving the Company or, to the Vendor’s knowledge, any of the Employees before any committee relating to any Employee Plan.

(w) Collective Agreements. Except as described in Section 3.1(w) of the Disclosure Letter, the Company has not entered into, is not bound by and does not apply any agreement with any labour union or employee association or employee representative body nor made commitments to or conducted negotiations with any labour union or employee association or employee representative body with respect to any collective agreements, whether in the form of shop agreements (Betriebsvereinbarungen), reconciliation of interest agreements (Interessenausgleiche), social plans (Sozialpläne), general commitments (Gesamtzusagen), standard terms of employment (vertragliche Einheitsregelungen), works agreements (Betriebsvereinbarungen), collective bargaining agreements (Tarifverträge) or in any other legal form under the Laws of any jurisdiction which restrict the Company’s freedom to dismiss any of the Employees or to change the terms of employment of the Employees (including restrictions in the form of an obligation to make, in the case of dismissals or changes to terms of employment, any payments) (the “Collective Agreements”). Except as described in Section 3.1(w) of the Disclosure Letter, there are no Collective Agreements which apply either based on the Company’s membership in an Employers Association or based on a reference in the individual employment agreement or based on permanent practice (betriebliche Übung) or based on an agreement with any labour union or employee association or employee representative body, and there are no shop agreements with a works council.

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(x) Employees. Section 3.1(x) of the Disclosure Letter includes a correct and complete list of the Company’s Employees and the Material Employees, as defined below. Such list correctly states for each Employee the function/position (job title), wage (or tariff) group, date of start of employment, date of birth and education. Unless as otherwise disclosed in Section 3.1(v) of the Disclosure Letter, no such Employee has a right to any incentive compensation or any other right or contingent right which has accrued, is currently accruing or will accrue on or prior to the Closing Date and which shall become payable on or after the Closing Date. Section 3.1(x) of the Disclosure Letter includes a correct and complete list of the Company’s directors, and all employees with a fixed annual gross salary in excess of €75,000, or an individually agreed notice period of more than six (6) months, or an individually agreed entitlement to a severance payment in case of termination of employment exceeding three (3) months’ gross salary, or any other contractual entitlements to cash or non-cash benefits, the aggregate annual value of which exceeds €35,000 (collectively the “Material Employees”). Such list correctly states for each Material Employee the function/position, date of birth, fixed annual gross compensation, notice period, entitlements to severance payment in case of termination, other material entitlements to cash or non-cash benefits, the date of his service or employment contract and the nature and date of all ancillary agreements, amendments, side letters, waivers and similar documents, if any (such contracts are hereinafter referred to as the “Material Personnel Contracts”). The copies of the Material Personnel Contracts which the Vendor will deliver to the Purchaser at the Closing Date will be correct and complete. Except as disclosed in Section 3.1(x) of the Disclosure Letter, (i) the Material Personnel Contracts are in full force and effect and enforceable against the parties thereto in accordance with their terms, (ii) no party to a Material Personnel Contract has given or, to the knowledge of the Vendor, is reasonably likely to give notice of termination, and, to the knowledge of the Vendor, no circumstances exist which give any party to a Material Personnel Contract an extraordinary right to terminate or modify such Material Personnel Contract, except as provided for in the respective agreement or statutory law, (iii) no party to a Material Personnel Contract is in breach of such agreement or, to the knowledge of the Vendor, is reasonably likely to become unable to meet its obligations, and (iv) the execution or consummation of this Agreement or the transactions contemplated herein do not trigger any rights of any party to a Material Personnel Contract. Except as disclosed in Section 3.1(x) of the Disclosure Letter, the Company has in the last three (3) years prior to the Closing Date not experienced any disputes with Governmental Authorities with regard to labour or work environment matters (in particular, regarding disabled persons and repayment obligations) or any material individual labour disputes or any strike, labour interruption or disturbance or other collective labour disputes of any material nature.

(y) No Subsidiaries. The Company has no subsidiaries and holds no shares in any entity and is not partner to any partnership, joint venture or any cross-shareholding arrangement.

(z) Contracts and Commitments. Except as disclosed in Section 3.1(z) of the Disclosure Letter, the Company is not a party to or bound by any:

(i) Contract for the purchase of materials, supplies or services which requires payment by the Company of more than €150,000, in the case of any single Contract, agreement or commitment;

(ii) Contract for the purchase or sale of any equipment or fixed or capital assets by the Company providing for payments in excess of €150,000 or any Contract obligating the Company to make payments, contingent or otherwise, arising out of the prior acquisition of the assets or businesses of other Persons (or any parts thereof);

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(iii) management, consulting, agency or similar Contract, other than the Services Agreement;

(iv) Material Contract (as defined below);

(v) any lease, agreement in the nature of a lease or agreement to lease whether as lessor or lessee, and whether in respect of real property or personal property, except for any lease or agreement in the nature of a lease relating to personal property where the term is less than one (1) year or where the aggregate annual payments under such lease or agreement and under any related service or maintenance or similar Contract do not exceed €150,000;

(vi) agency Contracts, Contracts with independent dealers and distributors or other distribution Contracts;

(vii) credit agreements as a lender or borrower and other instruments evidencing financial indebtedness, or interest rate derivatives or other financial instruments;

(viii) Contracts for joint ventures, strategic alliances, sales co-operations, joint development of products and other forms of cooperation or similar purposes; or

(ix) guarantees, suretyships, letters of comfort, performance bonds or similar instruments issued by the Company or any third party, in either case to secure the indebtedness or other obligation of the Company, the Vendor, any of the Vendor’s Affiliates or any third party.

Section 3.1(z) of the Disclosure Letter contains a complete and correct list of all Contracts of the kind set forth in Subsections 3.1(z)(i) to 3.1(z)(ix) above, to which the Company is a party or by which the Company is otherwise bound.

For the purposes of this Agreement, a “Material Contract” means any Contract if it requires or may require the provision by the Company to any Person of goods or services in excess of €150,000.

(aa) No Default Under Agreements. The Contracts referred to in Section 3.1(z) of the Disclosure Letter are in full force and effect and are enforceable against the parties thereto in accordance with their terms. To the knowledge of the Vendor, the Company is not in material default or material breach of any Contract referred to in Section 3.1(z) of the Disclosure Letter. To the knowledge of the Vendor, no other party to such a Contract, lease or other instrument is in material breach or material default thereunder. No party to any Contract referred to in Section 3.1(z) of the Disclosure Letter has given written notice of termination or indicated in writing that it will give notice of termination and, to the knowledge of the Vendor, no circumstances exist which would give any party thereto the right to terminate or modify such Contract, and the execution or consummation of this Agreement or the transactions contemplated herein do not trigger any change of control rights of any party in respect of those Contracts that shall remain with the Company following Closing.

(bb) Financial Statements. The Financial Statements contained in Section 3.1(bb) of the Disclosure Letter have been prepared in accordance with German GAAP applied (including capitalization rights (Aktivierungswahlrechte) and valuation principles (Bewertungsgrundsätze)) on a basis consistent with prior periods and pursuant to the German Commercial Code (HGB), are correct and complete in all material respects and present a true

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and fair view of the assets and liabilities (whether accrued, absolute, contingent or otherwise), and financial position and earnings position of the Company (vermitteln ein den tatsächlichen Verhältnissen entsprechendes Bild der Vermögens, Finanz und Ertragslage der Gesellschaft) as at their respective dates for the respective periods covered by the Financial Statements. The Financial Statements have been audited and unqualified auditor’s certificates have been received with respect thereto. Without limiting the generality of the foregoing: (i) the Inventories shown in the Financial Statements are valued at the lower of cost or market value, taking into account sufficient adjustments for obsolete or otherwise non-marketable items; and (ii) the accruals (Rückstellungen) in the Financial Statements have been calculated in accordance with applicable German GAAP.

(cc) Books and Records. The books and accounting and other records of the Company: (i) are in all material respects up-to-date and contain complete and correct details of the business activities of the Company and of all matters to be recorded under applicable Law or German GAAP; and (ii) have been maintained in accordance with applicable Law and reasonable business and accounting practices.

(dd) Tax. Except as disclosed in Section 3.1(dd) of the Disclosure Letter,

(i) the Company has (A) filed and will duly and timely file all Tax Returns and tax assessment amounts, (B) paid and will timely pay all Taxes when due, and (C) timely withheld and declared all Taxes to be deducted or withheld from payments which have to be filed, withheld or paid by Law or governmental order on or before the Closing Date in accordance with all applicable Laws with any Tax Authority;

(ii) as of the date of filing, the Tax Returns were and will be in all material respects correct and complete;

(iii) to the knowledge of the Vendor, the Company has not prepared and will not prepare Tax Returns deviating from an officially published view of any Tax Authority;

(iv) the actual and contingent liabilities that the Vendor is aware of in respect of Taxes attributable to all periods prior to the Closing Date have been sufficiently and reasonably provided for or accrued for in the Annual Financial Statements 2012;

(v) (i) there is no dispute between the Company and any Tax Authority with respect to Taxes for which the Vendor is responsible under this Agreement; and (ii) the Company has not been or is currently subject to any tax audit or any other investigation outside the annual tax assessment proceedings by any Tax Authority and none of such specific proceedings have been announced by any Tax Authority;

(vi) the Company is not a member of any consolidated or unitary group or a party to any arrangement as a result of which any income or loss, asset or liability of the Company is allocated for Tax purposes to its direct or indirect shareholder or a third party, or is otherwise taken into account in determining any Tax payable by the direct or indirect shareholder or third party, or vice versa (the “Tax Consolidation”);

(vii) the Company does not have a dependent agent or employee outside of Germany or any offices, registered or unregistered, outside of Germany;

(viii) the Company will prepare and submit all legally required transfer pricing documentation upon request of the Tax Authorities;

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(ix) the Company has not received a written Tax ruling and has not entered into and is currently not under negotiations to enter into any agreement with any Tax Authority; and

(x) (i) all Tax records to be maintained by the Company by Law or any officially published view of the Tax Authorities have been stored by the Company and are up-to-date, and (ii) all withholding Tax exemption certificates (in particular but not limited to withholding Taxes) which have been required to avoid or mitigate Tax have been obtained.

(ee) Absence of Material Changes. Except as disclosed in Section 3.1(ee) of the Disclosure Letter, since December 31, 2012: (i) the Company has operated, in all material respects, its business in the ordinary course of business consistent with past practice; (ii) the Company has not taken any action that would have been required to be disclosed in accordance with Section 5.3 had this Agreement been in effect since December 31, 2012; and (iii) the Company has not suffered any change in business, financial condition or operations that has had a Material Adverse Impact.

(ff) Compliance with Laws; No Unlawful Business Practices. To the Vendor’s knowledge, the Company is conducting the Business in compliance with all applicable Laws except for any non-compliance the consequence of which would not have a Material Adverse Impact, provided, however, that this sentence shall not apply to the Vendor’s compliance with Environmental Laws as set forth in Section 3.1(u). To the Vendor’s knowledge, none of the Company’s directors, officers or Employees is, in connection with the Business, under administrative or criminal investigation or indictment by any Governmental Authority. Neither: (i) the Company, nor (ii) to the Vendor’s knowledge, any of the Company’s directors, officers, or employees, nor (iii) to the Vendor’s knowledge, any person or entity acting on behalf of any of the foregoing, has in connection with the Business: (a) made any unlawful payment in any form, whether directly or indirectly, to any Governmental Authority from corporate funds; (b) requested or accepted any bribes or other unlawful benefits; (c) violated or is in violation of Section 298, 299, 333, and 334 of the German Penal Code, the U.S. Foreign Corrupt Practices Act or similar Laws of other jurisdictions, as applicable; (d) made any bribe, or any direct or indirect unlawful payment to any officer or employee rebate, payoff, influence payment, kickback or other unlawful payment to any person; or (e) established or maintained for purposes of such unlawful payments any funds or assets that have not been properly recorded in the books and records of the Company.

(gg) Subsidies. All public grants (Zuschüsse), allowances, aids and other subsidies (Subventionen) in whatever form (the “Public Subsidies”) received by the Company within the period of three (3) years prior to the date of this Agreement are listed in Section 3.1(gg) of the Disclosure Letter and such list indicates the nature of the Public Subsidy and dates of any administrative orders, agreements or other instruments on which basis the Public Subsidy was given and the amounts received. No proceedings regarding a revocation or withdrawal of a Public Subsidy have been initiated or to the Vendor’s knowledge threatened, and to the Vendor’s knowledge there are no circumstances, which would justify the initiation of such proceedings. The Company is in compliance in all material respects with its obligations under or in connection with the Public Subsidies, including the obligations under any ancillary provisions in the respective orders or agreements thereto. Except as disclosed in Section 3.1(gg) of the Disclosure Letter, the Company is not obliged under the Public Subsidies to maintain a certain level of employees in the future or to make any additional investments. No Public Subsidy will have to be repaid in whole or in part due to the execution or consummation of this Agreement or the transactions contemplated herein.

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(hh) Product Liability. To the knowledge of the Vendor, the products designed, manufactured or distributed and the services rendered by the Company prior to the Closing Date do not suffer from any defects and Vendor is not aware of any fact or circumstance which give or could give rise to any product liability or warranty claims and no such claims have been raised against the Company which have not been settled.

(ii) Insurance. Section 3.1(ii) of the Disclosure Letter includes a correct and complete list of all insurance policies maintained by or on behalf of the Company, including details of the insured, insured risk, insurance company, policy number, date, term, annual premium and maximum amount of coverage (“Insurance Policies”). The Insurance Policies provide insurance coverage against all risks against which insurance is customarily sought for comparable businesses operating in a comparable industry. The Insurance Policies are and will remain in full force and effect until the Closing Date and the coverage is reasonable to adequately cover the risks of the Company’s business. No Insurance Policy will lapse or otherwise be affected as a result of or in connection with the execution or consummation of this Agreement or the transactions contemplated herein. All premiums due under the Insurance Policies have been paid and there has been no breach of any material obligation of the Company under the Insurance Policies.

(jj) Guarantee Agreements and Collateral. Other than as set forth in Section 3.1(jj) of the Disclosure Letter, the Company is not acting as a guarantor and has not granted any collateral for liabilities or obligations of the Vendor, any of the Vendor’s Affiliates (other than the Company) or any third party.

(kk) Finder’s Fees and Management Incentives. The Company has not: (i) incurred any obligation for brokerage or finders’ fees, agents’ commissions or similar payments to be made in connection with this transaction; or (ii) paid or promised to their directors, officers or employees any bonus or other special incentives in connection with this Agreement or the transactions contemplated herein.

The foregoing sets out an exhaustive list of the Vendor’s Guarantees, and any implied guarantee or warranty under any Law of any jurisdiction is hereby expressly and irrevocably waived by the Purchaser.

3.2 By the Purchaser

The Purchaser guarantees by way of independent guarantee undertakings (selbständige Garantieversprechen), pursuant to § 311 of the German Civil Code (BGB), that the following statements (“Purchaser’s Guarantees”) are true and correct, in each case as of the date hereof and as of the Closing Date:

(a) Organization. The Purchaser is a partnership duly registered, validly existing and in good standing as a limited partnership (GmbH & Co. KG) under the laws of Germany and has the unrestricted right, power, authority and capacity to enter into this Agreement and to perform its obligations hereunder.

(b) Authority Relative to this Agreement. This Agreement and each of the documents contemplated hereby has been, or will prior to the Time of Closing be, duly authorized, executed and delivered by the Purchaser and constitutes, or will constitute, when executed, valid and binding obligations of the Purchaser, enforceable in accordance with its terms, subject to the availability of equitable remedies and the enforcement of creditors’ rights generally.

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(c) Corporate Approvals. All required approvals of any corporate bodies of the Purchaser have been given prior to the signing of this Agreement. The execution and delivery by the Purchaser of this Agreement and performance by it of its obligations hereunder will not result in: (i) a violation or breach of any provision of or constitute a default under its organizational documents or any other legal obligations of the Purchaser or any material agreement, arrangement or understanding to which the Purchaser is a party; or (ii) to the knowledge of the Purchaser, any challenge (Anfechtung) by any third party on any legal basis, including on the basis of any creditor protection laws.

(d) Approvals and Consents. Other than in connection with applicable merger control, competition or anti-trust Laws of Germany and Ukraine, no authorization, consent or approval of, or filing with or notice to, any Governmental Authority or other Person is necessary for the consummation by the Purchaser of its obligations under this Agreement, except for such authorizations, consents, approvals and filings as to which the failure by the Purchaser to obtain or made would not prevent or materially delay the consummation of this Agreement.

(e) Purchase Price. The Purchaser has, or will have as of Closing, sufficient immediately available funds or binding, irrevocable and unconditional financing commitments by third parties, if applicable, to make all payments and to perform all actions required to be made under this Agreement, which are subject to no other conditions than the Closing Conditions.

(f) No Interference. There is no action, suit, investigation or other proceeding pending or, to the knowledge of the Purchaser, threatened before any court, arbitrator, governmental body, agency or official that in any manner challenges or seeks to prevent, enjoin, alter or materially delay the execution or consummation of this Agreement or the transactions contemplated herein, and, to the knowledge of the Purchaser, there are no circumstances likely to give rise to any of the foregoing.

(g) Brokers. Except for Houlihan Lokey, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Purchaser. The Purchaser shall be solely responsible for payment of the fees and expenses of Houlihan Lokey.

3.3 By the Guarantor

The Guarantor guarantees by way of independent guarantee undertakings (selbstständige Garantieversprechen), pursuant to § 311 of the German Civil Code (BGB), that the following statements (“Guarantor’s Guarantees”) are true and correct, in each case as of the date hereof and as of the Closing Date:

(a) Organization. The Guarantor is a corporation duly organized, validly existing and in good standing under the laws of British Columbia, Canada, and has the unrestricted right, power and authority and capacity to enter into this Agreement and to perform its obligations hereunder.

(b) Authority Relative to this Agreement. This Agreement and each of the documents contemplated hereby has been, or will prior to the Time of Closing be, duly authorized, executed and delivered by the Guarantor and constitutes, or will constitute, when executed, valid and binding obligations of the Guarantor, enforceable in accordance with its terms, subject to the availability of equitable remedies and the enforcement of creditors’ rights generally.

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(c) Corporate Approvals. All required approvals of any corporate bodies of the Guarantor have been given prior to the signing of this Agreement. The execution and delivery by the Guarantor of this Agreement and performance by it of its obligations hereunder will not result in a violation or breach of any provision of or constitute a default under its organizational documents or any agreement, arrangement or understanding to which the Guarantor is a party.

(d) Approvals and Consents. No authorization, consent or approval of, or filing with or notice to, any Governmental Authority or other Person is necessary for the consummation by the Guarantor of its obligations under this Agreement.

3.4 By the Purchaser Guarantor

The Purchaser Guarantor guarantees by way of independent guarantee undertakings (selbstständige Garantieversprechen), pursuant to § 311 of the German Civil Code (BGB), that the following statements (“Purchaser Guarantor’s Guarantees”) are true and correct, in each case as of the date hereof and as of the Closing Date:

(a) Organization. The Purchaser Guarantor is a corporation duly organized, validly existing and in good standing under the laws of Pennsylvania, United States of America, and has the unrestricted right, power and authority and capacity to enter into this Agreement and to perform its obligations hereunder.

(b) Authority Relative to this Agreement. This Agreement and each of the documents contemplated hereby has been, or will prior to the Time of Closing be, duly authorized, executed and delivered by the Purchaser Guarantor and constitutes, or will constitute, when executed, valid and binding obligations of the Purchaser Guarantor, enforceable in accordance with its terms, subject to the availability of equitable remedies and the enforcement of creditors’ rights generally.

(c) Corporate Approvals. All required approvals of any corporate bodies of the Purchaser Guarantor have been given prior to the signing of this Agreement. The execution and delivery by the Purchaser Guarantor of this Agreement and performance by it of its obligations hereunder will not result in a violation or breach of any provision of or constitute a default under its organizational documents or any material agreement, arrangement or understanding to which the Purchaser Guarantor is a party.

(d) Approvals and Consents. No authorization, consent or approval of, or filing with or notice to, any Governmental Authority or other Person is necessary for the consummation by the Purchaser Guarantor of its obligations under this Agreement.

ARTICLE 4

MERGER CONTROL

4.1 Merger Control Procedures

(a) The Purchaser shall use its commercially reasonable efforts to ensure that the approvals referred to in Section 6.2(a)(ii) (the “Merger Clearances”) are obtained as soon as possible after the date hereof and that the Vendor is kept reasonably informed of the status of the proceedings before the relevant authorities. In particular, the Purchaser shall:

(i) ensure that all filings necessary to obtain the Merger Clearances (the “Merger Filings”) are made as soon as reasonably possible and within five (5) Business Days from the date hereof; provided, however, that the Vendor has provided all requested information to the Purchaser in a timely manner;

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(ii) respond timely to reasonable information requests to avoid any declaration of incompleteness by the competent merger control authorities, or any other suspension of the time periods for clearance, and shall not, without the prior consent of the Vendor (such consent not to be unreasonably withheld), withdraw any filing made;

(iii) prior to submitting any Merger Filing or any subsequent submission, provide to the Vendor or its legal counsel the contents of such Merger Filing and/or submission; and to reasonably, in good faith, take the Vendor’s comments thereon into consideration, provided that such comments are provided to the Purchaser in a timely manner;

(iv) to the extent possible without delaying any submission or missing a deadline, inform the Vendor or its legal counsel in advance of any subsequent submissions to allow for sufficient time that is reasonably necessary for the Vendor or its legal counsel to review and comment;

(v) inform the Vendor of any relevant communications with any authorities relating to the Merger Clearance and the progress of such Merger Clearance;

(vi) not without the prior written approval of the Vendor (such approval not to be unreasonably withheld), agree with the relevant competition and merger control authorities to any suspension or extension of any suspension of the statutory waiting periods; and

(vii) for a period of 45 (forty-five) days from the date hereof, not conclude any transaction or agreement to acquire any non-woven wall covering business that might reasonably be expected to delay or make it more difficult to obtain any of the Merger Clearances.

(b) Each of the Vendor and the Purchaser agree to use commercially reasonable efforts to obtain all consents and approvals referred to in Section 3.1(g). Each of the Vendor and the Purchaser shall provide such information and cooperation as the other Party may reasonably request in connection therewith.

(c) Notwithstanding any provision in this Agreement, competitively sensitive information of a Party will be provided on a privileged and confidential basis, and labeled as such, only to the external legal counsel or external expert of the other Party seeking such consents and approvals and shall not be shared by such counsel or expert with any other party.

ARTICLE 5

COVENANTS

5.1 Access to Information

The Vendor shall cause the Company to give, until the Time of Closing, to the Purchaser and its authorized representatives reasonable access to its premises at all reasonable times and in a manner so as not to interfere with the normal business operations of the Company, its assets, books, accounts, Tax Returns, Contracts, commitments and records and to its personnel at all reasonable times and furnish them with such information relating to the Business and its affairs and assets as the Purchaser may reasonably request and as is compliant with applicable competition Laws.

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5.2 Conduct of Business Until Time of Closing

Except as expressly provided in this Agreement or except with the prior written consent of the Purchaser (such consent not to be unreasonably withheld), prior to the Time of Closing the Vendor shall cause the Company to:

(a) operate the Business only in the ordinary course, consistent with past practice and, to the extent consistent with such operation, use all commercially reasonable efforts to preserve its business organization and goodwill;

(b) use commercially reasonable efforts to preserve their relationships with their customers, suppliers, distributors and others with whom they deal in the ordinary course of business;

(c) use commercially reasonable efforts to maintain all of the assets of the Business in their current condition, ordinary wear and tear excepted, and continue to maintain insurance in accordance with past practices;

(d) maintain its books, records and accounts in the ordinary course;

(e) continue to collect accounts receivable and pay accounts payable in the ordinary course of business;

(f) promptly disclose to Purchaser prior to entering into any agreement, arrangement or any other undertaking by which the Company would be bound and involving any liability or obligation of any nature greater than €150,000; and

(g) comply in all material respects with all applicable Laws.

5.3 Vendor’s Negative Covenant

Except as expressly provided in this Agreement or disclosed in Section 5.3 of the Disclosure Letter or except with the prior written consent of the Purchaser (such consent not to be unreasonably withheld), prior to the Time of Closing the Vendor shall ensure that the Company does not:

(a) amend its organizational documents;

(b) amalgamate, merge or consolidate with, or acquire all or substantially all the shares or assets of, any Person;

(c) adopt or amend any Employee Plan (or any plan that would be a Employee Plan if adopted);

(d) transfer, lease, licence, sell or otherwise dispose of any of its material assets, other than Inventory in the ordinary course of the Business;

(e) enter into or amend any lease of real property;

(f) grant to any Material Employee any increase in compensation or benefits, except as may be required under Material Personnel Contracts or collective bargaining agreements existing as of the date of this Agreement;

(g) incur, assume or guarantee any liabilities or indebtedness other than in the normal course of business (but shall in no event incur any financial indebtedness); grant any lien that would have been required to be set forth in the Disclosure Letter pursuant to Section 3.1 of the Agreement; or waive any claims or rights of material value;

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(h) make any change in any method of accounting or accounting practice or policy other than as required under German GAAP;

(i) appoint a liquidator, receiver or trustee in bankruptcy for the Company or in relation to the assets of the Business;

(j) make a material change in its Tax accounting methods or change or rescind any material election in respect of Taxes, amend any material Tax Return, enter into any material closing agreement, or settle any material claim or assessment in respect of Taxes, in each case, that could reasonably be expected to affect the Tax liability of the Company for any taxable period beginning after the Closing Date;

(k) amend, terminate or allow the expiration of any material Contract, other than in the normal course of business;

(l) incur any capital expenditures other than capital expenditures in the ordinary course of business and as set forth in the 2013 business plan which exceed €100,000 in aggregate, provided that the Company shall be authorized to make all capital expenditures in accordance with all legally binding commitments and Contracts with third parties in existence as at the date of this Agreement;

(m) declare or pay any dividend or make any other distribution on any of its shares of any class, or resolving to reduce its share capital in any way or repurchase, redeem or otherwise acquire any of its shares, other than in connection with the settlement of the Intercompany Accounts pursuant to Section 5.4;

(n) issue or grant an option to subscribe for any shares in its capital; or

(o) make any other change to the business affairs of the Business which would have a Material Adverse Impact, other than any change made for bona fide business purposes in response to any change in general business conditions or any change in the markets or prices for the principal products of the Business.

5.4 Intercompany Accounts; Intercompany Loan Agreements

All intercompany trade payables and receivables and all intercompany loan payables and intercompany loan receivables (outstanding principal amounts and interest) (the “Intercompany Accounts”) between the Company on the one hand and the Vendor or any of its Affiliates (other than the Company) on the other hand, shall be settled, and the underlying intercompany loan agreements shall be terminated on or prior to the Closing Date.

5.5 Payment of Patent Renewal Fees and Trademark Register Corrections

All annual fees, renewal fees or any late fees with any registration authority for any of the Company’s registered patent and patent applications which become due between the date hereof and the Closing Date or are overdue, shall be paid in full before the expiration of such late payment period or the Closing Date, whichever is earlier. The Vendor shall use commercially reasonable efforts to cause the Company to apply to the responsible registration authority to update, as applicable, the registration of the trademarks prior to the Closing Date so that the Company is reflected as the owner of such trademarks. The Vendor shall provide written evidence of any such application prior to the Closing Date.

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5.6 Release of Security Interests under Loan Agreements

Prior to the Closing Date, the Vendor shall use commercially reasonable efforts to obtain a written confirmation from each of the respective lenders under the Loan Agreements providing that, upon payment on the Closing Date of amounts outstanding under the Loan Agreements to such lenders, all Encumbrances and other charges relating to the assets of the Company established under or granted in connection with such Loan Agreements will be automatically released (or, as applicable, provide the Company with the documentation to de-register such Encumbrances in public registers) and the Company shall be discharged from all obligations thereunder. Such written confirmations shall be in form and substance satisfactory to the Vendor and the Purchaser, both acting reasonably.

5.7 Release under Guarantee Agreements

Prior to the Closing Date, the Vendor shall use commercially reasonable efforts to secure the release and full discharge of any and all obligations of the Company under the Guarantee Agreements and shall obtain a written confirmation from each of the respective counterparties under the Guarantee Agreements providing for such release and the release of all Encumbrances and other charges relating to the Company established under or granted in connection with such Guarantee Agreements and as applicable, provide the Company with the documentation to de-register such Encumbrances in public registers. Such written confirmations shall be in form and substance satisfactory to the Vendor and the Purchaser, both acting reasonably.

5.8 Confidential Information

Until the Time of Closing, the Parties will keep confidential and not use for any purpose other than the transactions set out herein any information (unless otherwise required by Law or such information is readily available or becomes readily available from public or published information or sources) obtained from the other Parties hereto. From and after the Closing Date, the Vendor shall not disclose to anyone (other than to its advisors, as it considers necessary, or as directed by the Purchaser or as required by Law or the rules of any stock exchange on which the shares of the Vendor are listed) or use for its own or for any other purpose, any confidential information concerning the Business and shall hold all such information in the strictest confidence. If this Agreement does not complete, the Parties shall not disclose to anyone, other than to or as directed by one of the other non-Affiliate Parties (or as required by Law or the rules of any stock exchange on which the shares of the other non-Affiliate Parties are listed), or use for its own or for any other purpose, any confidential information of any of the other non-Affiliate Parties and shall hold all such information in the strictest confidence and shall either return copies of all information given to it by one of the other non-Affiliate Parties and its representatives or confirm the destruction of the same.

5.9 Non-Competition

For a period of three (3) years from the Closing Date, the Vendor agrees and covenants not to, and agrees to cause its Affiliates not to

(a) engage in, or own, directly or indirectly any financial interests in any Person engaged in, any commercial activity that competes with the Business in:

(i) Western and Eastern Europe, including Russia and the Ukraine;

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(ii) the United States of America, Canada and Mexico; and

(iii) Asia;

(collectively, the “Territory”).

Notwithstanding the foregoing, the Vendor may (A) purchase or otherwise acquire for purely financial investment purposes any class of securities of any enterprise (but without gaining control or management functions or any material influence over such enterprise), or (B) purchase or otherwise acquire a Person, or a group of assets constituting a business, engaged in diversified activities that obtains less than twenty-five percent (25%) of its overall annual revenue (based on such Person’s or business’ latest audited financial statements or other such public information if available) attributable to businesses that compete with the Business; and

(b) sell or otherwise make available, directly or indirectly, to any Person engaging, directly or indirectly, in any commercial activity that competes with the Business in the Territory any know-how or other elements of goodwill, trade secrets or other information of a confidential nature of the Company with the exception of technical know-how (i.e. manufacturing processes, product development and applications) which shall be kept confidential for as long as the information is confidential.

5.10 Non-Solicitation

For a period of two (2) years from the Closing Date, the Vendor shall refrain, and shall procure that the Vendor’s Affiliates refrain, from:

(i) influencing or attempting to influence any customer, supplier, consultant or other third party maintaining a contractual or other business relationship with the Company to terminate or discontinue such relationship; or

(ii) soliciting or attempting to solicit the service or employment of any current or future director, officer or employee of the Company,

provided that the foregoing restriction shall not apply to any solicitation directed at the public or industry participants in general by the Vendor or the Vendor’s Affiliates in publications available to the public in general.

5.11 Injunctive Relief

The Vendor and the Purchaser understand and agree that in the case of a breach the Vendor of the obligations in Sections 5.9 and 5.10, the remedies available to the Purchaser under this Agreement may not be sufficient to indemnify the Purchaser and the Company fully against all damage, and that therefore the Purchaser shall be entitled to enforce any claims for specific performance (Unterlassungs- und Beseitigungsansprüche) by injunctive relief (einstweiliger Rechtsschutz) without having to establish irreparable harm and without having to provide a bond or other collateral (ohne Sicherheitsleistung).

5.12 Termination of Managing Director

Effective at the Effective Time, the Vendor as the sole shareholder of the Company shall have revoked the appointment of Mr. Alfonso Ciotola as managing director of the Company with effect as of the Closing Date, and the Company shall have terminated the agreement between the Company and the Vendor dated April 1, 2009 assigning Mr. Ciotola to work as the managing director of the Company, with

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effect as of the Effective Time. The Vendor shall settle any and all amounts owed or which shall be owed to Mr. Ciotola under such agreement, and the Company shall have received the written confirmation of Mr. Ciotola, in form and substance satisfactory to the Purchaser, in its sole discretion and acting reasonably, that Mr. Ciotola has waived all rights to any claims against the Company for compensation, reimbursement of expenditures or otherwise.

5.13 Cooperation

The Parties shall cooperate fully in good faith with each other and their respective legal advisors, accountants and other representatives in connection with any steps required to be taken as part of their other respective obligations under this Agreement.

5.14 Breach of Vendor’s Obligations

In case of a breach of the Vendor’s obligations under this Agreement, the Purchaser shall be entitled to specific performance (Erfüllungsansprüche) and/or damages (Schadensersatz). In relation to damage claims, Article 7 shall apply mutatis mutandis.

5.15 Breach of Purchaser’s Obligations

In case of a breach of the Purchaser’s obligations under this Agreement, the Vendor shall be entitled to specific performance (Erfüllungsansprüche) and/or damages (Schadensersatz). In relation to damage claims, Article 7 shall apply mutatis mutandis.

ARTICLE 6

CLOSING

6.1 Closing / Closing Date

Consummation (Vollzug) of this Agreement shall occur on the date on which all Closing Conditions are satisfied (or waived in accordance with Section 6.3) and all Closing Actions have been delivered (or waived in accordance with Section 6.5) (“Closing”). Closing shall take place at the offices of Jones Day, NexTower, Thurn-und-Taxis-Platz 6, 60313 Frankfurt am Main, Germany on the fifth Business Day following the date upon which the last Closing Condition has been satisfied or waived (the “Closing Date”).

6.2 Closing Conditions

Closing shall only take place if each of the following conditions precedent (aufschiebende Bedingungen) (the “Closing Conditions”) have been satisfied:

(a) Mutual Conditions of Closing

(i) No Action or Proceeding. No judgment or order shall have been issued by any Governmental Authority, no action, suit or proceeding shall have been threatened or taken by any Governmental Authority or Person, and no Law or policy shall have been proposed, enacted, promulgated or applied which makes it illegal or otherwise directly or indirectly restrains, enjoins, prohibits or imposes material limitations or conditions on the acquisition by, or the disposition by the Vendor to, the Purchaser of the Purchased Shares or the completion of the transactions contemplated by this Agreement or the right of the Purchaser to own or exercise full rights of ownership of the Purchased Shares.

(ii) Competition/Antitrust Laws. All consents or approvals which may be required under applicable merger control, competition or antitrust Laws in Germany and Ukraine in respect of the purchase and sale of the Purchased Shares contemplated in this Agreement shall have been obtained or deemed to have been obtained under applicable Law or all applicable waiting periods thereunder shall have expired without any action being taken by any competent authority which would prevent the transactions contemplated by this Agreement.

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(b) Conditions for the Benefit of the Purchaser

(i) Covenants. All of the covenants contained in this Agreement to be performed by the Vendor at or before the Time of Closing shall have been performed in all material respects and a certificate of a senior officer of the Vendor dated the Closing Date confirming the foregoing shall have been delivered to the Purchaser.

(ii) Termination of and Discharge of Charges under the Loan Agreements. The Company shall (a) with respect to each Loan Agreement have entered into arrangements with the respective lender under such Loan Agreement providing that upon payment to such lender on the Closing Date of all outstanding amounts and pre-payment penalties or similar amounts pursuant to such Loan Agreement, the Encumbrances or other charges granted in connection with such Loan Agreement will be automatically released (and, where relevant, the Company will be provided with the necessary documentation to de-register such Encumbrances from public registries), and such lender shall confirm that such Loan Agreement has been fully repaid and that the Company is released and discharged from its obligations thereunder, and (b) have provided instruction and notification to the Purchaser for the repayment of all due and/or outstanding amounts thereunder from the Closing Date Payment Amount.

(iii) Termination of and Discharge of Charges under the Guarantee Agreements. The Company shall (a) with respect to each Guarantee Agreement, have entered into arrangements with the lenders under such Guarantee Agreement providing that upon payment on the Closing Date of certain amounts to such lenders, the Encumbrances or other charges granted in connection with such Guarantee Agreements will be automatically released (or, where relevant, the Company will be provided with the necessary documentation to de-register such Encumbrances from public registries), and confirm that the Company is released and discharged from its obligations thereunder, and (b) to the extent applicable, have provided instruction and notification to the Purchaser for the repayment of all due and/or outstanding amounts thereunder from the Closing Date Payment Amount.

(iv) Termination of Services Agreement. The Company shall have ceased to be a party to the Services Agreement, without recourse to or liability of the Company.

(v) Termination of Factoring Agreement. The Company shall have (a) entered into arrangements with CommerzFactoring GmbH providing that, upon payment on the Closing Date of a certain amount to CommerzFactoring GmbH, any Accounts Receivable assigned pursuant to the Factoring Agreement shall be repurchased and retransferred to the Company, all amounts retained by CommerzFactoring GmbH shall be released to the Company and the Encumbrance or other charges granted in connection with the Factoring Agreement will be automatically released and discharged, and (b) provided instruction and notification to the Purchaser for the repayment of all due and/or outstanding amounts thereunder from the Closing Date Payment Amount.

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(vi) Intercompany Loan Agreements; Intercompany Accounts. All intercompany loan agreements shall have been terminated without recourse to or liability of the Company and all Intercompany Accounts shall have been definitively settled on or prior to the Closing Date.

(vii) No Material Adverse Change. No Material Adverse Change shall have occurred since December 31, 2012 and a certificate of a senior officer of the Vendor dated the Closing Date confirming the foregoing shall have been delivered to the Purchaser.

(c) Conditions for the Benefit of the Vendor

(i) Covenants. All of the covenants contained in this Agreement to be performed by the Purchaser at or before the Time of Closing shall have been performed in all material respects and a certificate of a senior officer of the Purchaser dated the Closing Date confirming the foregoing shall have been delivered to the Vendor.

(ii) Directors’ and Officers’ Release. The Vendor and the Guarantor shall have received a release from the Company in a form satisfactory to the Vendor and the Guarantor, both acting reasonably, releasing the officers and directors of the Company who are also officers, directors or employees of the Vendor and/or the Guarantor from all claims and obligations whatsoever based upon their actions as officers and directors of the Company on any matter arising prior to the Closing Date.

6.3 Waiver of Closing Conditions

The Vendor shall have the right to determine, in its sole discretion, whether to waive the Closing Conditions set forth in Sections 6.2(a) and 6.2(c), in writing, other than Section 6.2(a)(ii). Such waiver shall have the same effect as the satisfaction of the relevant Closing Condition. For the avoidance of doubt, a waiver of Closing Conditions by the Vendor shall not be construed as a waiver of any of its rights or any other of the Purchaser’s obligations hereunder.

The Purchaser shall have the right to determine, in its sole discretion, whether to waive the Closing Conditions set forth in Sections 6.2(a) and 6.2(b), in writing, other than Section 6.2(a)(ii). Such waiver shall have the same effect as the satisfaction of the relevant Closing Condition. For the avoidance of doubt, a waiver of Closing Conditions by the Purchaser shall not be construed as a waiver of any of its rights or any other of the Vendor’s obligations hereunder.

6.4 Closing Actions

On the Closing Date, the Parties shall concurrently (Zug um Zug) execute the following acts and execute and deliver (abschließen) the following agreements and documents (the “Closing Actions”):

(a) Vendor’s Closing Deliveries

The Vendor will deliver or cause to be delivered the following to the Purchaser:

(i) a certified copy of resolutions of the directors of the Vendor authorizing the execution and delivery of this Agreement and all transactions contemplated hereby;

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(ii) a certificate of the Vendor as to the accuracy as of the Closing Date, of the Vendor’s representations and warranties, the performance of its covenants to be performed at or before the Closing with particulars of any material inaccuracy or non-performance, including the absence of any Material Adverse Change as set forth in Section 6.2(b)(vii) (the “Vendor Closing Certificate”); and

(iii) a shareholders’ resolution of the Company signed by the Vendor as the sole shareholder of the Company terminating the current managing director pursuant to Section 5.12 effective as of the Effective Time and appointing one person nominated by the Purchaser as managing director of the Company with effect as of the Effective Time.

(b) Guarantor’s Closing Deliveries

The Guarantor will deliver the following to the Purchaser:

(i) a certified copy of resolutions of the directors of the Guarantor authorizing the execution and delivery of this Agreement and all transactions contemplated hereby; and

(ii) a certificate of the Guarantor as to the accuracy, as of the Closing Date, of the Guarantor’s representations and warranties with particulars of any material inaccuracy.

(c) Purchaser Guarantor’s Closing Deliveries

The Purchaser Guarantor will deliver the following to the Vendor:

(i) a certified copy of resolutions of the directors of the Purchaser Guarantor authorizing the execution and delivery of this Agreement and all transactions contemplated hereby; and

(ii) a certificate of the Purchaser Guarantor as to the accuracy, as of the Closing Date, of the Purchaser Guarantor’s representations and warranties with particulars of any material inaccuracy.

(d) Purchaser’s Closing Deliveries

The Purchaser will deliver the following to the Vendor:

(i) the Closing Date Payment Amount in immediately available funds pursuant to Section 2.2(a)(ii);

(ii) a certified copy of resolutions of the directors of the Purchaser authorizing the execution and delivery of this Agreement and all transactions contemplated hereby;

(iii) a certificate of the Purchaser as to the accuracy, as of the Closing Date, of the Purchaser’s representations and warranties and the performance of its covenants to be performed at or before the Closing with particulars of any inaccuracy or non-performance (the “Purchaser Closing Certificate”); and

(iv) the consent to act as managing director of the Company signed by the person nominated by the Purchaser to act as managing director of the Company with effect as of the Effective Time.

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(e) Mutual Closing Delivery

The Parties shall confirm in a written document, to be jointly executed and substantially in the form attached hereto as Schedule B (the “Closing Memorandum”), that all Closing Conditions have been fulfilled or waived, that the payment of Closing Date Payment Amount pursuant to Section 2.2(a)(ii) has been effected and received and that all other Closing Actions have been performed and that Closing has occurred. The executed Closing Memorandum shall serve as irrefutable proof that the payment of Closing Date Payment Amount pursuant to Section 2.2(a)(ii) has occurred.

6.5 Terms of Closing

The Vendor shall have the right to determine, in its sole discretion, whether to waive the Closing Actions set forth in Section 6.4(c) in writing. Such waiver shall have the same effect as the satisfaction of the relevant Closing Condition. For the avoidance of doubt, a waiver of Closing Conditions by the Vendor shall not be construed as waiver of any of its rights or of any other of the Purchaser’s obligations hereunder.

The Purchaser shall have the right to determine, in its sole discretion, whether to waive the Closing Actions set forth in Sections 6.4(a) and (b) in writing. Such waiver shall have the same effect as the satisfaction of the relevant Closing Condition. For the avoidance of doubt, a waiver of Closing Conditions by the Purchaser shall not be construed as waiver of any of its rights or of any other of the Vendor’s or the Guarantor’s obligations hereunder.

6.6 Books and Records

Following the Closing, the Vendor shall deliver or make available to the Purchaser, all books and records pertaining to the Business and the Company and such other records or copies thereof in the possession or control of the Vendor which are necessary for the carrying on of the Business, including:

(a) records relating to customers and suppliers;

(b) books, purchase orders, invoices and other documents, files, data and records of or relating to the Business; and

(c) records relating to the original tax classification of the assets of the Business by the Vendor or any predecessor corporation in the Vendor’s possession.

6.7 Further Assurances

Each Party to this Agreement covenants and agrees that, from time to time subsequent to the Closing Date, it shall, at the request and expense of the requesting Party, execute and deliver all such documents, including, without limitation, all such additional conveyances, transfers, consents and other assurances and do all such other acts and things as any other Party hereto, acting reasonably, may from time to time request be executed or done in order to better evidence or perfect or effectuate any provision of this Agreement or of any agreement or other document executed pursuant to this Agreement or any of the respective obligations intended to be created hereby or thereby.

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ARTICLE 7

LEGAL CONSEQUENCES IN CASE OF BREACH

7.1 General

Within thirty (30) Business Days after having received notice of a breach of one or more of the Vendor’s Guarantees or any other of the Vendor’s obligations under this Agreement, the Purchaser shall notify the Vendor in writing thereof, reasonably specifying such breach (to the extent reasonably possible underlying the facts, legal basis for possible claims and an estimation of potential damages to be claimed by the Purchaser) and to the extent Purchaser has collected any evidence, provide such evidence in order to enable the Vendor to assess the merits of a possible breach (“Claim Notice”); provided, however that the Purchaser’s failure to give such notification shall not affect the indemnification provided hereunder except as provided for in Section 7.2(c). At the option of the Purchaser, (i) the Vendor shall have the right to remedy the relevant breach within thirty (30) days after having received the Claim Notice by putting the Purchaser in the position in which it would be in had the relevant Vendor’s Guarantee not been breached (“restitution in kind”, Naturalrestitution) or (ii) the Purchaser shall be entitled to demand from the Vendor compensation in money (Schadensersatz in Geld) according to §§ 249 et seq. German Civil Code (BGB) (Schaden) incurred by the Purchaser, including reasonable legal, accounting and other fees and expenses of professional advisors, but excluding (i) any lost profits (entgangener Gewinn), (ii) any loss of goodwill or reputational damages, (iii) any punitive or exemplary damages in an amount equal to the actual and direct loss suffered by the Purchaser; and (iv) similar incidental or consequential losses (mittelbare oder Folgeschäden). The Purchaser shall further be excluded from asserting any claims for damages due to a recalculation of the Purchase Price.

7.2 Limitation of Liability

The Vendor’s liability shall be limited pursuant to the following provisions:

(a) The Vendor shall not be liable under or in connection with this Agreement to the extent that such liability would not have occurred but for the passing of, or change in, any legal provision after the date hereof unless such passing of or change was publicly known before the date hereof.

(b) The Vendor shall not be liable under or in connection with this Agreement in respect of any damage or loss resulting from, or increased by:

(i) any voluntary act or omission of the Purchaser or any of its Affiliates, or their respective directors, officers, employees, agents or other representatives, after the date hereof, including any changes in the accounting methods or principles utilized; or

(ii) any act or omission agreed in, and in compliance with, this Agreement or otherwise requested or approved by the Purchaser in writing.

(c) The Vendor’s liability under or in connection with this Agreement shall be reduced by any quantifiable amount, as such amount is determined by the competent arbitral tribunal, which is caused by the Purchaser’s non-compliance with its statutory obligations to mitigate damages under § 254 of the German Civil Code.

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(d) The Vendor shall not be liable under or in connection with this Agreement in respect of:

(i) all matters disclosed in the appropriate section of the Disclosure Letter with reference to the specific section of the representations and warranties, provided such disclosure is made with reasonable clarity;

(ii) all matters contained in the most recent versions of the commercial register excerpt, articles of association, and shareholders’ list (Handelsregisterauszug, Gesellschaftsvertrag, Gesellschafterliste) of the Company which were available online at www.unternehmensregister.de on November 9, 2012;

(iii) all matters disclosed, contained or referred to in the Company’s Confidential Information Memorandum dated October 2011; and

(iv) all matters otherwise disclosed in the appropriately marked folder and with reasonable clarity in the electronic data room as of March 9, 2013 as evidenced by the CD-Rom or DVD-Rom made as of such date and delivered to the Purchaser on the date hereof.

Except for the foregoing, Section 442 of the German Civil Code shall not apply.

(e) The Vendor shall further not be liable under or in connection with this Agreement in respect of any claim to the extent that the Purchaser or the Company has (i) actually received any recovery by counterclaim or otherwise from any third party based on any claim that the Purchaser or the Company has against any third party that reduces the losses that the Purchaser or the Company would otherwise suffer, and (ii) the Purchaser or the Company have actually received any proceeds of any claims under any insurance policy that reduces the losses that that the Purchaser or the Company would otherwise suffer.

(f) The Vendor shall further not be liable under or in connection with this Agreement in respect of any claim to the extent the Company has immediately quantifiable and non-assessable Tax benefit arising directly from such loss. Such future, quantifiable Tax benefit shall be valued at its net present value calculated at a discount rate of three percent (3%) per annum, a term of five (5) years and a tax rate of thirty percent (30%).

7.3 Liability Floor

Claims against the Vendor made under or in connection with this Agreement can only be made if each single claim, or in case of a series of similar breaches the aggregate of these claims resulting from such series of breaches, exceeds an amount of €150,000 (the “De Minimis Amount”), and to the extent the aggregate amount of all such claims exceeds an amount of €750,000 (the “Liability Floor”). If the Liability Floor is exceeded, the Purchaser shall be entitled to the full amount of all such claims, including the Liability Floor, provided, however, that the De Minimis Amount and the Liability Floor shall not apply to any breaches by the Vendor:

(i) of the Vendor Guarantees in Sections 3.1(a), 3.1(b), 3.1(c), 3.1(d), 3.1(e), 3.1(i) and 3.1(j) (Organization, Authority Relative to this Agreement, Corporate Approvals, No Other Agreements to Purchase, Ownership of Purchased Shares, No Insolvency and Share Capital);

(ii) with respect to the Vendor’s Guarantees in respect of Taxes in Section 3.1(dd) and the Tax indemnity in Article 8;

(iii) with respect to the Vendor’s covenants set forth in Article 5 whereby only the De Minimis Amount shall apply ; and

(iv) in connection with the Vendor’s obligations pursuant to the post-Closing adjustments set forth at Section 2.2(b).

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7.4 Maximum Liability

The Vendor’s liability under this Agreement shall be limited to an aggregate maximum amount corresponding to fifteen percent (15%) of the Purchase Price. Such maximum liability shall not apply to breaches of Sections 3.1(a), 3.1(b), 3.1(c), 3.1(e), 3.1(i) and 3.1(j) (Organization, Authority Relative to this Agreement, Corporate Approvals, Ownership of Purchased Shares and Share Capital) and to the obligations in connection with: (i) the post-Closing adjustments set forth at Section 2.2(b); (ii) breaches of the Vendor’s Tax Guarantee pursuant to Section 3.1(dd) and the Tax indemnity in Article 8; and (iii) the Vendor’s covenants set forth in Article 5. The Purchaser’s liability under this Agreement shall be limited to an aggregate maximum amount of €40,000,000. Such maximum liability shall not apply to breaches of Sections 3.2(a), 3.2(b), 3.2(c), 3.2(d) and 3.2(e) (Organization, Authority Relative to this Agreement, Corporate Approvals, Approvals and Consents and Funding of the Purchase Price) and to the obligations in connection with: (i) the post-Closing adjustments set forth at Section 2.2(b); and (ii) the Purchaser’s covenants set forth in Article 5. With respect to any obligation where the maximum amount set forth in this Section 7.4 does not apply, the overall liability of each of the Vendor and the Purchaser under this Agreement shall be limited to the Purchase Price.

7.5 Time Limitations

The claims of the Purchaser under this Agreement, except for claims under Article 8, which shall be time-bared as set forth in Section 8.8, shall become time-barred as follows:

(a) claims arising from a breach of Section 3.1(b) (Authority Relative to this Agreement), and Section 3.1(e) (Ownership of Purchased Shares) within a period of thirty (30) years after the Closing Date;

(b) Section 3.1(a) (Organization) and Section 3.1(d) (No Other Agreements to Purchase) within a period of five (5) years after the Closing Date;

(c) claims arising from a breach of Section 3.1(dd) (Tax) shall become time-barred at the end of the calendar year four (4) years from the year in which all Tax Returns for periods ending on or before the Closing Date were filed, unless a tax audit is commenced during that period, in which case such claims shall only become time-barred six (6) months after each Tax assessment note (der jeweilige Steuerbescheid) for periods ending on or before the Closing Date have become final and binding (formell bestandskräftig);

(d) claims arising from a breach of Section 3.1(u) (Environmental) shall become time-barred five (5) years after the Closing Date;

(e) claims arising from a breach of Sections 3.1(v) (Employee Plans), 3.1(w) (Collective Agreements) or 3.1(x) (Employees) shall become time barred two (2) years after the Closing Date;

(f) all other claims shall become time-barred eighteen (18) months after the Closing Date if not expressly stated otherwise in this Agreement; and

(g) Section 203 of the German Civil Code shall not apply unless the Parties expressly agree in writing that the expiry period shall be tolled (gehemmt) on the basis of pending settlement negotiations.

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7.6 Third Party Claims

In the event that a claim against the Purchaser or the Company is asserted by a third party which results, or which Purchaser believes to result, from a breach of the provisions of this Agreement (“Third Party Claim”) the following shall apply:

(a) No admissions in relation to such Third Party Claim shall be made by or on behalf of the Purchaser or any of the Purchaser’s Affiliates (including, after Closing, the Company) and the Third Party Claim shall not be compromised, disposed of or settled without the prior written consent of the Vendor, which shall not be unreasonably (taking into account the interest of the Company) withheld or delayed.

(b) If the Vendor wishes to defend the Purchaser or the Company against the Third Party Claim in its or their name and on its or their behalf, the Vendor shall notify the Purchaser accordingly within a period of three (3) weeks after having been notified of the Third Party Claim. Upon such notification, the Vendor shall be entitled to take in good faith any action to defend, and appeal the Third Party Claim (including the assertion and pursuit of justifiable (vertretbar) counter-claims or other claims against any third parties) in the name and on behalf of the Purchaser or the Company. However, the Vendor shall not compromise or settle any Third Party Claim without the prior written consent of the Purchaser. The Purchaser shall, or procure that the Company shall, promptly give all assistance and information to the Vendor as may be reasonably required to defend the Third Party Claim and in particular promptly forward all notices, communications and filings (including court papers).

(c) If the Vendor decides not to take over the defense of a Third Party Claim, the Purchaser shall, or shall procure that the Company shall, carry out the defense of the Third Party Claim in good faith.

7.7 Limitation of Vendor’s Liability for Breach of Environmental Guarantee

The Purchaser shall not have a claim for breach of the Vendor’s environmental guarantee set forth in Section 3.1(u) if and to the extent such breach is caused by the Company’s investigations, preparatory or exploratory activities (including excavation and work plans/engineering undertaken that are not in the ordinary course of business) after the Closing Date which were not required pursuant to applicable Environmental Laws or a Governmental Authority, unless such investigations, preparatory or exploratory activities were in connection with construction on the Real Property relating to the expansion or reduction of the Business or the demolition of any structures in the context of the Business operating in the normal course. This limitation of liability shall not apply to any such actions taken by the Purchaser pursuant to a requirement of a Governmental Authority.

7.8 Specific Exclusions and Waivers

The rights and remedies of the Purchaser provided in this Agreement shall be the exclusive and sole remedy for the Purchaser against the Vendor, its Affiliates, shareholders, directors and employees. Any other claims of the Purchaser in relation to any breach under and in connection with this Agreement, in particular, without limitation, irrespective of their nature or legal basis, including any rights and claims arising out of or in connection with § 437 through 441 of the German Civil Code (Haftung für Sach- und Rechtsmängel), breach of pre-contractual or contractual obligations (culpa in contrahendo) pursuant to §§ 280 and 313 of the German Civil Code, any right to contest (anfechten), to rescind (zurücktreten) or to require the dissolution of this Agreement and the transactions contemplated thereunder, any right to supplementary performance (Nacherfüllung) or reduction of the Purchase Price (Minderung) are all

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hereby expressly excluded and waived by the Purchaser except in case of intent (Vorsatz) or bad faith (Arglist). The intent of Persons assisting the Vendor (Erfüllungsgehilfen) shall not be attributed to the Vendor pursuant to § 278 of the German Civil Code. Any representation made by the Vendor in this Agreement, in particular the Vendor’s Guarantees pursuant to Section 3.1, shall not be construed as to extend the Vendor’s obligation to disclose certain matters regarding the Company.

7.9 Payments Deemed to be Adjustment of Purchase Price

Payments made by the Vendor or the Purchaser, as the case may be, pursuant to this Article 7 shall be deemed to be an adjustment of the Purchase Price, provided, however, that this shall be without prejudice to any provisions in this Agreement where the Vendor’s liability or obligations are expressed as a fraction of the Purchase Price.

7.10 Breach of Purchaser’s Guarantees

In case of a breach of the Purchaser’s Guarantees under Section 3.2 under this Agreement, the provisions of this Article 7 shall apply mutatis mutandis. The claims arising from a breach of the Purchaser’s Guarantee under Section 3.2(b) (Authority Relative to this Agreement) shall survive the Closing for a period of thirty (30) years after the Closing Date and claims arising from a breach of any other of the Purchaser’s Guarantees under Section 3.2 shall survive the Closing for a period of five (5) years.

7.11 Breach of Guarantor’s Guarantees

In case of a breach of the Guarantor’s Guarantees under Section 3.3 under this Agreement, the provisions of this Article 7 shall apply mutatis mutandis. The claims arising from a breach of the Guarantor’s Guarantees under Section 3.3 shall survive the Closing for a period of five (5) years.

7.12 Breach of Purchaser Guarantor’s Guarantees

In case of a breach of the Purchaser Guarantor’s Guarantees under Section 3.4 under this Agreement, the provisions of this Article 7 shall apply mutatis mutandis. The claims arising from a breach of the Purchaser Guarantor’s Guarantees under Section 3.4 shall survive the Closing for a period of five (5) years.

ARTICLE 8

TAXES

8.1 Taxes

“Taxes” shall mean any tax within the meaning of § 3 of the German Tax Code (AO) or any taxes under the Laws of any other jurisdiction (including any withholding of amounts paid to or by or on behalf of any Person), together with any penalties, fines, interest or additions thereto and any secondary liability (Haftungsschuld) for Taxes and social security charges but excluding, for the avoidance of doubt, deferred taxes and notional tax losses (such as reductions of loss carry forwards or future depreciation) imposed under the applicable Laws by any competent Governmental Authority of public body in charge of imposing Taxes (a “Tax Authority”). Except as otherwise provided herein, Article 7 does not apply to claims under this Article 8.

8.2 Indemnification

(a) The Vendor shall indemnify and hold harmless the Purchaser and the Company against any Taxes imposed under applicable Laws and relating to the Company (a “Tax Indemnification Claim”),

(i) for periods ending on or before the Closing Date; and

(ii) for the Pre Closing Straddle Period.

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(b) With respect to Taxes relating to a period which begins prior to the Closing Date and which ends after the Closing Date (the “Straddle Period”), the portion of the Taxes allocable to the period which begins prior to the Closing Date and ends on the Closing Date (“Pre-Closing Straddle Period”) shall be calculated as if the Pre-Closing Straddle Period is equal to a fiscal period (Veranlagungszeitraum).

(c) The Tax Indemnification shall be due five (5) days before the Tax amount falls due but not earlier than ten (10) days after receipt of the notification of the Tax Indemnification Claim.

For greater certainty, there are not and shall not be any accrued Taxes payable for the period ending on or before the Closing Date or the Pre-Closing Straddle Period in the calculation of Working Capital or the Final Closing Working Capital. The Parties agree that there shall not be any duplication in the payment of any amounts pursuant to a Tax Indemnification Claim.

8.3 Tax Releases, Tax Benefits

In relation to tax releases, tax benefits and changes in accounting and filing practices relating to period prior to the Closing Date, the following shall apply:

(a) If the Company is entitled to any refund of Taxes with regard to periods ending on or before the Closing Date or the Pre-Closing Straddle Period and the refund of Taxes is not recorded as receivable in the Annual Financial Statements 2012, the Company shall be obliged to transfer any such payment within twenty (20) Business Days to the Vendor except the Purchaser can set off such refund with a Tax Indemnification Claim.

(b) If the Company is entitled to or could receive any benefits by refund, set-off or reduction of Taxes as the result of an adjustment or payment giving rise to a Tax Indemnification Claim, then the corresponding benefit shall reduce the Tax Indemnification Claim of such Taxes. This shall in particular, but without limitation, apply to any Tax benefits arising after the Closing Date resulting from the lengthening of any amortization or depreciation periods, higher depreciation allowances or carry forwards of losses or deductions. Section 7.2(f) shall apply accordingly.

(c) The Vendor shall not be responsible for any Tax liabilities attributable to periods ending on or before the Closing Date or the Pre-Closing Straddle Period resulting from: (i) any change in the accounting and taxation principles or practices of the Company (including methods of submitting taxation returns) introduced after the Closing Date, except if required under mandatory Law; (ii) any transaction, action, omission, declaration or other measure initiated or executed by Purchaser, any of its Affiliates or, after the Closing Date, (including, but not limited to, the change in the exercise of any Tax election right, the amendment of any Tax Return without the consent of the Vendor, the termination of any profit and loss pooling agreement or Tax consolidation scheme, the approval or implementation of any reorganizational measure, the omission to file a notice pursuant to the German Reorganisation Tax Act (Umwandlungssteuergesetz) in order to maintain a beneficial tax status or the sale of any asset); (iii) Taxes which with reasonable efforts can be or have been recovered from a third party; or (iv) any change of the law or of guidelines or decrees of a Tax Authority published after the Closing Date.

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8.4 Information of Vendor

The Purchaser shall keep the Vendor fully informed regarding the commencement of any Tax audit or other proceeding which may give rise to a Tax Indemnification Claim. If a claim for Taxes, including, without limitation, notice of a pending or threatened tax audit, is made by any Tax Authority (a “Tax Claim”) which, if successful, may result in an Tax Indemnification Claim, the Purchaser shall immediately notify the Vendor in writing of the Tax Claim so that at least fifteen (15) Business Days remain for filing an appeal on the date of the Vendor’s receipt of the Purchaser’s notice. The Vendor shall consult the Purchaser regarding the representation of the interests of the Company in any Tax audit or administrative or court proceeding relating to taxable periods ending on or before the Closing Date or the Pre-Closing Straddle Period, but the Vendor may employ counsel of its choice at its expense and may reasonably instruct Purchaser in respect to the settlement of such Tax Claim. The Purchaser or the Company shall submit to the Vendor all such relevant information and documents which are necessary to defend against any Tax Claim. Furthermore, the Purchaser or the Company shall render such support reasonably requested by the Vendor.

8.5 Tax Returns

All Tax Returns relating to taxable periods ending on or before the Closing Date or the Pre-Closing Straddle Period are to be prepared and filed by the Vendor or the Company. If Tax Returns relating to taxable periods ending on or before the Closing Date or the Pre-Closing Straddle Period have not been filed by the Vendor, the Purchaser or the Company shall prepare any such Tax Returns at the costs of the Vendor in accordance with applicable Tax Laws with respect to the Company for taxable periods ending on or before the Closing Date or the Pre-Closing Straddle Period, but shall not file or cause to be filed such Tax Returns with the competent Tax authorities without the prior written consent of the Vendor, such consent not to be unreasonably withheld or delayed, and the Vendor shall respond within a period of twenty (20) Business Days. Tax Returns relating to taxable periods ending on or before the Closing Date or the Pre-Closing Straddle Period shall not be amended or changed by the Purchaser without the prior written consent of the Vendor, except where the amendment or change is required by mandatory Tax Law.

8.6 Cooperation in Tax Matters

The Vendor, the Company and the Purchaser shall reasonably cooperate, and shall cause their respective Affiliates, officers, employees, agents, auditors and representatives reasonably to cooperate (each at their own expense), in preparing and filing all Tax Returns (including amended returns and claims for refund), including maintaining and making available to each other all records necessary in connection with Tax Claims and in resolving all disputes and audits with respect to all periods ending on or before the Closing Date or the Pre-Closing Straddle Period.

8.7 No Indemnity

Notwithstanding the foregoing, the Vendor shall not indemnify or hold harmless the Purchaser from or against any liability for Taxes attributable to a breach by the Purchaser of its obligations under this Agreement.

8.8 Time Limitations

Any claims of the Purchaser under this Article 8 shall be time-barred six (6) months after each Tax assessment note (der jeweilige Steuerbescheid) shall have become final and binding (formell bestandskräftig). The Vendor’s rights under this Article 8 shall become time-barred six (6) months after the Vendor has been notified in writing by the Purchaser that the respective amount to be paid under this

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Article 8 has become final and binding but at the latest four (4) years following the Closing Date. The claims of the Purchaser under this Article 8 shall become time-barred at the latest four (4) years following the Closing Date. Section 203 of the German Civil Code shall apply if and to the extent the Vendor participates in a Tax matter in accordance with Section 8.6.

8.9 Tax Audit Costs

The Vendor shall reimburse the Purchaser or the Company for all reasonable costs and expenses related to periods ending on or before the Closing Date or the Pre-Closing Straddle Period (i) incurred in respect to the preparation of Tax Returns which have not been prepared at the Closing Date, (ii) incurred in respect to the conduct of Tax audits, and (iii) preparation of required transfer pricing documentation.

ARTICLE 9

SPECIFIC INDEMNITY

9.1 Specific Indemnity by the Vendor and the Guarantor

The Vendor and the Guarantor shall indemnify and hold harmless the Purchaser and the Company (by way of a genuine contract for the benefit of a third party (echter Vertrag zugunsten Dritter)) from any claims in connection with any illiquidity, over-indebtedness or insolvency of the Vendor or any of Vendor’s Affiliates (other than the Company), asserted by any third party (including, for the avoidance of doubt, any creditor of the Vendor or the Vendor’s Affiliates and any third party acting ex officio (Partei kraft Amtes) for the Vendor or any of the Vendor’s Affiliates, such as an insolvency administrator) and any liabilities, losses, damages, and reasonable expenses incurred by the Purchaser or the Company in connection therewith. Nothing in this Agreement shall in any way limit the liability of the Vendor and the Vendor’s Guarantor under this Section 9.1.

9.2 Specific Indemnity by the Purchaser and the Purchaser Guarantor

The Purchaser and the Purchaser Guarantor shall indemnify and hold harmless the Vendor and the Guarantor (also by way of a genuine contract for the benefit of a third party (echter Vertrag zugunsten Dritter)) from any claims in connection with any illiquidity, over-indebtedness or insolvency of the Company asserted by any third party (including, for the avoidance of doubt, any creditor of the Company or the Company’s Affiliates and any third party acting ex officio (Partei kraft Amtes) for the Company, such as an insolvency administrator) and any liabilities, losses, damages, and reasonable expenses incurred by the Vendor in connection therewith. Nothing in this Agreement shall in any way limit the liability of the Purchaser and the Purchaser’s Guarantor under this Section 9.2.

ARTICLE 10

TERMINATION OF THIS AGREEMENT

10.1 Obligations of the Vendor and the Purchaser

The obligations of the Vendor and the Purchaser hereunder shall terminate:

(a) by the mutual written consent of the Vendor and the Purchaser;

(b) by the Purchaser if any of the conditions set forth in Section 6.2(b) (Conditions for the Benefit of the Purchaser) shall have become incapable of fulfillment, and shall not have been waived by the Purchaser;

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(c) by the Vendor if any of the conditions set forth in Section 6.2(c) (Conditions for the Benefit of the Vendor) shall have become incapable of fulfillment, and shall not have been waived by the Vendor; or

(d) upon notice by the Vendor or the Purchaser to the other party if the purchase and sale of the Purchased Shares has not been completed by June 30, 2013 and such date has not been otherwise extended by the Vendor and the Purchaser;

provided, however, that the party seeking termination pursuant to Section 10.1(b), 10.1(c) or 10.1(d) is not then in breach of any of its representations, warranties, covenants or agreements contained in this Agreement.

10.2 Liability on Termination

If this Agreement is terminated, it shall, except for obligations under Section 1.9 (Governing Law) Section 5.8 (Confidential Information), Section 11.2 (Arbitration, Place of Jurisdiction) and Section 12.7 (Language) hereunder, become void and of no force and effect and there shall be no liability on the part of any Party or their respective officers and directors except to the extent that any Party is in default of any of its obligations.

ARTICLE 11

DISPUTE RESOLUTION

11.1 Negotiation

The Parties shall attempt in good faith to resolve any controversy, dispute or claim arising out of or relating to this Agreement or the breach, termination, enforceability or validity thereof (collectively, a “Dispute”) promptly by negotiation between representatives who have authority to settle the Dispute. Any Party may give another a written notice (a “Dispute Notice”) setting forth with reasonable specificity the nature of the Dispute and the identity of such Party’s representatives who will attend and participate in the meeting at which the Parties will attempt to settle the Dispute. Following the receipt of a Dispute Notice, the representatives of the Parties involved shall meet as soon as is practicable at a mutually acceptable time and place to negotiate in good faith a settlement of the Dispute, and shall meet thereafter as they reasonably deem necessary. All negotiations pursuant to this Section 11.1 shall be confidential and shall be treated as compromise and settlement negotiations. Nothing said or disclosed, nor any document produced, in the course of such negotiations which is not otherwise independently discoverable shall be offered or received as evidence or used for impeachment or for any other purpose in any current of future arbitration or litigation.

11.2 Arbitration; Place of Jurisdiction

(a) If the Dispute has not been resolved within thirty (30) days after the receipt of a Dispute Notice through negotiation as provided in Section 11.1, then the Dispute shall be finally settled in accordance with the Arbitration Rules of the German Institution of Arbitration (Deutsche Institution für Schiedsgerichtsbarkeit e.V. - DIS) as applicable at the time of the initiation of the arbitration proceeding without recourse to the ordinary courts of law.

(b) The place of arbitration shall be Frankfurt am Main, Germany. The arbitral tribunal shall consist of three arbitrators. The arbitral proceedings shall be exclusively conducted in the English language.

(c) Except as required by Law or by regulation, or with the consent of all Parties involved in the proceeding, no Party hereto shall disclose or disseminate any information relating to the Dispute or to the dispute resolution proceedings called for hereby except for disclosure to those of its officers, employees, accountants, attorneys and agents whose duties reasonably require them to have access to such information.

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11.3 Costs and Fees

All fees and expenses of the arbitrators, expenses for hearing facilities and other expenses of the arbitration shall be borne equally by the Parties unless the arbitrators in the award assess such fees and expenses other than equally against the Parties. Each Party shall bear the fees and expenses of its own attorneys and witnesses except to the extent otherwise provided in this Agreement or by law; provided, that if the arbitrators determine that the claim or defence of any Party was frivolous or lacked a reasonable basis in fact or law, the arbitrators may assess against such Party all or part of the fees and expenses of attorneys and witnesses for the other Party.

ARTICLE 12

GENERAL MATTERS

12.1 Public Notices

No press release or other announcement concerning the transaction contemplated by this Agreement shall be made by the Vendor, the Guarantor, the Purchaser Guarantor or the Purchaser without the prior written consent of the other Parties (such consent not to be unreasonably withheld or delayed) provided, however, that any Party may, without such consent, make such disclosure if the same is required by any stock exchange on which any of the securities of such Party or any of its Affiliates are listed or by any securities commission or other similar regulatory authority having jurisdiction over such Party or any of its Affiliates, and if such disclosure is required, the Party making the disclosure shall use reasonable efforts to give prior oral or written notice to the other Parties.

12.2 Expenses

The Parties to this Agreement acknowledge and agree that each party shall pay its own expenses (including fees and expenses of its legal, accounting, financial or other professional advisors) in connection with the transactions contemplated by this Agreement (whether or not the sale and purchase of the Purchased Shares is consummated). The foregoing shall not constitute a limitation with respect to remedies in the case of a breach of any of the provisions contained in this Agreement, in which event damages sought by the non-breaching party may include the foregoing expenses.

The cost of the notarization of this Agreement and the filing fees for the required filings with the merger control authorities and the real estate transfer tax triggered by the transactions contemplated by this Agreement shall be for the account of the Purchaser.

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12.3 Notices

Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be given by facsimile or by hand-delivery as hereinafter provided. Any such notice or other communication, if sent by facsimile or other means of electronic communication, shall be deemed to have been received on the Business Day following the sending, or if delivered by hand shall be deemed to have been received at the time it is delivered to the applicable address noted below either to the individual designated below or to an individual at such address having apparent authority to accept deliveries on behalf of the addressee. Notice of change of address shall also be governed by this Section 12.3. Notices and other communications shall be addressed as follows:

(a) if to the Vendor:

c/o Fortress Paper Ltd.

2nd Floor - 157 Chadwick Court

North Vancouver, B.C.

V7M 3K2

Attention: Chadwick Wasilenkoff

Telecopier number: +1 604 988-5327

(b) with a copy (which shall not constitute notice) to:

Sangra Moller LLP

1000 Cathedral Place

925 West Georgia Street

Vancouver, B.C.

V6C 3L2

Attention: Winston Yee

Telecopier number: +1 604 669-8803

(c) if to the Purchaser:

P.H. Glatfelter Co.

96 South George Street, Ste. 500

York, Pennsylvania

USA 17401-1434

Attention: Christopher W. Astley

Telecopier number: +1 717 846-7208

(d) with a copy (which shall not constitute notice) to:

Jones Day

Thurn-und-Taxis-Platz 6

60313 Frankfurt

Germany

Attention: My Linh Vu-Grégoire

Telecopier number: +49 69 9726 3993

Notwithstanding the foregoing, any notice or other communication required or permitted to be given by either Party pursuant to or in connection with any dispute resolution procedures contained herein may only be delivered by hand.

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12.4 Further Assurances

Each of the Parties shall promptly do, make, execute, deliver, or cause to be done, made, executed or delivered, all such further acts, documents and things as the other Party hereto may reasonably require from time to time for the purpose of giving effect to this Agreement and shall use reasonable efforts and take all such steps as may be reasonably within its power to implement to their full extent the provisions of this Agreement.

12.5 Set-Off etc.

Except as explicitly otherwise provided herein, the Purchaser’s right of set-off, retention or other refusal of performance with regard to the obligation to pay all or any part of the Purchase Price (and any interest payable thereon) shall be excluded.

12.6 No Third Party Beneficiaries

This Agreement shall not confer any rights or remedies upon any Person other than the Parties hereto and their respective successors and permitted assigns.

12.7 Language

(a) The English version of this Agreement shall be the only governing version.

(b) Where a term or phrase in German has been added in parentheses after an English term or phrase, the German term or phrase shall be decisive for the purposes of interpretation of the English term or phrase whenever such term or phrase is used in this Agreement.

(c) Although in the English language, each term within this Agreement shall be construed and interpreted in accordance with German law only, and any English, United States or other common law concept or interpretation shall be disregarded.

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IN WITNESS WHEREOF the parties hereto have executed this Agreement.

FORTRESS SECURITY PAPERS AG
By:	*
	Name:
	Title:
FORTRESS PAPER LTD.
By:	*
	Name:
	Title:
GLATFELTER GERNSBACH GMBH & CO. KG
By:	*
	Name:
	Title:
P.H. GLATFELTER CO.
By:	*
	Name:
	Title:

* by Powers of Attorney

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EX-10.1

Exhibit 10.1

IKB Loan Agreement ¹

¨ Copy for the Borrower

¨ Copy for the Bank

Loan Contract

Between

Glatfelter Gernsbach GmbH & Co. KG, Hördener Str. 5

76593 Gernsbach

– hereinafter referred to as “the

Borrower” –

And

IKB Deutsche Industriebank AG, Düsseldorf

– hereinafter referred to as “the Bank” –

the following Loan Contract is hereby concluded:

1. Amount of the loan, refinancing, payout percentage

The Bank hereby concludes a contract with the Borrower for a loan

of EUR 42,700,000.--

to be refinanced by the KfW from the KfW Energy-Efficiency Program.

The payout percentage will be 100%. This amount will be made available to the Borrower by the Bank in accordance with the procedure described in Conditions for Payout (Section 8).

2. Interest, interest calculation method, default interest, charges

(1) Interest

Interest will be payable on the loan at 2.05% per annum from the date of its payout by the Bank / from the date that the amount is debited by the KfW. This interest is payable quarterly in retrospect on 31.3., 30.6., 30.9. and 30.12. of each year. Should any such due date fall on a weekend or a statutory holiday in Germany, for purposes of calculating the default interest, the business day (Werktag) following the initial due date shall be the date decisive for calculating the default interest.

¹  Working translation only; the German version governs.

(2) Interest Calculation Method

Interest is to be calculated by the German method (a month is assumed to consist of 30 days and a year of 360 days).

(3) Default Interest

The Bank will charge the Borrower interest at the current base rate as per § 247 German Civil Code (BGB) plus 5.00 % per annum on amounts which it does not receive on time.

(4) KfW Commitment Fees

From April 26, 2013 until the end of the agreed drawdown period the KfW will charge the Borrower commitment commission at 3.00% per annum on the amount of the loan currently not yet taken up. The Bank will either withhold this commitment commission on payout or charge it to the Borrower separately. The commission will not be payable if the Borrower makes it possible for the Bank to call for the refinancing funds two bank working days before April 26, 2013.

3. Drawdown

The loan must be taken up in full by April 26, 2014 by means of one or more drawdowns. The Borrower must give the Bank two bank working days’ prior notice of each drawdown by issuing a written request for a payout.

If any portion of the loan is not taken up by the contractually agreed date, in whole or in part, any entitlement to the payout of the portion concerned will lapse, reducing the amount of the loan accordingly.

4. Term, Capital Repayment

The loan is repayable in 32 installments of EURO 1,334,375.00 quarterly on 31.3., 30.6., 30.9. and 30.12. of each year. Should any such due date fall on a weekend or a statutory holiday in Germany, for purposes of calculating the default interest, the business day (Werktag) following the initial due date shall be the date decisive for calculating the default interest.

First installment: June 30, 2015

Last installment: March 31, 2023

Interest is payable separately on the respective due date.

Portions of the loan already repaid cannot be drawn down again.

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5. Use of the Loan

The loan is to be used in accordance with the following investment and finance plan:

Investment location:	Hördener Str. 5, 76593 Gernsbach (Rastatt)
Investment Plan:
Utility/Generating
Station	EUR   6,800,000.00
Other investments	EUR 35,900,000.00
Total	EUR 42,700,000.00
Finance Plan:
Loan(s) applied for:	EUR 42,700,000.00

6. Rules relevant to subsidies, further requirements / subsidy provider information

This loan does not contain subsidies.

This program of KfW is managed under directive EG no. 800/2008 EC Commission (General Block Exemption Regulation), published in the official gazette of EU no. L 214/3 as of August 9, 2008.

The requirements for subsidies of this program as well as the other general conditions governing this program of the General Block Exemption Regulation are summarized in a separate spreadsheet. Details with respect to the subsidy requirements are set forth in the general subsidy guidelines of the KfW. Both guidelines can be retrieved under http://www.kfw.de.

7. Guarantee

The loan shall be secured by providing the following collateral:

• Guarantee from the parent company, P.H. Glatfelter Company (PA), in favor of the Bank (pursuant to a draft to be provided) up to a maximum amount of EURO 42,700,000.00 in favor of the Bank.

Any reasonable costs arising out of or in connection with the drafting of the guarantee and the legal opinion with respect to the above-mentioned guarantee, as well as any and all other costs incurred by the Bank in connection with the guarantee, as invoiced by the attorney, shall be assumed by the Borrower. In case the Bank advances such costs, the Borrower shall be obligated to reimburse the Bank upon first demand.

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The Borrower shall provide the Bank within three months following the pay-out of the loan amount with the following documentation:

• the guarantee pursuant to the draft as to be drafted by the Borrower’s counsel and as agreed with the Bank’s counsel;

• The legal opinions, including capacity opinion, addressed to the Bank, which has been drafted by the Borrower’s counsel and which draft has been reviewed and agreed by the Bank’s counsel, and which confirms, to the satisfaction of the Bank, the validity of the New York law governed guaranty and the enforceability in Pennsylvania.

The Bank shall not require the provision of any further collateral. The guarantee shall expire upon repayment of the amounts due by the Borrower under this loan contract; the Bank shall be obligated to return the original guarantee document to the guarantor immediately following any such repayment.

8. Preconditions for payout

The Bank will take up the loan from the refinancing institution and on receipt make the funds available to the Borrower

• by paying it into a bank account to be nominated by the latter

as soon as the loan contract has been concluded and as soon as the Bank has been supplied with the following:

a drawdown declaration as per the attached draft;

at the request of the Bank, with each request for a payout, the following information on the Borrower shall be provided:

• business analysis as of a date not older than 8 weeks.

Unless otherwise agreed, statements submitted to the Bank must bear a legally binding signature.

A further precondition is that at the time of the payout concerned no grounds for cancellation may apply.

The Bank is entitled in an individual case to permit drawdown even before all of the preconditions for payout have been satisfied. If a payout takes place in an individual case before security as provided for herein has been provided, this will not release the Borrower of its obligation to provide the security concerned. This will apply accordingly if any of the other preconditions have not been satisfied at the time of payout.

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9. Covenants

(1) Financial Covenants

During the term of the loan contract, the Borrower shall provide the Bank with evidence that the following covenants (the interest coverage covenant under (a) and the Maximum Leverage Ratio under (b)), in each case referring to the Glatfelter group, have been complied with. The financial covenants will be determined pursuant to the Master Credit Facility (as hereinafter defined) and its provisions. The evidence of compliance shall, pursuant to the terms of the Master Credit Facility, be given by providing a Compliance Certificate (as defined in the Master Credit Facility).

(a) Interest Coverage Covenant

The ratio (the “Interest Coverage Ratio”) of Consolidated EBITDA (as defined in the Master Credit Facility) to consolidated interest expense (excluding Timberland Installment Sale Interest Expense (as defined in the Master Credit Facility)) of the Glatfelter group, measured as of the end of each fiscal quarter, shall for the four (4) fiscal quarters then ended, not be less than 3.50 to 1.0;

Whereby

Master Credit Facility is the USD 350,000,000.00 Revolving Credit Facility by and among, inter alia, P.H. Glatfelter Company and certain of its subsidiaries as borrowers, and PNC Bank, National Association as Administrative Agent, dated as of November 21, 2011, as amended from time to time between the parties thereto; this explicitly includes any amendment, extension, supplement, renewal, total or partial novation, transfer to or redemption by third party lenders as well as any direct or indirect extensions of the loan commitment hereunder, and any new or continued, similarly structured revolving facility.

The Borrower shall inform the Bank about changes to the Master Credit Facility in due course.

Should the Master Credit Facility pursuant to the above definition no longer exist, the respective last version of the Master Credit Facility shall be decisive for purposes of the financial covenants and their interpretation under this loan contract.

(b) Maximum Leverage Ratio

P.H. Glatfelter Company (PA) shall not permit the Leverage Ratio (as defined in the Master Credit Facilty), measured as of the end of each fiscal quarter, to exceed 3.50 to 1.00.

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(c) Breach of Financial Covenants

In case of a violation of the financial covenants set forth under (a) or (b), the parties will, in good faith, try for a period of not less than 30 calendar days, to reach an mutual agreement, which will not lead to a termination of this loan contract. Should such agreement not be reached, the Bank shall be entitled, following the expiration of such cure period, to exercise its rights pursuant to Section 11 of this loan contract.

Such agreement pursuant to the preceding paragraph shall include an amendment or supplement or other agreement with respect to the Master Credit Facility pursuant to which any violation of the financial covenants has been cured pursuant to the Master Credit Facility (e.g., through a waiver). The Bank shall have no termination right in such case, respectively a termination right of the Bank shall lapse in such case.

(2) Precondition for the Loan to be Granted

The Bank’s willingness to grant this loan and its permission for all and any drawdown is conditional on compliance with the following conditions throughout the term of the loan:

• The Borrower may not enter, with respect to immovable fixed assets and machines (technical equipment), into any collateral agreements or provide any collateral to any third party (other than affiliates of the Borrower), or has agreed or will agree to the provision of any collateral, in excess of such collateral relating to immovable fixed assets and machines (technical equipment) already in existence at the time of this loan agreement (i.e., no land charges or mortgages relating to land and building and no in rem collateral relating to machines, owned by the Borrower at the site in Gernsbach). This includes a prohibition to provide further collateral relating to immovable fixed assets and machines (technical equipment ) (as described above) under existing agreements or reevaluate any such already existing in rem collateral. The Borrower’s obligation hereunder solely relates to collateral relating immovable fixed assets and machines (technical equipment), and explicitly does not include any other assets of Borrower (in particular, accounts receivable).

This shall not apply to: commercial collateral in connection with supplier credits by way of retention of title or subsequent assignments or transfer of account receivables; the encumbrance of real estate with a mortgage or a land charge which has already been encumbered with a mortgage or a land charge in favor of the Bank; collateral for taxes and other charges; landlord liens; capital leasing and operating leases; as well as security interests or pledges created pursuant to general terms and condition of banks.

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10. Disclosure of business/financial circumstances and reporting

(1) Evidence of Use

Immediately on the completion of investments the Borrower must prove to the Bank using the attached application of funds record form that it has utilized the loan for the purpose stipulated in Section 5.

(2) Loan Documents

The Borrower must supply the Bank with any documents required pursuant to § 18 German Banking Act (KWG) or to any other regulatory rules.

For this purpose it must in particular supply the Bank with the following documents on production/on receipt, but at the latest before the submission deadline:

From Glatfelter Gernsbach GmbH & Co. KG, Gernsbach:

• Annual financial statements and auditors’ report – annually, 9 months after the financial year concerned; for the first time as of December 31, 2012;

• Interim figures, profit and loss statement at least (self-produced) – quarterly, 90 days after the end of the period under review, for the first time as per March 31, 2013.

Documentation must be submitted bearing a legally binding signature / in a form which complies with commercial law requirements.

From P.H. Glatfelter Company (Group, consolidated), York, Pennsylvania

• Annual accounts; annually, 180 days following the respective end of the fiscal year, for the first time as per December 31, 2012;

• Quarterly reports (on the group level) within 60 days following the end of a calendar quarter; for the first time as per March 31, 2013.

11. Termination without Notice for Good Cause

Termination of the loan contract without notice will be only possible for cause, if one of the following reasons applies which renders it unreasonable to expect the Bank to continue with it, even taking into account the Borrower’s legitimate interests. Good cause under this loan contract shall only be:

a) the Borrower is in default with regard to a payment obligation due under the contract and it is, taking into account all of the circumstances of the individual case and balancing the parties’ respective interests, unreasonable to expect the Bank to continue with it, or

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b) there is a substantial deterioration or threatened deterioration in the Borrower’s financial situation or an actual or threatened decline in the value of a security, jeopardizing the repayment of the loan even if the collateral provided for it are disposed of, or

c) the Borrower becomes insolvent. This will be held to apply if an application is made for the commencement of insolvency proceedings with respect to the Borrower’s assets and

• either the Borrower made the application itself, or

• the Borrower is either insolvent or over-indebted pursuant to §§ 17 and 19 German Insolvency Ordinance, or

• the court has ordered security measures pursuant to § 21 German Insolvency Ordinance, or

d) the Borrower fails to fulfill its obligations under section 9, Covenants, or

e) the loan has been obtained without justification, or has not been used according to its purposes, or the Borrower has, despite having received a notice period from the Bank, not allowed an inspection of the corresponding use of funds; or

f) the conditions for granting the loan have subsequently been changed or no longer exist (e.g. sale of the co-financed business or parts thereof; change of control at the guarantor), or

g) the Borrower has provided incorrect information about its financial situation; or

h) the Borrower violates an obligations under this loan contract; or

i) the scope of the total expenditures as estimated in the investment plan and the amount of costs that can be subsidized are reduced or the part if the public subsidies increases.

If the good cause in question consists of a breach of a contractual obligation, termination will only be permissible after a deadline set for rectification has expired or a formal warning issued without result, unless the particular circumstances of the individual case (§ 323 Para. 2 nos. 1 and 3 and Para. 3 German Civil Code (BGB)) render this unnecessary.

The above is without prejudice to any German Civil Code provisions designed to protect consumers or to any other contractual arrangements.

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12. Transfer of the Loan Risk to a Third Party, Disclosure of Information

(1) Provision of Information

Basis and substantial part of this financing is that the Bank, for the purpose of refinancing the subsidized program loan and/or protecting against the risk associated with the granting of the loan by means of an agreement under the law of obligations, for example by a guarantee or a sub-participation, is entitled to disclose the necessary information to a third party or to anyone who for financial, technical or legal reasons has to be involved in the execution of such transactions, e.g. lawyers, rating agencies, auditors.

A third party for the purpose of the above paragraph may only be a member of the European central banking system, a public law subsidy institution, the KfW, the European Investment Bank or a credit institution.

Before passing on information, the Bank must place the recipient of the information under an obligation to keep it confidential unless such an obligation is already imposed by statutory or professional rules or by professional custom.

If the party who acquires the loan claim and/or risk associated with the loan refinances it through the capital markets, that party is entitled to disclose to potential investors the name of the Borrower, the amount of the loan, information about the security provided and similar information required for an assessment of the financial risk.

The Borrower hereby consents to the disclosure of information permitted in the above paragraphs and relieves the Bank of its banking confidentiality obligations to this extent.

(2) Transfer of the Loan Claim

Any assignment or pledge of the loan claim to a third party is subject to the Borrower’s consent, unless (i) the Bank has terminated this loan contract; or (ii) the assignment or pledge of the loan claim is to refinance a subsidized program loan by a public law development finance bank (including the KfW and the EIB or a public law subsidy).

The Borrower hereby consents to the disclosure of information permitted in the above paragraphs and relieves the Bank of its banking confidentiality obligations to this extent.

(3) Material non public information

The consent to disclose information and the relief from the bank secrecy obligations does not apply to material non-public information pursuant to the applicable US securities laws and regulations.

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13. Severance Clause

Should any of the provisions of this loan contract be invalid or unviable, either in whole or in part, this shall not affect the validity of the contract’s other terms.

14. Statement pursuant to German Money-Laundering Act

The Borrower hereby confirms that in taking out this loan it is acting for its own account.

The Borrower shall be obligated to inform the Bank about any changes to the beneficial owner immediately without undue delay.

15. Statute of Limitation

With the exception of claims for damages, claims by the Bank arising out of this loan contract will only expire by limitation after 5 years. This period will begin to run at the end of the year in which the claim concerned becomes due.

16. Choice of Law, Legal Venue

This loan contract is subject to German law.

The Bank is entitled to take legal action against the Borrower at the court with jurisdiction over the place where the Bank is registered for business (Düsseldorf) or at another court with jurisdiction. The Borrower is only entitled to take legal action against the Bank before a court with jurisdiction over the place where the Bank is registered.

17. Acceptance of the contract

Acceptance of the contract may be confirmed by sending to the Bank by April 22, 2013 the latter’s copy of this contract bearing the legally binding signatures of all of the contracting parties. After the expiry of this deadline, the Bank will no longer be bound by its loan offer.

18. Incorporation of standard terms and conditions

The attached General Terms for Capital Investment Loans – Contractual arrangements between principal banker and ultimate borrower – and the attached Bank’s Standard Terms and Conditions, subject to the following provisions, also apply,:

Terms and Conditions Bank and the End customer:

• The Borrower objects to the granting of bank information reports pursuant to Section 2(2).

• Section 13 shall not apply to the loan contract between the parties; the loan under this loan agreement is explicitly granted with the security and collateral as agreed in this loan agreement only.

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• Section 19 shall not apply; the termination rights as provided for in this agreement shall be exclusive, save for statutory termination rights which cannot be excluded by mutual agreement.

19. Miscellaneous

(1) Direct Debit

Pursuant to the direct debit authorization granted by the Borrower, the Bank will debit the payments due from the Borrower on the relevant due dates from its account set forth below:.

Bank: Deutsche Bank AG

Baden Baden, Germany

BLZ/Bank Code 662 700 01

SWIFT # (Intl transfers) DEUTDESM662

Kto#/Acct # 3929858

IBAN DE39 6627 0001 0392 9858 00

Glatfelter Gernsbach GmbH and Co. KG

(2) Turnover Tax

Contributions relating to the granting of the loan are exempted from tax pursuant to § 4 S. 8 German Turnover Tax Act (UStG).

(3) Language

The German version of this loan contract shall be decisive irrespective of any potential translation hereof into the English language, which may become necessary for practical purposes.

(4) Miscellaneous

The version of the loan contract sent to the Borrower as of March 25, 2013 shall become null and avoid with this version.

(Signature page follows)

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Düsseldorf, March 26, 2013

IKB Deutsche Industriebank AG

/s/ Karl Michael Delhey

/s/ Anja Brobecker

Gernsbach, April 11, 2013

Glatfelter Gernsbach GmbH & Co. KG

/s/ John P. Jacunski

Represented by Glatfelter Verwaltungsgesellschaft mbH,

in turn represented by John P. Jacunski, managing director

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IKB

Deutsche Industriebank

General Terms and Conditions of Business²

Basic rules for the customer/bank relationship

1. Scope of and modifications to these General Terms and Conditions of Business and the special terms for individual business relations

(1) Scope

The General Terms and Conditions of Business apply to the whole business relationship between the customer and German branches of the Bank (hereinafter referred to as the Bank). In addition, special terms and conditions containing differences from or amendments to these General Terms and Conditions of Business apply to individual business relations (for example to security, payment or savings transactions); they are agreed with the customer when an account is opened or an order is issued. If the customer maintains business relationships with branches outside Germany, the Bank’s lien (Section 14 of these General Terms and Conditions of Business) shall also secure the claims of these foreign branches.

(2) Modifications

Modifications to these General Terms and Conditions of Business and the special terms and conditions shall be offered to the customer in text form at the latest two months before the proposed date on which they are to take effect. If the customer has agreed communication by electronic means (for example online banking) with the Bank as part of the business relationship, the modifications can also be offered by that means. The customer shall be regarded as having consented to the modifications unless the customer states his/her/its refusal of them by the proposed time they are due to take effect. The Bank shall expressly draw the customer’s attention to this consequence in its offer. If the customer is offered modifications to conditions governing payment services (for example, conditions for remittances), the customer is entitled to terminate the payment services master agreement affected by the amendment before the proposed effective date of the modification without notice and at no cost. The Bank shall expressly draw the customer’s attention to this right of termination in its offer.

2. Banking secrecy and banking information

(1) Banking secrecy

The Bank is obliged to maintain secrecy on any and all customer-related facts and assessments of which it gains knowledge (banking secrecy). The Bank may disclose information on the customer only if this is required by law or the customer has consented thereto or the Bank is authorised to provide banking information.

(2) Banking information

Banking information denotes general statements and comments concerning the financial situation of customers, their creditworthiness and solvency. Information as to the amounts of balances held in accounts, savings deposits, securities held in safekeeping or other assets entrusted to the Bank or any credit utilised shall not be disclosed.

(3) Requirements for disclosure of banking information

The Bank shall be authorised to provide banking information on legal entities and merchants recorded in the Commercial Register provided that the inquiry relates to their business activities. However, the Bank shall not be authorised to provide any information if it has received instruction to the contrary from the customer. The Bank shall provide banking information on other persons, in particular on private customers and associations, only if they have expressly agreed thereto in general or in the particular

²  Working translation only; the German version governs.

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case. Banking information shall be provided only if the party requesting it substantiates a credible legitimate interest in obtaining the information requested and there is no reason to assume that the provision of information is contrary to interests of the customer which merit protection.

(4) Recipient of banking information

The Bank shall provide banking information only to its own customers and other credit institutions for their purposes or those of their customers.

3. Liability of the Bank; contributory negligence of the customer

(1) Principles of liability

The Bank shall be liable in relation to fulfilment of its obligations for any fault on the part of its employees and persons used by it in order fulfil its obligations. Insofar as the special terms and conditions for individual business relations or other agreements provide otherwise, they shall take precedence. In the event that the customer has contributed to the occurrence of damage through his/her/its own wrongful conduct (for example, by infringing the duties of cooperation specified in Section 11 of these Terms and Conditions of Business), the extent to which the Bank and the customer have to bear the loss shall be determined in accordance with the principles of contributory negligence.

(2) Forwarded orders

Where, by virtue of its content, an order is executed typically in such a form that the Bank entrusts its further execution to a third party, the Bank fulfils the order by forwarding it in its own name to the third party (forwarded order). This relates, for example, to obtaining banking information from other credit institutions or the custody and management of securities abroad. In such cases, the Bank’s liability shall be limited to the careful selection and instruction of the third party.

(3) Disruption to business

The Bank shall not be liable for damage incurred due to force majeure, insurrection, war and natural events or other events for which it cannot be held responsible (for example strikes, lockouts, disruption to transport, or acts decreed by public authorities in Germany or abroad).

4. Limits to the customer’s right to offset claims

The customer may offset claims against claims of the Bank only if his/her/its claims are uncontested or have been ruled on finally and conclusively by a court of law.

5. Right of disposal after the customer’s death

After the customer’s death, the Bank may require submission of a certificate of inheritance, a certificate of executorship or further documents necessary to clarify the right of disposal over the deceased’s estate; at the Bank’s request, documents in foreign languages must be translated into German before being submitted to the Bank. The Bank may forgo submission of a certificate of inheritance or a certificate of executorship where it is presented with an original or a certified copy of the last will and testament (will, deed of inheritance) alongside a record of its opening protocol. The Bank may consider any person designated therein as heir or executor as the beneficiary, allow this person to dispose of any assets and, in particular, make payment or delivery to this person, thereby discharging its obligations. This shall not apply if the Bank is aware that the person designated therein is not entitled to dispose of the assets (for example, due to a challenge to or invalidity of the will) or if this has not come to the knowledge of the Bank owing to negligence.

6. Applicable law and place of jurisdiction for commercial and public-law customers

(1) Applicability of German law

German law shall apply to the business relationship between the customer and the Bank.

(2) Place of jurisdiction for customers in Germany

If the customer is a merchant and the business relationship in dispute is attributable to the conduct of the customer’s commercial enterprise, the Bank may sue the customer before the court of law which

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has jurisdiction over the place at which the account is held or at another court of law with jurisdiction; the same applies to a legal entity under public law and to special funds under public law. The Bank itself may be sued by said customer only in the court having jurisdiction over the place where the account is held.

(3) Place of jurisdiction for customers abroad

The arrangement on the place of jurisdiction shall also apply to customers who conduct a comparable trade or business abroad and to foreign institutions which are comparable with German legal entities under public law or a domestic special fund under public law.

Account management

7. Balance statements for current accounts

(1) Issue of balance statements

Unless otherwise agreed, the Bank shall issue a balance statement for current accounts at the end of each calendar quarter; in this, the claims accrued by both parties since the last balancing of accounts (including interest and charges imposed by the Bank) shall be offset against each other. The Bank may charge interest on the balance arising therefrom in accordance with Section 12 of these Terms and Conditions of Business or any other arrangement concluded with the customer.

(2) Deadline for objections; approval by tacit acquiescence

Any objections a customer may have concerning the inaccuracy or incompleteness of a balance statement must be raised not later than within six weeks following its receipt; if the objections are made in text form, it is sufficient to send these within the six-week period. Failure to make objections in due time will be deemed to constitute approval of the statement. When issuing the balance statement, the Bank will expressly draw the customer’s attention to this consequence. The customer may demand a correction of the balance statement even after expiry of this period, but must then prove that his/her/its account was either wrongly debited or mistakenly not credited.

8. Reversal entries and adjusting entries made by the Bank

(1) Prior to issue of a balance statement

Incorrect credit entries on current accounts (for example, owing to a wrong account number) may be reversed by the Bank through a debit entry prior to the issue of the next balance statement to the extent that the Bank has a repayment claim against the customer (reversal entry); in this case, the customer may not object to the debit entry on the grounds that he/she/it has already disposed of the amount credited.

(2) After issue of a balance statement

If the Bank notices an incorrect credit entry only after a balance statement has been issued and if the Bank has a repayment claim against the customer, it will debit the account of the customer with the amount of its claim (adjusting entry). If the customer objects to the adjusting entry, the Bank will re-credit the account with the amount in dispute and assert its repayment claim separately.

(3) Notification of the customer; calculation of interest

The Bank will immediately notify the customer of any reversal entries and adjusting entries made. As regards calculation of interest, the Bank shall make the entries retroactively effective the date on which the incorrect entry was made.

9. Collection orders

(1) Conditional credit entries effected upon presentation of documents

If the Bank credits the countervalue of cheques and direct debits before they are honoured, this shall be done on condition of payment, even if those items are payable at the Bank itself. If the customer submits other papers, instructing the Bank to collect an amount due from a debtor (for example, interest

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coupons), and if the Bank effects a credit entry for such amount, this is done subject to the Bank obtaining the amount. This proviso shall also apply if the cheques, direct debits or other papers are payable at the Bank itself. If cheques or direct debits are not honoured or if the Bank does not obtain the amount under the collection order, the Bank shall cancel the conditional credit entry. This shall be done regardless of whether or not a balance statement has been issued in the meantime.

(2) Honouring direct debits and cheques issued by the customer

Direct debits, collections and cheques shall be honoured if the debit entry has not been cancelled at the latest on the second bank working day³ after it was made. The payment rules in the special terms and conditions agreed for this purpose apply to direct debits using other collection procedures. Cheques payable in cash are deemed to have been honoured once their amount has been paid to the presenting party. Cheques are also deemed to have been honoured as soon as the Bank sends a payment notice. Cheques presented through the Bundesbank’s clearing house are deemed to have been honoured if they are not returned by the time stipulated by the Bundesbank.

10. Foreign currency transactions and risks relating to foreign currency accounts

(1) Execution of orders relating to foreign currency accounts

Foreign currency accounts of the customer serve to effect the cashless settlement of payments to and disposals by the customer in foreign currency. Disposals of credit balances on foreign currency accounts (for example, by means of remittances to the debit of the foreign currency credit balance) are settled through banks in the home country of the currency unless the Bank executes them entirely in-house.

(2) Credit entries for foreign currency transactions with the customer

If the Bank concludes a transaction with the customer (for example, a forward exchange transaction) under which it owes the provision of an amount in a foreign currency, it will discharge its foreign currency obligation by crediting the account of the customer in the respective currency, unless otherwise agreed.

(3) Temporary restriction in performance by the Bank

The Bank’s duty to execute a disposal order to the debit of a foreign currency credit balance (Subsection 1) or to discharge a foreign currency obligation (Subsection 2) shall be suspended to the extent that and for as long as the Bank cannot or can only restrictedly dispose of the currency in which the foreign currency credit balance or the obligation is denominated, on account of political measures or events in the country of the currency in question. To the extent that and for as long as such measures or events persist, the Bank is not obliged either to fulfil its duty at some other place outside the country of the respective currency, in some other currency (including the euro) or by procuring cash. However, the Bank’s duty to execute a disposal order to the debit of a foreign currency credit balance shall not be suspended if the Bank can execute it entirely in-house. The right of the customer and of the Bank to set off mutual claims due in the same currency against each other shall not be affected by the above provisions.

(4) Exchange rate

The exchange rate for foreign currency transactions shall be determined on the basis of the “List of Prices and Services”. The payment services master agreement shall also apply to payment services.

Customer’s duties to cooperate

11. Customer’s duties to cooperate

(1) Notification of changes

Proper settlement of business transactions requires that the customer notify the Bank without delay of any changes in his/her/its name and address, as well as the termination of, or amendment to, any

³  Bank working days are all days except: Saturdays and 24 and 31 December.

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power of representation towards the Bank conferred upon any person (in particular a power of attorney). This duty to give notification shall also exist where the power of representation is recorded in a public register (for example, in the Commercial Register) and any termination thereof or any amendments thereto are entered in that register. In particular, more extensive statutory notification obligations may apply, in particular pursuant to the German Money Laundering Act (Geldwäschegesetz).

(2) Clarity of orders

Orders must unambiguously disclose their contents. Orders that are not clearly worded may lead to queries, which may result in delays. Above all, in the case of orders, the customer must ensure the accuracy and completeness of the details, in particular the account number and the bank sort code or IBAN⁴ and BIC⁵, as well as the currency. Amendments, confirmations or repetitions of orders must be designated as such.

(3) Special reference to urgency in connection with the execution of an order

If the customer considers that an order requires particularly prompt execution, the customer shall notify the Bank thereof separately. For orders given on a printed form, this must be done separately from the form.

(4) Examination of and objections to communications received from the Bank

The customer must immediately examine statements of account, security transaction statements, statements of securities and of investment income, other statements, notices of execution of orders, as well as information on expected payments and consignments (advices) as to their accuracy and completeness and immediately raise any objections relating thereto.

(5) Notification of the Bank in case of non-receipt of communications

The customer must notify the Bank immediately if periodic balance statements and statements of securities are not received. The duty to notify the Bank also exists if other communications expected by the customer (security transaction statements, statements of account after execution of customer orders or payments expected by the customer) are not received.

Cost of banking services

12. Interest, charges and disbursements

(1) Interest and charges in retail banking business

The level of interest and charges payable in respect of loans and services customary in retail banking may be ascertained from the “List of Fees – Standard rates for retail banking” and also in the “List of Prices and Services”. If a customer makes use of a loan or service listed therein, then unless otherwise agreed the interest rates and charges stated in the List of Fees or the List of Prices and Services at the time shall apply. As regards remuneration for any services not stated therein which are provided following the instructions of the customer, or which are believed to be in the interests of the customer and which can, in the given circumstances, only be expected to be provided for remuneration, the relevant statutory provisions shall apply, unless otherwise agreed.

(2) Interest and charges outside retail banking business

The amount of interest and charges outside retail banking business shall, in the absence of any other agreement and statutory provisions to the contrary, be determined by the Bank at its reasonable discretion (Section 315 of the German Civil Code (BGB)).

⁴  International Bank Account Number

⁵  Bank Identifier Code

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(3) Services for which no fee is payable

The Bank shall not charge any fee for services which it is required to provide by law or pursuant to an ancillary contractual obligation, or for services which it renders in its own interests, unless the charging of such a fee is legally permissible and it is levied in accordance with the statutory regulations.

(4) Changes in interest rates; the customer’s right of termination if they are increased

Interest rates on loans with a variable interest rate shall be changed in compliance with the respective loan agreement with the customer. The Bank shall inform the customer of changes in the interest rate. In the event of an increase in the interest rate, the customer may, unless otherwise agreed, give notice within six weeks from the announcement of the change, terminating with immediate effect the loan agreement affected by the increase. If the customer terminates the loan agreement, the increased interest rate shall not be applied to it. The Bank will allow an adequate period of time for winding up the relationship.

(5) Changes in charges for services typically used on a long-term basis

Changes in the charges for services which are typically used on a long-term basis by the customer in the context of the business relationship (for example, management of ordinary accounts and securities accounts) shall be submitted to the customer in text form not less than two months before the date on which it is proposed that they should take effect. If the customer has agreed communication by electronic means (for example online banking) with the Bank as part of the business relationship, the modifications can also be offered by that means. The customer shall be regarded as having consented to the modification unless the customer states his/her/its refusal of it by the proposed time it is due to take effect. The Bank shall expressly draw the customer’s attention to this consequence in its offer. If the customer is offered modifications to the agreement in question, the customer is also entitled to terminate said agreement affected by the modification before the proposed effective date of the modification without notice and at no cost. The Bank shall expressly draw the customer’s attention to this right of termination in its offer. If the customer terminates the agreement, the altered charge shall not be used as the basis for the terminated business relationship.

(6) Disbursements

The Bank shall be authorised to charge the customer for disbursements which are incurred when the Bank carries out the customer’s instructions or acts in the presumed interests of the customer (in particular, long-distance telephone calls, postage costs) or when collateral is furnished, administered, released or realised (in particular, notarial fees, storage charges, cost of custodianship of items serving as collateral).

(7) Special arrangements for consumer loan agreements and payment services agreements with consumers for payments within the European Economic Area (EEA) in an EEA currency

In the case of consumer loan agreements and payment services agreements with consumers for payments within the European Economic Area⁶ (EEA) in an EEA currency⁷, the interest rates and costs (charges and disbursements) shall comply with the respective contractual agreements and special terms and conditions, and additionally with the statutory regulations.

Security for the Bank’s claims against the customer

13. Providing or increasing security

(1) Right of the Bank to request or increase security

The Bank can request the provision of security for any claims that may arise from the banking relationship, even if such claims are conditional (for example, claim for reimbursement of expenses in relation to enforcing of a guarantee assumed for the customer). However, if the customer has assumed

⁶  The European Economic Area currently includes: Belgium, Bulgaria, Denmark, Germany, Estonia, Finland, France, Greece, Ireland, Iceland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, the Netherland, Norway, Austria, Poland, Portugal, Romania, Sweden, Slovakia, Slovenia, Spain, the Czech Republic, Hungary, the United Kingdom of Great Britain and Northern Ireland, and Cyprus.

⁷  The EEA currencies currently include: The euro, pound sterling, Bulgarian lev, Danish krone, Icelandic krona, Latvian lats, Lithuanian litas, Norwegian krone, Polish zloty, Romanian leu, Swedish krona, Swiss franc, Czech koruna and Hungarian forint

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liability towards the Bank for liabilities of another of the Bank’s customers (for example, as guarantor), the Bank is not entitled to demand that the security for the debt arising from such assumption of liability be provided or increased until it becomes due.

(2) Change in risk

If the Bank, upon claims arising against the customer, has initially dispensed wholly or partly with demanding that security be provided or increased, it may nonetheless make such a demand at a later time, provided, however, that circumstances occur or become known which justify a higher risk assessment of the claims against the customer. This may, in particular, be the case where

– the economic status of the customer has changed or threatens to change for the worse or

– the value of the existing security has deteriorated or threatens to deteriorate.

The Bank has no right to demand security if it has been expressly agreed that the customer either does not have to provide any security or must only provide that security which has been specified. For consumer loan agreements, the Bank is entitled to demand that security be provided or increased only if such security is specified in the loan agreement; if, however, the net loan amount exceeds 75,000 Euros, the Bank may demand that security be provided or increased even if the loan agreement does not contain any or any exhaustive details on security.

(3) Setting of a time limit for providing or increasing security

The Bank shall set an appropriate time limit for providing or increasing security. If the Bank intends to make use of its right of termination without notice in accordance with Section 19 Subsection 3 of these Terms and Conditions of Business because the customer fails to comply with the obligation to provide or increase security within the time limit, it will draw the customer’s attention to this consequence before doing so.

14. Agreement of a lien in favour of the Bank

(1) Agreement on the lien

The customer and the Bank agree that the Bank acquires a lien on the customer’s securities and items which have come or will come into the possession of a German branch in the course of banking business. The Bank shall also acquire a lien on any claims which the customer has or may in future have against the Bank arising from the banking relationship (for example, credit balances).

(2) Secured claims

The lien serves to secure all existing, future and contingent claims arising from the banking relationship which the Bank and all its German and foreign branches are entitled to against the customer. However, if the customer has assumed liability towards the Bank for liabilities of another of the Bank’s customers (for example, as guarantor), the lien shall not secure the debt arising from such assumption of liability until it becomes due.

(3) Exemptions from the lien

If the Bank receives monies or other assets on the condition that they may only be used for a particular purpose (for example, cash deposit for payment of a bill of exchange), then the Bank’s lien shall not extend to such monies or assets. The same shall apply to shares issued by the Bank itself (treasury shares) and to securities which the Bank holds in custody abroad on behalf of the customer. The lien shall also not extend to participation rights/participation certificates issued by the Bank itself and the securitised and non-securitised subordinated liabilities of the Bank.

(4) Interest and dividend coupons

If securities are subject to the Bank’s lien, the customer is not entitled to demand delivery of the interest and dividend coupons pertaining to such securities.

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15. Security rights in relation to items for collection and discounted bills of exchange

(1) Transfer of ownership by way of security

The Bank acquires ownership by way of security of any cheques and bills of exchange deposited for collection at the time such items are deposited. The Bank acquires absolute ownership of discounted bills of exchange at the time of the purchase of such a bill of exchange; if it debits discounted bills of exchange back to the account, it retains ownership of them by way of security.

(2) Assignment of claims

When the Bank acquires ownership of cheques and bills of exchange, the underlying claims are also assigned to the Bank; the claims also pass to the Bank if other items are deposited for collection (for example, direct debits, documents of commercial trading).

(3) Items for collection tied to a specific purpose

If items for collection are deposited with the Bank subject to the proviso that their countervalue may be used only for a specific purpose, the transfer of ownership by way of security and assignment of claims do not apply to these documents.

(4) Secured claims of the Bank

Ownership by way of security and the assignment of claims serve to secure all claims the Bank acquires from the customer’s current accounts against the customer at the time of presentation of items for collection or which arise as a result of the re-debiting of unpaid items for collection or discounted bills of exchange. Upon request of the customer, the Bank shall retransfer to the customer the ownership by way of security of such items and of the claims that have passed to it if it does not, at the time of such request, have any claims against the customer that need to be secured or if it does not permit the customer to dispose of the countervalue of such items before they are definitively paid.

16. Limitation of the claim to security and obligation to release security

(1) Cover limit

The Bank may assert its claim that security be provided or increased until the realisable value of all security corresponds to the total amount of all claims arising from the banking relationship (cover limit).

(2) Release of security

If the realisable value of all security exceeds the cover limit on a more than temporary basis, the Bank shall, at the customer’s request, release such security items as it may choose in the amount exceeding the cover limit; when selecting the security items to be released, the Bank will take into account the legitimate concerns of the customer or of any third party that has provided security for the customer’s liabilities. In this context, the Bank shall also be obliged to execute orders of the customer relating to the items subject to the lien (for example, sale of securities, paying out of deposits in savings accounts).

(3) Special agreements

If assessment criteria other than the realisable value, another cover limit or another limit for the release of security have been agreed for a specific security item, said other criteria or limits shall apply.

17. Realisation of security

(1) The Bank’s right of choice

When realising security, the Bank may choose between several security items. When realising security and selecting the items to be realised, the Bank will take into account the legitimate concerns of the customer and any third party who may have provided security for the liabilities of the customer.

(2) Credited proceeds under value-added tax law

If the realisation process is subject to value-added tax, the Bank shall issue a credit note for the proceeds to the customer, which shall act as an invoice for delivery of the item used as security and comply with the requirements of value-added tax law.

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Termination

18. Termination rights of the customer

(1) Right of termination at any time

The customer may at any time, without notice, terminate the business relationship as a whole or individual business relationship (for example the cheque agreement) for which neither a term nor different termination arrangements have been agreed.

(2) Termination on serious grounds

If the Bank and the customer have agreed on a term or different termination arrangements for a particular business relationship, such relationship may be terminated without notice only if there is a serious ground which makes it unreasonable for the customer to continue the business relationship, after giving due consideration to the legitimate concerns of the Bank.

(3) Statutory rights of termination

Statutory rights of termination shall remain unaffected.

19. Termination rights of the Bank

(1) Termination with a period of notice

Upon observing an adequate notice period, the Bank may at any time terminate the business relationship as a whole or individual relationship for which neither a term nor different termination arrangements have been agreed (for example, the cheque agreement that authorises the use of cheque forms). In determining the period of notice, the Bank will take into account the legitimate concerns of the customer. The period of notice for termination of a payment services master agreement (for example a current account or card agreement) or of an agreement for the maintenance of a securities account shall be at least two months.

(2) Termination of loans without a fixed term

Loans and loan commitments for which neither a fixed term nor different termination arrangements have been agreed may be terminated at any time by the Bank without notice. When exercising this right of termination, the Bank will give due consideration to the legitimate concerns of the customer.

If the German Civil Code (BGB) specifies special provisions for termination of a consumer loan agreement, the Bank can only terminate the agreement in accordance with said provisions.

(3) Termination on serious grounds without notice

Termination of the business relationship as a whole or of individual business relationships without notice is permitted if there is a serious ground which makes it unreasonable for the Bank to continue the business relationship as a whole or individual relationship, giving due consideration to the legitimate concerns of the customer. A serious ground shall exist in particular if

– the customer has made incorrect statements as to his/her/its financial situation which were of significant importance for the Bank’s decision concerning the granting of loans or other transactions involving risks for the Bank (for example issue of a payment card) or

– if a substantial deterioration occurs or threatens to occur in the customer’s financial situation or in the value of security, jeopardising repayment of the loan or the discharge of another obligation towards the Bank, even when an existing item of security is realised or

– the customer fails to comply, within a reasonable period of time set by the Bank, with the obligation to provide or increase security in accordance with Section 13 Subsection 2 of these Terms of Conditions of Business or under any other agreement.

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If the serious ground consists of breach of a contractual obligation, termination is only permissible after unsuccessful expiration of a grace period or after a failed reminder, unless this grace period can be waived due to the individual circumstances of the individual case (Section 323 (2) and (3) of the German Civil Code (BGB)).

(4) Termination of consumer loan agreements due to default

If the German Civil Code (BGB) specifies special provisions on termination due to default on the repayment of a consumer loan, the Bank may only terminate the agreement pursuant to said provisions.

(5) Settlement following termination

In the event of termination without notice, the Bank shall allow the customer an appropriate time for settlement (in particular for the repayment of any loan), unless it is necessary to attend immediately thereto (for example, return of the cheque forms if the check agreement is terminated).

Protection of deposits

20. Deposit Protection Fund

(1) Scope of protection

The Bank is a member of the Deposit Protection Fund of the National Association of German Banks (Bundesverband deutscher Banken e.V.). The Deposit Protection Fund guarantees all liabilities that have to be carried under the balance sheet item “Liabilities to customers”. This includes demand, term and savings deposits, including registered savings certificates. The protection limit per creditor is 30% of the liable equity of the Bank applicable to securing deposits up to 31 December 2014, 20% up to 31 December 2019, 15% up to 31 December 2024 and 8.75% as of 1 January 2025. The new security limits shall apply respectively as of the above key dates to deposits established or extended after 31 December 2011, regardless of the time when they were established. The old protection limits apply to deposits established before 31 December 2011 until the deposit is due or until the next possible date of termination. The Bank shall inform the customer of this protection limit upon request. It can also be viewed on the Internet at www.bankenverband.de. If the Bank is a branch of a bank from another European Economic Area country, the Deposit Protection Fund shall only provide compensation if and to the extent that credit balances exceed the protection limit covered by the home country’s deposit protection scheme. The level of coverage provided by the home country’s deposit protection scheme can be viewed on the Internet at the website of the relevant protection institution, the address of which shall be made available to the customer by the Bank upon request.

(2) Exemptions from deposit protection

Claims in respect of which the Bank has issued bearer instruments, such as bearer debentures and bearer certificates of deposit, as well as liabilities to banks are not protected.

(3) Additional application of the bylaws of the Deposit Protection Fund

Further details of the scope of protection are contained in Section 6 of the bylaws of the Deposit Protection Fund, which will be provided upon request

(4) Transfer of claims

If the Deposit Protection Fund or an authorised representative of it makes payments to a customer, the respective amount of the customer’s claims against the Bank together with all subsidiary rights shall be transferred simultaneously to the Deposit Protection Fund.

(5) Provision of information

The Bank is authorised to provide the Deposit Protection Fund or an authorised representative of it with all the information and documents required in this connection.

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Ombudsman procedure

21. Out-of-court arbitration of disputes

The consumer can appeal to the ombudsman of the private banks to settle disputes with the Bank. If the complaint relates to a dispute covered by payment services law (§§ 675c to 676c of the German Civil Code (BGB)), customers who are not consumers can also appeal to the ombudsman of the private banks. Further details are contained in the “Rules of Procedure for the Settlement of Customer Complaints in the German Banking Sector”, which are available on request or can be downloaded from www.bankenverband.de.

The complaint must be submitted in writing to the Customer Complaints Department at the National Association of German Banks: Bundesverband deutscher Banken e.V., PO Box 04 03 07, 10062 Berlin, Germany.

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General Terms for Capital Investment Loans KfW⁸

– Contractual relationships between principal banker and ultimate borrower –

Capital investment loans provided by the KfW are subject to the following version of the General Terms for Capital Investment Loans which apply to contractual arrangements between the principal banker and the ultimate borrower (AB-EKN) up to and including item 13. ERP loans and loans which are refinanced or subsidised from public budgets shall also be subject to the special terms stated in item 14. Loans for which the principal banker is granted a liability discharge on the basis of a federal or state guarantee shall also be subject to the special terms stated in item 15.

1. Application of funds

(1) The loan may only be used to finance the project for which the loan has been approved. The financial institution which concludes the loan agreement with the ultimate borrower (hereinafter referred to as the principal banker) shall be informed without delay if the investment project or its financing should change.

(2) Immediately after performance of the investment the ultimate borrower shall automatically submit evidence to the principal banker on how the loan funds have been used and on compliance with any attached conditions.

2. Drawing on funds

(1) Drawings on loan funds – potentially in part amounts – from the principal banker may only then be made if these can be put to their specified purpose within a reasonable period of time. If it becomes apparent after disbursement has been made, that it will not be possible to make use of the funds in good time, the corresponding amounts shall be repaid to the principal banker without delay so that they may be returned to the KfW. The funds may be drawn on again if the preconditions referred to above are met. Sentences 2 and 3 of this paragraph shall not apply if the loan does not exceed an amount of 25,000 euros. Sentences 2 and 3 of this paragraph shall not apply to the last disbursement amount of the loan either if this amount does not exceed 25,000 euros. The principal banker shall be entitled to stipulate minimum loan call amounts.

(2) Natural persons who are commercial or freelance ultimate borrowers may only draw on the loan funds if they have submitted evidence to the principal banker of their authority to manage the business affairs and represent the company or law firm, practice or similar.

(3) If reasons apply which would justify termination of the loan agreement, the principal banker may turn down disbursement of the loan funds.

3. Interest payment date

The agreed rate of interest shall be paid on the loan. Interest shall be calculated according to the German commercial interest method (30/360 method). Interest payments shall be due quarterly in arrears on March 31, June 30, September 30 and December 30 of each year, unless otherwise agreed in the loan agreement.

4. Calculation of costs and expenses

The loan processing and administration costs incurred by the financial institution by which the loan is directly refinanced and by the principal banker shall be covered by the interest rate and the programme-specific handling fees paid by the KfW; this shall also include any costs relating to a change in ultimate borrower or change of bank. The principal banker shall be entitled to charge the following costs to the ultimate borrower separately to the extent that such costs are directly related to the granting of the loan, are concretely verifiable and can be specified to the ultimate borrower. Travel expenses for tours of plants or visits to companies incurred before loans are granted as well as costs incurred for the production of expert appraisals and the monitoring of transfer of title of ownership for security purposes, costs for the creation and entry of mortgages, costs for photocopies, postage and

⁸  Working translation only; the German version governs.

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expenses undertaken by the principal banker and invoiced to the ultimate borrower. If the KfW does not arrange corresponding regulations then waiver fees, early repayment penalties or similar costs for this loan shall not be charged. Where such costs may be charged, they shall be charged by the principal banker.

5. Repayment

(1) The repayment rates or equal periodic payments shall be due for payment on the dates specified in the loan agreement. If a deduction is made from the nominal loan amount upon disbursement, such deducted amount shall be a time independent fee charged by the KfW which shall not be repaid if the loan is repaid ahead of schedule.

(2) Unless otherwise explicitly agreed, loans which are 100% paid out may only be repaid to the principal banker ahead of schedule in combination with an early repayment penalty. Loans which are disbursed at less than 100% of their nominal value may be repaid to the principal banker in full or part ahead of schedule at any time during the first fixed-interest period subject to a period of notice of 10 bank working days. Statutory rights to terminate shall remain unaffected by the above provisions. An early repayment penalty may be charged by the principal banker to the extent permitted by law.

(3) Unless otherwise agreed with the ultimate borrower, unscheduled part repayments shall generally be credited to the repayment rates or equal periodic payments most recently due under the loan repayment schedule.

6. Default

If the ultimate borrower defaults on his payment obligations, the principal banker shall be entitled to charge statutory interest on arrears.

7. Collateralisation

(1) The principal banker shall be entitled to transfer to the KfW the receivables due from the ultimate borrower arising from the granting of the loan and the security provided. Even following assignment by way of security to the KfW the relevant receivables will be included under the collateral purpose agreed between the principal banker and the ultimate borrower. Collateral which is or will be provided by the ultimate borrower to the principal banker for a loan which is refinanced by the KfW serve – to the extent that a legally effective agreement on broad purpose has been made – to secure any loan receivables held by the principal banker against the ultimate borrower which have been or will be assigned to the KfW. This shall also apply if collateral is provided by a third party.

(2) The collateral agreed for this loan shall not be used primarily to secure other loans provided by the principal banker. Other collateral which is or will be provided by the ultimate borrower or a third party to the principal banker for loans which are not refinanced by the KfW serve – to the extent that a legally effective agreement on broad purpose has been made – to provide subordinate security for any loan receivables held by the principal banker against the ultimate borrower which have been or will be assigned to the KfW.

8. Auditing rights

The KfW shall be entitled to carry out on-site inspections of the ultimate borrower’s business documents and accounts, to inform itself about the ultimate borrower’s financial position and about the use of the loan funds pursuant to item 1 para. 1. The KfW can arrange for these inspections to be performed by a third party appointed by it. Unless otherwise agreed, the costs of such inspections shall be paid by the ultimate borrower. The KfW will ensure that third parties commissioned by it shall also treat information with confidentiality.

9. Duties to inform

The ultimate borrower shall inform the principal banker about any events of importance which may influence the funding aim or which might jeopardise the proper servicing of the loan. The principal banker shall be entitled to pass on the information to the KfW.

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10. Submission of annual financial statements

Unless otherwise agreed, the ultimate borrower shall submit its annual financial statements and requisite notes at the request of the principal banker or the KfW. If delays should occur in the preparation of the annual financial statements, the ultimate borrower shall first report its provisional figures.

11. Termination for good cause

(1) The principal banker shall be entitled to terminate the entire loan or part of the loan immediately at any time for good cause, in particular if

a) the loan was acquired wrongfully or is not used according to its purpose or the ultimate borrower does not allow the use to which the funds have been put to be verified despite the setting of a deadline by the principal banker for this purpose.

b) the requirements for the granting of the loan have subsequently changed or no longer apply (e.g. disposal of the firm or parts of the firm, change in property or ownership relations).

c) the ultimate borrower gave wrong information about its financial position.

d) the ultimate borrower neglects any important duties assumed with the loan agreement.

e) a substantial deterioration occurs or is at risk of occurring in the financial position of the ultimate borrower or in the value of the collateral provided and the repayment of the loan, including the liquidation of collateral, is jeopardised as a result.

f) the scope of the overall spending estimated in the investment plan as well as the scope of the eligible costs is reduced or the share of public funding increases. If good causes consists in breach of contract, termination shall only be possible after fruitless expiry of a period of grace or after unsuccessful warning unless one of the reasons specified in Section 323 (2) of the German Civil Code (BGB) applies.

(2) In the event of part termination (reduction) and unless otherwise agreed with the ultimate borrower, the repaid amount shall in all cases be offset from the remaining repayment rates or equal periodic payments (in proportion to the remaining term of the loan).

12. Provision of information

The principal banker shall be entitled to provide unlimited information to the KfW or to a third party commissioned by the KfW, to grant access to documents and to provide copies for documentation purposes. The provisions of this paragraph shall also apply if files are managed electronically.

13. Limited validity

If the general terms and conditions of the principal banker clash with these General Terms, the latter shall have precedence.

14. Special conditions for ERP loans and loans which are refinanced or subsidised from public funds

Unless stipulated otherwise in the loan agreement, ERP loans and loans which are refinanced or subsidised from public funds are also subject to the following special conditions:

(1) The loan may only be used in proportion with the other funds provided under the financing plan. Only if the latter are not yet available may loan funds also exceptionally be used at an earlier time. The loan may only be drawn on – where applicable in part amounts – if the amounts requested can be put to their stipulated purpose within 3 months. If it becomes apparent after disbursement has been made, that it will not be possible to make use of the funds in good time, the corresponding amounts shall be repaid to the principal banker without delay so that they may be returned to the KfW. The funds may be drawn on again if the preconditions referred to above are met. Sentences 1, 4 and 5 of this paragraph shall not apply if the loan does not exceed an amount of 25,000 euros. Sentences 1, 4 and 5 of this paragraph shall not apply to the last disbursement loan amount either if this amount does not exceed 25,000 euros.

(2) If the cost of specific positions is reduced by 20% or more, the funds saved may only be used to cover the increased costs of other eligible items with the prior agreement of the principal banker.

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(3) Under Section 91 of the Federal Budget Code (BHO), the German Federal Court of Auditors is empowered to carry out inspections. The responsible Federal Government ministries or third parties commissioned by the same are also entitled to carry out inspections.

(4) Interest premium

The agreed rate of interest increases from the day after which disbursement is made to 5 percentage points above the base rate pursuant to Section 247 of the German Civil Code (BGB) if and to the extent that

- the loan has been wrongfully acquired,

- the loan has not been used for the purpose for which it is intended,

- regardless of a period set by the principal banker the ultimate borrower has failed to enable performance of an inspection to ensure that the funds have been used for the purpose for which they were intended or

- the ultimate borrower does not use the funds within 3 months for the specified purpose and does not pay them back to the principal banker without delay.

If the requirements for the granting of the loan have subsequently changed or no longer apply, the rate of interest shall increase to 5 percentage points above the base rate pursuant to Section 247 of the German Civil Code (BGB) from the time at which such requirements change or cease to apply. If the rate of interest stated in the loan agreement is higher than the base rate plus 5 percentage points, the rate of interest stated in the loan agreement shall continue to apply.

15. Special terms for loans for which the principal banker is granted a liability discharge on the basis of a federal or state guarantee

Under Section 91 of the Federal Budget Code (BHO), the German Federal Court of Auditors or, subject to state regulations, the respective state court of auditors, shall be authorised to audit loans for which the principal banker is granted a liability discharge on the basis of a federal or state guarantee. The responsible Federal Government ministries or third parties commissioned by the same are also entitled to carry out inspections.

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EX-10.2

Exhibit 10.2

GUARANTY

GUARANTY, dated as of April 17, 2013, made by P.H. Glatfelter Company, a corporation organized and existing under the laws of the Commonwealth of Pennsylvania (the “Guarantor”), in favor of IKB Deutsche Industriebank AG (including its successors and assigns, “Bank”).

For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and to induce Bank to enter into the Loan Contract dated as of March 26, 2013, and executed by Glatfelter Gernsbach GmbH & Co. KG (the “Borrower”) on April 11, 2013 (as amended, supplemented and otherwise modified from time to time, the “Credit Agreement”) with the Borrower, the Guarantor agrees as follows:

1. Guaranty. The Guarantor unconditionally guarantees the punctual payment when due, whether upon maturity, by acceleration or otherwise, of all obligations (now or hereafter existing) of the Borrower under the Credit Agreement, whether for principal, interest, fees, expenses or otherwise, in each case strictly in accordance with the terms thereof (all such obligations being the “Obligations”); provided that the Guarantor’s maximum liability under this Guaranty with respect to that portion of the Obligations consisting of principal under the Credit Agreement will not exceed EUR 42,700,000.00. If the Borrower fails to pay any Obligation in full when due (whether at stated maturity, by acceleration or otherwise), the Guarantor will promptly pay the same to Bank. The Guarantor will also pay to Bank any and all expenses (including without limitation, reasonable legal fees and expenses) incurred by Bank in enforcing its rights under this Guaranty. This Guaranty is a guaranty of payment and not merely of collection.

2. Guaranty Absolute. The liability of the Guarantor under this Guaranty shall be irrevocable, absolute and unconditional irrespective of, and the Guarantor hereby irrevocably waives any defenses it may now or hereafter acquire in any way relating to, any or all of the following: (i) any illegality, lack of validity or enforceability of any Obligation, (ii) any amendment, modification, waiver or consent to departure from the terms of any Obligation, including any renewal or extension of the time or change of the manner or place of payment, (iii) any exchange, substitution, release, non-perfection or impairment of any collateral securing payment of any Obligation, (iv) any change in the corporate existence, structure or ownership of the Borrower, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Borrower or its assets or any resulting release or discharge of any Obligation, (v) the existence of any claim, set-off or other rights that the Guarantor may have at any time against the Borrower, Bank, or any other corporation or person, whether in connection herewith or any unrelated transactions, provided that nothing herein will prevent the assertion of any such claim by separate suit or compulsory counterclaim, (vi) any law, regulation, decree or order of any jurisdiction, or any other event, affecting any term of any Obligation or Bank’s rights with respect thereto and (vii) any other circumstance or any existence of or reliance on any representation by Bank that might otherwise constitute a defense available to, or a legal or equitable discharge of, the Borrower or the Guarantor or any other guarantor or surety.

Without limiting the generality of the foregoing, the Guarantor guarantees that it shall pay Bank strictly in accordance with the express terms of the Credit Agreement, including in the amounts and in the currency expressly agreed to thereunder, irrespective of and without giving effect to any laws of the jurisdiction where the Borrower is principally located in effect from time to time, or any order, decree or regulation in the jurisdiction where the Borrower is principally located.

It is the intent of this Section 2 that the Guarantor’s obligations hereunder are and shall be absolute and unconditional under any and all circumstances. The Guarantor shall make any payments without setoff, counterclaim or other defense and on the same basis as payments are made by the Borrower under the Credit Agreement.

3. Waiver. The Guarantor waives promptness, diligence, notice of acceptance, notice of dishonor and any other notice with respect to any Obligation and this Guaranty and any requirement that Bank exercise any right or take any action against the Borrower or any collateral security or credit support.

4. Reinstatement. This Guaranty will continue to be effective or be reinstated, as the case may be, if at any time any payment of any Obligation is rescinded or must otherwise be returned by Bank upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, all as though such payment had not been made.

5. Subrogation. The Guarantor will not assert, enforce or otherwise exercise any rights which it may acquire by way of subrogation under this Guaranty, by any payment made hereunder or otherwise, until payment in full of the Obligations and the termination of the Credit Agreement.

6. Taxes. Any and all payments by the Guarantor hereunder will be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, or deductions, assessments, fees or other charges imposed in each case by any governmental authority, including any interest, additions to tax or penalties applicable thereto (“Taxes”), other than Excluded Taxes. “Excluded Taxes” shall mean (i) any and all Taxes attributable to Bank’s failure to deliver to the Guarantor, at the time or times requested by the Guarantor or the Borrower, such properly completed and executed documentation as will permit payments hereunder to be made without withholding or at a reduced rate of withholding or enable the Guarantor or the Borrower to determine whether or not Bank is subject to backup withholding or information reporting requirements, (ii) any and all U.S. federal withholding Taxes imposed under FATCA, (iii) any and all Taxes that would not have been imposed but for a present or former connection between Bank and the jurisdiction imposing such Tax (other than connections arising solely from Bank having executed, delivered, registered, become a party to, or received payments under this Guaranty), (iv) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, imposed as a result of Bank being organized under the laws of, or having its principal office or its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof). “FATCA” shall mean Sections 1471 through 1474 of the U.S. Internal Revenue Code (“Code”), as of the date of this Agreement (or any amended or successor provisions of law that are substantively comparable to such Sections and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreements entered into pursuant to Section 1471(b)(1) of the Code, and any intergovernmental agreement to facilitate the implementation of FATCA (or of any provisions of FATCA). If the Guarantor is required by law to deduct or withhold any Taxes from or in respect of any sum payable hereunder the Guarantor will (i) make such deduction or withholding (ii) pay the full amount deducted or withheld to the relevant taxation authority or other authority in accordance with applicable law and (iii) if such Taxes are not Excluded Taxes, increase the amount payable as may be necessary so that after making all required deductions in respect of non-Excluded Taxes (including deductions applicable to additional sums payable under this Section) Bank will receive an amount equal to the sum it would have received had no such deductions been made. In addition, the Guarantor will pay any present or future stamp, court or documentary taxes or any other similar taxes, charges or levies, that arise from any payment made hereunder or from the execution, delivery, enforcement of, or registration of, or otherwise with respect to, this Guaranty or the Obligations (“Other Taxes”). To the extent available, the Guarantor will promptly furnish to Bank the original or a certified copy of a receipt evidencing payment of Taxes or Other Taxes. The Guarantor will indemnify Bank for the full amount of Taxes (other than Excluded Taxes) or Other Taxes paid by Bank, in respect of this Guaranty, within 30 days of Bank’s request therefor. Without prejudice to the survival of any other agreement contained herein, the Guarantor’s agreements and obligations contained in this Section will survive the payment in full of the Obligations, principal and interest hereunder and any termination of this Guaranty.

2

7. Place of Payment The Guarantor will pay Bank at such location in Germany as Bank specifies to the Guarantor.

8. Set-Off. If the Guarantor fails to pay any of its obligations hereunder when due and payable, Bank is authorized at any time and from time to time, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by Bank to or for the Guarantor’s credit or account against any and all of the Obligations, whether or not Bank has made any demand under this Guaranty. Bank will promptly notify the Guarantor after any such set-off and application, provided that the failure to give such notice will not affect the validity of such set-off and application. Bank’s rights under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) that Bank may have.

9. Representations and Warranties. The Guarantor represents and warrants that: (i) the execution, delivery and performance by the Guarantor of this Guaranty are within its corporate powers, have been duly authorized by all necessary corporate action, and do not contravene (x) its charter or by-laws or (y) any applicable law, (ii) no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by the Guarantor of this Guaranty, and (iii) this Guaranty has been duly executed and delivered by the Guarantor and is its legal, valid and binding obligation, enforceable against the Guarantor in accordance with its terms.

10. Continuing Guaranty. This is a continuing guaranty and applies to all Obligations whenever arising. This Guaranty is irrevocable and will remain in full force and effect until the indefeasible payment in full of the Obligations and all amounts payable hereunder and the termination of all of the agreements relating to the Obligations.

11. Amendments; Transfers. No amendment or waiver of any provision of this Guaranty, and no consent to departure by the Guarantor herefrom, will in any event be effective unless the same is in writing and signed by Bank, and then such waiver or consent will be effective only in the specific instance and for the specific purpose for which given. This Guaranty shall be binding upon the Guarantor and its successors and assigns and shall inure to the benefit of Bank and its successors and assigns. Bank may assign its rights under this Guaranty, but the Guarantor shall not assign its rights or delegate its performance under this Guaranty.

12. Addresses. All notices and other communications provided for hereunder will be in writing (including telecopier communication), and mailed, telecopied or delivered to it, if to the Guarantor, at its address at P. H. Glatfelter Company, 96 S. George St. Ste 500, York, PA 17401-1434, Attention: Scott Corcoran, Manager, Global Treasury Operations, and if to Bank, at its address at Wilhelm-Bötzkes-Straße 1, 40474 Düsseldorf, Germany, Attention: Mr. Karl Michael Delhey, or, as to either party, at such other address as is designated by such party in a written notice to the other party. All such notices and other communications will, when mailed or telecopied, be effective when deposited in the mails or telecopied, respectively.

13. Guarantor’s Credit Decision, Etc. The Guarantor has, independently and without reliance on Bank and based on such documents and information as the Guarantor has deemed appropriate, made its own credit analysis and decision to enter into this Guaranty. The Guarantor has adequate means to obtain from the Borrower on a continuing basis information concerning the financial condition, operations and business of the Borrower, and the Guarantor is not relying on Bank to provide such information now or in the future. The Guarantor acknowledges that it has received and reviewed an executed copy of the Credit Agreement and that it will receive substantial direct and indirect benefit from the extensions of credit contemplated by this Guaranty.

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14. Limitation of Guaranty. Any term or provision of this Guaranty to the contrary notwithstanding, the maximum aggregate amount for which the Guarantor shall be liable hereunder shall not exceed the maximum amount for which the Guarantor can be liable without rendering this Guaranty subject to avoidance under applicable requirements of law relating to fraudulent conveyance or fraudulent transfer (including the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act and Section 548 of the Bankruptcy Code or any applicable provisions of comparable requirements of law).

15. Governing Law. This Guaranty and any claims, controversy, dispute or cause of action (whether in contact or tort or otherwise) arising out of this Guaranty shall be governed by, and construed in accordance with, the law of the State of New York.

16. Consent to Jurisdiction, Etc. The Guarantor hereto irrevocably and unconditionally (i) submits to the non-exclusive jurisdiction of any New York State or Federal court located in the City of New York over any suit, action or proceeding arising out of or relating to this Guaranty, (ii) accepts for itself and in respect of its property the jurisdiction of such courts, (iii) waives any objection to the laying of venue of any such suit, action or proceeding brought in any such courts and any claim that any such suit, action or proceeding has been brought in an inconvenient forum and (iv) consents to the service of any process, summons, notice or document in any such suit, action or proceeding by registered mail addressed to such party at its address specified in Section 12. A final judgment in any such suit, action or proceeding will be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing herein will affect the right of any party to serve legal process in any other manner permitted by law or affect such party’s right to bring any suit, action or proceeding against such party or its property in the courts of other jurisdictions. To the extent that either party has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, such party irrevocably waives such immunity in respect of its obligations under this Guaranty.

17. WAIVER OF JURY TRIAL. THE GUARANTOR HERETO IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS GUARANTY OR ACTIONS IN THE NEGOTIATION, ADMINISTRATION OR ENFORCEMENT HEREOF.

18. Termination. Upon indefeasible payment in full of the Obligations, this Guaranty shall be automatically terminated without any further action by Bank, and Bank will promptly return the original Guaranty to the Guarantor, as well as take action upon reasonably request by the Guarantor to evidence the termination and release of said Obligations.

4

To evidence the Guarantor’s agreement to this Guaranty, it has signed and delivered this Guaranty on the date set forth in the preamble.

P.H. GLATFELTER COMPANY
By	/s/ John P. Jacunski
	Name:	John P. Jacunski
	Title:	Senior Vice President and Chief Financial Officer

EX-31.1

EXHIBIT 31.1

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

I, Dante C. Parrini certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, 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.

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 Glatfelter’s board of directors (or persons performing similar functions):

(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.

May 9, 2013

By	/s/ Dante C. Parrini
	Dante C. Parrini
	Chairman and Chief Executive Officer

EX-31.2

EXHIBIT 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 Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, 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.

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 Glatfelter’s board of directors (or persons performing similar functions):

(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.

May 9, 2013

By	/s/ John P. Jacunski
	John P. Jacunski
	Senior Vice President and Chief Financial Officer

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 Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, of P. H. Glatfelter Company (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dante C. Parrini, 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.

May 9, 2013

By	/s/ Dante C. Parrini
	Dante C. Parrini
	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 Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, 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.

May 9, 2013

By	/s/ John P. Jacunski
	John P. Jacunski
	Senior Vice President and Chief Financial Officer

XML

Guarantor Financial Statements (Tables)

3 Months Ended

Mar. 31, 2013

Guarantor Financial Statements [Abstract]

Condensed Consolidating Statements of Income and Comprehensive Income

Condensed Consolidating Statements of Income and Comprehensive Income for the

three months ended March 31, 2013

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	227,116		$	15,016		$	178,072		$	(15,015	)	$	405,189
Energy and related sales, net		1,101			—			—			—			1,101
Total revenues		228,217			15,016			178,072			(15,015	)		406,290
Costs of products sold		200,469			13,407			149,968			(14,929	)		348,915
Gross profit		27,748			1,609			28,104			(86	)		57,375
Selling, general and administrative expenses		20,602			540			12,345			—			33,487
Gains on dispositions of plant, equipment and timberlands, net		—			(73	)		—			—			(73	)
Operating income		7,146			1,142			15,759			(86	)		23,961
Other non-operating income (expense)
Interest expense		(3,841	)		—			—			—			(3,841	)
Interest income		(760	)		1,658			(796	)		—			102
Other, net		12,934			60			740			(13,487	)		247
Total other non-operating income (expense)		8,333			1,718			(56	)		(13,487	)		(3,492	)
Income (loss) before income taxes		15,479			2,860			15,703			(13,573	)		20,469
Income tax provision (benefit)		(150	)		772			4,255			(37	)		4,840
Net income (loss)		15,629			2,088			11,448			(13,536	)		15,629
Other comprehensive income		(7,689	)		(4,608	)		(7,978	)		12,586			(7,689	)
Comprehensive income	$	7,940		$	(2,520	)	$	3,470		$	(950	)	$	7,940

Condensed Consolidating Statements of Income and Comprehensive Income for the

three months ended March 31, 2012

In thousands	Parent Company			Guarantors		Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	223,802		$	15,370	$	173,561		$	(15,381	)	$	397,352
Energy and related sales, net		1,861			—		—			—			1,861
Total revenues		225,663			15,370		173,561			(15,381	)		399,213
Costs of products sold		192,876			13,948		146,742			(15,323	)		338,243
Gross profit		32,787			1,422		26,819			(58	)		60,970
Selling, general and administrative expenses		17,036			739		12,192			—			29,967
Gains on dispositions of plant, equipment and timberlands, net		(26	)		—		(11	)		—			(37	)
Operating income		15,777			683		14,638			(58	)		31,040
Other non-operating income (expense)
Interest expense		(4,305	)		—		36			—			(4,269	)
Interest income		(650	)		1,642		(869	)		—			123
Other, net		11,189			89		473			(11,555	)		196
Total other non-operating income (expense)		6,234			1,731		(360	)		(11,555	)		(3,950	)
Income (loss) before income taxes		22,011			2,414		14,278			(11,613	)		27,090
Income tax provision (benefit)		3,133			1,093		4,011			(25	)		8,212
Net income (loss)		18,878			1,321		10,267			(11,588	)		18,878
Other comprehensive income		11,651			—		8,634			(8,634	)		11,651
Comprehensive income	$	30,529		$	1,321	$	18,901		$	(20,222	)	$	30,529

Condensed Consolidating Balance Sheet

Condensed Consolidating Balance Sheet as of

March 31, 2013

In thousands	Parent Company		Guarantors		Non Guarantors		Adjustments/ Eliminations			Consolidated
Assets
Cash and cash equivalents	$	40,149	$	5,786	$	30,505	$	—		$	76,440
Other current assets		237,981		401,248		227,565		(442,455	)		424,339
Plant, equipment and timberlands, net		240,695		6,089		370,871		—			617,655
Other assets		793,462		158,225		44,005		(889,505	)		106,187
Total assets	$	1,312,287	$	571,348	$	672,946	$	(1,331,960	)	$	1,224,621
Liabilities and Shareholders’ Equity
Current liabilities	$	359,376	$	27,364	$	279,633	$	(437,252	)	$	229,121
Long-term debt		250,000		—		—		—			250,000
Deferred income taxes		36,734		2,207		39,976		(19,664	)		59,253
Other long-term liabilities		121,554		6,442		10,105		3,523			141,624
Total liabilities		767,664		36,013		329,714		(453,393	)		679,998
Shareholders’ equity		544,623		535,335		343,232		(878,567	)		544,623
Total liabilities and shareholders’ equity	$	1,312,287	$	571,348	$	672,946	$	(1,331,960	)	$	1,224,621

Condensed Consolidating Balance Sheet as of

December 31, 2012

In thousands	Parent Company		Guarantors		Non Guarantors		Adjustments/ Eliminations			Consolidated
Assets
Cash and cash equivalents	$	43,748	$	4,311	$	49,620	$	—		$	97,679
Other current assets		204,961		387,627		214,568		(385,977	)		421,179
Plant, equipment and timberlands, net		241,969		6,204		373,013		—			621,186
Other assets		787,348		160,741		45,133		(890,281	)		102,941
Total assets	$	1,278,026	$	558,883	$	682,334	$	(1,276,258	)	$	1,242,985
Liabilities and Shareholders’ Equity
Current liabilities	$	337,761	$	6,041	$	291,547	$	(384,441	)	$	250,908
Long-term debt		250,000		—		—		—			250,000
Deferred income taxes		34,604		3,691		40,972		(17,221	)		62,046
Other long-term liabilities		115,982		10,602		11,093		2,675			140,352
Total liabilities		738,347		20,334		343,612		(398,987	)		703,306
Shareholders’ equity		539,679		538,549		338,722		(877,271	)		539,679
Total liabilities and shareholders’ equity	$	1,278,026	$	558,883	$	682,334	$	(1,276,258	)	$	1,242,985

Condensed Consolidating Statement of Cash Flows

Condensed Consolidating Statement of Cash Flows for the three

months ended March 31, 2013

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net cash provided (used) by
Operating activities	$	7,688		$	1,713		$	6,394		$	—		$	15,795
Investing activities
Expenditures for plant, equipment and timberlands		(11,763	)		(57	)		(19,571	)		—			(31,391	)
Proceeds from disposal plant, equipment and timberlands, net		—			73			—			—			73
Repayments from (advances of) intercompany loans, net and other		(1,100	)		(1,264	)		—			2,364			—
Intercompany capital contributed		—			(90	)		—			90			—
Other		(175	)		—			—			—			(175	)
Total investing activities		(13,038	)		(1,338	)		(19,571	)		2,454			(31,493	)
Financing activities
Payments of note offering costs		(108	)		—			—			—			(108	)
Payment of dividends to shareholders		(3,905	)		—			—			—			(3,905	)
(Repayments) borrowings of intercompany loans, net		6,350			1,100			(5,086	)		(2,364	)		—
Intercompany capital received		—			—			90			(90	)		—
Payments for share based compensation awards and other		(586	)		—			—			—			(586	)
Total financing activities		1,751			1,100			(4,996	)		(2,454	)		(4,599	)
Effect of exchange rate on cash		—			—			(942	)		—			(942	)
Net increase (decrease) in cash		(3,599	)		1,475			(19,115	)		—			(21,239	)
Cash at the beginning of period		43,748			4,311			49,620			—			97,679
Cash at the end of period	$	40,149		$	5,786		$	30,505		$	—		$	76,440

Condensed Consolidating Statement of Cash Flows for the three

months ended March 31, 2012

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net cash provided (used) by
Operating activities	$	(2,148	)	$	1,797		$	10,094		$	—		$	9,743
Investing activities
Expenditures for plant, equipment and timberlands		(4,597	)		—			(9,555	)		—			(14,152	)
Proceeds from disposal plant, equipment and timberlands, net		26			—			23			—			49
Repayments from (advances of) intercompany loans, net		3,373			(1,383	)		—			(1,990	)		—
Total investing activities		(1,198	)		(1,383	)		(9,532	)		(1,990	)		(14,103	)
Financing activities
Net (repayments of) proceeds from indebtedness		(5,000	)		—			—			—			(5,000	)
Payment of dividends to shareholders		(3,898	)		—			—			—			(3,898	)
Repurchases of common stock		(1,204	)		—			—			—			(1,204	)
(Repayments) borrowings of intercompany loans, net		10,400			—			(12,390	)		1,990			—
Proceeds from stock options exercised and other		602			—			27			—			629
Total financing activities		900			—			(12,363	)		1,990			(9,473	)
Effect of exchange rate on cash		—			—			455			—			455
Net increase (decrease) in cash		(2,446	)		414			(11,346	)		—			(13,378	)
Cash at the beginning of period		3,007			2,894			32,376			—			38,277
Cash at the end of period	$	561		$	3,308		$	21,030			—		$	24,899

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Long-Term Debt (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Summary of long-term debt
Total long-term debt	$ 250,000	$ 250,000
Less current portion
Long-term debt, net of current portion	250,000	250,000
5.375% Notes, due Oct. 2020 [Member]
Summary of long-term debt
Total long-term debt	250,000	250,000
Revolving credit facility, due Nov. 2016 [Member]
Summary of long-term debt
Total long-term debt

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Stock-Based Compensation (Details 1) (Restricted Stock Units and Performance Share Awards [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Restricted Stock Units and Performance Share Awards [Member]
Compensation expense for the periods
Compensation expense	$ 720	$ 576

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Guarantor Financial Statements (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Condensed Consolidating Statements of Income and Comprehensive Income
Net sales	$ 405,189	$ 397,352
Energy and related sales, net	1,101	1,861
Total revenues	406,290	399,213
Costs of products sold	348,915	338,243
Gross profit	57,375	60,970
Selling, general and administrative expenses	33,487	29,967
Gains on dispositions of plant, equipment and timberlands, net	(73)	(37)
Operating income	23,961	31,040
Other non-operating income (expense)
Interest expense	(3,841)	(4,269)
Interest income	102	123
Other, net	247	196
Total other non-operating income (expense)	(3,492)	(3,950)
Income (loss) before income taxes	20,469	27,090
Income tax provision (benefit)	4,840	8,212
Net income (loss)	15,629	18,878
Other comprehensive income	(7,689)	11,651
Comprehensive income	7,940	30,529
Parent Company [Member]
Condensed Consolidating Statements of Income and Comprehensive Income
Net sales	227,116	223,802
Energy and related sales, net	1,101	1,861
Total revenues	228,217	225,663
Costs of products sold	200,469	192,876
Gross profit	27,748	32,787
Selling, general and administrative expenses	20,602	17,036
Gains on dispositions of plant, equipment and timberlands, net		(26)
Operating income	7,146	15,777
Other non-operating income (expense)
Interest expense	(3,841)	(4,305)
Interest income	(760)	(650)
Other, net	12,934	11,189
Total other non-operating income (expense)	8,333	6,234
Income (loss) before income taxes	15,479	22,011
Income tax provision (benefit)	(150)	3,133
Net income (loss)	15,629	18,878
Other comprehensive income	(7,689)	11,651
Comprehensive income	7,940	30,529
Guarantors [Member]
Condensed Consolidating Statements of Income and Comprehensive Income
Net sales	15,016	15,370
Energy and related sales, net
Total revenues	15,016	15,370
Costs of products sold	13,407	13,948
Gross profit	1,609	1,422
Selling, general and administrative expenses	540	739
Gains on dispositions of plant, equipment and timberlands, net	(73)
Operating income	1,142	683
Other non-operating income (expense)
Interest expense
Interest income	1,658	1,642
Other, net	60	89
Total other non-operating income (expense)	1,718	1,731
Income (loss) before income taxes	2,860	2,414
Income tax provision (benefit)	772	1,093
Net income (loss)	2,088	1,321
Other comprehensive income	(4,608)
Comprehensive income	(2,520)	1,321
Non Guarantors [Member]
Condensed Consolidating Statements of Income and Comprehensive Income
Net sales	178,072	173,561
Energy and related sales, net
Total revenues	178,072	173,561
Costs of products sold	149,968	146,742
Gross profit	28,104	26,819
Selling, general and administrative expenses	12,345	12,192
Gains on dispositions of plant, equipment and timberlands, net		(11)
Operating income	15,759	14,638
Other non-operating income (expense)
Interest expense		36
Interest income	(796)	(869)
Other, net	740	473
Total other non-operating income (expense)	(56)	(360)
Income (loss) before income taxes	15,703	14,278
Income tax provision (benefit)	4,255	4,011
Net income (loss)	11,448	10,267
Other comprehensive income	(7,978)	8,634
Comprehensive income	3,470	18,901
Adjustments/ Eliminations [Member]
Condensed Consolidating Statements of Income and Comprehensive Income
Net sales	(15,015)	(15,381)
Energy and related sales, net
Total revenues	(15,015)	(15,381)
Costs of products sold	(14,929)	(15,323)
Gross profit	(86)	(58)
Selling, general and administrative expenses
Gains on dispositions of plant, equipment and timberlands, net
Operating income	(86)	(58)
Other non-operating income (expense)
Interest expense
Interest income
Other, net	(13,487)	(11,555)
Total other non-operating income (expense)	(13,487)	(11,555)
Income (loss) before income taxes	(13,573)	(11,613)
Income tax provision (benefit)	(37)	(25)
Net income (loss)	(13,536)	(11,588)
Other comprehensive income	12,586	(8,634)
Comprehensive income	$ (950)	$ (20,222)

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Long-Term Debt (Details Textual) (USD $) In Millions, unless otherwise specified				3 Months Ended				3 Months Ended
	Mar. 31, 2013	Dec. 31, 2012	Mar. 31, 2012	Mar. 31, 2013 5.375% Notes [Member]	Oct. 03, 2012 5.375% Notes [Member]	Mar. 31, 2013 Letter of Credit [Member]	Dec. 31, 2012 Letter of Credit [Member]	Mar. 31, 2013 Revolving Credit Facility [Member]	Nov. 21, 2011 Revolving Credit Facility [Member]	Mar. 31, 2013 Maximum [Member] Revolving Credit Facility [Member]	Mar. 31, 2013 Minimum [Member] Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity									$ 350
Debt instrument maturity date				Oct. 15, 2020				Nov. 21, 2016
Federal fund rate Spread										1.25%	0.25%
Spread, Euro-rate										2.25%	1.25%
Outstanding Amount of Debt					250.0
Letter of credit outstanding						5.2	5.2
Percentage of aggregate principal amount of outstanding	5.375%	5.375%		5.375%	5.375%
Long-Term Debt (Textual) [Abstract]
Margin over federal fund rate	0.50%
Margin over Euro-rate	1.00%
Unamortized deferred debt issuance costs		$ 4.8	$ 4.7

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Income Taxes (Details Textual) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Dec. 31, 2012
Income Taxes (Textual) [Abstract]
Gross unrecognized tax benefits	$ 26.5		$ 30.4
Unrecognized tax benefits that would impact effective tax rate	26.5
Lower range of gross unrecognized tax benefits balance may decrease within the next twelve months	0
Higher range of gross unrecognized tax benefits balance may decrease within the next twelve months	14.0
Benefit from a reduction in interest payable	0.2
Interest expense		0.1
Liability for interest	1.2		1.4
Penalties associated with uncertain tax positions	$ 0	$ 0

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Long-Term Debt (Tables)

3 Months Ended

Mar. 31, 2013

Long-Term Debt [Abstract]

Summary of long-term debt

In thousands	March 31 2013		December 31 2012
Revolving credit facility, due Nov. 2016	$	—	$	—
5.375% Notes, due Oct. 2020		250,000		250,000
Total long-term debt		250,000		250,000
Less current portion		—		—
Long-term debt, net of current portion	$	250,000	$	250,000

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Guarantor Financial Statements (Details Textual)	Mar. 31, 2013	Dec. 31, 2012
Guarantor financial statements (Textual) [Abstract]
Interest rate on notes guaranteed	5.375%	5.375%
PHG Tea Leaves, Inc. [Member]
Schedule of Equity Method Investments [Line Items]
Percentage owned in domestic subsidiaries	100.00%
Mollanvick, Inc. [Member]
Schedule of Equity Method Investments [Line Items]
Percentage owned in domestic subsidiaries	100.00%
The Glatfelter Pulp Wood Company [Member]
Schedule of Equity Method Investments [Line Items]
Percentage owned in domestic subsidiaries	100.00%
Glatfelter Holdings, LLC [Member]
Schedule of Equity Method Investments [Line Items]
Percentage owned in domestic subsidiaries	100.00%

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Asset Retirement Obligation (Details Textual) (USD $)	Mar. 31, 2013	Dec. 31, 2012	Mar. 31, 2012	Dec. 31, 2011	Dec. 31, 2008
Asset Retirement Obligations [Line Items]
Asset retirement obligation	$ 8,302,000	$ 8,882,000	$ 9,594,000	$ 9,679,000
Asset Retirement Obligation (Textual) [Abstract]
Fair value of asset retirement obligations related to the legal requirements					11,500,000
Other current liabilities [Member]
Asset Retirement Obligations [Line Items]
Asset retirement obligation		3,600,000
Other Long Term Liabilities [Member]
Asset Retirement Obligations [Line Items]
Asset retirement obligation	$ 3,000,000

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Guarantor Financial Statements (Details 1) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012	Mar. 31, 2012	Dec. 31, 2011
Assets
Cash and cash equivalents	$ 76,440	$ 97,679	$ 24,899	$ 38,277
Other current assets	424,339	421,179
Plant, equipment and timberlands, net	617,655	621,186
Other assets	106,187	102,941
Total assets	1,224,621	1,242,985
Liabilities and Shareholders' Equity
Current liabilities	229,121	250,908
Long-term debt	250,000	250,000
Deferred income taxes	59,253	62,046
Other long-term liabilities	141,624	140,352
Total liabilities	679,998	703,306
Shareholders' equity	544,623	539,679
Total liabilities and shareholders' equity	1,224,621	1,242,985
Parent Company [Member]
Assets
Cash and cash equivalents	40,149	43,748	561	3,007
Other current assets	237,981	204,961
Plant, equipment and timberlands, net	240,695	241,969
Other assets	793,462	787,348
Total assets	1,312,287	1,278,026
Liabilities and Shareholders' Equity
Current liabilities	359,376	337,761
Long-term debt	250,000	250,000
Deferred income taxes	36,734	34,604
Other long-term liabilities	121,554	115,982
Total liabilities	767,664	738,347
Shareholders' equity	544,623	539,679
Total liabilities and shareholders' equity	1,312,287	1,278,026
Guarantors [Member]
Assets
Cash and cash equivalents	5,786	4,311	3,308	2,894
Other current assets	401,248	387,627
Plant, equipment and timberlands, net	6,089	6,204
Other assets	158,225	160,741
Total assets	571,348	558,883
Liabilities and Shareholders' Equity
Current liabilities	27,364	6,041
Long-term debt
Deferred income taxes	2,207	3,691
Other long-term liabilities	6,442	10,602
Total liabilities	36,013	20,334
Shareholders' equity	535,335	538,549
Total liabilities and shareholders' equity	571,348	558,883
Non Guarantors [Member]
Assets
Cash and cash equivalents	30,505	49,620	21,030	32,376
Other current assets	227,565	214,568
Plant, equipment and timberlands, net	370,871	373,013
Other assets	44,005	45,133
Total assets	672,946	682,334
Liabilities and Shareholders' Equity
Current liabilities	279,633	291,547
Long-term debt
Deferred income taxes	39,976	40,972
Other long-term liabilities	10,105	11,093
Total liabilities	329,714	343,612
Shareholders' equity	343,232	338,722
Total liabilities and shareholders' equity	672,946	682,334
Adjustments/ Eliminations [Member]
Assets
Cash and cash equivalents
Other current assets	(442,455)	(385,977)
Plant, equipment and timberlands, net
Other assets	(889,505)	(890,281)
Total assets	(1,331,960)	(1,276,258)
Liabilities and Shareholders' Equity
Current liabilities	(437,252)	(384,441)
Long-term debt
Deferred income taxes	(19,664)	(17,221)
Other long-term liabilities	3,523	2,675
Total liabilities	(453,393)	(398,987)
Shareholders' equity	(878,567)	(877,271)
Total liabilities and shareholders' equity	$ (1,331,960)	$ (1,276,258)

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Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2013

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation The unaudited condensed consolidated financial statements (“financial statements”) include the accounts of Glatfelter and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.

We prepared these financial statements in accordance with accounting principles generally accepted in the United States of America (“generally accepted accounting principles” or “GAAP”). In our opinion, the financial statements reflect all normal, recurring adjustments needed to present fairly our results for the interim periods. When preparing these financial statements, we have assumed that you have read the audited consolidated financial statements included in our 2012 Annual Report on Form 10-K (“2012 Form 10-K”).

Accounting Estimates

Accounting Estimates The preparation of financial statements in conformity with GAAP 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 financial statements are reasonable, based upon currently available facts and known circumstances, but recognizes that actual results may differ from those estimates and assumptions.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements In February 2013, the FASB issued ASU 2013-02 – “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” which requires new disclosures about items reclassified out of accumulated other comprehensive income. We adopted the requirements of this standard in the first quarter of 2013.

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Stock-Based Compensation (Details 3) (SOSARs [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
SOSARs [Member]
Compensation expense for the periods
Three months ended	$ 385	$ 354

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Earnings Per Share (Details 1) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012
Number of potential common shares that have been excluded from the computation of diluted earnings per share for the indicated period due to their anti-dilutive nature
Potential common shares	589

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Share Repurchases (Tables)

3 Months Ended

Mar. 31, 2013

Share Repurchases [Abstract]

Summary of share repurchases under a stock repurchase plan

	shares		(thousands)
Authorized amount		n/a	$	25,000
Repurchases		291,120		(4,462	)
Remaining authorization			$	20,538

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Retirement Plans and Other Post-Retirement Benefits (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Pension Benefits [Member]
Schedule of pension and post retirement medical benefit plans
Service cost	$ 3,211	$ 2,931
Interest cost	5,520	5,772
Expected return on plan assets	(10,903)	(10,563)
Amortization of prior service cost	774	613
Amortization of unrecognized loss	5,289	4,323
Net periodic benefit cost	3,891	3,076
Other Benefits [Member]
Schedule of pension and post retirement medical benefit plans
Service cost	789	710
Interest cost	545	609
Expected return on plan assets		(113)
Amortization of prior service cost	(125)	(234)
Amortization of unrecognized loss	202	179
Net periodic benefit cost	$ 1,411	$ 1,151

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Share Repurchases (Details Textual) (USD $) In Thousands, except Share data, unless otherwise specified	1 Months Ended	3 Months Ended	11 Months Ended
	May 31, 2012	Mar. 31, 2013	Mar. 31, 2013
Share Repurchases (Textual) [Abstract]
Authorized a share repurchase under a stock repurchase plan	$ 25,000		$ 25,000
Repurchases, shares		0	291,120

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Financial Derivatives and Hedging Activities (Details 1) (Not designated as hedging [Member], Forward foreign currency exchange contracts [Member]) In Thousands, unless otherwise specified	Mar. 31, 2013 Euro / U.S. dollar [Member] EUR (€)	Dec. 31, 2012 Euro / U.S. dollar [Member] EUR (€)	Mar. 31, 2013 Euro / British Pound [Member] EUR (€)	Dec. 31, 2012 Euro / British Pound [Member] EUR (€)	Mar. 31, 2013 U.S. dollar / Canadian dollar [Member] CAD	Dec. 31, 2012 U.S. dollar / Canadian dollar [Member] CAD	Mar. 31, 2013 U.S Dollar / Euro [Member] USD ($)	Dec. 31, 2012 U.S Dollar / Euro [Member] USD ($)	Mar. 31, 2013 U.S. dollar / British Pound [Member] USD ($)	Dec. 31, 2012 U.S. dollar / British Pound [Member] USD ($)
Sell / Buy
Sell Notional	€ 13,000	€ 13,000	€ 4,000	€ 4,000	2,000	2,000		$ 2,000	$ 2,000

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Stock-Based Compensation (Details) (Restricted Stock Units and Performance Share Awards [Member])	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Restricted Stock Units and Performance Share Awards [Member]
Summary of stock option activity
Balance January 1	847,679	788,088
Granted	153,265	162,217
Forfeited	(9,313)	(17,000)
Shares delivered	(97,681)	(72,080)
Balance March 31	893,950	861,125

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Gains on Dispositions of Plant, Equipment and Timberlands, Net

3 Months Ended

Mar. 31, 2013

Gains on Dispositions of Plant, Equipment and Timberlands, Net [Abstract]

GAINS ON DISPOSITIONS OF PLANT, EQUIPMENT AND TIMBERLANDS, NET

3. GAINS ON DISPOSITIONS OF PLANT, EQUIPMENT AND TIMBERLANDS, NET

During the first quarters of 2013 and 2012, we completed sales of assets as summarized in the following table:

Dollars in thousands	Acres		Proceeds		Gain
2013
Other		n/a	$	73	$	73
Total			$	73	$	73
2012
Other		n/a	$	49	$	37
Total			$	49	$	37

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Financial Derivatives and Hedging Activities (Details 2) (Forward foreign currency exchange contracts [Member], USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Prepaid Expenses and Other Current Assets [Member] | Designated as hedging [Member]
Fair values of derivative instruments
Derivative asset, fair value	$ 293	$ 107
Prepaid Expenses and Other Current Assets [Member] | Not designated as hedging [Member]
Fair values of derivative instruments
Derivative asset, fair value	50	159
Other Current Liabilities [Member] | Designated as hedging [Member]
Fair values of derivative instruments
Derivative liability, fair value	230	751
Other Current Liabilities [Member] | Not designated as hedging [Member]
Fair values of derivative instruments
Derivative liability, fair value	$ 18	$ 16

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Accumulated Other Comprehensive Income (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Schedule of changes in accumulated other comprehensive income
Beginning Balance - Currency Translation Adjustments	$ 316	$ (11,043)
Beginning Balance	(599)	1,649
Beginning Balance - Changes in pensions	(159,560)	(153,002)
Beginning Balance - Change in other postretirement defined benefit plans	(4,297)	(3,881)
Beginning Balance - Total	(163,966)	(166,741)
Other comprehensive income before reclassifications (net of tax) - Currency Translation Adjustments	(11,957)	9,454
Other comprehensive income before reclassifications (net of tax) - Unrealized gain (loss) on derivatives	(170)	320
Other comprehensive income before reclassifications (net of tax) - Changes in pensions
Other comprehensive income before reclassifications (net of tax) - Changes in other postretirement defined benefit plans
Other comprehensive income before reclassifications (net of tax) - Total	(11,567)	9,045
Amounts reclassified from accumulated other comprehensive income (net of tax) - Currency translation adjustments
Amounts reclassified from accumulated other comprehensive income (net of tax) - Unrealized gain (loss) on derivatives	70	(572)
Amounts reclassified from accumulated other comprehensive income (net of tax) - Changes in pensions	3,779	3,051
Amounts reclassified from accumulated other comprehensive income (net of tax) - Change in other postretirement defined benefit plans	48
Amounts reclassified from accumulated other comprehensive income (net of tax) - Total	3,878	2,606
Net current period other comprehensive income (loss) - Currency translation adjustments	(11,957)	9,454
Net current period other comprehensive income (loss) - Unrealized gain (loss) on derivatives	441	(820)
Net current period other comprehensive income (loss) - Changes in pensions	3,779	3,051
Net current period other comprehensive income (loss) - Change in other postretirement defined benefit plans	48	(34)
Net current period other comprehensive income (loss) - Total	3,878	11,651
Ending Balance - Currency Translation Adjustments	(11,641)	(1,589)
Ending Balance	12	509
Ending Balance - Changes in pensions	(155,781)	(149,951)
Ending Balance - Change in other postretirement defined benefit plans	(4,249)	(3,915)
Ending Balance - Total	(171,655)	(155,090)
Cash Flow Hedging [Member]
Schedule of changes in accumulated other comprehensive income
Beginning Balance	(425)	1,185
Other comprehensive income before reclassifications (net of tax) - Unrealized gain (loss) on derivatives	390	(409)
Amounts reclassified from accumulated other comprehensive income (net of tax) - Unrealized gain (loss) on derivatives	51	(411)
Net current period other comprehensive income (loss) - Unrealized gain (loss) on derivatives	441	(820)
Ending Balance	$ 16	$ 365

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Income Taxes (Tables)

3 Months Ended

Mar. 31, 2013

Income Taxes [Abstract]

Summary of tax years that remain subject to examination by major jurisdiction

	Open Tax Years
Jurisdiction	Examinations not yet initiated		Examination in progress
United States
Federal		2009 - 2012	N/A
State		2008 - 2012	2009
Canada (1)		2010 - 2012	2007 - 2011
Germany (1)		2007, 2010 - 2012	2008 - 2011
France		2010 - 2012	N/A
United Kingdom		2009 - 2012	N/A
Philippines		2011 - 2012	2010

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

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Accumulated Other Comprehensive Income (Tables)

3 Months Ended

Mar. 31, 2013

Accumulated Other Comprehensive Income [Abstract]

Summary of reclassifications out of accumulated other comprehensive income

in thousands	Currency Translation Adjustments			Unrealized gain (loss) on derivatives			Change in pensions			Change in other postretirement defined benefit plans			Total
Balance at January 1, 2013	$	316		$	(425	)	$	(159,560	)	$	(4,297	)	$	(163,966	)
Other comprehensive income before reclassifications (net of tax)		(11,957	)		390			—			—			(11,567	)
Amounts reclassified from accumulated other comprehensive income (net of tax)		—			51			3,779			48			3,878
Net current period other comprehensive income (loss)		(11,957	)		441			3,779			48			(7,689	)
Balance at March 31, 2013	$	(11,641	)	$	16		$	(155,781	)	$	(4,249	)	$	(171,655	)
Balance at January 1, 2012	$	(11,043	)	$	1,185		$	(153,002	)	$	(3,881	)	$	(166,741	)
Other comprehensive income before reclassifications (net of tax)		9,454			(409	)		—			—			9,045
Amounts reclassified from accumulated other comprehensive income (net of tax)		—			(411	)		3,051			(34	)		2,606
Net current period other comprehensive income (loss)		9,454			(820	)		3,051			(34	)		11,651
Balance at March 31, 2012	$	(1,589	)	$	365		$	(149,951	)	$	(3,915	)	$	(155,090	)

Schedule of changes in accumulated other comprehensive income (losses)

	Three months ended March 31
In thousands	2013			2012
Description							Line Item in Statements of Income
Cash Flow Hedges (Note 13)
Gains (losses) on cash flow hedges	$	70		$	(572	)	Costs of products sold
		(19	)		161		Income tax provision
Net of tax		51			(411	)
Retirement Plans and Other Post Retirement Benefits (Note 8)
Amortization of deferred benefit pension plan items
Prior service costs		613			506		Costs of products sold
		161			107		Selling, general and administrative
Actuarial losses		4,114			3,490		Costs of products sold
		1,175			833		Selling, general and administrative
		6,063			4,936
		(2,284	)		(1,885	)	Income tax provision
Net of tax		3,779			3,051
Amortization of deferred benefit other plan items
Prior service costs		(100	)		(190	)	Costs of products sold
		(25	)		(44	)	Selling, general and administrative
Actuarial losses		155			138		Costs of products sold
		47			41		Selling, general and administrative
		77			(55	)
		(29	)		21		Income tax provision
Net of tax		48			(34	)
Total reclassifications, net of tax	$	3,878		$	2,606

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Asset Retirement Obligation (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Summary of asset retirement obligation activity
Balance at January 1,	$ 8,882	$ 9,679
Accretion	82	122
Payments	(662)	(207)
Balance at March 31,	$ 8,302	$ 9,594

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Accumulated Other Comprehensive Income (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Summary of reclassifications out of accumulated other comprehensive income
Gains and losses on cash flow hedges, Income tax provision	$ (19)	$ 161
Net of tax	51	(411)
Total reclassifications, net of tax	3,878	2,606
Costs of products sold [Member]
Summary of reclassifications out of accumulated other comprehensive income
Gains (losses) on cash flow hedges, costs of products sold	70	(572)
Pension Plan Items [Member]
Summary of reclassifications out of accumulated other comprehensive income
Subtotal	6,063	4,936
Income tax provision	(2,284)	(1,885)
Net of tax	3,779	3,051
Pension Plan Items [Member] | Costs of products sold [Member]
Summary of reclassifications out of accumulated other comprehensive income
Amortization of deferred benefit, Prior service costs	613	506
Amortization of deferred benefit, Actuarial losses	4,114	3,490
Pension Plan Items [Member] | Selling, general and administrative expenses [Member]
Summary of reclassifications out of accumulated other comprehensive income
Amortization of deferred benefit, Prior service costs	161	107
Amortization of deferred benefit, Actuarial losses	1,175	833
Other Plan Items [Member]
Summary of reclassifications out of accumulated other comprehensive income
Subtotal	77	(55)
Income tax provision	(29)	21
Net of tax	48	(34)
Other Plan Items [Member] | Costs of products sold [Member]
Summary of reclassifications out of accumulated other comprehensive income
Amortization of deferred benefit, Prior service costs	(100)	(190)
Amortization of deferred benefit, Actuarial losses	155	138
Other Plan Items [Member] | Selling, general and administrative expenses [Member]
Summary of reclassifications out of accumulated other comprehensive income
Amortization of deferred benefit, Prior service costs	(25)	(44)
Amortization of deferred benefit, Actuarial losses	$ 47	$ 41

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Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2013

SOSARs [Member]

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Summary of stock option activity

	2013					2012
SOSARS	Shares			Wtd Avg Exercise Price		Shares			Wtd Avg Exercise Price
Outstanding at January 1,		2,121,454		$	12.93		2,298,288		$	12.35
Granted		361,923			18.36		371,812			15.61
Exercised		(40,986	)		13.90		(65,637	)		(10.57	)
Canceled / forfeited		(23,920	)		15.61		(10,000	)		(14.96	)
Outstanding at March 31,		2,418,471		$	13.70		2,594,463		$	12.85
SOSAR Grants
Weighted average grant date fair value per share	$	5.64				$	4.98
Aggregate grant date fair value (in thousands)	$	2,042				$	1,850
Black-Scholes assumptions
Dividend yield		2.18	%				2.31	%
Risk free rate of return		0.99	%				1.05	%
Volatility		39.62	%				41.51	%
Expected life		6 yrs					6 yrs

Compensation expense for the periods

	March 31
In thousands	2013		2012
Three months ended	$	385	$	354

Restricted Stock Units and Performance Share Awards [Member]

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Summary of stock option activity

Units	2013			2012
Balance January 1,		847,679			788,088
Granted		153,265			162,217
Forfeited		(9,313	)		(17,100	)
Shares delivered		(97,681	)		(72,080	)
Balance March 31,		893,950			861,125

Compensation expense for the periods

	Three months ended March 31
Dollars in thousands	2013		2012
Compensation expense	$	720	$	576

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Retirement Plans and Other Post-Retirement Benefits (Tables)

3 Months Ended

Mar. 31, 2013

Retirement Plans and Other Post-Retirement Benefits [Abstract]

Schedule of pension and post retirement medical benefit plans

	Three months ended March 31
In thousands	2013			2012
Pension Benefits
Service cost	$	3,211		$	2,931
Interest cost		5,520			5,772
Expected return on plan assets		(10,903	)		(10,563	)
Amortization of prior service cost		774			613
Amortization of unrecognized loss		5,289			4,323
Subtotal	$	3,891		$	3,076
Other Benefits
Service cost	$	789		$	710
Interest cost		545			609
Expected return on plan assets		—			(113	)
Amortization of prior service cost		(125	)		(234	)
Amortization of unrecognized loss		202			179
Net periodic benefit cost	$	1,411		$	1,151

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Accounting Policies

3 Months Ended

Mar. 31, 2013

Accounting Policies [Abstract]

ACCOUNTING POLICIES

2. ACCOUNTING POLICIES

Basis of Presentation The unaudited condensed consolidated financial statements (“financial statements”) include the accounts of Glatfelter and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.

We prepared these financial statements in accordance with accounting principles generally accepted in the United States of America (“generally accepted accounting principles” or “GAAP”). In our opinion, the financial statements reflect all normal, recurring adjustments needed to present fairly our results for the interim periods. When preparing these financial statements, we have assumed that you have read the audited consolidated financial statements included in our 2012 Annual Report on Form 10-K (“2012 Form 10-K”).

Accounting Estimates The preparation of financial statements in conformity with GAAP 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 financial statements are reasonable, based upon currently available facts and known circumstances, but recognizes that actual results may differ from those estimates and assumptions.

Recently Issued Accounting Pronouncements In February 2013, the FASB issued ASU 2013-02 – “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” which requires new disclosures about items reclassified out of accumulated other comprehensive income. We adopted the requirements of this standard in the first quarter of 2013.

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Inventories (Tables)

3 Months Ended

Mar. 31, 2013

Inventories [Abstract]

Inventories, net of reserves

In thousands	March 31 2013		December 31 2012
Raw materials	$	57,689	$	61,084
In-process and finished		103,605		102,331
Supplies		59,814		58,951
Total	$	221,108	$	222,366

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Gains on Dispositions of Plant, Equipment and Timberlands, Net (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Summary for sale of timberlands and other assets
Proceeds	$ 73	$ 49
Gain	73	37
Other [Member]
Summary for sale of timberlands and other assets
Acres	0	0
Proceeds	73	49
Gain	$ 73	$ 37

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Inventories (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Inventories, net of reserves
Raw materials	$ 57,689	$ 61,084
In-process and finished	103,605	102,331
Supplies	59,814	58,951
Total	$ 221,108	$ 222,366

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Guarantor Financial Statements (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Condensed Consolidating Statement of Cash Flows
Net cash provided (used) by Operating activities	$ 15,795	$ 9,743
Investing activities
Expenditures for plant, equipment and timberlands	(31,391)	(14,152)
Proceeds from disposals of plant, equipment and timberlands, net	73	49
Repayments from (advances of) intercompany loans, net and other
Intercompany capital contributed
Other	(175)
Total investing activities	(31,493)	(14,103)
Financing activities
Payments of note offering costs	(108)
Net (repayments of) proceeds from indebtedness		(5,000)
Repurchase of common stocks		(1,204)
Payment of dividends to shareholders	(3,905)	(3,898)
(Repayments) borrowings of intercompany loans, net
Intercompany capital received
(Payments for) proceeds from share-based compensation awards and other	(586)	629
Total financing activities	(4,599)	(9,473)
Effect of exchange rate on cash	(942)	455
Net increase (decrease) in cash	(21,239)	(13,378)
Cash and cash equivalents at the beginning of period	97,679	38,277
Cash and cash equivalents at the end of period	76,440	24,899
Parent Company [Member]
Condensed Consolidating Statement of Cash Flows
Net cash provided (used) by Operating activities	7,688	(2,148)
Investing activities
Expenditures for plant, equipment and timberlands	(11,763)	(4,597)
Proceeds from disposals of plant, equipment and timberlands, net		26
Repayments from (advances of) intercompany loans, net and other	(1,100)	3,373
Intercompany capital contributed
Other	(175)
Total investing activities	(13,038)	(1,198)
Financing activities
Payments of note offering costs	(108)
Net (repayments of) proceeds from indebtedness		(5,000)
Repurchase of common stocks		(1,204)
Payment of dividends to shareholders	(3,905)	(3,898)
(Repayments) borrowings of intercompany loans, net	6,350	10,400
Intercompany capital received
(Payments for) proceeds from share-based compensation awards and other	(586)	602
Total financing activities	1,751	900
Effect of exchange rate on cash
Net increase (decrease) in cash	(3,599)	(2,446)
Cash and cash equivalents at the beginning of period	43,748	3,007
Cash and cash equivalents at the end of period	40,149	561
Guarantors [Member]
Condensed Consolidating Statement of Cash Flows
Net cash provided (used) by Operating activities	1,713	1,797
Investing activities
Expenditures for plant, equipment and timberlands	(57)
Proceeds from disposals of plant, equipment and timberlands, net	73
Repayments from (advances of) intercompany loans, net and other	(1,264)	(1,383)
Intercompany capital contributed	(90)
Other
Total investing activities	(1,338)	(1,383)
Financing activities
Payments of note offering costs
Payment of dividends to shareholders
(Repayments) borrowings of intercompany loans, net	1,100
Intercompany capital received
(Payments for) proceeds from share-based compensation awards and other
Total financing activities	1,100
Effect of exchange rate on cash
Net increase (decrease) in cash	1,475	414
Cash and cash equivalents at the beginning of period	4,311	2,894
Cash and cash equivalents at the end of period	5,786	3,308
Non Guarantors [Member]
Condensed Consolidating Statement of Cash Flows
Net cash provided (used) by Operating activities	6,394	10,094
Investing activities
Expenditures for plant, equipment and timberlands	(19,571)	(9,555)
Proceeds from disposals of plant, equipment and timberlands, net		23
Repayments from (advances of) intercompany loans, net and other
Intercompany capital contributed
Other
Total investing activities	(19,571)	(9,532)
Financing activities
Payments of note offering costs
Payment of dividends to shareholders
(Repayments) borrowings of intercompany loans, net	(5,086)	(12,390)
Intercompany capital received	90
(Payments for) proceeds from share-based compensation awards and other		27
Total financing activities	(4,996)	(12,363)
Effect of exchange rate on cash	(942)	455
Net increase (decrease) in cash	(19,115)	(11,346)
Cash and cash equivalents at the beginning of period	49,620	32,376
Cash and cash equivalents at the end of period	30,505	21,030
Adjustments/ Eliminations [Member]
Condensed Consolidating Statement of Cash Flows
Net cash provided (used) by Operating activities
Investing activities
Expenditures for plant, equipment and timberlands
Proceeds from disposals of plant, equipment and timberlands, net
Repayments from (advances of) intercompany loans, net and other	2,364	(1,990)
Intercompany capital contributed	90
Other
Total investing activities	2,454	(1,990)
Financing activities
Payments of note offering costs
Payment of dividends to shareholders
(Repayments) borrowings of intercompany loans, net	(2,364)	1,990
Intercompany capital received	(90)
(Payments for) proceeds from share-based compensation awards and other
Total financing activities	(2,454)	1,990
Effect of exchange rate on cash
Net increase (decrease) in cash
Cash and cash equivalents at the beginning of period
Cash and cash equivalents at the end of period

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Condensed Consolidated Statements of Income (unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Condensed Consolidated Statements of Income [Abstract]
Net sales	$ 405,189	$ 397,352
Energy and related sales, net	1,101	1,861
Total revenues	406,290	399,213
Costs of products sold	348,915	338,243
Gross profit	57,375	60,970
Selling, general and administrative expenses	33,487	29,967
Gains on dispositions of plant, equipment and timberlands, net	(73)	(37)
Operating income	23,961	31,040
Non-operating income (expense)
Interest expense	(3,841)	(4,269)
Interest income	102	123
Other, net	247	196
Total non-operating income (expense)	(3,492)	(3,950)
Income before income taxes	20,469	27,090
Income tax provision	4,840	8,212
Net income	$ 15,629	$ 18,878
Earnings per share
Basic	$ 0.36	$ 0.44
Diluted	$ 0.36	$ 0.43
Cash dividends declared per common share	$ 0.10	$ 0.09
Weighted average shares outstanding
Basic	42,966	42,751
Diluted	43,921	43,467

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Income Taxes (Details)	3 Months Ended
	Mar. 31, 2013
United States - Federal [Member]
Summary of tax years that remain subject to examination by major jurisdiction
Examinations not yet initiated	2009 – 2012
United States - State [Member]
Summary of tax years that remain subject to examination by major jurisdiction
Examinations not yet initiated	2008 – 2012
Examination in progress	2009
Canada [Member]
Summary of tax years that remain subject to examination by major jurisdiction
Examinations not yet initiated	2010 – 2012
Examination in progress	2007 – 2011
Germany [Member]
Summary of tax years that remain subject to examination by major jurisdiction
Examinations not yet initiated	2007, 2010 – 2012
Examination in progress	2008 – 2011
France [Member]
Summary of tax years that remain subject to examination by major jurisdiction
Examinations not yet initiated	2010 – 2012
United Kingdom [Member]
Summary of tax years that remain subject to examination by major jurisdiction
Examinations not yet initiated	2009 – 2012
Philippines [Member]
Summary of tax years that remain subject to examination by major jurisdiction
Examinations not yet initiated	2011 – 2012
Examination in progress	2010

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Condensed Consolidated Statements of Cash Flows (unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Operating activities
Net income	$ 15,629	$ 18,878
Adjustments to reconcile to net cash provided by operations :
Depreciation, depletion and amortization	15,358	17,086
Amortization of debt issue costs and original issue discount	327	304
Pension expense, net of unfunded benefits paid	3,577	2,787
Deferred income tax provision (benefit)	906	(955)
Gains on dispositions of plant, equipment and timberlands, net	(73)	(37)
Share-based compensation	1,878	1,632
Change in operating assets and liabilities
Accounts receivable	(19,475)	(13,333)
Inventories	(2,100)	(9,726)
Prepaid and other current assets	8,885	2,710
Accounts payable	2,331	(1,985)
Environmental matters	(13)	(13)
Accruals and other current liabilities	(16,428)	(14,511)
Cellulosic biofuel and alternative fuel mixture credits	5,690	7,403
Other	(697)	(497)
Net cash provided by operating activities	15,795	9,743
Investing activities
Expenditures for purchases of plant, equipment and timberlands	(31,391)	(14,152)
Proceeds from disposals of plant, equipment and timberlands, net	73	49
Other	(175)
Net cash used by investing activities	(31,493)	(14,103)
Financing activities
Net repayments of revolving credit facility		(5,000)
Payments of note offering costs	(108)
Repurchase of common stocks		(1,204)
Payments of dividends	(3,905)	(3,898)
(Payments) proceeds from share-based compensation awards and other	(586)	629
Net cash used by financing activities	(4,599)	(9,473)
Effect of exchange rate changes on cash	(942)	455
Net decrease in cash and cash equivalents	(21,239)	(13,378)
Cash and cash equivalents at the beginning of period	97,679	38,277
Cash and cash equivalents at the end of period	76,440	24,899
Cash paid (received) for:
Interest, net of amounts capitalized	145	232
Income taxes, net	$ (3,742)	$ 5,616

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Fair Value of Financial Instruments (Details Textual) (USD $) In Millions, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Fair value of financial instruments (Textual) [Abstract]
Percentage of aggregate principal amount of outstanding	5.375%	5.375%
5.375% Fixed Rate Debt [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Amount of fixed rate debt	250.0	250.0

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Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2013

Fair Value of Financial Instruments [Abstract]

Carrying value and fair value of long-term debt

	March 31, 2013				December 31, 2012
In thousands	Carrying Value		Fair Value		Carrying Value		Fair Value
Fixed-rate bonds	$	250,000	$	263,750	$	250,000	$	260,340
Variable rate debt		—		—		—		—
Total	$	250,000	$	263,750	$	250,000	$	260,340

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Financial Derivatives and Hedging Activities (Details Textual)	3 Months Ended
	Mar. 31, 2013
Not designated as hedging [Member]
Financial Derivatives and Hedging Activities (Textual) [Abstract]
Maturities of foreign currency derivative contracts not designated as hedging instruments	1 month
Designated as hedging [Member]
Financial Derivatives and Hedging Activities (Textual) [Abstract]
Maximum maturity period of foreign currency derivative contracts designated as hedging instruments	12 months
Fair value Measurements [Member]
Financial Derivatives and Hedging Activities (Textual) [Abstract]
Accumulated other comprehensive income realization period	12 months

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Segment Information

3 Months Ended

Mar. 31, 2013

Segment Reporting [Abstract]

SEGMENT INFORMATION

16. SEGMENT INFORMATION

The following table sets forth financial and other information by business unit for the period indicated:

Three months ended March 31 In millions	Specialty Papers				Composite Fibers				Advanced Airlaid Materials				Other and Unallocated						Total
	2013		2012		2013		2012		2013		2012		2013			2012			2013			2012
Net sales	$	227.1	$	223.8	$	111.8	$	111.9	$	66.2	$	61.6		—			—		$	405.2		$	397.4
Energy and related sales, net		1.1		1.9		—		—		—		—		—			—			1.1			1.9
Total revenue		228.2		225.7		111.8		111.9		66.2		61.6		—			—			406.3			399.2
Cost of products sold		195.5		188.7		90.4		91.5		59.5		55.1		3.5			2.9			348.9			338.2
Gross profit (loss)		32.7		37.0		21.5		20.4		6.7		6.5		(3.5	)		(2.9	)		57.4			61.0
SG&A		14.5		13.3		9.8		9.5		2.2		2.6		7.0			4.5			33.5			30.0
Gains on dispositions of plant, equipment and timberlands, net		—		—		—		—		—		—		(0.1	)		—			(0.1	)		—
Total operating income (loss)		18.3		23.7		11.6		10.9		4.5		3.8		(10.5	)		(7.4	)		24.0			31.0
Non-operating expense		—		—		—		—		—		—		(3.5	)		(4.0	)		(3.5	)		(4.0	)
Income (loss) before income taxes	$	18.3	$	23.7	$	11.6	$	10.9	$	4.5	$	3.8	$	(13.9	)	$	(11.4	)	$	20.5		$	27.1
Supplementary Data
Net tons sold		202.3		195.8		22.5		22.7		23.9		22.3		—			—			248.8			240.8
Depreciation, depletion and amortization	$	8.3	$	8.9	$	4.6	$	6.0	$	2.2	$	2.2		0.2			—		$	15.4		$	17.1
Capital expenditures		8.6		4.6		17.5		9.1		2.1		0.5		3.2			—			31.4			14.2

The sum of individual amounts set forth above may not agree to the consolidated financial statements included herein due to rounding.

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 Business Unit Performance table.

Management evaluates results of operations of the business units before pension expense, certain corporate level costs, and the effects of certain gains or losses not considered to be related to the core business operations. Management believes that this is a more meaningful representation of the operating performance of its core businesses, the profitability of business units and the extent of cash flow generated from these core operations. Such amounts are presented under the caption “Other and Unallocated.” This presentation is 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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Financial Derivatives and Hedging Activities (Tables)

3 Months Ended

Mar. 31, 2013

Derivative [Line Items]

Fair values of derivative instruments

In thousands	March 31 2013		December 31 2012		March 31 2013		December 31 2012
Balance sheet caption	Prepaid Expenses and Other Current Assets				Other Current Liabilities
Designated as hedging:
Forward foreign currency exchange contracts	$	293	$	107	$	230	$	751
Not designated as hedging:
Forward foreign currency exchange contracts	$	50	$	159	$	18	$	16

Income or (loss) from derivative instruments recognized in results of operations

	Three months ended March 31
In thousands	2013			2012
Designated as hedging:
Forward foreign currency exchange contracts:
Effective portion – cost of products sold	$	(70	)	$	572
Ineffective portion – other – net		79			140
Not designated as hedging:
Forward foreign currency exchange contracts:
Other – net	$	304		$	(1,070	)

Fair value amounts recorded as a component of accumulated other comprehensive income

In thousands	2013			2012
Balance at January 1,	$	(599	)	$	1,649
Deferred (losses) gains on cash flow hedges		541			(568	)
Reclassified to earnings		70			(572	)
Balance at March 31,	$	12		$	509

Designated as hedging [Member]

Derivative [Line Items]

Outstanding derivatives used to hedge foreign exchange risks

In thousands	March 31 2013		December 31 2012
Derivative	Buy Notional
Sell / Buy
Euro / U.S. dollar		25,929		27,003
U.S. dollar / Canadian dollar		12,528		12,369

Not designated as hedging [Member]

Derivative [Line Items]

Outstanding derivatives used to hedge foreign exchange risks

In thousands	March 31 2013		December 31 2012
Derivative	Sell Notional
Sell / Buy
Euro / U.S. dollar		13,000		13,000
Euro / British Pound		4,000		4,000
Canadian dollar / U.S. dollar		2,000		2,000
U.S. dollar / Euro		—		2,000
U.S. dollar / British Pound		2,000		—

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Subsequent Events

3 Months Ended

Mar. 31, 2013

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

18. SUBSEQUENT EVENTS

IKB Loan On April 11, 2013, Glatfelter Gernsbach GmbH & Co. KG (“Gernsbach”), a wholly-owned subsidiary of ours, entered into an agreement with IKB Deutsche Industriebank AG, Düsseldorf (“IKB”), pursuant to which Gernsbach borrowed from IKB approximately €42.7 million aggregate principal amount (the “IKB Loan”).

The IKB Loan is repayable in 32 quarterly installments beginning on June 30, 2015 and ending on March 31, 2023 and will bear interest at a rate of 2.05% per annum. Interest on the IKB Loan or portion thereof is payable quarterly in each year of the term of the loan with interest accruing from the date the loan or portion thereof is drawn.

Gernsbach is permitted to use borrowings under the Loan Contract to finance certain capital expenditures and to make other related investments at its manufacturing facility.

The IKB Loan provides for representations, warranties and covenants customary for financings of this type. The financial covenants contained in the IBK Loan, which relate to the minimum ratio of consolidated EBITDA to consolidated interest expense and the maximum ratio of consolidated total net debt to consolidated adjusted EBITDA, will be calculated by reference to our Amended and Restated Credit Agreement, dated November 21, 2011.

Acquisition On April 30, 2013, we completed the acquisition of Dresden Papier GmbH (“Dresden”) from Fortress Paper Ltd. for approximately $210 million, subject to post-closing working capital adjustments. Dresden, based in Heidenau, Germany, is the leading global supplier of nonwoven wallpaper base materials, and is a major supplier to most of the world’s largest wallpaper manufacturers. In 2012, Dresden’s revenues were $149.7 million and it employs approximately 146 people at its state-of-the-art, 60,000 metric-ton-capacity manufacturing facility. We financed the acquisition through a combination of cash on hand and borrowings under our Revolving Credit Facility.

Disclosure of additional quantitative financial information is not practicable due to the timing of the closing of the acquisition.

Dresden now operates as part of our Composite Fibers business unit, which manufactures fiber-based products for growing global niche markets, including filtration papers for tea and single serve coffee applications, metallized papers, composite laminates, and technical specialties.

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Commitments, Contingencies and Legal Proceedings (Details) (USD $)	3 Months Ended
	Mar. 31, 2013 OperableUnit	Jan. 31, 2008 Respondents
Commitments Contingencies and Legal Proceedings (Textual) [Abstract]
Aggregate of response actions response costs and NRDs	$ 1,000,000,000
Number of operable units	5
Number of Respondents		2
Cost of response incurred by government	4,280,000
Estimated cost of remediation made by government to all parties	1,000,000,000
Reasonable outside estimate for cost of remediation made by government to all parties	1,500,000,000
Estimated future cost of work yet to be done	360,000,000
Annual estimated cost rate seeks by government	70,000,000
Initial minimum amount of NRD assessment	176,000,000
Initial maximum amount of NRD assessment	333,000,000
Revised minimum amount of NRD assessment	287,000,000
Revised maximum amount of NRD assessment	423,000,000
The limitation period for the NRD's claims	3 years
Reserve for claiming liability	16,400,000
Reserve for environmental liability, current portion	100,000
Maximum estimated percentage of discharge	27.00%
Maximum estimated cost related to Fox River Matter	$ 275,000,000
Period over which estimated cost accrued	10 years

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Organization

3 Months Ended

Mar. 31, 2013

Organization [Abstract]

ORGANIZATION

1. ORGANIZATION

P. H. Glatfelter Company and subsidiaries (“Glatfelter”) is a manufacturer of specialty papers and fiber-based engineered materials. Headquartered in York, Pennsylvania, our manufacturing facilities are located in Spring Grove, Pennsylvania; Chillicothe and Freemont, Ohio; Gatineau, Quebec, Canada; Lydney, England; Caerphilly, Wales; Gernsbach and Falkenhagen, Germany; Scaër, France; and the Philippines. Our products are marketed worldwide, either through wholesale paper merchants, brokers and agents, or directly to customers.

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Condensed Consolidated Statements of Comprehensive Income (unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Condensed Consolidated Statements of Comprehensive Income [Abstract]
Net income	$ 15,629	$ 18,878
Foreign currency translation adjustments	(11,957)	9,454
Net change in:
Deferred gains (losses) on cash flow hedges, net of taxes of $(170) and $320, respectively	441	(820)
Unrecognized retirement obligations, net of taxes of $(2,313) and $(1,864), respectively	3,827	3,017
Other comprehensive income (loss)	(7,689)	11,651
Comprehensive income	$ 7,940	$ 30,529

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Asset Retirement Obligation

3 Months Ended

Mar. 31, 2013

Asset Retirement Obligation [Abstract]

ASSET RETIREMENT OBLIGATION

11. ASSET RETIREMENT OBLIGATION

During 2008, we recorded $11.5 million, net present value, of asset retirement obligations related to the legal requirement to close several lagoons at the Spring Grove, PA facility. Historically, lagoons were used to dispose of residual waste material. Closure of the lagoons, which is expected to be completed in 2016, will be accomplished by filling the lagoons, installing a non-permeable liner which will be covered with soil to construct the required cap over the lagoons. The amount referred to above, in addition to upward revisions, were accrued with a corresponding increase in the carrying value of the property, equipment and timberlands caption on the consolidated balance sheet. The amount capitalized is being amortized as a charge to operations on the straight-line basis in relation to the expected closure period. Following is a summary of activity recorded during the first quarters of 2013 and 2012:

In thousands	2013			2012
Balance at January 1,	$	8,882		$	9,679
Accretion		82			122
Payments		(662	)		(207	)
Balance at March 31,	$	8,302		$	9,594

At March 31, 2013 and December 31, 2012, $3.0 million and $3.6 million, respectively, is recorded in the accompanying condensed consolidated balance sheets under the caption “Other current liabilities” and the balance is recorded under the caption “Other long-term liabilities.”

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Document and Entity Information	3 Months Ended
	Mar. 31, 2013	Apr. 30, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	GLATFELTER P H CO
Entity Central Index Key	0000041719
Document Type	10-Q
Document Period End Date	Mar. 31, 2013
Amendment Flag	false
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q1
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		42,917,912

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Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2013

Fair Value of Financial Instruments [Abstract]

FAIR VALUE OF FINANCIAL INSTRUMENTS

12. FAIR VALUE OF FINANCIAL INSTRUMENTS

The amounts reported on the condensed consolidated balance sheets for cash and cash equivalents and accounts receivable approximate fair value. The following table sets forth carrying value and fair value of long-term debt:

	March 31, 2013				December 31, 2012
In thousands	Carrying Value		Fair Value		Carrying Value		Fair Value
Fixed-rate bonds	$	250,000	$	263,750	$	250,000	$	260,340
Variable rate debt		—		—		—		—
Total	$	250,000	$	263,750	$	250,000	$	260,340

As of March 31, 2013, and December 31, 2012, we had $250.0 million of 5.375% fixed rate debt. These bonds are publicly registered, but thinly traded. Accordingly, the values set forth above are based on debt instruments with similar characteristics (Level 2). The fair value of financial derivatives is set forth below in Note 13.

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Condensed Consolidated Statements of Comprehensive Income (Parenthetical) (unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Condensed Consolidated Statements of Comprehensive Income [Abstract]
Taxes on deferred losses on cash flow hedges	$ (170)	$ 320
Unrecognized retirement obligations	$ (2,313)	$ (1,864)

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Income Taxes

3 Months Ended

Mar. 31, 2013

Income Taxes [Abstract]

INCOME TAXES

6. 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.

As of March 31, 2013 and December 31, 2012, we had $26.5 million and $30.4 million of gross unrecognized tax benefits. As of March 31, 2013, if such benefits were to be recognized, approximately $26.5 million would be recorded as a component of income tax expense, thereby affecting our effective tax rate.

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, by major jurisdiction, tax years that remain subject to examination:

	Open Tax Years
Jurisdiction	Examinations not yet initiated		Examination in progress
United States
Federal		2009 - 2012	N/A
State		2008 - 2012	2009
Canada (1)		2010 - 2012	2007 - 2011
Germany (1)		2007, 2010 - 2012	2008 - 2011
France		2010 - 2012	N/A
United Kingdom		2009 - 2012	N/A
Philippines		2011 - 2012	2010

(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 decrease within the next twelve months by a range of zero to $14.0 million. Substantially all of this range relates to tax positions taken in the U.S., the U.K. and Germany

We recognize interest and penalties related to uncertain tax positions as income tax expense. During the first quarter of 2013, we recorded a $0.2 million benefit from a reduction in the amount of interest payable. For the first quarter of 2012, we recognized $0.1 million of interest expense. As of March 31, 2013 and December 31, 2012, we had recognized a liability for interest of $1.2 million and $1.4 million, respectively. We did not record any penalties associated with uncertain tax positions during the first quarters of 2013 or 2012.

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Accumulated Other Comprehensive Income

3 Months Ended

Mar. 31, 2013

Accumulated Other Comprehensive Income [Abstract]

ACCUMULATED OTHER COMPREHENSIVE INCOME

5. ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table sets details of the changes in accumulated other comprehensive income (losses) for the three months ended March 31, 2013 and 2012.

in thousands	Currency Translation Adjustments			Unrealized gain (loss) on derivatives			Change in pensions			Change in other postretirement defined benefit plans			Total
Balance at January 1, 2013	$	316		$	(425	)	$	(159,560	)	$	(4,297	)	$	(163,966	)
Other comprehensive income before reclassifications (net of tax)		(11,957	)		390			—			—			(11,567	)
Amounts reclassified from accumulated other comprehensive income (net of tax)		—			51			3,779			48			3,878
Net current period other comprehensive income (loss)		(11,957	)		441			3,779			48			(7,689	)
Balance at March 31, 2013	$	(11,641	)	$	16		$	(155,781	)	$	(4,249	)	$	(171,655	)
Balance at January 1, 2012	$	(11,043	)	$	1,185		$	(153,002	)	$	(3,881	)	$	(166,741	)
Other comprehensive income before reclassifications (net of tax)		9,454			(409	)		—			—			9,045
Amounts reclassified from accumulated other comprehensive income (net of tax)		—			(411	)		3,051			(34	)		2,606
Net current period other comprehensive income (loss)		9,454			(820	)		3,051			(34	)		11,651
Balance at March 31, 2012	$	(1,589	)	$	365		$	(149,951	)	$	(3,915	)	$	(155,090	)

The following table sets forth reclassifications out of accumulated other comprehensive income for the three months ended March 31, 2013 and 2012.

	Three months ended March 31
In thousands	2013			2012
Description							Line Item in Statements of Income
Cash Flow Hedges (Note 13)
Gains (losses) on cash flow hedges	$	70		$	(572	)	Costs of products sold
		(19	)		161		Income tax provision
Net of tax		51			(411	)
Retirement Plans and Other Post Retirement Benefits (Note 8)
Amortization of deferred benefit pension plan items
Prior service costs		613			506		Costs of products sold
		161			107		Selling, general and administrative
Actuarial losses		4,114			3,490		Costs of products sold
		1,175			833		Selling, general and administrative
		6,063			4,936
		(2,284	)		(1,885	)	Income tax provision
Net of tax		3,779			3,051
Amortization of deferred benefit other plan items
Prior service costs		(100	)		(190	)	Costs of products sold
		(25	)		(44	)	Selling, general and administrative
Actuarial losses		155			138		Costs of products sold
		47			41		Selling, general and administrative
		77			(55	)
		(29	)		21		Income tax provision
Net of tax		48			(34	)
Total reclassifications, net of tax	$	3,878		$	2,606

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Guarantor Financial Statements

3 Months Ended

Mar. 31, 2013

Guarantor Financial Statements [Abstract]

GUARANTOR FINANCIAL STATEMENTS

17. GUARANTOR FINANCIAL STATEMENTS

Our 5.375% Notes are 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, and Glatfelter Holdings, LLC. The guarantees are subject to certain customary release provisions including i) the designation of such subsidiary as an unrestricted or excluded subsidiary; (ii) in connection with any sale or disposition of the capital stock of the subsidiary guarantor; and (iii) upon our exercise of our legal defeasance option or our covenant defeasance option, all of which are more fully described in the Indenture dated as of October 3, 2012 among us, the Guarantors and US Bank National Association, as Trustee, relating to the 5.375% Notes. The following presents our condensed consolidating statements of income, including comprehensive income, and cash flows for the three months ended March 31, 2013 and 2012 and our condensed consolidating balance sheets as of March 31, 2013 and December 31, 2012. 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 Statements of Income and Comprehensive Income for the

three months ended March 31, 2013

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	227,116		$	15,016		$	178,072		$	(15,015	)	$	405,189
Energy and related sales, net		1,101			—			—			—			1,101
Total revenues		228,217			15,016			178,072			(15,015	)		406,290
Costs of products sold		200,469			13,407			149,968			(14,929	)		348,915
Gross profit		27,748			1,609			28,104			(86	)		57,375
Selling, general and administrative expenses		20,602			540			12,345			—			33,487
Gains on dispositions of plant, equipment and timberlands, net		—			(73	)		—			—			(73	)
Operating income		7,146			1,142			15,759			(86	)		23,961
Other non-operating income (expense)
Interest expense		(3,841	)		—			—			—			(3,841	)
Interest income		(760	)		1,658			(796	)		—			102
Other, net		12,934			60			740			(13,487	)		247
Total other non-operating income (expense)		8,333			1,718			(56	)		(13,487	)		(3,492	)
Income (loss) before income taxes		15,479			2,860			15,703			(13,573	)		20,469
Income tax provision (benefit)		(150	)		772			4,255			(37	)		4,840
Net income (loss)		15,629			2,088			11,448			(13,536	)		15,629
Other comprehensive income		(7,689	)		(4,608	)		(7,978	)		12,586			(7,689	)
Comprehensive income	$	7,940		$	(2,520	)	$	3,470		$	(950	)	$	7,940

Condensed Consolidating Statements of Income and Comprehensive Income for the

three months ended March 31, 2012

In thousands	Parent Company			Guarantors		Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	223,802		$	15,370	$	173,561		$	(15,381	)	$	397,352
Energy and related sales, net		1,861			—		—			—			1,861
Total revenues		225,663			15,370		173,561			(15,381	)		399,213
Costs of products sold		192,876			13,948		146,742			(15,323	)		338,243
Gross profit		32,787			1,422		26,819			(58	)		60,970
Selling, general and administrative expenses		17,036			739		12,192			—			29,967
Gains on dispositions of plant, equipment and timberlands, net		(26	)		—		(11	)		—			(37	)
Operating income		15,777			683		14,638			(58	)		31,040
Other non-operating income (expense)
Interest expense		(4,305	)		—		36			—			(4,269	)
Interest income		(650	)		1,642		(869	)		—			123
Other, net		11,189			89		473			(11,555	)		196
Total other non-operating income (expense)		6,234			1,731		(360	)		(11,555	)		(3,950	)
Income (loss) before income taxes		22,011			2,414		14,278			(11,613	)		27,090
Income tax provision (benefit)		3,133			1,093		4,011			(25	)		8,212
Net income (loss)		18,878			1,321		10,267			(11,588	)		18,878
Other comprehensive income		11,651			—		8,634			(8,634	)		11,651
Comprehensive income	$	30,529		$	1,321	$	18,901		$	(20,222	)	$	30,529

Condensed Consolidating Balance Sheet as of

March 31, 2013

In thousands	Parent Company		Guarantors		Non Guarantors		Adjustments/ Eliminations			Consolidated
Assets
Cash and cash equivalents	$	40,149	$	5,786	$	30,505	$	—		$	76,440
Other current assets		237,981		401,248		227,565		(442,455	)		424,339
Plant, equipment and timberlands, net		240,695		6,089		370,871		—			617,655
Other assets		793,462		158,225		44,005		(889,505	)		106,187
Total assets	$	1,312,287	$	571,348	$	672,946	$	(1,331,960	)	$	1,224,621
Liabilities and Shareholders’ Equity
Current liabilities	$	359,376	$	27,364	$	279,633	$	(437,252	)	$	229,121
Long-term debt		250,000		—		—		—			250,000
Deferred income taxes		36,734		2,207		39,976		(19,664	)		59,253
Other long-term liabilities		121,554		6,442		10,105		3,523			141,624
Total liabilities		767,664		36,013		329,714		(453,393	)		679,998
Shareholders’ equity		544,623		535,335		343,232		(878,567	)		544,623
Total liabilities and shareholders’ equity	$	1,312,287	$	571,348	$	672,946	$	(1,331,960	)	$	1,224,621

Condensed Consolidating Balance Sheet as of

December 31, 2012

In thousands	Parent Company		Guarantors		Non Guarantors		Adjustments/ Eliminations			Consolidated
Assets
Cash and cash equivalents	$	43,748	$	4,311	$	49,620	$	—		$	97,679
Other current assets		204,961		387,627		214,568		(385,977	)		421,179
Plant, equipment and timberlands, net		241,969		6,204		373,013		—			621,186
Other assets		787,348		160,741		45,133		(890,281	)		102,941
Total assets	$	1,278,026	$	558,883	$	682,334	$	(1,276,258	)	$	1,242,985
Liabilities and Shareholders’ Equity
Current liabilities	$	337,761	$	6,041	$	291,547	$	(384,441	)	$	250,908
Long-term debt		250,000		—		—		—			250,000
Deferred income taxes		34,604		3,691		40,972		(17,221	)		62,046
Other long-term liabilities		115,982		10,602		11,093		2,675			140,352
Total liabilities		738,347		20,334		343,612		(398,987	)		703,306
Shareholders’ equity		539,679		538,549		338,722		(877,271	)		539,679
Total liabilities and shareholders’ equity	$	1,278,026	$	558,883	$	682,334	$	(1,276,258	)	$	1,242,985

Condensed Consolidating Statement of Cash Flows for the three

months ended March 31, 2013

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net cash provided (used) by
Operating activities	$	7,688		$	1,713		$	6,394		$	—		$	15,795
Investing activities
Expenditures for plant, equipment and timberlands		(11,763	)		(57	)		(19,571	)		—			(31,391	)
Proceeds from disposal plant, equipment and timberlands, net		—			73			—			—			73
Repayments from (advances of) intercompany loans, net and other		(1,100	)		(1,264	)		—			2,364			—
Intercompany capital contributed		—			(90	)		—			90			—
Other		(175	)		—			—			—			(175	)
Total investing activities		(13,038	)		(1,338	)		(19,571	)		2,454			(31,493	)
Financing activities
Payments of note offering costs		(108	)		—			—			—			(108	)
Payment of dividends to shareholders		(3,905	)		—			—			—			(3,905	)
(Repayments) borrowings of intercompany loans, net		6,350			1,100			(5,086	)		(2,364	)		—
Intercompany capital received		—			—			90			(90	)		—
Payments for share based compensation awards and other		(586	)		—			—			—			(586	)
Total financing activities		1,751			1,100			(4,996	)		(2,454	)		(4,599	)
Effect of exchange rate on cash		—			—			(942	)		—			(942	)
Net increase (decrease) in cash		(3,599	)		1,475			(19,115	)		—			(21,239	)
Cash at the beginning of period		43,748			4,311			49,620			—			97,679
Cash at the end of period	$	40,149		$	5,786		$	30,505		$	—		$	76,440

Condensed Consolidating Statement of Cash Flows for the three

months ended March 31, 2012

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net cash provided (used) by
Operating activities	$	(2,148	)	$	1,797		$	10,094		$	—		$	9,743
Investing activities
Expenditures for plant, equipment and timberlands		(4,597	)		—			(9,555	)		—			(14,152	)
Proceeds from disposal plant, equipment and timberlands, net		26			—			23			—			49
Repayments from (advances of) intercompany loans, net		3,373			(1,383	)		—			(1,990	)		—
Total investing activities		(1,198	)		(1,383	)		(9,532	)		(1,990	)		(14,103	)
Financing activities
Net (repayments of) proceeds from indebtedness		(5,000	)		—			—			—			(5,000	)
Payment of dividends to shareholders		(3,898	)		—			—			—			(3,898	)
Repurchases of common stock		(1,204	)		—			—			—			(1,204	)
(Repayments) borrowings of intercompany loans, net		10,400			—			(12,390	)		1,990			—
Proceeds from stock options exercised and other		602			—			27			—			629
Total financing activities		900			—			(12,363	)		1,990			(9,473	)
Effect of exchange rate on cash		—			—			455			—			455
Net increase (decrease) in cash		(2,446	)		414			(11,346	)		—			(13,378	)
Cash at the beginning of period		3,007			2,894			32,376			—			38,277
Cash at the end of period	$	561		$	3,308		$	21,030			—		$	24,899

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Financial Derivatives and Hedging Activities

3 Months Ended

Mar. 31, 2013

Financial Derivatives and Hedging Activities [Abstract]

FINANCIAL DERIVATIVES AND HEDGING ACTIVITIES

13. FINANCIAL DERIVATIVES AND HEDGING ACTIVITIES

As part of our overall risk management practices, we enter into financial derivatives primarily designed to either i) hedge foreign currency risks associated with forecasted transactions – “cash flow hedges”; or ii) mitigate the impact that changes in currency exchange rates have on intercompany financing transactions and foreign currency denominated receivables and payables – “foreign currency hedges.”

Derivatives Designated as Hedging Instruments – Cash Flow Hedges We use currency forward contracts as cash flow hedges to manage our exposure to fluctuations in the currency exchange rates on certain forecasted production costs expected to be incurred over a maximum of twelve months. Currency forward contracts involve fixing the EUR-USD exchange rate or USD-CAD for delivery of a specified amount of foreign currency on a specified date.

We designate certain currency forward contracts as cash flow hedges of forecasted raw material purchases or certain production costs with exposure to changes in foreign currency exchange rates. The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges of foreign exchange risk is deferred as a component of accumulated other comprehensive income in the accompanying condensed consolidated balance sheets and is subsequently reclassified into costs of products sold in the period that inventory produced using the hedged transaction affects earnings. The ineffective portion of the change in fair value of the derivative is recognized directly to earnings and reflected in the accompanying condensed consolidated statements of income as non-operating income (expense) under the caption “Other-net.”

We had the following outstanding derivatives that were used to hedge foreign exchange risks associated with forecasted transactions and designated as hedging instruments:

In thousands	March 31 2013		December 31 2012
Derivative	Buy Notional
Sell / Buy
Euro / U.S. dollar		25,929		27,003
U.S. dollar / Canadian dollar		12,528		12,369

These contracts have maturities of twelve months or less.

Derivatives Not Designated as Hedging Instruments – Foreign Currency Hedges We also enter into forward foreign exchange contracts to mitigate the impact changes in currency exchange rates have on balance sheet monetary assets and liabilities. None of these contracts are designated as hedges for financial accounting purposes and, accordingly, changes in value of the foreign exchange forward contracts and in the offsetting underlying on-balance-sheet transactions are reflected in the accompanying condensed consolidated statements of income under the caption “Other – net.”

The following sets forth derivatives used to mitigate the impact changes in currency exchange rates have on balance sheet monetary assets and liabilities:

In thousands	March 31 2013		December 31 2012
Derivative	Sell Notional
Sell / Buy
Euro / U.S. dollar		13,000		13,000
Euro / British Pound		4,000		4,000
Canadian dollar / U.S. dollar		2,000		2,000
U.S. dollar / Euro		—		2,000
U.S. dollar / British Pound		2,000		—

These contracts have maturities of one month from the date originally entered into.

Fair Value Measurements The following table summarizes the fair values of derivative instruments for the period indicated and the line items in the accompanying condensed consolidated balance sheets where the instruments are recorded:

In thousands	March 31 2013		December 31 2012		March 31 2013		December 31 2012
Balance sheet caption	Prepaid Expenses and Other Current Assets				Other Current Liabilities
Designated as hedging:
Forward foreign currency exchange contracts	$	293	$	107	$	230	$	751
Not designated as hedging:
Forward foreign currency exchange contracts	$	50	$	159	$	18	$	16

The amounts set forth in the table above represent the net asset or liability giving effect to rights of offset with each counterparty.

The following table summarizes the amount of income or (loss) from derivative instruments recognized in our results of operations for the periods indicated and the line items in the accompanying condensed consolidated statements of income where the results are recorded:

	Three months ended March 31
In thousands	2013			2012
Designated as hedging:
Forward foreign currency exchange contracts:
Effective portion – cost of products sold	$	(70	)	$	572
Ineffective portion – other – net		79			140
Not designated as hedging:
Forward foreign currency exchange contracts:
Other – net	$	304		$	(1,070	)

The impact of activity not designated as hedging was substantially all offset by the remeasurement of the underlying on-balance sheet item.

The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

The fair values of the foreign exchange forward contracts are considered to be Level 2. Foreign currency forward contracts are valued using foreign currency forward and interest rate curves. The fair value of each contract is determined by comparing the contract rate to the forward rate and discounting to present value. Contracts in a gain position are recorded in the condensed consolidated balance sheets under the caption “Prepaid expenses and other current assets” and the value of contracts in a loss position is recorded under the caption “Other current liabilities.”

A rollforward of fair value amounts recorded as a component of accumulated other comprehensive income is as follows:

In thousands	2013			2012
Balance at January 1,	$	(599	)	$	1,649
Deferred (losses) gains on cash flow hedges		541			(568	)
Reclassified to earnings		70			(572	)
Balance at March 31,	$	12		$	509

We expect substantially all of the amounts recorded as a component of accumulated other comprehensive income will be realized in results of operations within the next twelve months and the amount ultimately recognized will vary depending on actual market rates.

Credit risk related to derivative activity arises in the event a counterparty fails to meet its obligations to us. This exposure is generally limited to the amounts, if any, by which the counterparty’s obligations exceed our obligation to them. Our policy is to enter into contracts only with financial institutions which meet certain minimum credit ratings.

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Inventories

3 Months Ended

Mar. 31, 2013

Inventories [Abstract]

INVENTORIES

9. INVENTORIES

Inventories, net of reserves, were as follows:

In thousands	March 31 2013		December 31 2012
Raw materials	$	57,689	$	61,084
In-process and finished		103,605		102,331
Supplies		59,814		58,951
Total	$	221,108	$	222,366

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Financial Derivatives and Hedging Activities (Details) (Designated as hedging [Member], Forward foreign currency exchange contracts [Member]) In Thousands, unless otherwise specified	Mar. 31, 2013 Euro / U.S. dollar [Member] EUR (€)	Dec. 31, 2012 Euro / U.S. dollar [Member] EUR (€)	Mar. 31, 2013 U.S. dollar / Canadian dollar [Member] USD ($)	Dec. 31, 2012 U.S. dollar / Canadian dollar [Member] USD ($)
Sell / Buy
Buy Notional	€ 25,929	€ 27,003	$ 12,528	$ 12,369

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Stock-Based Compensation

3 Months Ended

Mar. 31, 2013

Stock-Based Compensation [Abstract]

STOCK-BASED COMPENSATION

7. STOCK-BASED COMPENSATION

The P. H. Glatfelter Amended and Restated Long Term Incentive Plan (the “LTIP”) provides for the issuance of up to 5,500,000 shares of Glatfelter common stock to eligible participants in the form of restricted stock units, restricted stock awards, non-qualified stock options, performance shares, incentive stock options and performance units.

Since the approval of the LTIP, we have issued to eligible participants restricted stock units, performance share awards and stock only stock appreciation rights (“SOSARs”).

Restricted Stock Units (“RSU”) and Performance Share Awards (“PSAs”) Awards of RSUs and PSAs are made under our LTIP. The vesting of RSUs is based solely on the passage of time, generally on a graded scale over a three, four, and five-year period. PSAs are issued annually and cliff vest on December 31 of the third year following the grant assuming the achievement of predetermined, three-year cumulative performance targets. The performance measures include a minimum, target and maximum performance level providing the grantees an opportunity to receive more or less shares than targeted depending on actual financial performance. For both RSUs and PSAs, the grant date fair value of the awards, which is equal to the closing price per common share on the date of the award, is used to determine the amount of expense to be recognized over the applicable service period. Settlement of RSUs and PSAs will be made in shares of our common stock currently held in treasury.

The following table summarizes RSU and PSA activity during the first three months of 2013 and 2012:

Units	2013			2012
Balance January 1,		847,679			788,088
Granted		153,265			162,217
Forfeited		(9,313	)		(17,100	)
Shares delivered		(97,681	)		(72,080	)
Balance March 31,		893,950			861,125

The amount granted in 2013 and 2012 includes PSAs of 151,955 and 161,083, respectively, exclusive of reinvested dividends. The following table sets forth aggregate RSU and PSA compensation expense for the periods indicated:

	Three months ended March 31
Dollars in thousands	2013		2012
Compensation expense	$	720	$	576

Stock Only Stock Appreciation Rights (SOSARs) Under terms of the SOSAR, a recipient receives the right to 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 exercise price. The SOSARs vest ratably over a three year period and have a term of ten years.

The following table sets forth information related to outstanding SOSARS.

	2013					2012
SOSARS	Shares			Wtd Avg Exercise Price		Shares			Wtd Avg Exercise Price
Outstanding at January 1,		2,121,454		$	12.93		2,298,288		$	12.35
Granted		361,923			18.36		371,812			15.61
Exercised		(40,986	)		13.90		(65,637	)		(10.57	)
Canceled / forfeited		(23,920	)		15.61		(10,000	)		(14.96	)
Outstanding at March 31,		2,418,471		$	13.70		2,594,463		$	12.85
SOSAR Grants
Weighted average grant date fair value per share	$	5.64				$	4.98
Aggregate grant date fair value (in thousands)	$	2,042				$	1,850
Black-Scholes assumptions
Dividend yield		2.18	%				2.31	%
Risk free rate of return		0.99	%				1.05	%
Volatility		39.62	%				41.51	%
Expected life		6 yrs					6 yrs

The following table sets forth SOSAR compensation expense for the periods indicated:

	March 31
In thousands	2013		2012
Three months ended	$	385	$	354

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Retirement Plans and Other Post-Retirement Benefits

3 Months Ended

Mar. 31, 2013

Retirement Plans and Other Post-Retirement Benefits [Abstract]

RETIREMENT PLANS AND OTHER POST-RETIREMENT BENEFITS

8. RETIREMENT PLANS AND OTHER POST-RETIREMENT BENEFITS

The following table provides information with respect to the net periodic costs of our pension and post retirement medical benefit plans.

	Three months ended March 31
In thousands	2013			2012
Pension Benefits
Service cost	$	3,211		$	2,931
Interest cost		5,520			5,772
Expected return on plan assets		(10,903	)		(10,563	)
Amortization of prior service cost		774			613
Amortization of unrecognized loss		5,289			4,323
Subtotal	$	3,891		$	3,076
Other Benefits
Service cost	$	789		$	710
Interest cost		545			609
Expected return on plan assets		—			(113	)
Amortization of prior service cost		(125	)		(234	)
Amortization of unrecognized loss		202			179
Net periodic benefit cost	$	1,411		$	1,151

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Long-Term Debt

3 Months Ended

Mar. 31, 2013

Long-Term Debt [Abstract]

LONG-TERM DEBT

10. LONG-TERM DEBT

Long-term debt is summarized as follows:

In thousands	March 31 2013		December 31 2012
Revolving credit facility, due Nov. 2016	$	—	$	—
5.375% Notes, due Oct. 2020		250,000		250,000
Total long-term debt		250,000		250,000
Less current portion		—		—
Long-term debt, net of current portion	$	250,000	$	250,000

On November 21, 2011, we entered into an amendment to our revolving credit agreement with a consortium of banks (the “Revolving Credit Facility”) which increased the amount available for borrowing to $350 million, extended the maturity of the facility to November 21, 2016, and instituted a lower interest rate pricing grid.

For all U.S. dollar denominated borrowings under the Revolving Credit Facility, the borrowing rate is, at our option, (a) the bank’s base rate which is equal to the greater of i) the prime rate; ii) the federal funds rate plus 50 basis points plus an applicable spread ranging from 25 basis points to 125 basis points based on our corporate credit ratings determined by Standard & Poor’s Rating Services and Moody’s Investor Service, Inc. (the “Corporate Credit Rating”); or iii) the daily Euro-rate plus 100 basis points; or (b) the daily Euro-rate plus an applicable margin ranging from 125 basis points to 225 basis points based on the Corporate Credit Rating. For non-US dollar denominated borrowings, interest is based on (b) above.

The Revolving Credit Facility 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, limit certain intercompany financing arrangements, make acquisitions and engage in mergers or consolidations. We are also required to comply with specified financial tests and ratios including: i) maximum net debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) ratio; ii) a consolidated EBITDA to interest expense ratio; and iii) beginning December 31, 2015, a minimum liquidity ratio. A breach of these requirements would give rise to certain remedies under the Revolving Credit Facility, among which are the termination of the agreement and accelerated repayment of the outstanding borrowings plus accrued and unpaid interest under the credit facility.

On October 3, 2012, we completed a private placement offering of $250.0 million aggregate principal amount of 5.375% Senior Notes due 2020 (the “5.375% Notes”). The 5.375% Notes are fully and unconditionally guaranteed, jointly and severally, by PHG Tea Leaves, Inc., Mollanvick, Inc., The Glatfelter Pulp Wood Company, and Glatfelter Holdings, LLC (the “Guarantors”).

Unamortized deferred debt issuance costs related to the offering of the 5.375% Notes totaled $4.7 million and $4.8 million as of March 31, 2013 and December 31, 2012, respectively, and are reported under the caption “Other assets” in the accompanying condensed consolidated balance sheets. The deferred costs are being amortized on a straight line basis over the life of the 5.375% Notes.

Interest on the 5.375% Notes is payable semiannually in arrears on April 15 and October 15.

The 5.375% Notes are redeemable, in whole or in part, at anytime on or after October 15, 2016 at the redemption prices specified in the applicable Indenture. Prior to October 15, 2016, we may redeem some or all of the Notes at a “make-whole” premium as specified in the Indenture. These Notes and the guarantees of the notes are senior obligations of the Company and the Guarantors, respectively, rank equally in right of payment with future senior indebtedness of the Company and the Guarantors and will mature on October 15, 2020.

The 5.375% Notes contain cross default provisions that could result in all such notes becoming due and payable in the event of a failure to repay debt outstanding under the Revolving Credit Agreement at maturity or a default under the Revolving Credit Agreement that accelerates the debt outstanding thereunder. As of March 31, 2013, we met all of the requirements of our debt covenants.

As of March 31, 2013 and December 31, 2012, we had $5.2 million of letters of credit issued to us by certain financial institutions. The letters of credit, which reduce amounts available under our revolving credit facility, primarily provide financial assurances for the benefit of certain state workers compensation insurance agencies in conjunction with our self-insurance program. We bear the credit risk on this amount to the extent that we do not comply with the provisions of certain agreements. No amounts are outstanding under the letters of credit.

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Financial Derivatives and Hedging Activities (Details 4) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Fair value amounts recorded as a component of accumulated other comprehensive income
Beginning Balance	$ (599)	$ 1,649
Deferred (losses) gains on cash flow hedges	541	(568)
Reclassified to earnings	70	(572)
Ending Balance	$ 12	$ 509

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Share Repurchases (Details) (USD $) In Thousands, except Share data, unless otherwise specified	1 Months Ended	3 Months Ended	11 Months Ended
	May 31, 2012	Mar. 31, 2013	Mar. 31, 2013
Summary of share repurchases under a stock repurchase plan
Authorized amount	$ 25,000		$ 25,000
Repurchases, shares		0	291,120
Repurchases, amount			(4,462)
Remaining authorization			$ 20,538

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Financial Derivatives and Hedging Activities (Details 3) (Forward foreign currency exchange contracts [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Costs of products sold [Member] | Designated as hedging [Member]
Income or (loss) from derivative instruments recognized in results of operations
Effective portion of derivative instruments, gain (loss)	$ (70)	$ 572
Other - net [Member] | Designated as hedging [Member]
Income or (loss) from derivative instruments recognized in results of operations
Ineffective portion of derivative instruments, gain (loss)	79	140
Other - net [Member] | Not designated as hedging [Member]
Income or (loss) from derivative instruments recognized in results of operations
Derivative instruments, gain (loss)	$ 304	$ (1,070)

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Asset Retirement Obligation (Tables)

3 Months Ended

Mar. 31, 2013

Asset Retirement Obligation [Abstract]

Schedule of asset retirement obligation

In thousands	2013			2012
Balance at January 1,	$	8,882		$	9,679
Accretion		82			122
Payments		(662	)		(207	)
Balance at March 31,	$	8,302		$	9,594

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Stock-Based Compensation (Details Textual)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Performance Share Awards [Member]
Stock-Based Compensation (Textual) [Abstract]
Grants under performance share awards	151,955	161,083
Cumulative performance targets	3 years
SOSARs [Member]
Stock-Based Compensation (Textual) [Abstract]
Vesting period of stock	3 years
Vesting Term	10 years
Restricted Stock Units (RSUs) [Member]
Stock-Based Compensation (Textual) [Abstract]
The vesting graded scale	over a three, four, and five-year
Restricted Stock Units and Performance Share Awards [Member]
Stock-Based Compensation (Textual) [Abstract]
Grants under performance share awards	153,265	162,217
Long Term Incentive Plan [Member]
Stock-Based Compensation (Textual) [Abstract]
Issuance of shares	5,500,000

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Commitments, Contingencies and Legal Proceedings

3 Months Ended

Mar. 31, 2013

Commitments, Contingencies and Legal Proceedings [Abstract]

COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS

15. COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS

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, on which our former Neenah facility was located, and in the Bay of Green Bay Wisconsin (“Site”). The United States, the State of Wisconsin, and two Indian tribes (collectively, the “Governments”) seek to require (a) a cleanup of the Site (“response actions”), (b) reimbursement of cleanup costs (“response costs”), and (c) natural resource damages (“NRDs”). They claim that we, together with seven other entities that have been formally notified that they are potentially responsible parties (“PRPs”) under CERCLA for response costs or NRDs, are jointly and severally responsible under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA” or “Superfund”) for those response actions, response costs, and NRDs, all of which may total in excess of $1 billion.

The PRPs consist of us, Appleton Papers Inc. (“API”), CBC Coating, Inc. (formerly known as Riverside Paper Corporation), Georgia-Pacific Consumer Products, L.P. (formerly known as Fort James Operating Company), Menasha Corporation, NCR Corporation (“NCR”), U.S. Paper Mills Corp., and WTM I Company.

The Governments have identified manufacturing and recycling of NCR^®-brand carbonless copy paper as the principal source of the PCBs in sediments at the Site. Our predecessor, the Bergstrom Paper Company, and later we operated a deinking paper mill in Neenah, Wisconsin. This mill received NCR^®-brand carbonless copy paper in its furnish and discharged PCBs to Little Lake Butte des Morts, an impoundment of the river at the upstream end of the Site.

The United States Environmental Protection Agency (“EPA”) has divided the Lower Fox River and the Bay of Green Bay site into five “operable units”, including the most upstream (“OU1”) and four downstream reaches of the river and bay (“OU2-5”). OU1 extends from primarily Lake Winnebago to the dam at Appleton, and is comprised of Little Lake Butte des Morts. The Neenah Facility discharged its wastewater into this portion of this site.

We have resolved our liability for response actions and response costs associated with the permanent cleanup of Little Lake Butte des Morts through a consent decree, and amendments, entered in United States v. P.H. Glatfelter Co., No. 2:03-cv-949-LA (E.D. Wis.). Together with WTM I Company and with assistance from Menasha Corporation, we have completed that cleanup except for on-going operation and maintenance.

In November 2007, the United States Environmental Protection Agency (“EPA”) issued a unilateral administrative order for remedial action (“UAO”) to us and to seven other respondents directing us to implement the cleanup of the Site downstream of Little Lake Butte des Morts. Since that time, the district court has held that one of the respondents, Appleton Papers Inc., is not liable for this Site. In addition, the United States and the State of Wisconsin have entered into a settlement with another respondent, Georgia-Pacific LLP (“GP”), limiting GP’s responsibility to the downstream-most three miles of the river. Work has proceeded to implement the UAO, mostly funded by NCR and its indemnitors.

In January 2008, two of the UAO respondents, NCR and Appleton Papers Inc., brought two actions, consolidated under the caption Appleton Papers Inc. v. George A. Whiting Paper Co., No. 2:08-cv-16-WCG (E.D. Wis.) (“Whiting Litigation”), that ultimately involved us and more than two dozen parties in litigation, to allocate among the parties the responsibility for response actions, response costs, and NRDs for this Site. Most of the parties responsible for relatively small discharges of PCBs settled with the Governments, resolving their liability. As the result of a series of rulings on summary judgment and after trial, the Court has so far determined that (a) neither NCR nor Appleton Papers may pursue any other party for contribution, (b) NCR owes us and the other non-settling parties “full contribution” for any amounts we may have to pay on account of response actions or response costs downstream of Little Lake Butte des Morts or of NRDs, and (c) NCR is not liable for response costs, response actions, or NRDs in Little Lake Butte des Morts. A single issue remains concerning set off of our insurance coverage litigation settlement proceeds against our recovery from NCR of $4.28 million in costs we incurred in the past. Upon resolution of that issue, we anticipate entry of a final judgment and appeals by NCR and others of those portions of the rulings with which those parties disagree. Until the Whiting Litigation judgment becomes final and is affirmed on appeal, all past and future costs or damages incurred by any person remain the subject of litigation against us.

In October 2010, the United States and the State of Wisconsin sued us and thirteen other defendants to recover an injunction requiring the UAO respondents to complete the response actions required by the UAO and all parties to reimburse past and future response costs incurred by the Governments as well as to pay NRDs. That case is captioned United States v. NCR Corp., No. 1:10-cv-910-WCG (E.D. Wis.) (“Government Action”). To date, litigation of the Government Action has been limited to the United States’ claim against the UAO respondents for a mandatory injunction to require implementation of the remaining work under the UAO, that is, completion of the remedy in the 33 miles of the river downstream of Little Lake Butte des Morts. Following a trial in December 2012, on May 1, 2013, the district court granted that injunction (“May 2013 Order”). The May 2013 Order directs the Company “jointly and severally” along with three other defendants that are also enjoined (NCR, WTM I Company, and Menasha Corporation) to comply with the UAO. An accompanying declaratory judgment declares the Company and those three defendants jointly and severally liable with three additional defendants (Georgia-Pacific, LLP, U.S. Paper Mills, Inc., and CBC Coatings, Inc.) that have entered into agreements with the United States governing those parties’ compliance with the UAO. We have not yet determined whether we will appeal the May 2013 Order.

Cost estimates. Estimates of the Site remediation change over time as we, or others, gain additional data and experience at the Site. In addition, disagreement exists over the likely costs for some of this work. Based upon estimates made by the Governments and independent estimates commissioned by various potentially responsible parties, we have no reason to disagree with the Governments’ assertion that total past and future response costs and NRDs at this site may exceed $1 billion and that $1.5 billion is a reasonable “outside estimate.” Much of that amount has already been incurred. As described below, some of that amount is NRDs. The parties implementing the response action under the UAO in the downstream part of the river estimate the future cost of work yet to be done totals approximately $360 million. The Governments seek to have that work done at a rate estimated to cost approximately $70 million each year from 2013 through 2015, and at lower rate afterward.

NRDs. The Governments’ NRD assessment documents claimed that we are jointly and severally responsible for NRDs with a value between $176 million and $333 million. The Governments now claim that this range should be inflated to 2009 dollars and then certain unreimbursed past assessment costs should be added, so that the range of their claim would be $287 million to $423 million. We deny liability for most of these NRDs and believe that even if anyone is liable, that we are not jointly and severally liable for the full amount. The May 2013 Order does not determine whether liability for NRDs would be joint and several. Moreover, we believe that the Natural Resource Trustees may not legally pursue this claim at this late date, as the limitations period for NRD claims is three years from discovery.

Reserves for the Site. As of March 31, 2013, our reserve for the Site, including our remediation and ongoing monitoring obligations in Little Lake Butte des Morts, our share of remediation of the rest of the Site, NRDs associated with PCB contamination at the Site and all pending, threatened or asserted and unasserted claims against us relating to PCB contamination at the Site totaled $16.4 million. Of our total reserve for the Fox River, $0.1 million is recorded in the accompanying condensed consolidated balance sheets under the caption “Environmental liabilities” and the remainder is recorded under the caption “Other long term liabilities.”

Although we believe that amounts already funded by us and WTM I to implement the Little Lake Butte des Morts remedy are adequate and no payments have been required since January 2009, there can be no assurance that these amounts will in fact suffice. WTM I has filed a bankruptcy petition in the Bankruptcy Court in Richmond; accordingly, there can be no assurance that WTM I will be able to fulfill its obligation to pay half of any additional costs, if required.

We do not believe that we will be allocated a significant percentage share of liability in any final equitable allocation of the response costs and NRDs. The accompanying consolidated financial statements do not include reserves for defense costs for the Whiting Litigation, the Government Action, or any future defense costs related to our involvement at the Site, which could be significant.

In setting our reserve for the Site, we have assessed our legal defenses, including our successful defenses to the allegations made in the Whiting Litigation and the determination in the Whiting Litigation that NCR owes us “full contribution” for response costs and NRDs that we may become obligated to pay except in OU1, and assumed that we will not bear the entire cost of remediation or damages to the exclusion of other known parties at the Site, who are also potentially jointly and severally liable. The existence and ability of other parties to participate has also been taken into account in setting our reserve, and is generally based on our evaluation of recent publicly available financial information on certain of the responsible parties and any known insurance, indemnity or cost sharing agreements between responsible parties 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 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 Site.

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 Governments have published studies estimating the amount of PCBs discharged by each identified potentially responsible party’s (“PRP’s”) facility to the lower Fox River and Green Bay. These reports estimate our Neenah mill’s share of the mass of PCBs discharged to be as high as 27%. We do not believe the discharge mass estimates used in these studies are accurate because (a) the studies themselves disclose that they are not accurate and (b) the PCB mass estimates contained in the studies are based on assumptions that are unsupported by existing data regarding the Site. We believe that the Neenah mill’s absolute and relative contribution of PCB mass is significantly lower than the estimates set forth in these studies. The trial court in the Government Action has found that the Neenah mill discharged an unknown amount of PCBs.

In any event, based upon the rulings in the Whiting Litigation and the Government Action, neither of which endorsed an equitable allocation in proportion to the mass of PCBs discharged, we continue to believe that an allocation in proportion to mass of PCBs discharged would not constitute an equitable allocation of the potential liability for the contamination at the Fox River. We contend that 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.

In the 1990s, we entered into interim cost-sharing agreements with six of the other PRPs, which provided for those PRPs to share certain costs relating to scientific studies of PCBs discharged at the Site (“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 rulings in the Whiting Litigation as well as 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.

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 decisions of the courts, official documents such as records of decision, discussions with the United States and other parties, as well as legal counsel and engineering consultants. Based on our analysis of the current records of decision and cost estimates for work to be performed at the Site, we believe that it is reasonably possible that our costs associated with the Fox River matter may exceed our cost estimates and the aggregate amounts accrued for the Fox River matter by amounts that are insignificant or that could range up to $275 million over an undeterminable period that could range beyond 10 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. The rulings in our favor in the Whiting Litigation, if sustained on appeal, suggest that outcomes in the upper end of the monetary range have become somewhat less likely, while adverse rulings on some issues in the Whiting Litigation and the Government Action and increases in cost estimates for some of the work may make an outcome in the upper end of the range more likely. The Company also believes that the effect of reading the Whiting Litigation decisions together with the May 2013 Order requires the ongoing compliance with the UAO to be funded by NCR, or to the extent that the Company is required to provide any such funding, that NCR will be required to reimburse the Company. There can be no assurance, however, that the May 2013 Order will not have a material adverse effect on the Company’s consolidated financial position, liquidity or results of operation.

Summary. Our current assessment is that we will be able to manage this environmental matter without a long-term, material adverse impact on the Company. This matter 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 debt covenants. Moreover, there can be no assurance that our reserves will be adequate to provide for future obligations related to this matter, that our share of costs and/or damages will not exceed our available resources, or that those obligations will not have a long-term, material adverse effect on our consolidated financial position, liquidity or results of operations. Should a court grant the United States or the State of Wisconsin relief that requires us individually either to perform directly or to contribute significant amounts towards remedial action downstream of Little Lake Butte des Morts or to NRDs, those developments could have a material adverse effect on our consolidated financial position, liquidity and results of operations and might result in a default under our loan covenants.

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Gains on Dispositions of Plant, Equipment and Timberlands, Net (Tables)

3 Months Ended

Mar. 31, 2013

Gains on Dispositions of Plant, Equipment and Timberlands, Net [Abstract]

Summary for sale of timberlands and other assets

Dollars in thousands	Acres		Proceeds		Gain
2013
Other		n/a	$	73	$	73
Total			$	73	$	73
2012
Other		n/a	$	49	$	37
Total			$	49	$	37

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Stock-Based Compensation (Details 2) (SOSARs [Member], USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
SOSARs [Member]
Summary of stock option activity
Outstanding at January 1,	2,121,454	2,298,288
Granted	361,923	371,812
Exercised	(40,986)	(65,637)
Canceled/ forfeited	(23,920)	(10,000)
Outstanding at March 31,	2,418,471	2,594,463
Weighted Average Exercise Price, Outstanding at Jan 1	$ 12.93	$ 12.35
Weighted Average Exercise Price, Granted	$ 18.36	$ 15.61
Weighted Average Exercise Price, Exercised	$ 13.90	$ (10.57)
Weighted Average Exercise Price, Cancelled	$ 15.61	$ (14.96)
Weighted Average Exercise Price, Outstanding at March 31	$ 13.70	$ 12.85
Weighted average grant date fair value per share	$ 5.64	$ 4.98
Aggregate grant date fair value	$ 2,042	$ 1,850
Black-Scholes Assumptions
Dividend yield	2.18%	2.31%
Risk free rate of return	0.99%	1.05%
Volatility	39.62%	41.51%
Expected Life	6 years	6 years

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Earnings Per Share (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Details of basic and diluted earnings per share
Net income	$ 15,629	$ 18,878
Weighted average common shares outstanding used in basic EPS	42,966	42,751
Common shares issuable upon exercise of dilutive stock options and PSAs/RSUs	955	716
Weighted average common shares outstanding and common share equivalents used in diluted EPS	43,921	43,467
Earnings per share
Basic	$ 0.36	$ 0.44
Diluted	$ 0.36	$ 0.43

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Condensed Consolidated Balance Sheets (unaudited) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Current assets
Cash and cash equivalents	$ 76,440	$ 97,679
Accounts receivable, net	157,094	139,904
Inventories	221,108	222,366
Prepaid expenses and other current assets	46,137	58,909
Total current assets	500,779	518,858
Plant, equipment and timberlands, net	617,655	621,186
Other assets	106,187	102,941
Total assets	1,224,621	1,242,985
Current liabilities
Accounts payable	125,815	133,389
Dividends payable	4,341	3,905
Environmental liabilities	125	125
Other current liabilities	98,840	113,489
Total current liabilities	229,121	250,908
Long-term debt	250,000	250,000
Deferred income taxes	59,253	62,046
Other long-term liabilities	141,624	140,352
Total liabilities	679,998	703,306
Commitments and contingencies
Shareholders' equity
Common stock	544	544
Capital in excess of par value	52,074	52,492
Retained earnings	830,885	819,593
Accumulated other comprehensive loss	(171,655)	(163,966)
Shareholders' equity before treasury stock	711,848	708,663
Less cost of common stock in treasury	(167,225)	(168,984)
Total shareholders' equity	544,623	539,679
Total liabilities and shareholders' equity	$ 1,224,621	$ 1,242,985

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Earnings Per Share

3 Months Ended

Mar. 31, 2013

Earnings Per Share [Abstract]

EARNINGS PER SHARE

4. EARNINGS PER SHARE

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

	Three months ended March 31
In thousands, except per share	2013		2012
Net income	$	15,629	$	18,878
Weighted average common shares outstanding used in basic EPS		42,966		42,751
Common shares issuable upon exercise of dilutive stock options and PSAs / RSUs		955		716
Weighted average common shares outstanding and common share equivalents used in diluted EPS		43,921		43,467
Earnings per share
Basic	$	0.36	$	0.44
Diluted		0.36		0.43

The following table sets forth 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:

	March 31
In thousands	2013		2012
Potential common shares		—		589

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Fair Value of Financial Instruments (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Carrying value and fair value of long-term debt
Carrying Value	$ 250,000	$ 250,000
Fair Value	263,750	260,340
Fixed-rate bonds [Member]
Carrying value and fair value of long-term debt
Carrying Value	250,000	250,000
Fair Value	263,750	260,340
Variable rate debt [Member]
Carrying value and fair value of long-term debt
Carrying Value
Fair Value

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Segment Information (Details) (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Segment reporting information
Net sales	$ 405,189,000	$ 397,352,000
Energy and related sales, net	1,101,000	1,861,000
Total revenues	406,290,000	399,213,000
Cost of products sold	348,915,000	338,243,000
Gross profit (loss)	57,375,000	60,970,000
SG&A	33,487,000	29,967,000
Gains on dispositions of plant, equipment and timberlands, net	(73,000)	(37,000)
Total operating income (loss)	23,961,000	31,040,000
Non-operating expense	(3,492,000)	(3,950,000)
Income (loss) before income taxes	20,469,000	27,090,000
Supplementary Data
Net tons sold	248,800,000	240,800,000
Depreciation, depletion and amortization	15,358,000	17,086,000
Capital expenditures	31,400,000	14,200,000
Specialty Papers [Member]
Segment reporting information
Net sales	227,100,000	223,800,000
Energy and related sales, net	1,100,000	1,900,000
Total revenues	228,200,000	225,700,000
Cost of products sold	195,500,000	188,700,000
Gross profit (loss)	32,700,000	37,000,000
SG&A	14,500,000	13,300,000
Gains on dispositions of plant, equipment and timberlands, net
Total operating income (loss)	18,300,000	23,700,000
Non-operating expense
Income (loss) before income taxes	18,300,000	23,700,000
Supplementary Data
Net tons sold	202,300,000	195,800,000
Depreciation, depletion and amortization	8,300,000	8,900,000
Capital expenditures	8,600,000	4,600,000
Composite Fibers [Member]
Segment reporting information
Net sales	111,800,000	111,900,000
Energy and related sales, net
Total revenues	111,800,000	111,900,000
Cost of products sold	90,400,000	91,500,000
Gross profit (loss)	21,500,000	20,400,000
SG&A	9,800,000	9,500,000
Gains on dispositions of plant, equipment and timberlands, net
Total operating income (loss)	11,600,000	10,900,000
Non-operating expense
Income (loss) before income taxes	11,600,000	10,900,000
Supplementary Data
Net tons sold	22,500,000	22,700,000
Depreciation, depletion and amortization	4,600,000	6,000,000
Capital expenditures	17,500,000	9,100,000
Advanced Airlaid Materials [Member]
Segment reporting information
Net sales	66,200,000	61,600,000
Energy and related sales, net
Total revenues	66,200,000	61,600,000
Cost of products sold	59,500,000	55,100,000
Gross profit (loss)	6,700,000	6,500,000
SG&A	2,200,000	2,600,000
Gains on dispositions of plant, equipment and timberlands, net
Total operating income (loss)	4,500,000	3,800,000
Non-operating expense
Income (loss) before income taxes	4,500,000	3,800,000
Supplementary Data
Net tons sold	23,900,000	22,300,000
Depreciation, depletion and amortization	2,200,000	2,200,000
Capital expenditures	2,100,000	500,000
Other and Unallocated [Member]
Segment reporting information
Net sales
Energy and related sales, net
Total revenues
Cost of products sold	3,500,000	2,900,000
Gross profit (loss)	(3,500,000)	(2,900,000)
SG&A	7,000,000	4,500,000
Gains on dispositions of plant, equipment and timberlands, net	(100,000)
Total operating income (loss)	(10,500,000)	(7,400,000)
Non-operating expense	(3,500,000)	(4,000,000)
Income (loss) before income taxes	(13,900,000)	(11,400,000)
Supplementary Data
Net tons sold
Depreciation, depletion and amortization	200,000
Capital expenditures	$ 3,200,000

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Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2013

Earnings Per Share [Abstract]

Details of basic and diluted earnings per share (EPS)

	Three months ended March 31
In thousands, except per share	2013		2012
Net income	$	15,629	$	18,878
Weighted average common shares outstanding used in basic EPS		42,966		42,751
Common shares issuable upon exercise of dilutive stock options and PSAs / RSUs		955		716
Weighted average common shares outstanding and common share equivalents used in diluted EPS		43,921		43,467
Earnings per share
Basic	$	0.36	$	0.44
Diluted		0.36		0.43

Number of potential common shares that have been excluded from the computation of diluted earnings per share for the indicated period due to their anti-dilutive nature

	March 31
In thousands	2013		2012
Potential common shares		—		589

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Subsequent Events (Details)	3 Months Ended			3 Months Ended
	Mar. 31, 2013 USD ($)	Mar. 31, 2012 USD ($)	Dec. 31, 2012	Mar. 31, 2013 Subsequent Event [Member] Dresden Papier GmbH [Member] USD ($) Employees Mg	Mar. 31, 2013 Subsequent Event [Member] IKB Loan [Member] EUR (€) Installment
Subsequent Events (Textual) [Abstract]
Aggregate principal amount					€ 42,700,000
Number of installments					32
Installments beginning date					Jun. 30, 2015
Installments ending date					Mar. 31, 2023
Percentage of aggregate principal amount of outstanding	5.375%		5.375%		2.05%
Payment made for acquisition				210,000,000
Revenues	$ 406,290,000	$ 399,213,000		$ 149,700,000
Number of employees				146
Manufacturing capacity				60,000

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Segment Information (Tables)

3 Months Ended

Mar. 31, 2013

Segment Reporting [Abstract]

Schedule of financial and other information by business unit

Three months ended March 31 In millions	Specialty Papers				Composite Fibers				Advanced Airlaid Materials				Other and Unallocated						Total
	2013		2012		2013		2012		2013		2012		2013			2012			2013			2012
Net sales	$	227.1	$	223.8	$	111.8	$	111.9	$	66.2	$	61.6		—			—		$	405.2		$	397.4
Energy and related sales, net		1.1		1.9		—		—		—		—		—			—			1.1			1.9
Total revenue		228.2		225.7		111.8		111.9		66.2		61.6		—			—			406.3			399.2
Cost of products sold		195.5		188.7		90.4		91.5		59.5		55.1		3.5			2.9			348.9			338.2
Gross profit (loss)		32.7		37.0		21.5		20.4		6.7		6.5		(3.5	)		(2.9	)		57.4			61.0
SG&A		14.5		13.3		9.8		9.5		2.2		2.6		7.0			4.5			33.5			30.0
Gains on dispositions of plant, equipment and timberlands, net		—		—		—		—		—		—		(0.1	)		—			(0.1	)		—
Total operating income (loss)		18.3		23.7		11.6		10.9		4.5		3.8		(10.5	)		(7.4	)		24.0			31.0
Non-operating expense		—		—		—		—		—		—		(3.5	)		(4.0	)		(3.5	)		(4.0	)
Income (loss) before income taxes	$	18.3	$	23.7	$	11.6	$	10.9	$	4.5	$	3.8	$	(13.9	)	$	(11.4	)	$	20.5		$	27.1
Supplementary Data
Net tons sold		202.3		195.8		22.5		22.7		23.9		22.3		—			—			248.8			240.8
Depreciation, depletion and amortization	$	8.3	$	8.9	$	4.6	$	6.0	$	2.2	$	2.2		0.2			—		$	15.4		$	17.1
Capital expenditures		8.6		4.6		17.5		9.1		2.1		0.5		3.2			—			31.4			14.2

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Share Repurchases

3 Months Ended

Mar. 31, 2013

Share Repurchases [Abstract]

SHARE REPURCHASES

14. SHARE REPURCHASES

In May 2012, our Board of Directors authorized a new share repurchase program for up to $25.0 million of our outstanding common stock, exclusive of commissions. The following table summarizes share repurchases through March 31, 2013, made under this program:

	shares		(thousands)
Authorized amount		n/a	$	25,000
Repurchases		291,120		(4,462	)
Remaining authorization			$	20,538

During the first quarter of 2013, no shares were repurchased.