10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

or

o TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD

from ___to ___

For the quarterly period ended March 31, 2006

Commission file number 1-3560

P. H. Glatfelter Company

(Exact name of registrant as specified in its charter)

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

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 least the past 90 days. Yes  ü  No    .

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

    Large Accelerated      ü Accelerated          Non-Accelerated.

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

As of April 30, 2006, P. H. Glatfelter Company had 44,449,177 shares of common stock outstanding.

P. H. GLATFELTER COMPANY AND SUBSIDIARIES
REPORT ON FORM 10-Q
for the QUARTERLY PERIOD ENDED

MARCH 31, 2006

Table of Contents

			Page
PART I — FINANCIAL INFORMATION
	Item 1	Financial Statements
		Condensed Consolidated Statements of Income for the three months ended March 31, 2006
		and 2005 (unaudited)		2
		Condensed Consolidated Balance Sheets as of March 31, 2006 and December 31, 2005 (unaudited)		3
		Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2006
		and 2005 (unaudited)		4
		Notes to Condensed Consolidated Financial Statements (unaudited)		5
	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		17
	Item 3	Quantitative and Qualitative Disclosures About Market Risks		23
	Item 4	Controls and Procedures		24
PART II — OTHER INFORMATION
	Item 6	Exhibits		24
SIGNATURES				24
EXHIBIT INDEX				25
AGREEMENT FOR SALE OF ASSETS (LYDNEY)
CERTIFICATION OF CHAIRMAN AND CHIEF EXECUTIVE OFFICER
CERTIFICATION OF EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
CERTIFICATION OF CHAIRMAN AND CHIEF EXECUTIVE OFFICER
CERTIFICATION OF EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER

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	2006			2005
Net sales	$	160,606		$	143,896
Energy sales — net		2,457			2,544
Total revenues		163,063			146,440
Costs of products sold		142,798			117,846
Gross profit		20,265			28,594
Selling, general and administrative expenses		16,697			17,390
Restructuring charges		19,298			—
(Gains) losses on dispositions of plant, equipment and timberlands, net		10			(60	)
Operating income (loss)		(15,740	)		11,264
Nonoperating income (expense)
Interest expense		(3,393	)		(3,260	)
Interest income		666			498
Other — net		350			261
Total other income (expense)		(2,377	)		(2,501	)
Income (loss) before income taxes		(18,117	)		8,763
Income tax provision (benefit)		(6,252	)		2,473
Net income (loss)	$	(11,865	)	$	6,290
Earnings (loss) per share
Basic	$	(0.27	)	$	0.14
Diluted		(0.27	)		0.14
Cash dividends declared per common share		0.09			0.09
Weighted average shares outstanding
Basic		44,213			43,962
Diluted		44,213			44,267

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

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P. H. GLATFELTER COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

	March 31			December 31
In thousands	2006			2005
Assets
Current assets
Cash and cash equivalents	$	28,818		$	57,442
Accounts receivable — net		75,598			62,524
Inventories		87,188			81,248
Prepaid expenses and other current assets		24,629			22,343
Total current assets		216,233			223,557
Plant, equipment and timberlands — net		526,389			478,828
Other assets		350,155			342,592
Total assets	$	1,092,777		$	1,044,977
Liabilities and Shareholders’ Equity
Current liabilities
Current portion of long-term debt	$	—		$	19,650
Short-term debt		3,295			3,423
Accounts payable		46,114			31,132
Dividends payable		3,995			3,972
Environmental liabilities		7,642			7,575
Other current liabilities		65,991			74,126
Total current liabilities		127,037			139,878
Long-term debt		254,749			184,000
Deferred income taxes		206,559			206,269
Other long-term liabilities		82,508			82,518
Total liabilities		670,853			612,665
Commitments and contingencies		—			—
Shareholders’ equity
Common stock		544			544
Capital in excess of par value		41,186			43,450
Retained earnings		531,949			547,810
Deferred compensation		—			(2,295	)
Accumulated other comprehensive income (loss)		(3,432	)		(5,343	)
		570,247			584,166
Less cost of common stock in treasury		(148,323	)		(151,854	)
Total shareholders’ equity		421,924			432,312
Total liabilities and shareholders’ equity	$	1,092,777		$	1,044,977

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

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P. H. GLATFELTER COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Three Months Ended March 31
In thousands	2006			2005
Operating activities
Net income	$	(11,865	)	$	6,290
Adjustments to reconcile to net cash provided by continuing operations:
Depreciation, depletion and amortization		12,349			12,866
Pension income		(3,721	)		(3,880	)
Restructuring charges		27,521
Deferred income tax provision		(2,792	)		818
(Gains) losses on dispositions of plant, equipment and timberlands, net		10			(60	)
Other		168			161
Change in operating assets and liabilities
Accounts receivable		(12,768	)		(5,766	)
Inventories		1,632			(7,602	)
Other assets and prepaid expenses		(947	)		(1,223	)
Accounts payable and other liabilities		(14,299	)		(10,719	)
Net cash used by operating activities		(4,712	)		(9,115	)
Investing activities
Purchases of plant, equipment and timberlands		(5,241	)		(4,680	)
Proceeds from disposals of plant, equipment and timberlands		1			70
Acquisition of Lydney mill		(68,271	)		—
Net cash used by investing activities		(73,511	)		(4,610	)
Financing activities
Net proceeds from revolving credit facility		50,460			1,948
Payment of dividends		(3,972	)		(3,956	)
Proceeds from stock options exercised		2,845			116
Net cash provided (used) by financing activities		49,333			(1,892	)
Effect of exchange rate changes on cash		266			(488	)
Net decrease in cash and cash equivalents		(28,624	)		(16,105	)
Cash and cash equivalents at the beginning of period		57,442			39,951
Cash and cash equivalents at the end of period	$	28,818		$	23,846
Supplemental cash flow information
Cash paid for
Interest expense	$	6,093		$	5,717
Income taxes		9,122			5,889

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

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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 engineered products. Headquartered in York, Pennsylvania, our manufacturing facilities are located in Spring Grove, Pennsylvania; Chillicothe and Fremont, Ohio, Neenah, Wisconsin; Gernsbach, Germany; Scaër, France, the United Kingdom and the Philippines. Our products are marketed throughout the United States and in many foreign countries, either through wholesale paper merchants, brokers and agents or directly to customers.

2. ACCOUNTING POLICIES

     These unaudited condensed consolidated interim financial statements (“Financial Statements”) have been prepared in accordance with accounting principles generally accepted in the United States of America and with the rules and regulations of the Securities and Exchange Commission and include the accounts of Glatfelter and its wholly-owned subsidiaries. These Financial Statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in Glatfelter’s 2005 Annual Report on Form 10-K filed with the Securities and Exchange Commission.

     These Financial Statements do not include all of the information and notes required for complete financial statements. In management’s opinion, these Financial Statements reflect all adjustments, which are of a normal, recurring nature, necessary for a fair presentation of the results for the interim periods presented. Results for these interim periods are not necessarily indicative of results to be expected for the full year.

     Stock-based Compensation Effective January 1, 2006, we adopted Statement of Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payment” utilizing the modified prospective method This standard requires employee stock options and other stock-based compensation awards to be accounted for under the fair value method, and eliminates the ability to account for these instruments under the intrinsic value method prescribed by APB Opinion No. 25, and allowed under the original provisions of SFAS No. 123. The adoption of SFAS No. 123 (R) did not have a material effect on our consolidated results of operation or financial position.

3. ACQUISITIONS

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

     Effective March 13, 2006, we completed our purchase of Crompton’s Lydney mill and related inventory, located in Gloucestershire, UK for £37.5 million (US $65 million) in cash in addition to $2.9 million of transaction costs. The Lydney facility employs about 240 people, produces a broad portfolio of wet laid nonwoven products, including tea and coffee filter papers, clean room wipes, lens tissue, dye filter paper, double-sided adhesive tape substrates and battery grid pasting tissue, and had 2005 revenues of approximately £43 million (US $75 million). The purchase price was financed with existing cash balances and borrowings under the Company’s existing credit facility.

     Results of operations relating to the Lydney acquisition are not material for the period ended March 31, 2006. The following table summarizes the preliminary allocation of the purchase price to assets acquired and liabilities assumed:

In thousands
Assets acquired:
Inventory	$	9,131
Property and equipment		56,252
Intangibles and other assets		5,079
		70,462
Less acquisition related liabilities		(2,191	)
Total	$	68,271

     Under terms of the second agreement, we agreed to purchase Crompton’s Simpson Clough mill and related inventory, located in Lancashire, United Kingdom, and other related assets for £12.5 million (US $21.7 million). The mill employs about 95 people and had 2005 revenues of approximately £16.2 million (US $28 million). The

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assets to be purchased specifically exclude, among others, cash and investments, accounts receivable, computer software and other assets relating to the portion of the business being retained by Crompton. The liabilities being assumed by GLT-UK in the transaction specifically exclude, among others, liabilities in respect of any defined benefit pension plan or outstanding litigation.

     Pursuant to the terms of the agreement, the Company has guaranteed all of the obligations of GLT-UK thereunder. The closing of the transaction is subject to the receipt of all required regulatory approvals. Should regulatory approval be obtained, the Company expects the transaction to close in the second quarter of 2006.

     As more fully discussed in Note 13, during the first quarter of 2006 we entered into a definitive agreement to acquire, the Chillicothe, OH-based carbonless business operations from NewPage Corporation.

4. NEENAH FACILITY SHUTDOWN

     In connection with our agreement to acquire the Chillicothe, OH-based carbonless paper operations of NewPage Corporation, we committed to a plan to permanently shutdown the Neenah, WI facility. The production of certain products currently manufactured at the Neenah facility will be transferred to Chillicothe. The results of operations in the first quarter of 2006 include the following pre-tax charges related to the Neenah shutdown:

			Expected in the
	Three Months Ended		Second and Third Quarters in 2006
In thousands	March 31, 2006		LOW		HIGH
Accelerated depreciation	$	5,812	$	16,900	$	19,900
Inventory write-down		2,411		—		—
Severance and benefit continuation		1,761		3,660		4,400
Pension curtailments and other retirement benefit charges		6,304		—		—
Contract termination costs		11,109		100		300
Other		85		4,200		5,200
Total	$	27,482	$	24,860	$	29,800

     The Neenah shutdown, which is expected to be substantially completed by the end of June 2006, will result in the elimination of approximately 200 positions. The facility to be abandoned had been supporting our Specialty Papers business unit. Approximately $8.2 million of the Neenah shutdown related charges are recorded as part of costs of products sold in the accompanying statements of income.

     As part of the Neenah shutdown, we terminated our long-term steam supply contract, as provided for within the contract, resulting in a termination fee of approximately $11.0 million.

     No payments were made through March 31, 2006 related to these charges. Additional Neenah shutdown related charges totaling $25 million to $30 million are expected to be recorded in the second and third quarter of 2006.

5. 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	2006			2005
Net income (loss)	$	(11,865	)	$	6,290
Weighted average common shares outstanding used in basic EPS		44,213			43,962
Common shares issuable upon exercise of dilutive stock options, restricted stock awards and performance awards		—			305
Weighted average common shares outstanding and common share equivalents used in diluted EPS		44,213			44,267
Earnings (loss) per share
Basic	$	(0.27	)	$	0.14
Diluted		(0.27	)		0.14

     Approximately 462,000 potential common shares have been excluded from the computation of diluted earnings per share due to their anti-dilutive nature in 2006.

6. RETIREMENT PLANS AND OTHER POST-RETIREMENT BENEFITS

     We have both funded and, with respect to our international operations, unfunded noncontributory defined benefit pension plans covering substantially all of our employees. The benefits are based, in the case of certain plans, on average salary and years of service and, in the case of other plans, on a fixed amount for each year of service. Plan provisions and funding meet the requirements of the Employee Retirement Income Security Act of 1974. The Company uses a December 31 measurement date for all of its defined benefit plans.

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

	Three Months Ended
	March 31
In thousands	2006			2005
Pension Benefits
Service cost	$	1,029		$	1,047
Interest cost		4,246			4,160
Expected return on plan assets		(9,920	)		(9,741	)
Amortization of prior service cost		483			113
Amortization of unrecognized loss		441			541
		(3,721	)		(3,880	)
Curtailment charge		3,031			—
Net periodic benefit income	$	(690	)	$	(3,880	)
Other Benefits
Service cost	$	305		$	289
Interest cost		654			649
Expected return on plan assets		—			—
Amortization of prior service cost		(208	)		(184	)
Amortization of unrecognized loss		319			313
		1,070			1,067
Special termination charge		3,273			—
Net periodic benefit income	$	4,343		$	1,067

     As discussed in Note 4, in the first quarter of 2006, we recorded charges in connection with the curtailment of pension benefits and termination of certain post retirement benefits related to the Neenah facility shutdown.

7. COMPREHENSIVE INCOME

     The following table sets forth comprehensive income and its components:

	Three Months Ended
	March 31
In thousands	2006			2005
Net income (loss)	$	(11,865	)	$	6,290
Foreign currency translation adjustment		1,911			(3,239	)
Comprehensive income (loss)	$	(9,954	)	$	3,051

8. INVENTORIES

     Inventories, net of reserves, were as follows:

	March 31,		December 31,
In thousands	2006		2005
Raw materials	$	17,240	$	16,392
In-process and finished		40,706		39,930
Supplies		29,242		24,926
Total	$	87,188	$	81,248

9. LONG-TERM DEBT

     Long-term debt is summarized as follows:

	March 31,		December 31,
In thousands	2006		2005
Revolving credit facility, due June 2006	$	70,749	$	19,650
67/8% Notes, due July 2007		150,000		150,000
Note payable — SunTrust, due March 2008		34,000		34,000
Total long-term debt		254,749		203,650
Less current portion		—		(19,650	)
Long-term debt, excluding current portion	$	254,749	$	184,000

     The table above sets forth long-term debt as of March 31, 2006 prior to debt refinancing activities described in Note 13.

     On March 21, 2003, we sold approximately 25,500 acres of timberlands and received as consideration a $37.9 million 10-year interest bearing note receivable from the timberland buyer. We pledged this note as collateral under a $34.0 million promissory note payable to SunTrust Financial (the “Note Payable”). The Note Payable bears interest at a fixed rate of 3.82% for five years at which time we can elect to renew the obligation.

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

     At March 31, 2006 we had $5.3 million of letters of credit issued to us by a financial institution. The letters of credit are for the benefit of certain state workers’ compensation insurance agencies in conjunction with our self-insurance program. No amounts were outstanding under the letters of credit. We bear the credit risk on this amount to the extent that we do not comply with the provisions of certain agreements. The letters of credit do not reduce the amount available under our lines of credit.

10. CROSS-CURRENCY SWAP

     In conjunction with our 2002 refinancing, we entered into a cross-currency swap transaction effective June 24, 2002. Under this transaction, we swapped $70.0 million for approximately €73.0 million and pay interest on the Euro portion of the swap at a floating Eurocurrency Rate, plus applicable margins and receive interest on the dollar portion of the swap at a floating U.S. dollar LIBOR, plus applicable margins. The contract matures on June 24, 2006. The cross-currency swap is designed to provide protection from the impact that changes in currency rates have on certain U.S. dollar-denominated inter-company

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obligations recorded at our subsidiary in Gernsbach, Germany.

     The cross-currency swap is recorded in the Condensed Consolidated Balance Sheets at fair value of $(18.3) and $(16.4) million at March 31, 2006 and December 31, 2005, respectively, under the caption “Other current liabilities”. Changes in fair value are recognized in current earnings as “Other income (expenses)” in the Condensed Consolidated Statements of Income. The mark-to-market adjustment was offset by a gain on the related remeasurement of the U.S. dollar-denominated inter-company obligations.

     The credit risks associated with our financial derivative are controlled through the evaluation and monitoring of creditworthiness of the counterparties. Although counterparties may expose us to losses in the event of nonperformance, we do not expect such losses, if any, to be significant.

11. COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS

     Ecusta Division Matters At March 31, 2006, we had reserves for various matters associated with our former Ecusta Division. Activity in these reserves during the periods indicated is summarized below.

	Ecusta
	Environmental			Workers'
In thousands	Matters			Comp			Other		Total
Balance, Jan. 1, 2005	$	6,391		$	2,144		$	3,300	$	11,835
Accruals		—			—			—		—
Payments		(342	)		(7	)		—		(349	)
Other Adjustments		—			—			—		—
Balance, Mar. 31, 2005	$	6,049		$	2,137		$	3,300	$	11,486

	Ecusta
	Environmental			Workers'
In thousands	Matters			Comp			Other		Total
Balance, Jan. 1, 2006	$	8,105		$	1,913		$	3,300	$	13,318
Accruals		—			—			—		—
Payments		(214	)		(45	)		—		(259	)
Other Adjustments		16			—			—		16
Balance, Mar. 31, 2006	$	7,907		$	1,868		$	3,300	$	13,075

     With respect to the reserves set forth above as of March 31, 2006, $1.4 million is recorded under the caption “Other current liabilities” and $11.7 million is recorded under the caption “Other long-term liabilities” in the accompanying condensed consolidated balance sheets.

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

     Background Information In August 2001, pursuant to an acquisition agreement (the “Acquisition

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

     In August 2002, the Buyers shut down the manufacturing operation of the pulp and paper mill in Pisgah Forest, North Carolina, which was the most significant operation of the Ecusta Division. On October 23, 2002, RFS Ecusta and RFS US filed for bankruptcy under Chapter 7 of the U.S. Bankruptcy Code. In accordance with the provisions of the Acquisition Agreement, we notified the Buyers of third party claims (“Third Party Claims”) made against us for which we are seeking indemnification from the Buyers. The Third Party Claims primarily relate to certain environmental matters, post-retirement benefits, workers’ compensation claims and vendor payables.

     Effective August 8, 2003, the assets of RFS Ecusta and RFS US, which substantially consist of the pulp and paper mill and related real property, were sold to several third parties unrelated to the Buyers (the “New Buyers”). We understand the New Buyers’ business plan was to continue certain mill-related operations and to convert portions of the mill site into a business park.

     Ecusta Environmental Matters Beginning in April 2003, government authorities, including the North Carolina Department of Environment and Natural Resources (“NCDENR”), initiated discussions with us and the New Buyers regarding, among other environmental issues, certain landfill closure liabilities associated with the Ecusta mill and its properties. The discussions focused on NCDENR’s desire to establish a plan and secure financial resources to close three landfills located at the Ecusta facility and to address other environmental matters at the facility. During the third quarter of 2003, the discussions ended with NCDENR’s conclusion to hold us responsible for the closure of three landfills. Accordingly, we established reserves approximating $7.6 million. In March 2004 and September 2005, the NCDENR issued us separate orders requiring the closure of two of the three landfills at issue. We have substantially completed the closure of these two landfills and will begin closing the third during 2006.

     In October 2004, one of the New Buyers entered into a Brownfields Agreement with the NCDENR relating to the Ecusta mill, pursuant to which the New Buyer was to be held responsible for certain specified environmental concerns.

     In September 2005, NCDENR sought our participation, pursuant to a proposed consent order, in the

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evaluation and potential remediation of environmentally hazardous conditions at the former Ecusta mill site. In January 2006, NCDENR modified its proposed consent order to include us and the company (the “Prior Owner”) from whom our predecessor, Ecusta Corporation, purchased the Ecusta mill. NCDENR and the United States Environmental Protection Agency (“USEPA”) have indicated that if neither party enters into the proposed consent order EPA will likely list the mill site on the National Priorities List and pursue assessment and remediation of the site under the Comprehensive Environmental Responsibility, Compensation and Liability Act (more commonly known as “Superfund”). In addition to calling for the assessment, closure, and post-closure monitoring and maintenance of the third landfill for which we had previously been held responsible, the proposed consent order asserts concerns regarding:

i.	mercury and certain other contamination on and around the site;
ii.	potentially hazardous conditions existing in the sediment and water column of the site’s water treatment and aeration and sedimentation basin (the “ASB”); and
iii.	contamination associated with two additional landfills on the site that were not used by us.

     With respect to the concerns set forth above (collectively, the “NCDENR matters”) we believe the Prior Owner has primary liability for the mercury contamination; that the New Buyers, as owner and operator of the ASB, have primary liability for addressing any issues associated with the ASB, including closure, and that the New Buyers, in a May 2004 agreement, expressly agreed to indemnify and hold us harmless from certain environmental liabilities, which include most, if not all, of the NCDENR matters. We continue to have discussions with NCDENR concerning our potential responsibilities and appropriate remedial actions, if any, which may be necessary.

     In addition, it is possible the New Buyers may not have sufficient cash flow to continue meeting certain obligations to NCDENR and us. Specifically, the New Buyers are obligated (i) to treat leachate and stormwater runoff from the landfills, which we are currently required to manage, and (ii) to remediate groundwater contamination in the vicinity of a former caustic building at the site. If the New Buyers should default on these obligations, it is possible that NCDENR will require us to make appropriate arrangements for the treatment and disposal of the landfill waste streams and to be responsible for the remediation of certain contamination on and around the site (collectively, the “New Buyers Matters”).

     As a result of NCDENR’s September 2005 communication with us and our assessment of the range of likely outcomes of the NCDENR Matters and the New Buyers Matters, our results of operations for 2005 included a $2.7 million charge to increase our reserve for estimated costs associated with the Ecusta environmental matters. The addition to the reserve includes estimated operating costs associated with continuing certain water treatment facilities at the site which are necessary to treat leachate discharges from certain of the landfills, the closure for which we had previously reserved, estimated costs to perform an assessment of certain risks posed by the presence of mercury, further characterization of sediment in the ASB and treatment of other contamination.

     The reserves relating to additional environmental assessment activities were premised, in part, on the belief that it might be mutually beneficial to us and NCDENR if we were to agree to perform the assessment activities, without accepting responsibility for any subsequently required remediation. We believe that outcome may still be possible. However, it is currently unclear whether NCDENR and EPA will accept such an arrangement. It is equally uncertain what action will be taken by EPA and NCDENR in the absence of a consent order (and against whom) and what remediation, if any, will be required if and when additional assessments are performed.

     In addition, it is unclear how liability for any required assessment or remediation will be apportioned among the Prior Owner, Glatfelter, the Buyers and the New Buyers. Therefore, the 2005 charge does not include costs associated with further remediation activities that we may be required to perform the range of which we are currently unable to estimate, however, they could be significant.

     Whether we will be required to remediate, the extent of contamination, if any, and the ultimate costs to remedy, are not reasonably estimable based on information currently available to us. Accordingly, no amounts for such actions have been included in our reserve discussed above. If we are required to complete additional remedial actions, further charges would be required, and such amounts could be material.

     We are evaluating potential legal claims and defenses we may have with respect to any other parties including previous owners of the site and their obligations and/or cost recoveries. We are also evaluating options for ensuring that the New Buyers fulfill their obligations with respect to the New Buyers Matters. We are uncertain as to what additional Ecusta-related claims, including, among others, environmental matters, government oversight and/or government past costs, if any, may be asserted against us.

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     Workers’ Compensation Prior to 2003, we established reserves related to potential workers’ compensation claims which at that time were estimated to total approximately $2.2 million. In the fourth quarter of 2005, the North Carolina courts issued a ruling that held us liable for workers’ compensation claims of certain employees that were injured during their employment at the Ecusta facility prior to our sales of the Division. Since this ruling, we have made payments as indicated in the reserve analysis presented earlier in this Note 11.

     We continue to believe the Buyers are responsible for the Environmental Matters and the Workers’ Compensation claims under provisions of the Acquisition Agreement, and believe we have a strong legal basis for indemnification. We are pursuing appropriate avenues to enforce the provisions of the Acquisition Agreement.

     Other In October 2004, the bankruptcy trustee for the estates of RFS Ecusta and RFS US filed a complaint in the U.S. Bankruptcy Court for the Western District of North Carolina against certain of the Buyers and other related parties (“Defendant Buyers”) and us. The complaint alleges, among other things, that the Defendant Buyers engaged in fraud and fraudulent transfers and breached their fiduciary duties. With respect to Glatfelter, the complaint alleges that we aided and abetted the Defendant Buyers in their purported actions in the structuring of the acquisition of the Ecusta Division and asserts a claim against us under the Bankruptcy Code. The trustee seeks damages from us in an amount not less than $25.8 million, plus interest, and other relief. We believe these claims are largely without merit and we are vigorously defending ourselves in this action. Accordingly, no amounts have been recorded in the accompanying consolidated financial statements.

     The bankruptcy trustee filed another complaint, also in the U.S. Bankruptcy Court for the Western District of North Carolina, against us, certain banks and other parties, seeking, among other things, damages totaling $6.5 million for alleged breaches of the Acquisition Agreement (the “Breach Claims”), release of certain amounts held in escrow totaling $3.5 million (the “Escrow Claims”) and recoveries of unspecified amounts allegedly payable under the Acquisition Agreement and a related agreement. We were first notified of the potential Breach Claims in July 2002, which are primarily related to the physical condition of the Ecusta mill at the time of sale. We believe these claims are without merit. With respect to the Escrow Claims, the trustee seeks the release of certain amounts held in escrow related to the sale of the Ecusta Division, of which $2.0 million was escrowed at the time of closing in the event of claims arising such as those asserted in the Breach Claim. The Escrow Claims also include amounts alleged to total $1.5 million arising from sales by us of

certain properties at or around the Ecusta mill. We have previously reserved such escrowed amounts and they are recorded in the accompanying Condensed Consolidated Balance Sheets as “Other long-term liabilities.” We are vigorously defending ourselves in this action.

     Both of the above actions have been transferred to the U.S. Federal Court for the Western District of North Carolina, along with another action in which we, the bankruptcy trustee and the Buyers are pursuing claims against one another for determination of ultimate contractual liability for workers’ compensation benefits referenced above.

     Fox River — Neenah, Wisconsin We have previously reported with respect to potential environmental claims arising out of the presence of polychlorinated biphenyls (“PCBs”) in sediments in the lower Fox River and in the Bay of Green Bay, downstream of our Neenah, Wisconsin facility. We acquired the Neenah facility in 1979 as part of the acquisition of the Bergstrom Paper Company. In part, this facility used wastepaper as a source of fiber. At no time did the Neenah facility utilize PCBs in the pulp and paper making process, but discharges from the facility containing PCBs from wastepaper may have occurred from 1954 to the late 1970s. Any PCBs that the Neenah facility discharged into the Fox River resulted from the presence of NCR^®-brand carbonless copy paper in the wastepaper that was received from others and recycled.

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

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

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     The areas of the lower Fox River and in the Bay of Green Bay in which the contamination exists are commonly referred to as Operable Unit 1 (“OU1”), which consists of Little Lake Butte des Morts, the portion of the river that is closest to our Neenah facility, Operable Unit 2 (“OU2”), which is the portion of the river between dams at Appleton and Little Rapids, and Operable Units 3 through 5 (“OU3—5”), an area approximately 20 miles downstream of our Neenah facility.

     The following summarizes the status of our potential exposure:

     Response Actions

     OU1 and OU2 On January 7, 2003, the Wisconsin Department of Natural Resources (the “Wisconsin DNR”) and the Environmental Protection Agency (“EPA”) issued a Record of Decision (“ROD”) for the cleanup of OU1 and OU2. Subject to extenuating circumstances and alternative solutions that may arise during the cleanup, the ROD requires the removal of approximately 784,000 cubic yards of sediment from OU1 and no active remediation of OU2. The ROD also requires the monitoring of the two operable units. Based on the remediation activities completed to date, contract proposals received for the remaining remediation work, and the potential availability of alternative remedies under the ROD, we believe the total remediation of OU1 will cost between $61 million and $137 million.

     On July 1, 2003, WTM I Company entered into an Administrative Order on Consent (“AOC”) with EPA and the Wisconsin DNR regarding the implementation of the Remedial Design for OU1.

     In the first quarter of 2004, the United States District Court for the Eastern District of Wisconsin approved a consent decree regarding OU1 (“the OU1 Consent Decree”). Under terms of the OU1 Consent Decree, Glatfelter and WTM I Company each agreed to pay approximately $27 million, of which $25.0 million from each was placed in escrow to fund response work associated with remedial actions specified in the ROD. The remaining amount that the parties agreed to pay under the Consent Decree includes payments for NRD, and NRD assessment and other past costs incurred by the governments. In addition, EPA agreed to take steps to place $10 million from another source into escrow for the OU1 cleanup, all of which has been received.

     The terms of the OU1 Consent Decree and the underlying escrow agreement restrict the use of the funds to qualifying remediation activities or restoration activities at the lower Fox River site. The response work is being managed and/or performed by Glatfelter and WTM I, with governmental oversight, and funded by the amounts

placed in escrow. Beginning in mid 2004, Glatfelter and WTM I have performed activities to remediate OU1, including, among others, construction of de-watering and water-treatment facilities, dredging of portions of OU1, dewatering of the dredged materials, and hauling of the dewatered sediment to an authorized disposal facility. Since the start of these activities, to date approximately 105,000 cubic yards of contaminated sediment has been dredged.

     The terms of the OU1 Consent Decree include provisions to be followed should the escrow account be depleted prior to completion of the response work. In this event, each company would be notified and be provided an opportunity to contribute additional funds to the escrow account and to extend the remediation effort. Should the OU1 Consent Decree be terminated due to insufficient funds, each company would lose the protections contained in the settlement and the governments may turn to one or both parties for the completion of OU1 clean up. In such a situation, the governments may also seek response work from a third party, or perform the work themselves and seek response costs from any or all PRPs for the site, including Glatfelter. Based on information currently available to us, and subject to government approval of the use of alternative remedies, we believe the required remedial actions can be completed with the amount of monies committed under the Consent Decree. If the Consent Decree is terminated due to the insufficiency of the escrow funds, Glatfelter and WTM I each remain potentially responsible for the costs necessary to complete the remedial action.

     As of March 31, 2006, our portion of the escrow account totaled approximately $12.6 million, of which $7.2 million is recorded in the accompanying Consolidated Balance Sheet under the caption “Prepaid expenses and other current assets” and $5.4 million is included under the caption “Other assets.” As of March 31, 2006, our reserve for environmental liabilities, substantially all of which is for OU1 remediation activities, totaled $13.7 million.

     OUs 3 — 5 On July 28, 2003, the EPA and the Wisconsin DNR issued a ROD (the “Second ROD”) for the cleanup of OU3 — 5. The Second ROD calls for the removal of 6.5 million cubic yards of sediment and certain monitoring at an estimated cost of $324.4 million but could, according to the Second ROD, cost within a range from approximately $227.0 million to $486.6 million. The most significant component of the estimated costs is attributable to large-scale sediment removal by dredging.

     During the first quarter of 2004, NCR Corp. and Georgia Pacific Corp. entered into an AOC with the United States EPA under which they agreed to perform

GLATFELTER

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the Remedial Design for OUs 3-5, thereby accomplishing a first step towards remediation.

     We do not believe that we have more than a de minimis share of any equitable distribution of responsibility for OU3—5 after taking into account the location of our Neenah facility relative to the site and considering other work or funds committed or expended by us. However, uncertainty regarding responsibilities for the cleanup of these sites continues due to disagreement over a fair allocation or apportionment of responsibility.

     Natural Resource Damages The ROD and Second ROD do not place any value on claims for NRDs associated with this matter. As noted above, NRD claims are distinct from costs related to the primary remediation of a Superfund site. Calculating the value of NRD claims is difficult, especially in the absence of a completed remedy for the underlying contamination. The State of Wisconsin, the United States Fish and Wildlife Service (“FWS”), the National Oceanic and Atmospheric Administration (“NOAA”), four Indian tribes and the Michigan Attorney General have asserted that they possess NRD claims related to the lower Fox River and the Bay of Green Bay.

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

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

     Other Information The Wisconsin DNR and FWS have each published studies, the latter in draft form, estimating the amount of PCBs discharged by each identified PRP to the lower Fox River and the Bay of Green Bay. These reports estimate our Neenah facility’s share of the volumetric discharge to be as high as 27%. We do not believe the volumetric estimates used in these studies are accurate because (a) the studies themselves disclose that they are not accurate and (b) the volumetric

estimates contained in the studies are based on assumptions that are unsupported by existing evidence. We believe that our volumetric contribution is significantly lower than the estimates set forth in these studies. Further, we do not believe that a volumetric allocation would constitute an equitable distribution of the potential liability for the contamination. Other factors, such as the location of contamination, the location of discharge and a party’s role in causing discharge must be considered in order for the allocation to be equitable.

     We have entered into interim cost-sharing agreements with four of the other PRPs, pursuant to which such PRPs have agreed to share both defense costs and costs for scientific studies relating to PCBs discharged into the lower Fox River. These interim cost-sharing agreements have no bearing on the final allocation of costs related to this matter. Based upon our evaluation of the magnitude, nature and location of the various discharges of PCBs to the river and the relationship of those discharges to identified contamination, we believe our share of any liability among the identified PRPs is much less than our per capita share of the cost sharing agreement.

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

     While the OU1 Consent Decree clarifies the extent of the exposure that we may have with regard to the Fox River site, it does not completely resolve our potential liability related to this matter. We continue to believe that this matter may result in litigation, but cannot predict the timing, nature, extent or magnitude of such litigation. We currently are unable to predict our ultimate cost related to this matter.

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Reserves for Fox River Environmental Liabilities

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

	March 31,		December 31,
In millions	2006		2005
Recorded as:
Environmental liabilities	$	7.6	$	7.6
Other long-term liabilities		6.1		9.2
Total	$	13.7	$	16.8

     The classification of our environmental liabilities is based on the development of the underlying Fox River OU1 remediation plan and execution of the related escrow agreement for the funding thereof. The reserve balance declined as a result of payments associated with remediation activities under the OU1 Consent Decree and items related to the Fox River matter. We did not record charges associated with the Fox River matter to our results of operations during the first quarters of 2005 or 2006.

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

     Range of Reasonably Possible Outcomes Based on currently available information, including actual remediation costs incurred to date, we believe that the remediation of OU1 can be satisfactorily completed for the amounts provided under the OU1 Consent Decree. Our assessment is dependent, in part, on government approval of the use of alternative remedies in OU1, on the successful negotiation of acceptable contracts to complete remediation activities, and an effective implementation of the chosen technologies by the remediation contractor. However, if we are unsuccessful in managing our costs to implement the ROD or if alternative remedies are not accepted by government authorities, additional charges may be necessary.

     The OU1 Consent Decree does not address response costs necessary to remediate the remainder of the Fox

River site and only addresses NRDs and claims for reimbursement of government expenses to a limited extent. Due to judicial interpretations that find CERCLA imposes joint and several liability, uncertainty persists regarding our exposure with respect to the remainder of the Fox River site.

     Based on our analysis of currently available information and experience regarding the cleanup of hazardous substances, we believe that it is reasonably possible that our costs associated with the lower Fox River and the Bay of Green Bay may exceed our original reserves by amounts that may prove to be insignificant or that could range, in the aggregate, up to approximately $125 million, over a period that is undeterminable but that could range beyond 20 years. We believe that the likelihood of an outcome in the upper end of the monetary range is significantly less than other possible outcomes within the range and that the possibility of an outcome in excess of the upper end of the monetary range is remote.

     In our estimate of the upper end of the range, we have considered: (i) the remedial actions agreed to in the OU1 Consent Decree and our belief that the required work can be accomplished with the funds to be escrowed under the OU1 Consent Decree; and (ii) no active remediation of OU2. We have also assumed dredging for the remainder of the Fox River site as set forth in the Second ROD, although at a significantly higher cost than estimated in the Second ROD. We have also assumed our share of the ultimate liability to be 18%, which is significantly higher than we believe is appropriate or than we will incur, and a level of NRD claims and claims for reimbursement of expenses from other parties that, although reasonably possible, is unlikely.

     In estimating both our current reserves for environmental remediation and other environmental liabilities and the possible range of additional costs, we have assumed that we will not bear the entire cost of remediation and damages to the exclusion of other known PRPs who may be jointly and severally liable. The ability of other PRPs to participate has been taken into account, generally based on their financial condition and probable contribution. Our evaluation of the other PRPs’ financial condition included the review of publicly available financial information. Furthermore, we believe certain of these PRPs have corporate or contractual relationships with additional entities that may shift to those entities some or all of the monetary obligations arising from the Fox River site. The relative probable contribution is based upon our knowledge that at least two PRPs manufactured the paper, and arranged for the disposal of the wastepaper, that included the PCBs and consequently, in our opinion, bear a higher level of responsibility.

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     In addition, our assessment is based upon the magnitude, nature and location of the various discharges of PCBs to the river and the relationship of those discharges to identified contamination. We 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 Fox River site.

     Summary Our current assessment is that we should be able to manage these environmental matters without a long-term, material adverse impact on the Company. These matters could, however, at any particular time or for any particular year or years, have a material adverse effect on our consolidated financial position, liquidity and/or results of operations or could result in a default under our loan covenants. Moreover, there can be no assurance that our reserves will be adequate to provide for future obligations related to these matters, that our share of costs and/or damages for these matters will not exceed our available resources, or that such obligations will not have a long-term, material adverse effect on our consolidated financial position, liquidity or results of operations. With regard to the Fox River site, if we are not successful in managing the implementation of the OU1 Consent Decree and/or if we are ordered to implement the remedy proposed in the Second ROD, such developments could have a material adverse effect on our consolidated financial position, liquidity and results of

operations and may result in a default under our loan covenants.

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

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

GLATFELTER

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12. SEGMENT AND GEOGRAPHIC INFORMATION

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

Business Unit Performance	For The Three Months Ended March 31,
In thousands	Specialty Papers				Long Fiber & Overlay				Other and Unallocated						Total
	2006		2005		2006		2005		2006			2005			2006			2005
Net sales	$	102,349	$	92,730	$	58,253	$	51,145	$	4		$	21		$	160,606		$	143,896
Energy sales, net		2,457		2,544		—		—		—			—			2,457			2,544
Total revenue		104,806		95,274		58,253		51,145		4			21			163,063			146,440
Cost of products sold		89,034		80,151		49,029		41,210		1			22			138,064			121,383
Gross profit (loss)		15,772		15,123		9,224		9,935		3			(1	)		24,999			25,057
SG&A		9,282		10,362		6,081		6,145		1,566			1,226			16,929			17,733
Pension income		—		—		—		—		(3,721	)		(3,880	)		(3,721	)		(3,880	)
Restructuring recorded as component of COS		—		—		—		—		8,223			—			8,223			—
Restructuring charges		—		—		—		—		19,298			—			19,298			—
Gains (losses) on dispositions of plant, equipment and timberlands		—		—		—		—		10			(60	)		10			(60	)
Total operating income (loss)		6,490		4,761		3,143		3,790		(25,373	)		2,713			(15,740	)		11,264
Nonoperating income (expense)		—		—		—		—		(2,377	)		(2,501	)		(2,377	)		(2,501	)
Income (loss) before income taxes	$	6,490	$	4,761	$	3,143	$	3,790	$	(27,750	)	$	212		$	(18,117	)	$	8,763
Supplementary Data
Net tons sold		119,087		110,738		14,884		11,679		—			5			133,971			122,422
Depreciation expense	$	8,410	$	8,869	$	3,939	$	3,997		—			—		$	12,349		$	12,866

     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 included in “Other and Unallocated” in the table above. Certain prior period information has been reclassified to conform to the current period presentation.

     Management evaluates results of operations before non-cash pension income, restructuring related charges, unusual items, effects of asset dispositions and insurance recoveries because it believes this is a more meaningful representation of the operating performance of its core papermaking businesses, the profitability of business units and the extent of cash flow generated from core operations. This presentation is closely aligned with the management and operating structure of our company. It is also on this basis that the Company’s performance is evaluated internally and by the Company’s Board of Directors.

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13. SUBSEQUENT EVENTS

     Chillicothe Acquisition On April 3, 2006, we completed our acquisition of Chillicothe, the carbonless business operations of NewPage Corporation, for $81.8 million in cash, subject to certain post-closing working capital adjustments. The Chillicothe assets consist of a 440,000 ton-per-year paper making facility in Chillicothe, Ohio and coating operations based in Fremont, Ohio. Chillicothe had revenue of $441.5 million in 2005 and a total of approximately 1,700 employees as of December 31, 2005.

     New Credit Facility On April 3, 2006, we, along with certain of our subsidiaries as borrowers and certain of our subsidiaries as guarantors, entered into a credit agreement with certain financial institutions. Pursuant to the credit agreement for our new credit facility, we may borrow, repay and reborrow revolving credit loans in an aggregate principal amount not to exceed $200.0 million outstanding at any time. All borrowings under our credit facility are unsecured. The revolving credit commitment expires on April 2, 2011.

     In addition, on April 3, 2006, pursuant to the credit agreement, we received a term loan in the principal amount of $100.0 million. Quarterly repayments of principal outstanding under the term loan begin on March 31, 2007 with the final principal payment due on April 2, 2011.

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

     We have the right to prepay the term loan and revolving credit borrowings in whole or in part without premium or penalty, subject to timing conditions related to the interest rate option chosen. If certain prepayment events occur, such as a sale of assets or the incurrence of additional indebtedness in excess of $10.0 million in the aggregate, we must repay a specified portion of the term loan within five days of the prepayment event.

     The credit agreement contains a number of customary events of default for financings of this type including, without limitation, (i) failure to pay principal, interest or fees when due, (ii) material breach of representations or warranties, (iii) covenant default, (iv) cross-default to other debt in excess of an agreed amount, (v) a change of control, (vi) insolvency or bankruptcy and (vii) monetary judgment default in excess of an agreed amount. If an

event of default under the credit agreement occurs and is continuing, then PNC Bank may declare outstanding obligations under the credit agreement immediately due and payable.

     The credit agreement contains a number of customary covenants for financings of this type that, among other things, restrict our ability to dispose of or create liens on assets, incur additional indebtedness, repay other indebtedness, create liens on assets, make acquisitions and engage in mergers or consolidations. We are also required to comply with specified financial tests and ratios, each as defined in the credit agreement, including a consolidated minimum net worth test and a maximum debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) ratio. A breach of these requirements would give rise to certain remedies under the credit agreement, among which are the termination of the agreement and acceleration of the outstanding borrowings plus accrued and unpaid interest under our new credit facility.

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

     Private Placement On April 28, 2006, we completed a private placement offering of $200.0 million aggregate principal amount of our 7^1/8% Senior Notes due 2016. Our net proceeds from this offering totaled approximately $196.4 million, after deducting the commissions and other fees and expenses relating to the offering. We expect to use the net proceeds to redeem $150.0 million aggregate principal amount of our outstanding 6^7/8% notes due July 2007, plus the payment of the applicable redemption premium and accrued interest. We expect to use the remaining net proceeds for working capital and general corporate purposes.

     Interest on these Senior Notes will accrue at the rate of 7^1/8% per annum and will be payable semiannually in arrears on May 1 and November 1, commencing on November 1, 2006.

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

        .

GLATFELTER

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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 its 2005 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, net sales, costs of products sold, non-cash pension income, environmental costs, capital expenditures and liquidity, all of which are inherently difficult to predict. Although we make such statements based on assumptions that we believe to be reasonable, there can be no assurance that actual results will not differ materially from our expectations. Accordingly, we identify the following important factors, among others, which could cause our results to differ from any results that might be projected, forecasted or estimated in any such forward-looking statements:

i.	variations in demand for, or pricing of, our products;
ii.	changes in the cost or availability of raw materials

	we use, in particular market pulp, pulp substitutes, and abaca fiber, and changes in energy-related costs;
iii.	our ability to develop new, high value-added Specialty Papers and Long Fiber & Overlay Papers;
iv.	the impact of competition, changes in industry paper production capacity, including the construction of new mills, the closing of mills and incremental changes due to capital expenditures or productivity increases;
v.	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 Neenah mill is located; and the costs of environmental matters at our former Ecusta Division mill;
vi.	the gain or loss of significant customers and/or on-going viability of such customers;
vii.	risks associated with our international operations, including local economic and political environments and fluctuations in currency exchange rates;
viii.	geopolitical events, including war and terrorism;
ix.	enactment of adverse state, federal or foreign tax or other legislation or changes in government policy or regulation;
x.	adverse results in litigation;
xi.	disruptions in production and/or increased costs due to labor disputes;
xii.	our ability to successfully implement the EURO Program;
xiii.	our ability to successfully execute our timberland strategy to realize the value of our timberlands;
xiv.	our ability to execute the planned shutdown of the Neenah facility in an orderly manner; and
xv.	our ability to finance, consummate and integrate acquisitions.

GLATFELTER

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

     Overview The comparison of our financial results for the first quarter of 2006 versus the first quarter of 2005 reflects the following significant items:

1)	Demand for products in our North America-based Specialty Papers business unit improved and selling prices strengthened;
2)	The results of our Long Fiber & Overlay Papers business unit, based in Europe, declined in the comparison primarily due to increased competition and the related adverse affect on selling prices;
3)	Input costs, primarily energy related, increased in the comparison putting pressures on our margins;
4)	Selling, general & administrative expenses declined $0.7 million in the quarter over quarter comparison despite $1.5 million of acquisitions integration costs incurred in the first quarter of 2006;
5)	We completed our $65 million acquisition of J R Crompton’s Lydney mill on March 13, 2006. This mill’s revenue in 2005 was approximately $75 million;
6)	In connection with its agreement to acquire the Chillicothe, OH-based carbonless paper operations of NewPage Corporation, the Company announced it would permanently shutdown its Neenah, WI facility. The production of products currently manufactured at the Neenah facility will be transferred to Chillicothe. The results of operations in the first quarter of 2006 include related pre-tax charges of $27.5 million. Additional Neenah shutdown related charges totaling $25 million to $30 million are expected to be recorded in the second and third quarters of 2006.

RESULTS OF OPERATIONS

Three Months Ended March 31, 2006 versus the
Three Months Ended March 31, 2005

     The following table sets forth summarized results of operations:

	Three Months Ended
	March 31
In thousands, except per share	2006			2005
Net sales	$	160,606		$	143,896
Gross profit		20,265			28,594
Operating income (loss)		(15,740	)		11,264
Net income (loss)		(11,865	)		6,290
Earnings per diluted share		(0.27	)		0.14

     The consolidated results of operations for the three months ended March 31, 2006 includes the following significant items:

In thousands, except per share	After-tax		Diluted EPS
2006
Restructuring charges	$	17,864	$	0.40
Acquisition integration related costs		953		0.02

     The above items decreased earnings by $18.8 million, or $0.42 per diluted share in the first quarter of 2006. There were no comparable transactions in the first quarter of 2005.

GLATFELTER

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Business Units

     The following table sets forth profitability information by business unit and the composition of consolidated income before income taxes:

        .

Business Unit Performance	For The Three Months Ended March 31,
In thousands	Specialty Papers				Long Fiber & Overlay				Other and Unallocated						Total
	2006		2005		2006		2005		2006			2005			2006			2005
Net sales	$	102,349	$	92,730	$	58,253	$	51,145	$	4		$	21		$	160,606		$	143,896
Energy sales, net		2,457		2,544		—		—		—			—			2,457			2,544
Total revenue		104,806		95,274		58,253		51,145		4			21			163,063			146,440
Cost of products sold		89,034		80,151		49,029		41,210		1			22			138,064			121,383
Gross profit (loss)		15,772		15,123		9,224		9,935		3			(1	)		24,999			25,057
SG&A		9,282		10,362		6,081		6,145		1,566			1,226			16,929			17,733
Pension income		—		—		—		—		(3,721	)		(3,880	)		(3,721	)		(3,880	)
Restructuring recorded as component of COS		—		—		—		—		8,223			—			8,223			—
Restructuring charges		—		—		—		—		19,298			—			19,298			—
Gains on dispositions of plant, equipment and timberlands		—		—		—		—		10			(60	)		10			(60	)
Total operating income (loss)		6,490		4,761		3,143		3,790		(25,373	)		2,713			(15,740	)		11,264
Nonoperating income (expense)		—		—		—		—		(2,377	)		(2,501	)		(2,377	)		(2,501	)
Income before income taxes	$	6,490	$	4,761	$	3,143	$	3,790		$(27,750	)	$	212			$(18,117	)	$	8,763
Supplementary Data
Net tons sold		119,087		110,738		14,884		11,679		—			5			133,971			122,422
Depreciation expense	$	8,410	$	8,869	$	3,939	$	3,997		—			—		$	12,349		$	12,866

     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. Costs incurred by support areas not directly aligned with the business unit are allocated primarily based on an estimated utilization of support area services.

     Management evaluates results of operations before non-cash pension income, and if applicable, restructuring related charges, unusual items, effects of asset dispositions and insurance recoveries because it believes this is a more meaningful representation of the operating performance of its core papermaking businesses, the profitability of business units and the extent of cash flow generated from core operations. This presentation is closely aligned with the management and operating structure of our Company.

     It is also on this basis that our performance is evaluated internally and by our Board of Directors.

     Sales and Costs of Products Sold

	Three Months Ended
	March 31
In thousands	2006			2005			Change
Net sales	$	160,606		$	143,896		$	16,710
Energy sales — net		2,457			2,544			(87	)
Total revenues		163,063			146,440			16,623
Costs of products sold		142,798			117,846			24,952
Gross profit	$	20,265		$	28,594			(8,329	)
Gross profit as a percent of Net sales		12.6	%		19.9	%

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

	Percent of Total
	2006			2005
Business Unit
Specialty Papers		63.7	%		64.4	%
Long-Fiber & Overlay Papers		36.3			35.6
Total		100.0	%		100.0	%

     Net sales totaled $160.6 million for the first quarter of 2006, an increase of $16.7 million, or 11.6%, compared to the same quarter a year ago. This growth was primarily driven by an 7.5% increase in volume and $3.7 million from higher average selling prices in the Specialty Papers business unit compared with the same quarter a year ago. Long Fiber & Overlay Papers’ volumes shipped increased 27.4% and selling prices declined $2.5 million in the quarter-to-quarter comparison. The Lydney mill acquisition, which was completed on March 13, 2006, contributed $3.5

GLATFELTER

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million of net sales during the quarter and the translation of foreign currencies unfavorably impacted 2006 first quarter net sales by $1.5 million compared to the same quarter a year ago.

     Costs of products sold totaled $142.8 million for the first quarter of 2006, an increase of $25.0 million compared with the same quarter a year ago. As discussed above, the 2006 first quarter costs of products sold includes an $8.2 million pre-tax charge for inventory write-downs and accelerated depreciation on property and equipment to be abandoned in connection with the Neenah shutdown. In addition to the effect of these charges, costs of products sold increased by $14.2 million due to the effect of increased shipping volumes, together with higher raw material and energy prices aggregating approximately $3.6 million. The translation of foreign currencies reduced costs by $1.5 million.

     Non-Cash Pension Income Non-cash pension income results from the over-funded status of our pension plans. The amount of pension income recognized each year is determined using various actuarial assumptions and certain other factors, including the fair value of our pension assets as of the beginning of the year. The following summarizes non-cash pension income for each of the first quarters of 2006 and 2005:

	Three Months Ended
	March 31
In thousands	2006		2005		Change
Recorded as:
Costs of products sold	$	3,489	$	3,537		($48	)
SG&A expense		232		343		(111	)
Total	$	3,721	$	3,880		($159	)

     Selling, General and Administrative (“SG&A”) expenses totaled $16.7 million in the first quarter of 2006 compared to $17.4 million in the year-earlier quarter. The first quarter of 2006 amounts include approximately $1.5 million of acquisition integration related expenses. The impact of these additional costs was offset by lower legal and professional fees as a result of the resolution of certain legal matters including insurance recoveries.

     Restructuring Charges — Neenah Facility Shutdown As discussed above, in the first quarter of 2006 we committed to a plan to permanently shutdown our Neenah facility. The following table summarizes restructuring charges incurred in connection with these initiatives:

	Three Months Ended
In thousands	March 31, 2006
Restructuring initiative:
Recorded as:
Costs of products sold	$	8,223
Restructuring charge		19,259
Total	$	27,482

	Three Months Ended
In thousands	March 31, 2006
Accelerated depreciation	$	5,812
Inventory write-down		2,411
Severance and benefit continuation		1,761
Pension and other retirement benefits curtailments		6,304
Contract termination costs		11,109
Other		85
Total	$	27,482

These initiatives are expected to be substantially completed by the end of June 2006. The facility to be abandoned had been supporting our Specialty Papers business unit. Additional Neenah shutdown related charges totaling $25 million to $30 million are expected to be recorded in the second and third quarters of 2006.

The first quarter results of operations also include $0.04 million of charges related to the European Restructuring and Optimization (EURO) Program.

     Income Taxes Our results of operations for the first quarter of 2006 reflects an effective tax rate of 34.5% compared to 28.2% in the first quarter a year ago. The lower effective tax rate in the first quarter of 2005 was primarily due to the resolution of certain state tax matters.

     Foreign Currency We own and operate paper and pulp mills in Germany, France and the United Kingdom as well as the Philippines. The local currency in Germany and France is the Euro, the British Pound Sterling in the UK while in the Philippines the currency is the Peso. During the first three months of 2006, these operations generated approximately 31% of our sales and 31% of operating expenses. The translation of the results from these international operations into U.S. dollars is subject to changes in foreign currency exchange rates.

GLATFELTER

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     The table below summarizes the effect from foreign currency translation on 2006 reported results compared to 2005:

	Three Months
In thousands	Ended March 31
	Favorable
	(unfavorable)
Net sales		($1,514	)
Costs of products sold		1,527
SG&A expenses		146
Income taxes and other		78
Net income	$	237

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

LIQUIDITY AND CAPITAL RESOURCES

     Our business is capital intensive and requires expenditures for new or enhanced equipment, for environmental compliance matters and to support our business strategy and research and development efforts. The following table summarizes cash flow information for each of the periods presented.

	Three Months Ended
	March 31
In thousands	2006			2005
Cash and cash equivalents at beginning of period	$	57,442		$	39,951
Cash provided by (used for)
Operating activities		(4,712	)		(9,115	)
Investing activities		(73,511	)		(4,610	)
Financing activities		49,333			(1,892	)
Effect of exchange rate changes on cash		266			(488	)
Net cash provided (used)		(28,264	)		(16,105	)
Cash and cash equivalents at end of period	$	28,818		$	23,846

     The increase in cash generated from operations in the comparison was primarily due to a reduction in cash used for working capital in the first quarter of 2006 compared with the year-earlier quarter.

     The changes in investing cash flows reflects the use of approximately $68.3 million to acquire JR Crompton’s Lydney mill in March of 2006. The acquisition was financed with additional borrowings under our revolving credit facility, as reflected by the increase in cash provided by financing activities.

     The following table sets forth our outstanding long-term indebtedness:

	March 31,		December 31,
In thousands	2006		2005
Revolving credit facility, due June 2006	$	70,749	$	19,650
67/8% Notes, due July 2007		150,000		150,000
Note payable — SunTrust, due March 2008		34,000		34,000
Other notes, various		—		—
Total long-term debt		254,749		203,650
Less current portion		—		(19,650	)
Long-term debt, excluding current portion	$	254,749	$	184,000

     As more fully discussed in Item 1 — Financial Statements, Note 13, on April 3, 2006 we refinanced the revolving credit facility set forth in the table above. The significant terms of the new credit facility are also set forth therein. In addition, as more fully described in Note 13, on April 28, 2006, we completed a private placement offering of $200.0 million aggregate principal amount of our 7^1/8% Senior Notes due 2016. We expect to use the net proceeds to redeem $150.0 million aggregate principal amount of our outstanding 6^7/8% notes due July 2007, plus the payment of the applicable redemption premium and accrued interest. We expect to use the remaining net proceeds of for working capital and general corporate purposes.

     During the first quarters of 2006 and 2005, cash dividends paid on common stock totaled $4.0 million in each quarter. Our Board of Directors determines what, if any, dividends will be paid to our shareholders. Dividend payment decisions are based upon then-existing factors and conditions and, therefore, historical trends of dividend payments are not necessarily indicative of future payments.

     We are subject to loss contingencies resulting from regulation by various federal, state, local and foreign governmental authorities with respect to the environmental impact of mills we operate, or have operated. To comply with environmental laws and regulations, we have incurred substantial capital and operating expenditures in past years. We anticipate that environmental regulation of our operations will continue to become more burdensome and that capital and operating expenditures necessary to comply with environmental regulations will continue, and perhaps increase, in the future. In addition, we may incur obligations to remove or mitigate 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. Because environmental regulations are not consistent worldwide, our ability to compete in the world

GLATFELTER

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marketplace may be adversely affected by capital and operating expenditures required for environmental compliance.

     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 existing credit facility or other bank lines of credit and other long-term debt. However, as discussed in Item 1 — Financial Statements — Note 11, 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, 2006 and December 31, 2005, we had not entered into any off-balance-sheet arrangements. A financial derivative instrument to which we are a party and guarantees of

indebtedness, which solely consists of obligations of subsidiaries and a partnership, are reflected in the consolidated balance sheets included herein in Item 1 — Financial Statements.

     Outlook We expect orders for our product offerings in the North America-based Specialty Papers business unit to be at or near capacity. In addition, pricing has strengthened and is expected to remain at or above these levels. We expect these conditions to prevail through most of 2006.

     In our Long Fiber & Overlay Papers business unit we expect order patterns to continue to improve

GLATFELTER

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

	Year Ended December 31													At March 31, 2006
														Carrying
Dollars in thousands	2006			2007			2008			2009		2010		Value			Fair Value
Long-term debt
Average principal outstanding
At fixed interest rates	$	184,000		$	115,250		$	8,500			—		—	$	184,000			$	185,801
At variable interest rates		70,749			—			—			—		—		70,749				70,749
Weighted-average interest rate
On fixed interest rate debt		6.31	%		5.97	%		3.82	%		—		—
On variable interest rate debt		5.53			—			—			—		—
Cross-currency swap
Pay variable — EURIBOR	€	34,993			—			—			—		—	$	(18,283	)		$	(18,283	)
Variable rate payable		3.49	%		—			—			—		—
Receive variable — US$ LIBOR	$	33,562			—			—			—		—
Variable rate receivable		5.60	%		—			—			—		—

     Our market risk exposure primarily results from changes in interest rates and currency exchange rates. At March 31, 2006, we had long-term debt outstanding of $254.7 million, of which $70.7 million or 27.8% was at variable interest rates.

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

     Variable-rate debt outstanding represents borrowings under our revolving credit facility that incur interest based on the domestic prime rate or a Eurocurrency rate, at our option, plus a margin. At March 31, 2006, the interest rate paid was 5.53%. A hypothetical 100 basis point increase or decrease in the interest rate on variable rate debt would increase or decrease annual interest expense by $0.7 million.

     At March 31, 2006, we had a cross-currency swap agreement outstanding with a termination date of June 24, 2006. Under this transaction, we swapped $70.0 million for approximately €73 million, pay interest on the Euro portion of the swap at a floating Eurocurrency Rate

(EURIBOR), plus applicable margins and receive interest on the dollar portion of the swap at a floating U.S. dollar LIBOR rate, plus applicable margins. The cross-currency swap is designed to provide protection from the impact that changes in currency rates have on certain U.S. dollar-denominated inter-company obligations recorded at our S&H subsidiary in Gernsbach, Germany.

     The cross currency swap is recorded at fair value on the Consolidated Balance Sheet under the caption “Other long-term liabilities.” Changes in fair value are recognized in earnings as “Other income (expense)” in the Consolidated Statements of Income. Changes in fair value of the cross-currency swap transaction are substantially offset by changes in the value of U.S. dollar-denominated inter-company obligations when they are re-measured in Euros, the functional currency of S&H.

     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 three months ended March 31, 2006, approximately 69% of our net sales were shipped from the United States, 24% from Germany, and 7% from other international locations.

GLATFELTER

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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, 2006, have concluded that, as of the evaluation date, our disclosure controls and procedures are effective.

     Changes in Internal Controls On March 13, 2006, we completed our acquisition of the Lydney mill from J R

Crompton Limited. We performed due diligence procedures associated with the acquisition of this facility and are in the process of evaluating how the separate financial reporting processes applicable to this newly acquired entity will be incorporated into our internal control structure. There were no other changes in our internal control over financial reporting during the three months ended March 31, 2006, that have materially affected or is reasonably likely to materially affect our internal control over financial reporting.

PART II

ITEM 6. EXHIBITS

     (a) Exhibits

     The following exhibits are filed herewith.

10	Agreement for Sale of Assets (Lydney), dated March 8, 2006, by and among J R Crompton Limited, Nicholas James Dargan and William Kenneth Dawson, as administrators and Glatfelter-UK Limited and P.H. Glatfelter Company, filed herewith.
31.1	Certification of George H. Glatfelter II, Chairman and Chief Executive Officer of Glatfelter, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of John C. van Roden, Jr., Executive Vice President and Chief Financial Officer of Glatfelter, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of George H. Glatfelter II, Chairman and Chief Executive Officer of Glatfelter, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.
32.2	Certification of John C. van Roden, Jr., Executive 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.

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 10, 2006
	By	/s/ John P. Jacunski
		John P. Jacunski
		Vice President and Corporate Controller
		(as chief accounting officer)

GLATFELTER

- 24 -

EXHIBIT INDEX

Exhibit Number	Description
10	Agreement for Sale of Assets (Lydney), dated March 8, 2006, by and among J R Crompton Limited, Nicholas James Dargan and William Kenneth Dawson, as administrators and Glatfelter-UK Limited and P.H. Glatfelter Company, filed herewith.
31.1	Certification of George H. Glatfelter II, Chairman and Chief Executive Officer of Glatfelter, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350 — Chief Executive Officer, filed herewith.
31.2	Certification of John C. van Roden, Jr., Executive Vice President and Chief Financial Officer of Glatfelter, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 — Chief Financial Officer, filed herewith.
32.1	Certification of George H. Glatfelter II, Chairman and Chief Executive Officer of Glatfelter, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 — Chief Executive Officer, filed herewith.
32.2	Certification of John C. van Roden, Jr., Executive 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.

GLATFELTER

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EX-10

                                                                    Exhibit 10

                               DATED MARCH 8 2006

                              J R CROMPTON LIMITED

                NICHOLAS JAMES DARGAN AND WILLIAM KENNETH DAWSON

                              GLATFELTER-UK LIMITED

                             P.H. GLATFELTER COMPANY

                                   ----------

                                    AGREEMENT
                             FOR THE SALE OF ASSETS
                                    (LYDNEY)

                                   ----------

                            (ADDLESHAW GODDARD LOGO)



                                    CONTENTS



                                                                                 PAGE
                                                                                 ----
                                                                              
      CLAUSE

 1    Definitions.............................................................     1
 2    Interpretation..........................................................     5
 3    Sale and Purchase.......................................................     5
 4    The Consideration.......................................................     6
 5    VAT.....................................................................     6
 6    Completion..............................................................     6
 7    Excluded Assets.........................................................     7
 8    Excluded Liabilities....................................................     8
 9    Third Party Items and Claims............................................     9
10    Intellectual Property Licence...........................................    10
11    Continuing the Business.................................................    10
12    Accounting for the Debts................................................    11
13    Records.................................................................    11
14    Exclusion of Warranties.................................................    12
15    Exclusion of Personal Liability.........................................    13
16    Employees...............................................................    13
17    Apportionments..........................................................    14
18    Data Protection.........................................................    14
19    Publicity...............................................................    14
20    Guarantee...............................................................    14
21    Notices.................................................................    15
22    General.................................................................    15
23    Governing Law and Jurisdiction..........................................    16

      SCHEDULE

 1    The Lydney Property.....................................................    18
      Part I - The Lydney Property............................................    18
      Part II - Special Conditions - The Lydney Property......................    19
      Part III - The Transfers - Lydney Property..............................    22
      Part IV - Details of the Charges to be Released - The Lydney Property...    23
 2    The Registered Trademarks...............................................    24
 3    The Patents.............................................................    25
 4    The Plant...............................................................    26
 5    The Third Party Items...................................................    27
 6    The German Contracts....................................................    28
 7    Sales Agency Agreements.................................................    29




THIS AGREEMENT is made on March 8, 2006

BETWEEN

(1)  J R CROMPTON LIMITED (No. 58810) whose registered office is at 12th Floor,
     Sunlight House, Quay Street, Manchester M3 3JZ (SELLER) acting by the
     Administrators (defined below);

(2)  NICHOLAS JAMES DARGAN and WILLIAM KENNETH DAWSON both of Deloitte & Touche
     LLP, 66 Shoe Lane, London EC4A 3BQ (together the ADMINISTRATORS);

(3)  GLATFELTER-UK LIMITED (No. 5734921) whose registered office is care of
     Jordans Limited 20-22 Bedford Row London WC/R4dS (BUYER); and

(4)  P.H. GLATFELTER COMPANY a United States Corporation incorporated and
     validly subsisting under the laws of the State of Pennsylvania whose
     principal executive offices are at 96 George Street, Suite 400, York
     Pennsylvania 17401 (GUARANTOR).

WHEREAS

(A)  The Administrators were appointed Joint Administrators of the Seller by an
     Administration Order made in the High Court of Justice Chancery Division
     Manchester District Registry on 7 February 2006 in proceedings the short
     title and reference to the record of which is AO No. 1146 of 2006 In the
     Matter of J R Crompton Limited.

(B)  The Seller has agreed to sell to the Buyer and the Buyer has agreed to
     purchase the Lydney Assets (defined below) which relate to the Lydney
     Business (defined below) on the terms of this Agreement.

(C)  The Guarantor is the ultimate parent company of the Buyer and has agreed to
     guarantee the Buyer's obligations under this Agreement.

IT IS AGREED:

1    DEFINITIONS

     In this Agreement, unless the context otherwise requires:

     ADMINISTRATORS' SOLICITORS means Addleshaw Goddard of 100 Barbirolli
     Square, Manchester M2 3AB Ref: SWM\103370-11491

     APPOINTMENT means the appointment of the Joint Administrators

     BUSINESS NAME means J R Crompton

     BUSINESS RIGHTS means any service marks database rights utility models
     topography rights inventions trade secrets know-how get up or other rights
     in respect of any other intellectual property (registerable or not) and
     wherever existing in the world (including all renewals extensions and
     revivals and all rights to apply for any of the foregoing) owned by the
     Seller and used by it exclusively in connection with the Lydney Business

     COMPLETION means the completion of the sale and purchase hereby agreed

     COMPLETION DATE means the date of this Agreement

     DEBTS means the book and other debts and monetary claims owing to the
     Seller and/or the Administrators as at the Transfer Date whether or not yet
     due or payable or invoiced.


                                       1



     DEVON VALLEY PROPERTY means the property occupied by the Seller at Hele
     Road, Exeter

     EXCLUDED ASSETS means the property rights and assets of or used by the
     Seller which are not expressly sold pursuant to this Agreement including
     but not limited to those set out in clause 7 (Excluded Assets) and, without
     limitation, the assets of the Retained Business and of the Simpson Clough
     Business

     EXCLUDED LIABILITIES means (save to the extent to which the Buyer agrees
     under this Agreement to discharge the same) all liabilities or obligations
     relating to the Lydney Business the Simpson Clough Business or the Retained
     Business outstanding on, or accrued or referable to the period up to and
     including the Transfer Date and including, for the avoidance of doubt, the
     items set out in clause 8 (Excluded Liabilities)

     GERMAN BUSINESS means any and all contracts, supply agreements, engagements
     or orders entered into on or before the Transfer Date with customers,
     suppliers, agents or representatives which in any way, in whole or part
     relate to the manufacture, supply or sale of goods into Germany and any
     contracts, engagements or orders entered into on or before the Transfer
     Date for the supply or sale of goods or services to the Seller by any
     supplier or contracting party based in Germany including without limitation
     the contracts details of which are set out in schedule 6 hereto, the German
     Business further includes all business secrets, Goodwill, Goods in Transit,
     Stock, Records and Third Party Items related to the manufacture, supply or
     sale of goods in Germany or to customers having their principal place of
     business in Germany and related to the supply of goods or services to the
     Seller out of Germany or by a company having its principal place of
     business in Germany

     GOODS IN TRANSIT means all and any items which were ordered by the Seller
     and/or the Administrators prior to the Transfer Date for delivery to the
     Lydney Property but which have not been delivered as at the Transfer Date
     whether or not the same have been paid for

     GOODWILL means the goodwill of the Seller exclusively in connection with
     the Lydney Business comprising:

     (a)  exclusive liberty for the Buyer to represent itself as carrying on the
          Lydney Business in succession to the Seller

     (b)  liberty to negotiate to take up all orders and enquiries relating
          exclusively to the Lydney Business (other than those which relate to
          the German Business) which have not been accepted by the Seller as at
          the date hereof

     (c)  liberty to use all customer lists and (in so far as not referring to
          the Seller and not referring to the rights or property of any other
          person) any technical literature and any technical drawings used by
          the Seller exclusively in connection with the Lydney Business (save in
          so far as the same relate to the German Business)

     HEAD OFFICE means the head office function of the Seller called on from
     Sunlight House, Quay Street, Manchester

     INTELLECTUAL PROPERTY means such trade marks patents design rights
     registered designs copyright database rights or domain names (wherever
     existing in the world and whether registered or not and including all
     renewals extensions and revivals) and all rights to apply for any for the
     foregoing as may be owned by the Seller and used exclusively in connection
     with the Lydney Business as at the Transfer Date and including (without
     limitation) those


                                       2



     registered trademarks (REGISTERED TRADEMARKS) listed in Schedule 2 and the
     Patent listed in schedule 3 but in every case subject to all licences and
     other rights of and obligations to third parties to which the Seller may be
     subject in relation to the same

     JRC USA means J R Crompton (USA) Limited

     LYDNEY ASSETS means the Business Rights, the Lydney Customer Contracts, the
     Goodwill, the Intellectual Property, the Plant, the Stock, the Transferred
     Records (as defined herein) and all contracts relating to the Third Party
     Items and relating exclusively to the Lydney Business but for the avoidance
     of doubt excludes the German business

     LYDNEY BUSINESS means the business of the manufacture of specialist
     beverage papers and related products carried on by the Seller at the Lydney
     Property prior to the Transfer Date but for the avoidance of doubt excludes
     the German Business, the Simpson Clough Business and the Retained Business

     LYDNEY CUSTOMER CONTRACTS means the benefit and burden of all contracts and
     engagements entered into and of all orders placed with the Seller or the
     Administrators on behalf of the Seller by customers exclusively in relation
     to the Lydney Business which are subsisting but uncompleted on the Transfer
     Date other than those relating to the German Business

     LYDNEY PROPERTY means the freehold property at Lydney, Gloucestershire as
     more particularly described in part 1 of schedule 1

     PLANT means such plant, machinery, vehicles, office furniture fittings and
     equipment relating exclusively to the Lydney Business as is listed in
     schedule 4 and is in the ownership of the Seller and situate at the Lydney
     Property on the Transfer Date but excluding any ROT Chattels

     RECORDS means the Transferred Records and the Retained Records

     REGULATIONS means the Transfer of Undertakings (Protection of Employment)
     Regulations 1981

     RETAINED BUSINESS means the business carried on by the Seller in respect of
     the manufacture of specialist beverage papers and related products at the
     Devon Valley Property and any retained business rights (including the right
     to use the Business Name), customer contracts relating to the Devon Valley
     Property any rights in respect of the Marla joint venture referred to in
     clause 8.1(d), and all other rights relating thereto together with such
     part of the Seller's business as is operated from Head Office or from or by
     JRC USA

     RETAINED RECORDS means all invoicing financial tax and other accounting
     records of the Seller but excludes the VAT Records

     RETURNS means all and any goods supplied by the Seller or the
     Administrators on behalf of the Seller prior to the Transfer Date but
     returned (whether as defective or for any other reason) at any time whether
     prior to or after the Transfer Date and any other claims by customers
     relating to defective or allegedly defective goods but excludes for the
     avoidance of doubt any Returns related to the German Business

     ROT CHATTELS means all and any chattels now or hereafter the subject of any
     ROT Claims


                                       3



     ROT CLAIMS means all and any existing or future claims by or on behalf of
     any third party to have retained title in or to any chattels included in
     the Lydney Assets and/or which at the time of the Appointment were and/or
     which at the date hereof are in the possession or control of the Seller

     SIMPSON CLOUGH BUSINESS means the business of the manufacture of specialist
     beverage products carried on by the Seller from premises occupied by the
     Seller at Simpson Clough Mill, Heywood, Lancashire (SIMPSON CLOUGH
     PROPERTY)

     STANDARD CONDITIONS means the Standard Conditions of Sale (Third Edition)

     STOCK means the Goods In Transit and such raw materials parts and other
     stock and work-in-progress (both finished and unfinished) relating
     exclusively to the Lydney Business as is in the ownership of the Seller and
     situate at the Lydney Property on the Transfer Date but excluding any ROT
     Chattels

     SUPPLY CONTRACTS means the benefit and burden of all contracts commitments
     and/or orders entered into or placed by or on behalf of the Seller or the
     Administrators on behalf of the Seller between the time of Appointment and
     the date of this Agreement for the supply to the Seller of goods, materials
     and/or services in connection with the Lydney Business (save insofar as
     delivered or rendered on or prior to the Transfer Date)

     THIRD PARTY ITEMS means any items which are the subject of hire purchase
     lease purchase credit sale or leasing agreements or on loan or otherwise in
     the ownership of third parties and which are situate at the Lydney Property
     on or which are otherwise put into the possession of the Buyer at any time
     after the Transfer Date including but not limited to the items listed in
     schedule 5 (but excluding any ROT Chattels)

     TOWN AND COUNTRY PLANNING ACTS means all enactments from time to time in
     force relating to town and country planning

     TRANSFER DATE means 5.00 pm on the date of this Agreement

     TRANSFERRED RECORDS means all sales literature and publicity material
     production data quality data formulae and recipes correspondence books and
     documents and other similar or like materials (including customer and
     supplier lists and records, the Lydney Customer Contracts and related
     documents) in whatever medium relating exclusively to the Lydney Business
     and/or the Lydney Assets or used or intended for use exclusively in the
     Lydney Business other than the Retained Records and the VAT Records but for
     the avoidance of doubt the Transferred Records do not include records
     relating to the German Business

     TRANSITIONAL SERVICES AGREEMENT means the agreement of even date with this
     Agreement between the parties to this Agreement which sets out the terms on
     which for a period of one month post Completion the Buyer shall be entitled
     to access certain head office services including payroll systems, computer
     software and support functions in connection with the transfer of the
     Lydney Business

     VAT means Value Added Tax

     VATA means the Value Added Tax Act 1994

     VAT RECORDS means the records relating to the Business as at the Transfer
     Date which are referred to in section 49(1)(b) VATA.


                                       4



2    INTERPRETATION

2.1  In this Agreement unless the context otherwise requires:

     (a)  the recitals and schedules form part of this Agreement and references
          to this Agreement include them;

     (b)  references to recitals, clauses and schedules are to recitals and
          clauses of, and schedules to, this Agreement and references in a
          schedule or part of a schedule to paragraphs are to paragraphs of that
          schedule or that part of the schedule;

     (c)  references to this Agreement or any other document are to this
          Agreement or that document as in force for the time being and as
          amended from time to time in accordance with this Agreement or that
          document (as the case may be);

     (d)  a reference to a statute or statutory provision shall be construed as
          including a reference to any subordinate legislation (as defined by
          section 21(1) Interpretation Act 1978) made from time to time under
          that statute or provision (whether before or after the date of this
          Agreement);

     (e)  a reference to a statute, statutory provision or subordinate
          legislation (as so defined) shall be construed as including a
          reference to:

          (i)  that statute, provision or subordinate legislation as in force at
               the date of this Agreement and as from time to time modified or
               consolidated, superseded, re-enacted or replaced (whether with or
               without modification and whether before or after the date of this
               Agreement);

          (ii) any statute, statutory provision or subordinate legislation (as
               so defined) which it consolidates, supersedes, re-enacts or
               replaces (whether with or without modification);

     (f)  the headings and contents table are for convenience only and do not
          affect its interpretation;

     (g)  the words "other", "including" and "in particular" do not limit the
          generality of any preceding words and any words which follow them
          shall not be construed as being limited in scope to the same class as
          the preceding words where a wider construction is possible.

3    SALE AND PURCHASE

3.1  The Seller shall sell and the Buyer shall buy whatever right, title and
     interest (if any) the Seller has in or to the Lydney Assets on the terms
     and for the consideration set out in this Agreement to the intent that the
     Buyer shall from the Transfer Date carry on the Lydney Business as a going
     concern.

3.2  Such (if any) right title and interest in or to the Lydney Assets and the
     Lydney Property shall pass to the Buyer at Completion.

3.3  For the consideration set out in this Agreement and subject to the
     conditions hereinafter set out (including the special conditions set out in
     part II of schedule 1) the Seller shall sell (without title guarantee) and
     the Buyer shall buy the Lydney Property subject to all liens obligations
     licences and encumbrances relating thereto. In the event of any conflict
     between


                                       5



     the conditions set out in the main body of this Agreement and the said
     special conditions set out in part II of schedule 1 the former conditions
     shall prevail.

3.4  The provisions of part V of schedule 1 shall more particularly apply in
     respect of the Lydney Leasehold Property.

4    THE CONSIDERATION

4.1  The aggregate monetary consideration for the sale of the Lydney Property
     and the Lydney Assets shall be L37,500,000 (Thirty Seven Million Five
     Hundred Thousand Pounds Sterling), payable on Completion which shall be
     payable as follows:

     (a)  for the Business Rights - L1

     (b)  for the Lydney Customer Contracts - L1

     (c)  for the Goodwill - L

     (d)  for the Intellectual Property - L1

     (e)  for the Plant - L

     (f)  for the Stock - L

     (g)  for the Transferred Records - L1

     (h)  for the Lydney Property - L

5    VAT

5.1  All payments to be made under this Agreement shall be deemed to be
     exclusive of VAT unless otherwise provided.

5.2  Subject to clauses 5.3 and 5.4 the Buyer shall not pay any VAT upon the
     consideration referred to in clause 4 (The Consideration) the parties being
     of the view that this is a transaction which by virtue of Article 5 Value
     Added Tax (Special Provisions) Order 1995 S.I. No.1995/1268 is not to be
     treated as either a supply of goods or a supply of services.

5.3  If and to the extent to which all or any of the Lydney Assets or the Lydney
     Property are for any reason subject to VAT then the Buyer shall against
     receipt of a VAT invoice pay to the Administrators on behalf of the Seller
     forthwith on demand the VAT due relative to such sale together with all
     interest and penalties which may be payable thereon.

5.4  The Buyer warrants that it is registered or will as a result of this
     transaction become registerable for VAT purposes and that it intends to use
     the Lydney Assets and the Lydney Property to carry on with effect from the
     Transfer Date the same kind of business as the Lydney Business.

6    COMPLETION

6.1  Completion shall take place in respect of the purchase of the Lydney Assets
     and the Lydney Property at the offices of the Administrators' Solicitors on
     the Completion Date when:


                                       6



     (a)  The Buyer shall pay to the Administrators on behalf of the Seller the
          sum of L37,500,000 being the aggregate consideration for the sale and
          purchase of the Lydney Property and Lydney Assets.

     (b)  The Seller shall leave at the Lydney Property or otherwise wherever
          the same may be situate all such items of the Lydney Assets as are
          transferable by delivery.

     (c)  The Seller shall deliver to the Buyer assignments in favour of the
          Buyer of:

          (i)  Goodwill

          (ii) Intellectual Property.

     (d)  Neither the Seller nor the Administrators shall have any obligation to
          the Buyer to identify or deliver any such items of the Lydney Assets
          to the Buyer or to take any positive steps whatsoever (including but
          not limited to seeking or obtaining any requisite consent of any
          person not party hereto) relating thereto to enable the Buyer to
          obtain the same.

     (e)  The parties hereto shall enter into the Transitional Services
          Agreement.

7    EXCLUDED ASSETS

     All assets and items owned by or in the possession of the Seller other than
     the Lydney Assets and the Lydney Property are excluded from the sale under
     this Agreement. In particular but without prejudice to the generality of
     the foregoing the following assets or items are excluded:

7.1  The Retained Business and any assets owned or used in connection with it.

7.2  The Simpson Clough Business and any assets owned or used in connection with
     it.

7.3  All deposits, prepayments, cheques, bills, notes or securities received by
     the Seller or the Administrators on behalf of the Seller on or before the
     Transfer Date and any cash in hand and at bank or in the banking system.

7.4  Any claim or potential claim under any insurance arising from any act
     occurring on or before the date hereof.

7.5  The Debts and all guarantees, indemnities, securities, rights of retention
     of title and liens for the same.

7.6  The Retained Records.

7.7  The ROT Chattels.

7.8  The interest of the Seller in any vehicles other than those forming part of
     the Plant.

7.9  The benefit of all agreements which are not assignable or of which a
     purported assignment would be a breach or would constitute an event of
     default or termination.

7.10 The German Business.

7.11 All investments in shares or securities of the Seller (including shares and
     securities and other rights of whatsoever nature of the Seller in
     subsidiaries (if any) and all moneys from time to time owing to the Seller
     from such subsidiaries).


                                       7



7.12 Any interest of the Seller in any freehold or leasehold properties other
     than the Lydney Property.

7.13 Any interest the Seller may have in or to any pension fund(s).

7.14 All computer software (if any) used by the Seller the copyright in which is
     not owned by the Seller.

7.15 The Third Party Items.

7.16 Any of the Lydney Assets which have been distrained upon.

7.17 The Business Name.

7.18 Any assets located in or upon the Simpson Clough Property or the Devon
     Valley Property at the Transfer Date.

7.19 All other items or assets of the Seller not specifically mentioned in
     clause 3 (Sale and Purchase).

8    EXCLUDED LIABILITIES

8.1  Without limiting the meaning of Excluded Liabilities, the following
     liabilities relating to the Lydney Business, the Simpson Clough Business
     and/or the Retained Business and/or the Lydney Assets are expressly
     excluded from the sale to the Buyer contemplated hereunder:

     (a)  any liability (accrued or outstanding) in respect of the defined
          benefit pension scheme, or any other pension scheme operated in
          connection with the Lydney Business, the Simpson Clough Business or
          the Retained Business prior to the Transfer Date;

     (b)  any liability of the Lydney Business, the Simpson Clough Business or
          the Retained Business relating to any claim, writ or action, pending
          or threatened in the Courts of the United Kingdom or any claim or
          action accrued or outstanding as at the Transfer Date by any statutory
          authority;

     (c)  to the extent not otherwise assumed under statute, any liability
          relating to environmental matters relating to the operation of the
          Lydney Business and the Simpson Clough Business at the Lydney Property
          or the Simpson Clough Property which may have accrued prior to the
          Transfer Date;

     (d)  any interest in or relating to the Joint Venture between (1) Dynamic
          Products Limited (2) the Seller (3) Marla Innovations Limited (4)
          Peter Ashby and any licence or agreement relating thereto to which the
          Seller is a party; and

     (e)  any agreements relating to the appointment of a sales agent to which
          the Seller is a party and details of which are set out in schedule 7
          hereto.

8.2  The Buyer understands that the Administrators will not discharge all or any
     of the Excluded Liabilities and that to the extent to which any such
     liabilities are and remain liabilities of the Seller they will at most rank
     only as ordinary unsecured liabilities of the Seller. The Buyer also
     understands that the Seller and the Administrators cannot and do not nor
     give any assurances that the Buyer will not, by operation of law or
     otherwise, become responsible for some or all of the Excluded Liabilities
     and to the extent to which the Buyer is or becomes so responsible, the
     Buyer will have no recourse to the Seller or the Administrators. The


                                       8



     exclusion of the Excluded Liabilities is not intended to have the effect of
     altering any extent to which by operation of law liabilities may pass to
     the Buyer as a result of its acquiring the Lydney Business under this
     Agreement.

9    THIRD PARTY ITEMS AND CLAIMS

9.1  Unless otherwise agreed, the Buyer shall be entitled to assume possession
     of the Third Party Items relating exclusively to the Lydney Business as
     from the Transfer Date and the Seller shall not object to or hinder any
     arrangement which the Buyer may wish to make with the owners of the Third
     Party Items.

9.2  The Seller shall at the Buyer's request and expense enter into novations of
     some or all agreements relating to such Third Party Items in such form
     (consistent with the terms of this Agreement) as is reasonably acceptable
     to the Seller and is approved by the Administrators' Solicitors.

9.3  The Buyer acknowledges that it acquires no title to the Third Party Items
     and undertakes not to hold itself out as the owner of the Third Party Items
     nor to sell, offer for sale, assign, charge or create or permit any lien,
     encumbrance or interest whatsoever to arise in relation to any Third Party
     Items.

9.4  Unless/until the same are returned to their owner the Buyer shall keep all
     Third Party Items in its possession and under its control at its own
     expense and in as good a state of repair as they are in at the Transfer
     Date.

9.5  If no novation takes place or if the Buyer receives a valid demand for
     delivery up of a Third Party Item from the owner, the Buyer shall
     immediately on demand deliver up possession of the Third Party Item to the
     owner or otherwise as the owner shall direct. The delivery up of any Third
     Party Item shall be at the Buyer's own expense.

9.6  Neither a failure to obtain novation nor a demand for delivery up of any
     Third Party Item shall prejudice this Agreement or the consideration paid
     or payable under it.

9.7  Save as set out in this clause 9 the Seller shall not be responsible to the
     Buyer in any way in relation to any of the Third Party Items and in
     particular but without prejudice to the generality of the foregoing neither
     the Seller nor the Administrators shall be responsible for making or
     failing to make any payment in respect thereof or for arranging the removal
     of any of the Third Party Items on or before the Transfer Date or at any
     other time and the Buyer shall permit the Seller the Administrators the
     owner or the lessor of any of the Third Party Items at any time access to
     the Third Party Items for the purpose of inspecting or removing all or any
     of the same on demand and pending such removal the Buyer shall maintain all
     such Third Party Items in the condition in which they are at the Transfer
     Date.

9.8  Without prejudice to the generality of the terms of the preceding
     sub-clause if the title of the Seller to any assets possession of which is
     allowed to the Buyer or which are purported to be sold to the Buyer under
     the terms of this Agreement shall be called into question (whether in
     proceedings or otherwise) by any third party at any time or if there shall
     be any dispute arising out of this Agreement then:

     (a)  the Buyer shall allow the Seller and/or the Administrators and their
          respective servants authorised agents and invitees access to all the
          assets in question during normal business hours for the purpose of
          resolving such question;


                                       9



     (b)  the Buyer undertakes not to hold itself out as the owner of such
          items, nor to sell, offer for sale, assign, charge or create any lien
          on such items and to keep the same in its own possession and in as
          good a state of repair and condition as they are at the Transfer Date
          and to indemnify and keep indemnified the Administrators and the
          Seller and their respective estates and effects against all actions,
          proceedings, claims, demands and costs whatsoever arising directly or
          indirectly out of the giving of possession or purported sale of such
          items to the Buyer hereunder.

9.9  The Buyer acknowledges that all ROT Chattels are excluded from the sale
     under this Agreement but possession of such chattels may be given to the
     Buyer at Completion and agrees:

     (a)  to accept full responsibility for and in respect of the ROT Claims;
          and

     (b)  to satisfy and discharge all of the liabilities of the Seller and/or
          the Administrators in respect of the ROT Claims;

     (c)  to indemnify and keep indemnified the Seller and the Administrators
          against all claims demands proceedings losses damages awards costs
          charges and expenses brought or made against them or suffered or
          incurred by them howsoever as a result of and/or in connection with
          all and any ROT Claims.

10   INTELLECTUAL PROPERTY LICENCE

     The Buyer hereby grants to the Seller (for itself and its successors and
     assigns) a perpetual worldwide non-exclusive royalty-free transferable
     licence to use and exploit the Intellectual Property in or in connection
     with the Simpson Clough Business and/or the Retained Business and any
     variation, extension or development thereof. Without prejudice to the
     generality of the foregoing the Seller is expressly permitted to transfer
     and/or sub-licence this licence (on such terms as the Seller considers
     appropriate) to any purchaser(s) of the whole or any part or parts of any
     such businesses in order to confer upon any such purchaser(s) the benefit
     of it.

11   CONTINUING THE BUSINESS

11.1 The Buyer acknowledges that the Seller may not be entitled to assign, and
     shall not be entitled to novate the Lydney Customer Contracts and to that
     extent does not purport to do so.

11.2 The Seller shall, for a period of 12 months from the Transfer Date, use
     reasonable efforts to co-operate with the Buyer in trying to persuade the
     other parties to any of the Lydney Customer Contracts to have them assigned
     or novated to the Buyer, although it is agreed and understood that the
     Seller may have little or no influence with such other parties and shall be
     under no obligation to make any payments directly or indirectly to such
     other parties to persuade them to do so.

11.3 The Buyer undertakes with the Seller and the Administrators at the Buyer's
     expense:

     (a)  if requested to do so by the Seller or the Administrators to complete
          in a proper and workmanlike manner and meet all liabilities in
          connection with the Lydney Customer Contracts and to indemnify the
          Seller and the Administrators against all obligations liabilities,
          actions, costs, expenses, claims demands, losses and outgoings of
          whatsoever nature or description arising out of or by virtue of either
          the Lydney Customer Contracts or of any breach or non-observance by
          the Buyer of the Seller's


                                       10



          obligations under the Lydney Customer Contracts or of the Buyer's
          obligations under this Agreement;

     (b)  to deal with the Returns in accordance with the rights of any customer
          of the Business (that is to say the rights the customer(s) would have
          had if the Administrators had not been appointed) and to use its
          reasonable endeavours to assist the Seller and the Administrators in
          determining the validity of any customer's right to make Returns
          provided that the Seller and the Administrators reserve the right:

          (i)  to deal with all or any of the Returns in their sole discretion;

          (ii) to require the Buyer to use its best endeavours to assist the
               Seller and the Administrators in selling or otherwise disposing
               of all or any of the Returns;

     (c)  to keep the Seller and the Administrators fully indemnified against
          all losses, proceedings, claims, liabilities, costs and expenses
          whatsoever in respect of any act omission neglect or default by the
          Buyer in connection with the Lydney Property, the Lydney Business, the
          Returns, the Supply Contracts or any of them or in respect of the use
          of the Lydney Assets or any of them;

     (d)  to accept delivery or other performance of or under the Supply
          Contracts and to and pay the relevant suppliers promptly and fully
          therefor.

11.4 The Buyer undertakes not at any time to use the Business Name in connection
     with its business.

12   ACCOUNTING FOR THE DEBTS

12.1 The Buyer shall not acquire the Debts which shall remain the property of
     the Seller and the Seller shall be solely responsible for collection of the
     Debts.

12.2 In the event that the Buyer receives any sums in respect of the Debts at
     any time after the Transfer Date, the Buyer undertakes forthwith to pay
     over to the Administrators all such monies The Buyer acknowledges that all
     such monies would be received by it as trustee for the Seller and that if
     for any reason it is not possible to pay any such monies direct to the
     Administrators then such monies shall be paid by the Buyer into a separate
     bank account.

12.3 For the avoidance of doubt the Buyer acknowledges that all monies owing to
     the Seller for goods delivered or services provided and/or invoiced to any
     customer of the Business on or before the Transfer Date shall continue to
     belong to the Seller and the Buyer shall not be entitled to recover from
     the Seller or the Administrators any deposits or payments by customers
     prior to the Transfer Date.

13   RECORDS

13.1 If the Seller shall leave any of the Retained Records or any other books,
     files or other documents not included in this sale in or on the Lydney
     Property or otherwise in the possession of the Buyer then the Buyer hereby
     acknowledges and agrees that they are the property of the Seller and will
     not be removed from the Lydney Property or, as the case may be, from the
     possession of the Buyer and the Buyer shall at all times and from time to
     time permit the Seller and/or the Administrators and their respective
     servants and agents to have access to such Retained Records, books, files
     or other documents in order to inspect deal with or remove the same.


                                       11



13.2 The Buyer shall for a period of not less than 7 years from the Transfer
     Date retain all of the Transferred Records in good condition and on a
     single site in England and for that period during normal working hours the
     Buyer shall free of any charge provide whatever access and copying
     facilities the Seller the Administrators or any Liquidator of the Seller
     (or their respective servants or agents) may require to the Transferred
     Records.

13.3 The Buyer shall make available free of charge to the Seller and the
     Administrators for a period of six calendar months from the Transfer Date
     office accommodation at the Lydney Property for the use by the Seller
     and/or the Administrators and/or their servants and/or agents in connection
     with the collection of the Debts and for the storage, or any inspection
     removal of dealing with or other matters relating to the Records or any
     books, files and other documents of the Seller as are not included in this
     sale, and for clerical purposes, together with the assistance of clerical
     staff and telephone and photocopying facilities at the Lydney Property.

13.4 For a period of six calendar months from the Transfer Date the Buyer shall
     (free of any charge) permit the Administrators and their servants and
     agents to input and print out as licensee during normal business hours all
     accounting and wages information relating to the Lydney Business which the
     Administrators may require from any computer equipment included in the
     Lydney Assets or which whilst not included in the Lydney Assets is acquired
     by or available to the Buyer and the Buyer agrees not to make any entry in
     or use of such equipment or its software which would remove destroy corrupt
     prevent or inhibit access to or affect the content of any such information
     or equipment.

13.5 The Seller will as soon as reasonably practicable after Completion request
     a direction from Customs under section 49(1)(b) VATA that from and after
     the Transfer Date the Seller shall be obliged to keep and preserve the VAT
     Records. If such a direction is made the Seller shall preserve the VAT
     Records for such periods as may be required by law and shall allow the
     Buyer and its agents (at the Buyer's expense) access to, and to take copies
     of, such records on reasonable notice during normal business hours. If such
     direction is not made the Seller will deliver to the Buyer the VAT Records
     in which event the Buyer undertakes to preserve for such period as required
     by law and to allow the Seller access to and to take copies of such records
     on reasonable notice during normal business hours.

14   EXCLUSION OF WARRANTIES

14.1 The Buyer admits that the Buyer has inspected and made all investigations
     it wishes concerning the Lydney Property and the Lydney Assets and that the
     Buyer enters into this Agreement solely as a result of that inspection and
     investigation and on the basis of the terms of this Agreement and not in
     reliance upon representations or warranties whether written or oral express
     or implied made by or on behalf of the Seller or the Administrators or
     their employees or any agents or representatives thereof or any of them.

14.2 No warranty or representation on the part of the Seller or the
     Administrators or their staff or any agents or representatives thereof or
     any of them as to the title, state, quality, quantity, description or
     fitness of the Lydney Property or the Lydney Assets or any of them is given
     or to be implied by this Agreement nor by anything said or written by or on
     behalf of the Seller or the Administrators or their staff or any agents or
     representatives thereof or any of them either before during or subsequent
     to the negotiations between the parties hereto.

14.3 So far as it is permissible by law to do so any statutory or common law
     warranties, representations guarantees or conditions that might otherwise
     be implied as to the title, state, quality, quantity description or fitness
     of the Lydney Property or the Lydney Assets or any of them are hereby
     expressly excluded.


                                       12



14.4 The Buyer acknowledges that it has satisfied itself, or has had the
     opportunity of satisfying itself as to the accuracy of the schedules to
     this Agreement and that no error or omission as to the title, state,
     quality, quantity, description or fitness of the Lydney Property or the
     Lydney Assets or any of them shall invalidate this sale and purchase or be
     the subject of any claim by the Buyer.

14.5 The Buyer undertakes to ensure that before it uses on a public road any
     motor vehicle of which it takes possession and control at the Transfer Date
     the same is roadworthy in accordance with the Road Vehicle (Construction
     and Use) Regulations 1986 and that any plant is safe before use. The Buyer
     acknowledges that neither the Seller nor the Administrators shall incur any
     liability to the Seller in respect of any fault or defect in any of the
     Lydney Assets.

14.6 Without in any way affecting the generality of the foregoing and solely to
     provide the Buyer with comfort as to the entitlement of the Administrators
     to commit the Seller to this Agreement the Administrators and the Seller
     hereby confirm to the Buyer that:

     (a)  Recital (A) to this Agreement is true and correct;

     (b)  The Administrators were and are appointed in accordance with the terms
          of the Insolvency Act 1986 and such appointments have not been
          resigned or terminated;

     (c)  Since 7 February 2006 the Administrators have not executed any
          document mortgaging or charging the title (if any) of the Seller to
          the Lydney Assets.

15   EXCLUSION OF PERSONAL LIABILITY

     The Administrators are party to this Agreement only for the purpose of
     receiving the benefit of this declaration and any covenants conditions or
     provisions in their favour contained in this Agreement. Neither the
     Administrators nor their business organisation or its members or partners
     or its or their employees or agents shall incur any personal liability (nor
     any liability ranking as an expense of the Administration of the Seller)
     howsoever arising under or in connection with this Agreement or the
     transaction hereby agreed or under any deed or other document or agreement
     entered into pursuant to or in connection with this Agreement.

16   EMPLOYEES

16.1 This Agreement and the transfer of the undertaking and assets of the Lydney
     Business effected hereby are intended by the parties hereto to be governed
     by the Regulations and the Buyer agrees that it shall be solely responsible
     for all claims by and liabilities to every employee referred to in clause
     16.2.

16.2 In accordance with the Regulations the contracts of employment of each
     employee of the Seller engaged in the Lydney Business shall be
     automatically transferred to the Buyer with effect at the latest from the
     Transfer Date. The parties do not envisage that any employees of the
     Simpson Clough Business or the Retained Business will transfer to the Buyer
     and those employees will be retained by the Seller in order for the Seller
     to conduct the Simpson Clough Business and the Retained Business.

16.3 If for any reason the Regulations do not effect the automatic transfer to
     the Buyer of the contract of employment of any employee of the Seller
     engaged in the Lydney Business that employee shall be deemed to have been
     dismissed by the Seller at the Transfer Date and re-engaged by the Buyer
     with effect therefrom and the Buyer shall be solely responsible for all
     claims by and liabilities to every such employee.


                                       13



16.4 Neither the Seller nor the Administrators shall have under or in connection
     with this Agreement or any document transaction or matter referred to
     herein or therein any liability to the Buyer directly or indirectly
     relating to:

     (a)  the Seller and/or the Administrators for any reason or at any
          particular time or at all not having terminated or not having been
          able to terminate by reason of redundancy or otherwise the contracts
          of employment of some or all of the Seller's employees or former
          employees

     (b)  the Buyer for any reason being or becoming actually or potentially
          liable for any redundancy or compensatory or other contribution,
          benefit or other payment(s) to or in respect of any employee or former
          employee of the Seller or of any other employer and/or the Buyer being
          or becoming the employer of any such person.

16.5 The Buyer will indemnify and keep indemnified each of the Seller and the
     Administrators against all claims, costs, demands, liabilities, actions and
     expenses of any nature whatsoever and howsoever arising in connection with
     any claim for or in respect of wrongful or unfair dismissal or redundancy
     or otherwise in respect of every employee or former employee of the Seller
     or their employment or former employment by the Seller.

17   APPORTIONMENTS

     There shall be no apportionments as between the Seller, the Administrators
     and the Buyer or any third party of any outgoings of any nature in respect
     of the Lydney Business or any of the Lydney Assets or any of the Third
     Party Items or the Lydney Property.

18   DATA PROTECTION

     The Buyer undertakes to comply with the provisions of the Data Protection
     Act 1998 in processing data held by it in connection with the Lydney
     Business and the Lydney Assets sold hereunder and to indemnify the Seller
     and the Administrators in respect of any loss liability costs and/or
     expenses suffered or incurred by them as a result of any failure so to
     comply.

19   PUBLICITY

     Save as required by law or any regulatory requirement the Buyer shall not
     divulge to any third party (except its professional advisers who shall also
     keep the same confidential) any information regarding the existence or
     subject matter of this Agreement without the prior written consent of the
     Administrators.

20   GUARANTEE

20.1 In consideration of the Seller entering into this Agreement the Guarantor
     unconditionally and irrevocably guarantees to the Seller and/or the
     Administrators as a primary obligation and debt of the Guarantor the due
     and punctual payment by the Buyer of all sums due under this Agreement and
     the due and punctual performance of all obligations of the Buyer under this
     Agreement and undertakes with the Seller and/or the Administrators that if
     and whenever the Buyer shall be in default of any of its obligations under
     this Agreement the Guarantor will forthwith make good the default as if the
     Guarantor instead of the Buyer was expressed to be the primary obligor
     under this Agreement and notwithstanding any indulgence granted by the
     Seller and/or the Administrators to the Buyer.


                                       14



21   NOTICES

21.1 Any notice or demand to be made hereunder shall be made in writing in the
     English language and may be served at the address of the relevant party
     shown at the commencement of this Agreement or in the case of a company at
     the registered office for the time being of the company to be served or to
     such other address in England as the person to be served may have notified
     in substitution for such address or registered office.

21.2 Service may be effected either by hand delivery, facsimile or by first
     class post. If effected by delivery by hand service shall be deemed to have
     taken place on delivery. If effected by facsimile, service shall be deemed
     to have taken place upon transmission and if effected by first class post,
     service shall be deemed to have taken place at noon on the business day
     following posting.

21.3 In proving service by first class post, it shall be sufficient to prove
     that an envelope correctly addressed and duly stamped containing the
     item(s) to be served was duly placed into the post.

21.4 In proving service by fax, it shall be sufficient to prove that the fax was
     properly addressed and despatched and confirmation of full transmission was
     received.

21.5 Emailed notices are not effective for the purpose of this Agreement.

22   GENERAL

22.1 ENTIRE AGREEMENT: This Agreement and the documents to be entered into
     pursuant to its terms together represent the entire agreement between the
     parties with regard to their subject matter.

22.2 SET-OFF: All payments to be made or procured and all indemnities to be
     afforded by the Buyer and/or the Guarantor to the Seller or to any other
     person under or in connection with this Agreement shall be paid or afforded
     or procured to be paid or afforded without assertion of any lien equity
     set-off or counterclaim whatsoever by or on behalf of the Buyer and/or the
     Guarantor and all such payments hereunder to the Seller shall be effected
     by the payment of cleared sterling funds.

22.3 DEFAULT INTEREST: In default of payment on its due date of any sum payable
     hereunder to the Seller and/or the Administrators the Buyer shall pay
     interest to the Seller and/or the Administrators on the amount outstanding
     for the time being at the rate of 4% per annum above the base lending rate
     of The Bank of England for the time being in force from the date on which
     such sum(s) became due until payment of such sum(s) in full.

22.4 RESCISSION: The Buyer acknowledges that if it shall be found that the
     Seller does not have title or unencumbered title to any or all of the
     Lydney Assets or the Lydney Property or if the Buyer is required to
     relinquish title and/or possession of all or any of the Lydney Assets or
     any Third Party Items or the Lydney Property this shall not be a ground or
     grounds for rescinding avoiding or varying any or all of the provisions of
     this Agreement or for the recovery from the Administrators or the Seller of
     any or all of the purchase price payable or paid by the Buyer hereunder or
     of any other form of compensation by way of damages or otherwise.

22.5 INDEMNITY: The Buyer will indemnify and keep indemnified the Administrators
     and the Seller and their respective estates and effects against all
     actions, proceedings, claims, demands and costs whatsoever arising directly
     or indirectly out of any breach or non-observance by the Buyer of the
     obligations set out in this Agreement.


                                       15



22.6 FAIRNESS: It is agreed by the Buyer that the terms and conditions of this
     Agreement and the exclusions and limitations herein contained are fair and
     reasonable in the context of a sale of the assets of a company in
     administration bearing in mind:

     (a)  that the Buyer agrees and acknowledges that it has entered into this
          Agreement on the basis of the limited information made available to it
          and that the Lydney Assets, the Lydney Property and the respective
          titles thereto are sold in their present state and condition and that
          the Buyer must rely and has relied upon its own opinion and
          professional advice in relation to the Lydney Assets, the Lydney
          Property and the said titles thereto and to the terms of this
          Agreement the Buyer and its professional advisers having been given
          the opportunity to inspect the same;

     (b)  that the consideration payable hereunder has been agreed on the basis
          that it takes into account the risk to the Buyer represented by the
          fact that all the parties believe the said terms and conditions,
          exclusions and limitations will be recognised as fully effective by
          the Courts.

22.7 SURVIVAL: All the provisions of this Agreement shall so far as they are
     capable of being performed and observed remain in full force and effect
     notwithstanding completion of any part of this Agreement except in respect
     of those matters then already performed.

22.8 VARIATION: No variation of this Agreement shall be effective unless it is
     in writing and is signed by or on behalf of each of the parties.

22.9 WAIVER: No failure to exercise and no delay in exercising on the part of
     the Seller or the Administrators any right power or privilege hereunder
     shall operate as a waiver thereof nor shall any single or partial exercise
     of any such right, power or privilege preclude any further or other
     exercise thereof or the exercise of any other right, power or privilege.

22.10 SEVERABILITY: In the event that any clause of this Agreement shall be held
     to be unenforceable by any court of competent jurisdiction the same shall
     cease to be binding on the parties but the remaining provisions of this
     Agreement shall continue in full force and effect.

22.11 COUNTERPARTS: This Agreement may be executed in any number of counterparts
     and by the parties on separate counterparts, all of which taken together
     shall constitute one and the same instrument.

22.12 THIRD PARTY RIGHTS: Unless this Agreement expressly states otherwise:

     (a)  a person who is not a party to this Agreement has no right to enforce
          any of its terms under the Contracts (Rights of Third Parties) Act
          1999;

     (b)  if a person who is not a party to this Agreement is stated to have the
          right to enforce its terms under the Contracts (Rights of Third
          Parties) Act 1999, the parties may vary this Agreement (and any
          documents entered into pursuant to or in connection with it) without
          the consent of that person.

23   GOVERNING LAW AND JURISDICTION

23.1 This Agreement is governed by and shall be interpreted in accordance with
     English Law.

23.2 Each party irrevocably submits to the non-exclusive jurisdiction of the
     English courts in relation to all matters arising out of or in connection
     with this Agreement.


                                       16



23.3 The Guarantor appoints Morgan Lewis of 2 Gresham Street London EC2V 7PE
     (PROCESS AGENT) as its agent for service of any document initiating or
     otherwise connected with any court proceedings in relation to any matter
     arising out of or in connection with this Agreement. Any such document
     shall be validly served on the Guarantor:

     (a)  by being sent by pre-paid first class post to or delivered to the
          Process Agent or left at the Process Agent's address set out in this
          clause; or

     (b)  in any other manner permitted by law.

23.4 Each party undertakes not to contest the enforcement against it of any
     judgment of the English courts on the ground that those courts did not have
     jurisdiction over it or, in the case of, the Guarantor, on the ground that
     service of any document which complied with clause 23.3 was invalid,
     ineffective or deficient in any way.

SIGNED BY the parties or their duly authorised representatives the day and year
first before written.


                                       17



                                   SCHEDULE 1

                               THE LYDNEY PROPERTY

                          PART I - THE LYDNEY PROPERTY



FREEHOLD (THE LYDNEY PROPERTY)
ADDRESS                                          TITLE NUMBER(S)
- ------------------------------                   ---------------
                                       
1 Station Road, Lydney, Gloucestershire   GR176926, GR167055, GR170846



                                       18



               PART II - SPECIAL CONDITIONS - THE LYDNEY PROPERTY

1    The Lydney Property is registered at the Land Registry under the Title
     Numbers listed in Part I of Schedule 1 and the title to the Lydney Property
     shall consist of official copy entries of the register as at 2006 and of
     the filed plan and such other documents (if any) as may have been made
     available to the Buyer for inspection prior to the date hereof except
     charges or financial encumbrances which are to be discharged or overridden
     at or before Completion.

2    The Lydney Property is sold subject to all covenants conditions agreements
     declarations exceptions reservations stipulations rights charges provisions
     and all other matters of a like nature whether or not specified in the
     office copy entries of the register or other documents relating to the
     Lydney Property to which the Lydney Property or any part thereof or the
     Seller as owner thereof is subject and for the purpose of affording to the
     Seller and the Administrators a full and sufficient indemnity the Buyer
     agrees that it will enter into a covenant in the transfer of the Lydney
     Property on behalf of itself and its successors in title thereafter to
     observe and perform all the said covenants conditions agreements
     declarations exceptions reservations stipulations rights charges provisions
     and other matters and to indemnify and keep indemnified the Seller and the
     Administrators and their respective estates and effects against all actions
     proceedings costs claims or demands whatsoever in respect of any breach
     non-performance or non observance of all or any of the same.

3    The Standard Conditions as hereinafter further varied shall apply to the
     sale of the Lydney Property provided that in the event of any conflict
     between the Standard Conditions and the conditions contained in the main
     body of this Agreement then the conditions contained in the main body of
     this Agreement shall prevail.

3.1  Standard Conditions 3.1.1, 3.1.3, 3.3.2(a), 3.3.2(b), and 3.3.2(c), 4.1,
     4.2.3, 4.3.2, 4.5.2, 4.5.5, 5.1.1, 5.1.2(a), 5.2.2(e), 5.2.7, 7.1.1, 7.1.2,
     7.1.3, 7.6.3, 8.1.3, 8.2.4, 8.3.2(a) and 8.3.4 shall not apply.

3.2  In Standard Condition 7.3.4 the last sentence thereof shall be deleted.

3.3  In Standard Condition 7.6.2(a) the words "with accrued interest" shall be
     deleted.

3.4  In Standard Condition 7.6.2(b) the words "at the sellers expense" shall be
     deleted.

4    Subject to clause 4.1 of this clause the transfer of the Lydney Property by
     the Seller to the Buyer shall be in the form set out in Part III of this
     Schedule.

5    The title to the Lydney Property having been deduced to and made available
     for inspection and investigated by or otherwise known to the Buyer the
     Buyer shall be deemed to have satisfied itself as to the same and shall not
     be entitled to raise any objection to or requisition on the Seller's title
     to the Lydney Property.

6    Without prejudice to the generality of the Standard Conditions (as varied
     by this Agreement) and the provisions of this Agreement the Lydney Property
     is sold subject to:

6.1  All town planning and other schemes orders notices restrictions charges
     agreements requirements resolutions of and/or notices under the Town and
     Country Planning Acts or by any local or other competent authority whether
     all or any of the same shall have been served or intimated before or after
     the Transfer Date and the Buyer shall be responsible at its own cost for
     compliance with all or any of the same.


                                       19



6.2  The permitted use of the Lydney Property for the purposes of enactments
     from time to time in force relating to or arising under the Town and
     Country Planning Acts and the Buyer shall not raise any objection to or
     requisition on such use.

6.3  All matters disclosed or reasonably to be expected to be disclosed by
     searches and as a result of enquiries formal or informal and whether made
     in person by writing or orally by or for the Buyer or which a prudent Buyer
     ought to make.

6.4  All overriding interests as defined in Section 70(1) Land Registration Act
     1925 whether or not registered at the Transfer Date.

6.5  All other (if any) tenancies licences leases agreements occupations
     wayleaves rights easements and quasi-easements upon whatever terms existing
     on or before the Transfer Date whether created formally or informally or
     whether or not all or any of the same have been disclosed by the Seller or
     the Administrators on or before the Transfer Date so far as all or any of
     the same remain in force and affect the Lydney Property or any part
     thereof. No warranty or representation is made by or on behalf of the
     Administrators or the Seller as to the validity of the said tenancies
     licences leases agreements occupations rights easements or quasi easements
     or as to whether payment of rent or any other monies payable thereunder is
     up to date or as to the tenant or other occupant thereunder.

6.6  All matters contained or referred to in any title deeds and documents
     insofar as all or any of the same remain in force and affect the Lydney
     Property. Save any subsisting charges or financial encumbrances.

7    The Lydney Property is sold in its actual condition and state of repair and
     the Buyer shall be deemed to have surveyed and inspected the same and shall
     purchase the same or be deemed to have purchased the same with full
     knowledge of its actual condition and state of repair.

8    There is expressly excluded from this sale any claim under any insurance
     policy or policies or any monies paid or payable thereunder arising from
     any act or event occurring on or arising out of the Lydney Property on or
     before the Transfer Date.

9    Neither the Seller nor the Administrators shall be required to transfer the
     Lydney Property to any person or party other than the Buyer nor in more
     than one lot nor at more than the purchase price payable for the Lydney
     Property under the terms of this Agreement nor at a price divided between
     different parts of the Lydney Property.

10   All representations warranties guarantees and conditions express or implied
     statutory or otherwise in respect of the Lydney Property or the right title
     and interest of the Seller or the Administrators therein are expressly
     excluded insofar as they are lawfully able to be so excluded (including
     without limitation warranties guarantees and conditions as to title quiet
     possession and description). In particular but without prejudice to the
     generality of the foregoing.

10.1 No warranty or representation is given by or on behalf of the
     Administrators or the Seller as to the boundaries of the Lydney Property
     and all (if any) measurements and areas plans drawings or photographs given
     or produced in respect of the Lydney Property are approximate and for
     identification purposes only without any guarantee as to their accuracy.

10.2 No warranty or representation is given by or on behalf of either the
     Administrators or the Seller that all or any of the covenants conditions
     agreements declarations and provisions and other matters to which the
     Lydney Property are subject have been complied with.


                                       20



10.3 No warranty or representation is given by or on behalf of the
     Administrators or the Seller as to any matter existing or arising under the
     Town and Country Planning Acts affecting the Lydney Property or its
     permitted use.

11   The Buyer hereby agrees to be responsible in every respect for all or any
     registrations at HM Land Registry of the title of the Seller and/or the
     Buyer to the Lydney Property and for all applications and requisitions
     relating to such registrations. Neither the Seller nor the Administrators
     shall be under any obligation to the Buyer or its successors in title to
     the Lydney Property to register at HM Land Registry any title to the Lydney
     Property or to deal with or otherwise satisfy any requisitions or other
     matters which may be raised by HM Land Registry and/or the Buyer and/or its
     successors in title to the Lydney Property relating to or in any way
     arising out of any such registrations or applications.


                                       21



                   PART III - THE TRANSFERS - LYDNEY PROPERTY

                              (Please see attached)


                                       22



      PART IV - DETAILS OF THE CHARGES TO BE RELEASED - THE LYDNEY PROPERTY

                              (Please see attached)


                                       23



SCHEDULE 2

                            THE REGISTERED TRADEMARKS

                                 (SEE ATTACHED)


                                       24



                                   SCHEDULE 3

                                   THE PATENTS


                                       25



                                   SCHEDULE 4

                                    THE PLANT

                               (See attached list)


                                       26



                                   SCHEDULE 5

                              THE THIRD PARTY ITEMS

                               (See attached list)


                                       27



                                   SCHEDULE 6

                              THE GERMAN CONTRACTS

                               (See attached list)


                                       28



                                   SCHEDULE 7

                             SALES AGENCY AGREEMENTS


                                       29




SIGNED by Addleshaw Goddard for N.J. Dargon
          --------------------------------- )     /s/ Addleshaw Goddard
as Joint Administrator acting without )               pp John Joyce
personal liability for and on behalf  )
of J R CROMPTON LIMITED in the        )
presence of:                          )

Witness


Signature /s/ S. McMahon
          ---------------------------
Name S. McMahon
     --------------------------------
Address 100 Barbirolli Square
        -----------------------------
        Manchester
        -----------------------------
Occupation Solicitor
           --------------------------


SIGNED by Addleshaw Goddard for N.J. Dargon
          -------------------------------- )      /s/ Addleshaw Goddard
on behalf of himself and              )               pp John Joyce
W.K. Dawson in the                    )
presence of:                          )

Witness


Signature /s/ S. McMahon
          ---------------------------
Name S. McMahon
     --------------------------------
Address As Above
        -----------------------------

        -----------------------------
Occupation
           --------------------------


SIGNED by Dante C. Parrini
          --------------------------- )           /s/ Dante C. Parrini
Director for and on behalf of         )
Glatfelter-UK Limited in the          )
presence of:                          )

Witness


Signature /s/ Jeffrey J. Norton
          ---------------------------
Name Jeffrey J. Norton
     --------------------------------
Address 96 S. George St.
        -----------------------------
        York, PA 17401 USA
        -----------------------------
Occupation General Counsel
           --------------------------


                                       30




SIGNED by George H. Glatfelter II
          --------------------------- )     /s/ George H. Glatfelter II
Director for and on behalf of the     )
said P.H. Glatfelter Company in       )
the presence of:                      )

Witness


Signature /s/ Jeffrey J. Norton
          ---------------------------
Name Jeffrey J. Norton
     --------------------------------
Address 96 S. George St.
        -----------------------------
        York, PA 17401 USA
        -----------------------------
Occupation  General Counsel
            -------------------------


                                       31

EX-31.1

EXHIBIT 31.1

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

     I, George H. Glatfelter II certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q for the quarter ended March 31, 2006, 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 the Glatfelter’s board of directors:

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Glatfelter’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in Glatfelter’s internal control over financial reporting.

Date: May 10, 2006	By:	/s/ George H. Glatfelter II
		George H. Glatfelter II
		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 C. van Roden, Jr. certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q for the quarter ended March 31, 2006, 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 the Glatfelter’s board of directors:

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Glatfelter’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in Glatfelter’s internal control over financial reporting.

Date: May 10, 2006	By:	/s/ John C. van Roden, Jr.
		John C. van Roden, Jr.
		Executive 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, 2006, of P. H. Glatfelter Company (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, George H. Glatfelter II, Chairman and Chief Executive Officer of the Company, certify to the best of my knowledge, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to Glatfelter and will be retained by Glatfelter and furnished to the Securities and Exchange Commission or its staff upon request.

Date: May 10, 2006	By:	/s/ George H. Glatfelter II
		George H. Glatfelter II
		Chairman and Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
18 U.S.C. SECTION 1350

In connection with the Quarterly Report on Form 10-Q for the year ended March 31, 2006, of P. H. Glatfelter Company (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John C. van Roden, Jr., Senior Vice President and Chief Financial Officer of the Company, certify to the best of my knowledge, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to Glatfelter and will be retained by Glatfelter and furnished to the Securities and Exchange Commission or its staff upon request.

Date: May 10, 2006	By:	/s/ John C. van Roden, Jr.
		John C. van Roden, Jr.
		Executive Vice President and Chief Financial Officer