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Neenah Paper Signs Agreement to Transfer Terrace Bay
Alpharetta, Georgia, USA, 08 August 2006 -- /PRNewswire/ -- (NYSE:NP) -- Neenah Paper, Inc. today announced it had signed definitive sales agreements with Terrace Bay Pulp Inc. and Eagle Logging Inc., members of the Buchanan group, to transfer the company's Terrace Bay pulp mill and the company's woodlands assets. A tentative agreement between the parties was announced in early May.

Pursuant to terms of the final agreement, Terrace Bay Pulp Inc. will assume responsibility for the Terrace Bay operations, including existing employee and other contracts, and certain assets and liabilities related to the operation. The assets of the company's woodland operations will be transferred to Eagle Logging Inc. Neenah Paper will make a cash payment of approximately USD 18 million and retain certain working capital amounts, primarily accounts receivable, finished inventories, and accounts payable, as well as employee liabilities for pension, long-term disability, and post- employment medical and life insurance for retirees.

In accordance with the agreement, Neenah Paper will initiate plans to curtail and settle its Ontario, Canada, defined benefit pension plan. Estimated cash costs related to this settlement are USD 18 million, with an initial payment of USD 11 million anticipated in the third quarter.

"This agreement represents a win for all parties, including Neenah Paper's shareholders, the workforce at Terrace Bay and their communities, and also Buchanan Forest Products," said Sean Erwin, chairman and chief executive officer. "It allows the mill to continue operating and cash requirements are substantially lower than if we had proceeded to close the mill. In fact, one- time costs have been largely funded through a drawdown of working capital this year. Neenah Paper is now in a position of added financial flexibility and strength and can focus on growing our core paper businesses."

It is anticipated that the transaction will close in August.

About Neenah Paper, Inc.

Neenah Paper manufactures and distributes a wide range of premium and specialty paper grades. The company also produces and sells bleached pulp, primarily for use in the manufacture of tissue and writing papers. Neenah Paper is based in Alpharetta, Georgia, and has manufacturing operations in Wisconsin, Michigan, and in the Canadian provinces of Ontario and Nova Scotia. Additional information about Neenah Paper can be found at the company's Web site at www.neenah.com.

Source: Neenah Paper, Inc.


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