Exhibit 10.4

SECOND AMENDED AND RESTATED REIMBURSEMENT AGREEMENT

THIS SECOND AMENDED AND RESTATED REIMBURSEMENT AGREEMENT, dated as of
December 27, 2010, is by and between CELLU TISSUE-CITYFOREST LLC, a Minnesota
limited liability company (the “Borrower”), and ASSOCIATED BANK, NATIONAL
ASSOCIATION, a national banking association (the “Bank”).

RECITALS

A. The Borrower and the Bank are parties to that certain Amended and Restated
Reimbursement Agreement dated as of March 21, 2007, as amended by that certain
First Amendment to Amended and Restated Reimbursement Agreement dated as of
December 3, 2009, and by that certain Second Amendment to Amended and Restated
Reimbursement Agreement dated as of December 9, 2010 (as so amended, the
“Amended and Restated Reimbursement Agreement”).

B. On the date hereof, Cellu Tissue Holdings, Inc., a Delaware corporation
(“Cellu Tissue”), merged with Sand Dollar Acquisition Corporation, a Delaware
corporation (the “Clearwater Merger Sub”) and a wholly-owned subsidiary of
Clearwater Paper Corporation, a Delaware corporation (“Clearwater”), pursuant to
that certain Merger Agreement, dated as of September 15, 2010, by and among
Cellu Tissue, Clearwater Merger Sub and Clearwater (the “Clearwater Merger”),
with Cellu Tissue continuing as the surviving corporation in the Clearwater
Merger.

C. The Borrower has requested that the Bank consent to the Clearwater Merger and
amend certain provisions of the Original Reimbursement Agreement pursuant to
this Agreement, and the Bank is willing to do so subject to the terms and
conditions of this Agreement.

NOW, THEREFORE, in consideration of the premises and other good and valuable
consideration the receipt and adequacy of which is hereby acknowledged, the
parties hereto hereby agree to amend and restate the Original Reimbursement
Agreement as follows:

ARTICLE I.

DEFINITIONS AND ACCOUNTING TERMS

1.1. Defined Terms. In addition to terms defined elsewhere in this Agreement,
the following terms shall have the following respective meanings (and such
meanings shall be equally applicable to both the singular and plural form of the
terms defined, as the context may require):

“Account”: The Borrower’s “Receivables”.

“Account Debtor”: Any Person who is or who may become obligated to the Borrower
under, with respect to, or on account of an Account, General Intangible or other
Collateral.

“Adjusted Net Income”: For any period, the Borrower’s net income for such period
but adjusted to exclude: (i) non-operating gains and losses (including
extra-ordinary or unusual gains

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and losses, gains and losses from discontinuance of operations, gains and losses
arising from the sale of assets other than Inventory and other non-recurring
gains and losses) during such period; and (ii) any income attributable to the
Borrower’s or any of its Subsidiaries’ Investment in any non-wholly owned
subsidiary which is not distributed in cash during such period.

“Affiliate”: As applied to any Person, means any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, “control” (including with
correlative meanings, the terms “controlling,” “controlled by” and “under common
control with”), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise.

“Agreement”: This Second Amended and Restated Reimbursement Agreement, as it may
be amended, modified, supplemented, restated or replaced from time to time.

“Amended and Restated Reimbursement Agreement”: As provided in the recitals
hereto.

“Amortization Schedule”: As provided in Section 8.18.

“Annual Budget”: The Annual Budget for the Borrower approved by the Borrower’s
Board of Directors and delivered to the Bank pursuant to Section 8.14(c).

“Annual Date”: Each annual date on which the Borrower is required to pay the
Letter of Credit Fee to the Bank pursuant to Section 2.3(a).

“Applicable Letter of Credit Fee Percentage”: 2.50%.

“Assigned Agreements”: As provided in the Security Agreement.

“Assignment of Leases and Rents”: The Assignment of Leases and Rents dated as of
June 29, 2005 made by the Borrower in favor of the Collateral Agent to secure
the Obligations, as assigned by the Collateral Agent to the Bank and amended
pursuant to that certain Assignment of Assignment of Leases and Rents and
Amendment (the “Rent Assignment/Amendment”) dated as of March 21, 2007, as so
amended and as it may be further amended, modified, supplemented, restated or
replaced from time to time.

“Bank”: As provided in the preamble hereto.

“Board of Directors”: As to any Person, the board of directors or managers, as
applicable, of such Person (or, if such Person is a partnership, the board of
directors or other governing body of the general partner of such Person) or any
duly authorized committee thereof.

“Bond Documents”: The Indenture, the Bond Loan Agreement, the Bonds, the
Remarketing Agreement, the Bonds Placement Agreement, the Security Documents and
all other documents delivered by the Borrower pursuant to the Bond Loan
Agreement.

“Bond Loan Agreement”: Loan Agreement dated as of March 1, 1998 by and between
the Issuer and the Borrower.

 

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“Bond Prepayment Fund”: As provided in Section 2.8.

“Bond Proceeds”: The proceeds from the sale of the Bonds.

“Bonds”: the Issuer’s Variable Rate Demand Solid Waste Disposal Facility Revenue
Bonds, Series 1998 (CityForest Corporation Project).

“Bonds Letter of Credit”: As provided in Section 2.1.

“Bonds Pledge Agreement”: The Pledge and Security Agreement dated as of June 29,
2005 made by the Borrower in favor of the Bank to secure the Obligations, as
originally executed and as it may be amended, modified, supplemented, restated
or replaced from time to time.

“Bonds Promissory Note”: The Promissory Note dated March 26, 1998 made by the
Borrower payable to the order of the Issuer in the original principal amount of
$27,000,000.00 and on which there is an outstanding principal amount of
$15,744,541.10 on the date hereof.

“Borrower”: As provided in the preamble hereto.

“Business Day”: Any day (other than a Saturday, Sunday or legal holiday in the
State of Wisconsin) on which national banks are permitted to be open in Green
Bay, Wisconsin.

“CA Accounts”: The Bond Prepayment Fund described in Section 2.8, the Letter of
Credit Fee Account described in Section 2.16 and the Senior Debt Reserve Fund
described in Section 2.10.

“Capital Expenditure”: Any amount debited to the fixed asset account on the
Borrower’s consolidated balance sheet in respect of: (a) the acquisition
(including, without limitation, acquisition by entry into a Capitalized Lease),
construction, improvement, replacement or betterment of land, buildings,
machinery, equipment or of any other fixed assets or capitalized leaseholds; and
(b) to the extent related to and not included in (a) above, materials, contract
labor and direct labor (excluding expenditures charged to repairs or maintenance
in accordance with GAAP).

“Capitalized Lease”: Any lease which, in accordance with GAAP, is capitalized on
the books of the lessee.

“Cash Collateral Account”: As provided in Section 10.4.

“Cellu Tissue”: As provided in the recitals hereto.

“Cellu Tissue Bank Guaranty”: The Amended and Restated Guaranty dated as of
December 27, 2010 made by Cellu Tissue in favor of the Bank, as originally
executed and as it may be amended, modified, supplemented, restated or replaced
from time to time

“Change of Control”: The occurrence of any of the following events (or any
combination of the following) whether arising from any single transaction or
event or any series of

 

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transactions or events (whether as the most recent transaction in a series of
transactions) which, individually or in the aggregate, results in a change in
the direct or indirect ownership of Borrower, such that:

(a) any “person” or “group” of related persons (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act) becomes the beneficial owner (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that such person
or group shall be deemed to have “beneficial ownership” of all shares that any
such person or group has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 50% of the total outstanding voting Equity Interests of Clearwater or any
of its direct or indirect parent entities (or their successors by merger,
consolidation or purchase of all or substantially all of their assets) (for the
purposes of this clause, such person or group shall be deemed to beneficially
own any outstanding voting Equity Interests of Clearwater or any of its direct
or indirect parent entities held by a parent entity, if such person or group
“beneficially owns” (as defined above), directly or indirectly, more than 50% of
the outstanding voting Equity Interests of such parent entity); or

(b) the first day on which a majority of the members of the Board of Directors
of Clearwater are not Continuing Directors; or

(c) the sale, lease, transfer, conveyance or other disposition (other than by
way of merger or consolidation), in one or a series of related transactions, of
all or substantially all of the assets of Clearwater and its Subsidiaries taken
as a whole to any “person” (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act); or

(d) the adoption by the shareholders of Clearwater of a plan or proposal for the
liquidation or dissolution of Clearwater; or

(e) Clearwater shall cease to own, free and clear of all Liens other than Liens
not prohibited by the Clearwater Bank of America Loan Agreement, 100% of the
outstanding Equity Interests of Cellu Tissue, or Cellu Tissue shall cease to
own, free and clear of all Liens other than Liens not prohibited by the
Clearwater Bank of America Loan Agreement, 100% of the outstanding Equity
Interests of the Borrower; or

(f) any other “Change of Control” (howsoever defined) shall occur under the
Clearwater Credit Facility Loan Documents or by any Clearwater Senior Notes
Indenture;

provided, that a holding company with no material assets or operations
independent of its ownership of the Equity Interests of Clearwater that is a
direct or indirect parent Clearwater shall not be deemed to “beneficially own,”
directly or indirectly, the voting Equity Interests of Clearwater or a direct or
indirect parent of Clearwater provided that the beneficial ownership of such
parent remains the same as existed prior to the creation of such entity.

“Chief Office”: As provided in the Security Agreement.

“Clearwater”: As provided in the recitals hereto.

 

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“Clearwater 7-1/8% Senior Notes”: The 7-1/8% Senior Notes due 2018 now or
hereafter issued under the Clearwater 7-1/8% Senior Notes Indenture and any
subsequent term Indebtedness refinancing, replacing or extending such notes.

“Clearwater 10-5/8% Senior Notes”: The 10-5/8% Senior Notes due 2016 now or
hereafter issued under the Clearwater 10-5/8% Senior Notes Indenture and any
subsequent term Indebtedness refinancing, replacing or extending such notes.

“Clearwater 7-1/8% Senior Notes Indenture”: The Indenture dated as of
October 22, 2010, among Clearwater, the subsidiary guarantors party thereto and
U.S. Bank National Association as trustee or if the Clearwater 7-1/8% Senior
Notes have been replaced by any subsequent term Indebtedness, the loan agreement
or other instrument governing such subsequent term Indebtedness; in each case,
as amended, modified, supplemented, restated or replaced from time to time.

“Clearwater 10-5/8% Senior Notes Indenture”: The Indenture dated as of June 11,
2009, among Clearwater, the subsidiary guarantors party thereto and U.S. Bank
National Association as trustee or if the Clearwater 10-5/8% Senior Notes have
been replaced by any subsequent term Indebtedness, the loan agreement or other
instrument governing such subsequent term Indebtedness; in each case, as
amended, modified, supplemented, restated or replaced from time to time.

“Clearwater Bank Guaranty”: The Guaranty dated as of December 27, 2010 made by
Clearwater in favor of the Bank, as originally executed and as it may be
amended, modified, supplemented, restated or replaced from time to time.

“Clearwater Credit Facility: The revolving credit and letter of credit facility
provided under the Loan and Security Agreement dated as of November 26, 2008 (as
amended prior to the date hereof, the “Clearwater Bank of America Loan
Agreement”) among Clearwater and Bank of America, N.A., as agent or, if the
Clearwater Bank of America Loan Agreement has been replaced by any subsequent
credit facility, the loan agreement providing for such subsequent credit
facility; in each case, as amended, modified, supplemented, restated or replaced
from time to time.

“Clearwater Credit Facility Loan Documents”: The Clearwater Bank of America Loan
Agreement and the other “Loan Documents” described therein or, if the Clearwater
Bank of America Loan Agreement has been replaced by any subsequent credit
facility, the documentation evidencing, guaranteeing or securing such subsequent
credit facility; in each case, as amended, modified, supplemented, restated or
replaced from time to time.

“Clearwater Merger”: As provided in the recitals hereto.

“Clearwater Merger Agreement”: As provided in the recitals hereto.

“Clearwater Merger Sub”: As provided in the recitals hereto.

“Clearwater Merger Transactions”: (a) Clearwater’s acquisition of all the
outstanding Equity Interests in Cellu Tissue and the consummation of the
Clearwater Merger, and the other

 

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transactions contemplated by the Clearwater Merger Agreement, (b) the Borrower’s
execution and delivery of the Clearwater Senior Notes Loan Documents to which
the Borrower is party, and (c) the execution, delivery and performance by the
Loan Parties of this Agreement and the other Loan Documents and the consummation
of the other transactions contemplated by this Agreement.

“Clearwater Prepayment Event”: The occurrence of the following: (a) either
(i) Clearwater incurs Indebtedness (including, without limitation, any
“Disqualified Stock” described in either Clearwater Senior Secured Notes
Indenture) that is not permitted by Section 4.9 of either Clearwater Senior
Secured Notes Indenture as in effect on the date of this Agreement or any
substitute covenant limiting debt incurrence which the Bank has consented to in
writing as a replacement for Section 4.9 of the Clearwater Senior Secured Notes
Indenture; and/or (ii) Clearwater refinances any of the Clearwater Senior
Secured Notes pursuant to an extension of either Clearwater Senior Secured Notes
Indenture or to any subsequent credit facility and the Bank determines that the
terms and conditions of such refinancing are materially adverse to the rights
and benefits of the Bank under the Loan Documents; and (b) the Bank, within 60
days after the date of on which the Borrower notifies the Bank of the occurrence
of any event described in clause (a)(i) or (ii) above, delivers a written demand
to the Borrower and Clearwater that the Borrower prepay all of the Obligations
in full, rather than approving Clearwater’s requested debt increase or
refinancing.

“Clearwater Senior Notes”: Individually and collectively, the Clearwater 10-5/8%
Senior Notes and the Clearwater 7-1/8% Senior Notes.

“Clearwater Senior Notes Indenture”: Individually and collectively, the
Clearwater 7-1/8% Senior Notes Indenture and the Clearwater 10-5/8% Senior Notes
Indenture.

“Clearwater Senior Notes Loan Documents”: The Clearwater Senior Notes
Indentures, the Clearwater Senior Notes, and the “Guaranties” and “Loan
Documents” described therein or, if the Clearwater Senior Notes have been
replaced by any subsequent term Indebtedness, the documentation evidencing,
guaranteeing or securing such subsequent term Indebtedness; in each case, as
amended, modified, supplemented, restated or replaced from time to time.

“Clearwater Senior Notes Subsidiary Guaranty”: The Note Guaranty described in
the Clearwater 10-5/8% Senior Notes Indenture that has been made by the Borrower
to secure the “Obligations” described therein, or, if the Clearwater 10-5/8%
Senior Notes have been replaced by any subsequent term Indebtedness, any similar
guaranty made by the Borrower guaranteeing the payment of such subsequent term
Indebtedness; in each case as amended, modified, supplemented or replaced from
time to time.

“Code”: The Internal Revenue Code of 1986, as amended, or any successor statute,
together with regulations thereunder.

“Collateral”: Any property in which the Bank, as the assignee of the Collateral
Agent, has been granted a Lien pursuant to any Security Document.

“Collateral Agency Agreement”: The Collateral Agency and Intercreditor Agreement
dated as of June 29, 2005 (the “Original Collateral Agency Agreement”) among the
Borrower,

 

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the Bank, the Bank in its separate capacity as collateral agent (in such
capacity, the “Collateral Agent”) and the “Senior Subordinated Agent” described
therein; provided, however, that on the Effective Date (as defined in the
Original Reimbursement Agreement) and immediately after the Collateral Agent’s
assignments of its rights under the Security Documents to the Bank, the
Borrower, the Bank and the Collateral Agent terminated the Collateral Agency
Agreement.

“Collateral Agent”: Associated Bank, National Association, in its capacity as
collateral agent for the benefit of itself and the ratable benefit of the
“Secured Parties” as defined in the Original Reimbursement Agreement.

“Compliance Certificate”: As provided in Section 8.14(b).

“Contingent Obligation”: With respect to any Person at the time of any
determination, without duplication, any obligation, contingent or otherwise, of
such Person guaranteeing or having the economic effect of guaranteeing any
Indebtedness of any other Person (the “primary obligor”) in any manner, whether
directly or otherwise, or entered into for the purpose of assuring in any manner
the owner of such Indebtedness of the payment of such Indebtedness or to protect
the owner against loss in respect thereof; provided, that the term “Contingent
Obligation” shall not include endorsements for collection or deposit, in each
case in the ordinary course of business.

“Continuing Directors”: As of any date of determination, any member of the Board
of Directors of Clearwater who: (1) was a member of such Board of Directors on
December 27, 2010; or (2) was nominated for election or elected to such Board of
Directors with the approval of a majority of the Continuing Directors (or a
majority of the nomination committee of the Board of Directors) who were members
of such Board of Directors at the time of such nomination or election.

“Conversion Date”: As provided in the Indenture.

“Damages”: All condemnation awards, warranty payments, proceeds of property or
casualty insurance policies of the Borrower, liquidated damages or other damages
received from time to time by or on behalf of the Borrower.

“Default”: Any event which, with the giving of notice to the Borrower or lapse
of time, or both, would constitute an Event of Default.

“Default Rate”: The sum of (i) the one-month LIBOR rate (the “LIBOR Rate”)
quoted by the Bank from Telerate page 3750 or any successor thereto, which shall
be that one-month LIBOR rate in effect two (2) Eurodollar Business Days prior to
the beginning of each calendar month, adjusted for any reserve requirement and
any subsequent costs arising from a change in government regulation, such rate
to be reset at the beginning of each succeeding month, plus (ii) 4.50%.

“Drawing”: As provided in the Bonds Letter of Credit.

“Drawing Date”: Any date on which the Bank honors a Drawing.

 

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“EBITDA”: For any period, the sum of: (a) the Adjusted Net Income for such
period; plus (b) the sum of the following amounts deducted in arriving at such
adjusted net income (but without duplication for any item): (i) Interest
Expense; (ii) depreciation and amortization expense; and (iii) federal, state
and local income taxes or, if the Borrower is a pass-through tax entity, the
maximum Permitted Tax Distributions that are permitted to be paid with respect
to such net income (assuming compliance with Section 9.7(b)(i)), regardless of
whether actually paid during such Measurement Period.

“Effective Date”: The date of this Agreement or, if the conditions precedent set
forth in Article VI shall not have been satisfied or waived in writing by the
Bank on such date, then such later date specified by the Borrower and the Bank
as being the Effective Date.

“Environmental Indemnity” or “Indemnity”: The Environmental and ADA Indemnity
Agreement dated as of June 29, 2005 made by the Borrower in favor of the
Collateral Agent, as assigned by the Collateral Agent to the Bank and amended
pursuant to that certain Assignment of Environmental Indemnity and Amendment
(the “Indemnity Assignment/Amendment”) dated as of March 21, 2007, as so amended
and as it may be further amended, modified, supplemented, restated or replaced
from time to time.

“Environmental Laws”: All present and future federal, state, regional or local
laws, statutes, ordinances, rules, regulations and other requirements of
governmental authorities relating to the environment or to any Hazardous
Substance or Hazardous Substance Activity including, without limitation, at the
federal level, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980,42 U.S.C. Section 9601, et seq., as now or hereafter
amended (“CERCLA”), the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901 et seq., as now or hereafter amended, the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801, et seq., as now or hereafter
amended, the Clean Water Act, 33 U.S.C. Section 1251, to sea., as now or
hereafter amended, the Clean Air Act, 42 U.S.C. Section 7901, et seq., as now or
hereafter amended, the Toxic Substances Control Act, 15 U.S.C. Sections 2601
through 2629, as now or hereafter amended, and the Safe Drinking Water Act, 42
U.S.C. Section 300f through 300j, as now or hereafter amended.

“Environmental Report(s)”: The environmental report(s) described in Schedule 1
to the Environmental Indemnity covering the “Premises” subject to the Mortgage
and delivered to the Bank pursuant to Section 6.1(a)(iii) of the Original
Reimbursement Agreement.

“Equipment”: As provided in the UCC including, without limitation, all of the
Borrower’s present and future interests in (i) equipment in all of its forms
wherever located, now or hereafter existing, whether owned or leased by the
Borrower, including, without limitation, machinery, transportation equipment,
manufacturing, distribution, selling, data processing and office equipment,
assembly systems, tools, molds, dies, fixtures, appliances, furniture,
furnishings, and trade fixtures, (ii) other tangible personal property (other
than the Borrower’s Inventory), and (iii) any and all accessions, parts and
appurtenances attached to any of the foregoing or used in connection therewith,
and any substitutions therefor and replacements, products and proceeds thereof.

 

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“Equity Interests”: Shares of capital stock, partnership interests, membership
interests in a limited liability company, beneficial interests in a trust or
other equity ownership interests in a Person, and any warrants, options or other
rights entitling the holder thereof to purchase or acquire any such equity
interest.

“ERISA”: The Employee Retirement Income Security Act of 1974, as amended, or any
successor statute, together with regulations thereunder.

“ERISA Affiliate”: Any trade or business (whether or not incorporated) that is a
member of a group of which the Borrower or any of its Subsidiaries is a member
and that is treated as a single employer under Section 414 of the Code.

“Eurodollar Business Day”: Means any day which is a Business Day and also a day
(other than a Saturday or Sunday) on which commercial banks are open for
business in New York, New York and a day for trading by and between banks in
United States dollar deposits in the interbank Eurodollar market.

“Event of Default”: Any event described in Section 10.1 which has not been cured
to the satisfaction of, or waived by, the Bank in accordance with Section 11.1.

“Exchange Act”: the Securities Exchange Act of 1934, as amended, and the rules
and regulations of the SEC promulgated thereunder.

“Federal Reserve Board”: The Board of Governors of the Federal Reserve System or
any successor thereto.

“Final Drawing”: As provided in the Bonds Letter of Credit.

“Financial Officer”: With respect to any described Person, the chief financial
officer, principal accounting officer, treasurer or controller of such Person.

“Financing Agreements”: This Agreement, the other Loan Documents and the Bond
Documents.

“Fixed Charge Coverage Ratio”: At any Quarterly Measurement Date, the numerical
ratio of: (a) the sum of: (i) the EBITDA for the Measurement Period ending at
such date; plus (ii) rent expense on Operating Leases deducted from the net
income included in the Adjusted Net Income used in calculating such EBITDA; plus
(iii) non-cash corporate allocations incurred during such Measurement Period; to
(b) the sum of: (i) the Interest Expense during such Measurement Period; plus
(ii) the Mandatory Principal Payments scheduled to have been paid during such
Measurement Period; plus (iii) the rent expense on Operating Leases scheduled to
have been paid during such Measurement Period; plus (iv) the greater of:
(A) Non-Financed Capital Expenditures made during such Measurement Period; or
(B) a maintenance Capital Expenditures requirement of $500,000.00, regardless of
whether actually paid during such Measurement Period; plus (v) federal, state
and local income taxes with respect to the net income included in the EBITDA for
such Measurement Period or, if the Borrower is a pass-through tax entity, the
maximum Permitted Tax Distributions that are permitted to be paid with respect
to

 

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such net income (assuming compliance with Section 9.7(b)), regardless of whether
actually paid during such Measurement Period.

“GAAP”: Generally accepted accounting principles as in effect from time to time
including, without limitation, applicable statements, bulletins and
interpretations of the Financial Accounting Standards Board and applicable
bulletins, opinions and interpretations issued by the American Institute of
Certified Public Accountants or its committees.

“Governmental Approvals”: The Permits and all other permits, authorizations,
consents, approvals, licenses, consent certificates, rulings, certifications,
orders, waivers, exemptions of, or filings or registrations with, any
Governmental Person required in connection with the operation or maintenance of
the Plant and the consummation of the transactions set forth in the Transaction
Documents.

“Governmental Person”: Any national, federal, state or local government (whether
foreign or domestic), any political subdivision thereof or any governmental,
quasi-governmental, administrative, judicial, public or statutory
instrumentality, authority, body or entity, or any other regulatory bureau,
authority, body or entity, including the Federal Deposit Insurance Corporation,
the Comptroller of the Currency or the Federal Reserve Board, any central bank
or any comparable authority.

“Governmental Rule”: Any law, statute, permit, concession, grant, franchise,
license, requirement, rule, regulation, ordinance, order, code, interpretation,
judgment, decree, directive, guideline, policy or other governmental restriction
or any similar form of decision of, or determination by, or any interpretation
or administration of any of the foregoing by, any Governmental Person whether
now or hereafter in effect.

“Hazardous Materials Claims”: As provided in Section 8.15.

“Hazardous Substance Activity”: Any storage, holding, disposal, leaching,
existence, use, release, migration, emission, discharge, generation, processing,
abatement, removal, repair, cleanup or detoxification, disposition, handling or
transportation of any Hazardous Substance from, under, into, on or about the
Property.

“Hazardous Substances” Any substance that is at any time defined or listed in,
or otherwise classified or regulated pursuant to, any Environmental Laws as
(a) a “hazardous substance,” “hazardous material,” “hazardous waste,”
“infectious waste,” “designated waste,” “biohazard,” “toxic substance,” “toxic
pollutant,” “pollutant,” “contaminant” or similarly designated substance; or
(b) otherwise having or exhibiting deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity or “EP
toxicity,” including asbestos, polychlorinated biphenyls and also including
petroleum products, by-products and wastes or by-products associated with the
extraction, refining or use of petroleum or petroleum products, whether or not
so listed or classified in such laws or regulations.

“Historical Financial Statements”: As provided in Section 7.5(b).

 

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“Indebtedness”: Without duplication, all obligations, contingent or otherwise,
which in accordance with GAAP should be classified upon the obligor’s balance
sheet as liabilities, but in any event including the following (whether or not
they should be classified as liabilities upon such balance sheet):
(a) obligations secured by any mortgage, pledge, security interest, lien, charge
or other encumbrance existing on property owned or acquired subject thereto,
whether or not the obligation secured thereby shall have been assumed and
whether or not the obligation secured is the obligation of the owner or another
party; (b) any obligation on account of deposits or advances; (c) any obligation
for the deferred purchase price of any property or services, except Trade
Accounts Payable; (d) any obligation as lessee under any Capitalized Lease;
(e) all Contingent Obligations; (f) undertakings or agreements to reimburse or
indemnify issuers of letters of credit or in connection with bankers’
acceptances including, without limitation, the Letter of Credit Obligations; and
(g) all Rate Protection Obligations. For all purposes of this Agreement, the
Indebtedness of any Person shall include the Indebtedness of any partnership or
joint venture as to which such Person is or may become personally liable.

“Indenture”: As provided in the recitals hereto.

“Insolvency or Liquidation Proceedings”: Any receivership, conservatorship,
general meeting of creditors, insolvency or bankruptcy proceeding, assignment
for the benefit of creditors or any proceeding or action by or against the
Borrower or any guarantor of the Obligations for any relief under any bankruptcy
or insolvency law or other laws relating to the relief of debtors, readjustment
of indebtedness, reorganizations, dissolution, liquidation, compositions or
extensions, or the appointment of any receiver, intervenor or conservator of, or
trustee, or similar officer for, the Borrower or any guarantor of the
Obligations or any substantial part of its or their respective properties or
assets, including, without limitation, proceedings under the United States
Bankruptcy Code (the “Bankruptcy Code”), or under other federal, state or local
statute, laws, rules and regulations, all whether now or hereafter in effect.

“Interest Expense”: For any period, the aggregate interest expense (including
capitalized interest) of the Borrower for such period including, without
limitation, the interest portion of any Capitalized Lease, the Letter of Credit
Fee and other fees and charges with respect to the Bonds Letter of Credit;
provided, however, that the foregoing shall be adjusted to reflect only the net
effect of any interest rate swap, interest hedging transaction, or other similar
arrangement entered into by the Borrower in order to reduce or eliminate
variations in its interest expenses.

“Interest Payment Date”: As provided in the Indenture.

“Inventory”: As provided in the UCC including, without limitation, including,
without limitation, all of the Borrower’s present and future: (a) inventory in
all of its forms wherever located, now or hereafter existing, (b) goods,
merchandise and other personal property furnished or to be furnished under any
contract of service or intended for sale, lease or exchange, and all consigned
goods and all other items which have previously constituted Equipment of the
Borrower but are then currently being held for sale or lease in the ordinary
course of the Borrower’s business, (c) raw materials, work-in-process and
finished goods, (d) materials and supplies of any kind, nature or description
used or consumed in the Borrower’s business or in connection with the
manufacture, production, packing, shipping, advertising, finishing or sale of
any of the Property described in clauses (a) through (c) above, (e) goods in
which the Borrower

 

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has a joint or other interest or right of any kind (including, without
limitation, goods in which the Borrower has an interest or right as consignee),
and (f) goods which are returned to or repossessed by the Borrower, in each case
whether in the possession of the Borrower, a bailee, a consignee, or any other
Person for sale, storage, transit, processing, use or otherwise, and any and all
accessions thereto, products thereof, and documents for or relating to any of
the foregoing.

“Investment”: The acquisition, purchase, making or holding of any stock or other
security, any loan, advance, contribution to capital, extension of credit
(except for trade and customer accounts receivable for Inventory sold or
services rendered in the ordinary course of business and payable in accordance
with customary trade terms), any acquisitions of real or personal property
(other than real and personal property acquired in the ordinary course of
business) and any purchase or commitment or option to purchase stock or other
debt or equity securities of, or any interest in, another Person or any integral
part of any business or the assets comprising such business or part thereof. The
amount of any Investment shall be the original cost of such Investment plus the
cost of all additions thereto, without any adjustments for increases or
decreases in value, or write-ups, write-downs or write-offs with respect to such
Investment.

“Issuer”: City of Ladysmith, Wisconsin.

“Land”: As provided in the Mortgage.

“Letter of Credit Amount”: As provided in the Bonds Letter of Credit.

“Letter of Credit Fee”: As provided in Section 2.3(a).

“Letter of Credit Fee Account”: As provided in Section 2.19.

“Letter of Credit Obligations”: At any date of determination, the sum of:
(a) the aggregate amount available to be drawn on the Bonds Letter of Credit on
such date; plus (b) the aggregate amount owed by the Borrower to the Bank on
such date as a result of a Drawing on the Bonds Letter of Credit for which the
Borrower has not reimbursed the Bank (such unpaid amount being the “Unreimbursed
Amount”).

“Leverage Ratio”: At any Quarterly Measurement Date, the ratio of: (a) the sum
(without duplication) of any unpaid Unreimbursed Amount, the outstanding
principal balance of the Bonds Promissory Note, the outstanding principal
balance of any Indebtedness incurred by the Borrower pursuant to Section 9.2(g),
and the outstanding principal of all other interest bearing Indebtedness of the
Borrower and its Subsidiaries (including, without limitation, the portion of any
Capitalized Lease allocable to principal in accordance with GAAP but excluding
Indebtedness arising under the Clearwater Senior Notes Subsidiary Guarantee so
long as the Indebtedness created thereby has not become due and payable at the
maturity of the guarantied obligations, by acceleration or otherwise, and
remains unpaid) at such date; to (b) the EBITDA for the Measurement Period
ending on such Quarterly Measurement Date.

“Liabilities”: At any date of determination, the aggregate amount of liabilities
appearing on the Borrower’s balance sheet at such date prepared in accordance
with GAAP.

 

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“Lien”: Any security interest, mortgage, pledge, lien, hypothecation, judgment
lien or similar legal process, charge, encumbrance, title retention agreement or
analogous instrument or device (including, without limitation, the interest of
the lessors under Capitalized Leases and the interest of a vendor under any
conditional sale or other title retention agreement).

“Liquidity Drawing”: As provided in the Bonds Letter of Credit.

“Loan Documents”: This Agreement, the Security Documents, the Rate Protection
Agreements, the Cellu Tissue Bank Guaranty, the Clearwater Bank Guaranty and
each other instrument, document, guaranty, security agreement, mortgage, or
other agreement executed and delivered by the Borrower or any other Loan Party
pursuant to which the Borrower or such Loan Party incurs any liability to the
Bank with respect to the Obligations, agrees to perform any covenant or
agreement with respect to the Obligations or grants any security interest to
secure the Obligations.

“Loan Party”: The Borrower, Clearwater and Cellu Tissue.

“Lockbox Agreement”: The Lockbox Services Agreement dated as of June 29, 2005
between the Borrower and the Bank, as amended by a First Amendment to Lockbox
Services Agreement dated as of June 29, 2005, as so amended and as it may be
further amended, modified, supplemented, restated or replaced from time to time

“Mandatory Principal Payments”: For any period, the payments required to be made
on the Bonds pursuant to the Amortization Schedule, and other principal payments
(including the portion of any payment on any Capitalized Lease allocable to
principal in accordance with GAAP) regularly scheduled to be paid by the
Borrower or any of its Subsidiaries during such period on the Borrower’s
Capitalized Leases and other interest-bearing Indebtedness.

“Material Adverse Occurrence”: The occurrence of any event which the Bank, in
good faith, determines could reasonably be expected to have a material adverse
effect on (a) the business, property, assets, operations or condition, financial
or otherwise of either: (i) the Borrower; or (ii) Cellu Tissue and its
Subsidiaries, taken as a whole; or (b) the Borrower’s or any other Loan Party’s
prospective ability to perform any of its payment or other obligations under the
Loan Documents.

“Material Contract”: Each contract (other than a lease, sublease or assignment
of an interest in land, improvements, equipment or fixtures) to which the
Borrower is a party that: (a) adversely affects the value of any of the
Collateral as security for the Obligations; or (b) is materially adverse to the
rights and benefits of the Bank under the Loan Documents.

“Maximum Debt Service Reserve Amount”: As provided in the Indenture.

“Measurement Period”: At any Quarterly Measurement Date, the four fiscal
quarters ending on such Quarterly Measurement Date.

“Monthly Date”: The first Business Day of each month.

“Moody’s”: Moody’s Investors Service, Inc. and any successor thereto.

 

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“Mortgage”: The Mortgage, Security Agreement, Financing Statement and Assignment
of Rents and Leases dated as of June 29, 2005 made by the Borrower in favor of
the Collateral Agent to secure the Obligations, as assigned by the Collateral
Agent to the Bank and amended by that certain Assignment of Mortgage, Security
Agreement, Financing Statement and Assignment of Rents and Leases and Amendment
dated as of March 21, 2007 (the “Mortgage Assignment/Amendment”), as so amended
and as it may be further amended, modified, supplemented, restated or replaced
from time to time.

“Multiemployer Plan”: A Plan that is a “multiemployer plan” within the meaning
of Section 4001(a)(3) of ERISA.

“Multiemployer Plan Insolvency”: With respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section 4245 of
ERISA.

“Net Proceeds”: With respect to any sale, transfer or other disposition of any
of the Borrower’s assets (other than sales of Inventory in the ordinary course
of business) or from the issuance of any Equity Interest in the Borrower other
than to Cellu Tissue) or of any option, warrant or other right to acquire the
same, or from the incurrence of any other Indebtedness (excluding Indebtedness
permitted to be incurred by Section 9.2) by the Borrower, in any case net of the
actual cash expenses paid by the Borrower in connection with such issuance or
incurrence, the cash proceeds received by the Borrower or such Subsidiary from
such transaction less the sum of: (a) the reasonable costs associated with such
transaction; and (b) the amount of any Indebtedness (other than the Obligations)
which is required to be paid in connection with such transaction.

“Non-Financed Capital Expenditures”: For any period, the portion of the Capital
Expenditures made during such period which was not financed by Purchase Money
Indebtedness or Capitalized Leases permitted to be incurred by Section 9.2(f).

“Obligations”: All Letter of Credit Obligations, Rate Protection Obligations,
advances, debts, liabilities, obligations, covenants and duties owing by the
Borrower to the Bank of any kind or nature, present or future, which arise under
this Agreement, any other Loan Document or any Rate Protection Agreement or by
operation of law, whether or not evidenced by any note, guaranty or other
instrument, whether or not for the payment of money, whether arising by reason
of an extension of credit, opening, guarantying or confirming of a letter of
credit, guaranty, indemnification or in any other manner, whether joint,
several, or joint and several, direct or indirect (including those acquired by
assignment or purchases), absolute or contingent, due or to become due, and
however acquired. The term includes, without limitation, all principal,
interest, fees, charges, expenses, attorneys’ fees, and any other sum chargeable
to the Borrower under this Agreement, any other Loan Document or any Rate
Protection Agreement.

“Operating Account”: The Borrower’s general operating account maintained at the
Bank, being account no. 2283089064 on the Effective Date and any successor
account therefor.

“Operating Lease”: Any lease of personal property other than a Capitalized
Lease.

“Optional Tender Date”: As provided in the Indenture.

 

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“Original Reimbursement Agreement”: Reimbursement Agreement dated June 29, 2005,
between the Bank and the Borrower.

“Paying Agent”: As provided in the Indenture.

“PBGC”: The Pension Benefit Guaranty Corporation, established pursuant to
Subtitle A of Title IV of ERISA, and any successor thereto or to the functions
thereof.

“Permits”: The permits set forth on Schedule 7.3 attached hereto and
incorporated herein by reference.

“Permitted Debt Repayments”: The repayments of the Borrower’s Indebtedness to
Cellu Tissue for borrowed money that are permitted to be paid pursuant to
Section 9.15(a)(vi).

“Permitted Distributions”: The dividends and distributions that are permitted to
be paid pursuant to Section 9.7(b).

“Permitted Encumbrances”: The Liens, charges and encumbrances on title to the
Project listed on Exhibit B to the Mortgage.

“Permitted Investments”: “Qualified Investments” as defined in the Indenture.

“Permitted Liens”: The following:

(a) Liens for taxes, assessments or governmental charges for the then current
year and Liens for other taxes, assessments or governmental charges that are not
yet delinquent or the amount or validity of which is being timely contested in
good faith and for the payment of which the Borrower has made adequate reserves;

(b) deposits or pledges to secure the payment of workers’ compensation,
unemployment insurance, old-age pensions or other social security benefits or
obligations;

(c) mechanics’, materialmen’s, warehousemen’s, carriers’ or other like Liens
arising in the ordinary course of business securing obligations that are not
overdue for more than 30 days or that are being timely contested in good faith
and for the payment of which the Borrower has made adequate reserves;

(d) Liens incurred or created in the ordinary course of business in connection
with or to secure the performance of bids, tenders, contracts (other than for
the payment of money), leases, statutory obligations, surety bonds or appeal
bonds;

(e) Liens covered by a bond in form and substance reasonably satisfactory to the
Bank;

(f) statutory banker’s liens and rights of set-off;

(g) the Permitted Encumbrances; and

 

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(h) Liens of judgments covered by insurance, or upon appeal and covered by bond
so long as: (i) no cash or property (other than proceeds of insurance payable by
reason of such judgments, decrees or attachments) is deposited or delivered to
secure any such judgment, or any appeal bond in respect thereof; (ii) levy and
execution on such Lien have been and continue to be stayed; and (iii) such Lien
does not prevent Bank from having a perfected first priority security interest
in the Collateral or with respect to future credit extensions made under this
Agreement.

“Permitted Tax Distributions”: As provided in Section 9.9(b)(i).

“Person”: Any natural person, corporation, partnership, joint venture, firm,
association, trust, unincorporated organization, government or governmental
agency or political subdivision, or any other entity, whether acting in an
individual, fiduciary or other capacity.

“Plan”: An “employee pension benefit plan” (as defined in Section 3(2)(A) of
ERISA) that is maintained for employees of the Borrower or of any ERISA
Affiliate, and subject to Title IV of ERISA or Section 412 of the Code.

“Plant”: Tissue mill owned by the Borrower in the Town of Ladysmith, Rusk
County, Wisconsin, as the same may be modified, improved, upgraded or expanded
from time to time.

“Pledged Bond Account”: As provided in Section 309 of the Indenture.

“Pledged Bonds”: As provided in the Indenture.

“Pledged Permits”: As provided in the Security Agreement.

“Property”: As provided in the Environmental Indemnity.

“Purchase Money Indebtedness”: Any Indebtedness incurred for the purchase of
personal property where the repayment thereof is secured solely by an interest
in the personal property so purchased.

“Quarterly Measurement Date”: The last day of each quarter of the Borrower’s
fiscal year.

“Rate Protection Agreement”: Any interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate futures contract,
interest rate options contract or similar agreement or arrangement between the
Borrower and the Bank designed to protect the Borrower against fluctuations in
interest.

“Rate Protection Obligations”: The liabilities, indebtedness, and obligations of
the Borrower, if any, to the Bank under the Rate Protection Agreement.

“Rating Agency”: Moody’s and any other national rating service maintaining a
rating on the Bonds at the request of the Issuer or the Borrower.

 

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“Receivables”: All of the Borrower’s present and future (a) accounts,
(b) contract rights, chattel paper, instruments, documents, general intangibles,
deposit accounts, and other rights to payment of any kind, now or hereafter
existing, whether or not arising out of or in connection with the sale, lease or
exchange of goods or the rendering of services, and whether or not earned by
performance, (c) any of the foregoing which are not evidenced by instruments or
chattel paper, (d) inter-company receivables, and any security documents
executed in connection therewith, (e) proceeds of any letters of credit or
insurance policies on which the Borrower is named as beneficiary, (f) claims
against third parties for advances and other financial accommodations and any
other obligations whatsoever owing to the Borrower, (g) tax refunds, tax refund
claims or guarantee claims, held by or granted to the Borrower; (h) rights now
or hereafter existing in and to all security agreements, leases, guarantees,
instruments, securities, documents of title and other contracts securing,
evidencing, supporting or otherwise relating to any of the foregoing, together
with all rights in any goods, merchandise or Inventory which any of the
foregoing may represent, and (i) rights in returned and repossessed goods,
merchandise and Inventory which any of the same may represent, including,
without limitation, any right of stoppage in transit. Such leases, security
agreements and other contracts described in this definition are referred to as
the “Related Contracts”. The foregoing uncapitalized terms “account”, “account
debtor”, “bill of lading”, “chattel paper”, “contract right”, “deposit account”,
“document”, “document of title”, “electronic chattel paper”, “equipment”,
“general intangible”, “investment property”, “letter-of-credit right”,
“instrument”, “inventory”, “money”, “payment intangible”, “proceeds”, products”,
“purchase money security interest”, “supporting obligation” and “warehouse
receipt” as used in this Agreement shall have the meanings ascribed thereto in
the UCC.

“Regulatory Change”: As to the Bank, any change (including any scheduled change)
applicable to a class of banks which includes the Bank in any:

(a) federal or state law or foreign law; or

(b) regulation, interpretation, directive or request (whether or not having the
force of law) of any court or governmental authority charged with the
interpretation or administration of any law referred to in clause (a) of this
definition or of any fiscal, monetary or other authority having jurisdiction
over such class of banks;

or the adoption after the date hereof of any new or final law, regulation,
interpretation, directive or request applicable to a class of banks which
includes the Bank.

“Related Contracts”: As provided in the definition of “Receivables”.

“Related Party”: Any Person (other than a Subsidiary, the Bank or any other
subsidiary or affiliate of Associated Bancorp): (a) which directly or
indirectly, through one or more intermediaries, controls, or is controlled by,
or is under common control with, the Borrower; (b) which beneficially owns or
holds 5% or more of the Equity Interest of the Borrower; or (c) 5% or more of
the Equity Interest of which is beneficially owned or held by the Borrower or a
Subsidiary. The term “control” means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities or by contract.

 

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“Release”: As provided in the Environmental Indemnity.

“Remarketing Agent”: Wells Fargo Brokerage Services, LLC, or any successor
thereto.

“Remarketing Agreement”: The Remarketing Agreement, dated as of March 27, 2003
between the Remarketing Agent and the Borrower.

“Remediation Work”: As provided in the Environmental Indemnity.

“Rent Expense”: For any Measurement Period, the aggregate amount of rent expense
as determined in accordance with GAAP.

“Reorganization”: With respect to any Multiemployer Plan, the condition that
such plan is in reorganization within the meaning of Section 4241 of ERISA.

“Reportable Event”: A “reportable event”, as defined in Section 4043 of ERISA
and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC, by regulation, has waived
the requirement of Section 4043(a) of ERISA that it be notified within 30 days
of the occurrence of such event, provided that a failure to meet the minimum
funding standard of Section 412 of the Code and Section 302 of ERISA shall be a
reportable event regardless of the issuance of any such waivers in accordance
with Section 412(d) of the Code.

“Required Secured Parties”: The Bank.

“Required Senior Reserve Balance”: With respect to the Senior Debt Service
Reserve Fund, $1,000,000.00.

“Restricted Debt Payment”: Any payment of the principal of any of the Borrower’s
Indebtedness to Cellu Tissue for borrowed money.

“Restricted Payment”: Any dividend or other distribution (whether in cash,
securities or other property) with respect to any Equity Interests in the
Borrower, or any payment (whether in cash, securities or other property),
including any sinking fund or similar deposit, on account of the purchase,
redemption, retirement, acquisition, cancellation or termination of any such
Equity Interests in the Borrower or any option, warrant or other right to
acquire any such Equity Interests in the Borrower.

“Scheduled Expiration Date”: As provided in the Bonds Letter of Credit.

“Secured Parties”: The Bank.

“Security Agreement”: The Security Agreement dated as of June 29, 2005 made by
the Borrower in favor of the Collateral Agent to secure the Obligations, as
assigned by the Collateral Agent to the Bank and amended pursuant to that
certain Assignment of Security Agreement and Amendment dated as of March 21,
2007, and as it may be further amended, modified, supplemented, restated or
replaced from time to time.

 

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“Security Document”: The Security Agreement, the Mortgage, the Assignment of
Rents, the Indemnity, the Bonds Pledge Agreement, the Lockbox Agreement and any
substitute or replacement.

“Semiannual Date”: Each Monthly Date occurring in March and September.

“Senior Debt Service Reserve Fund”: As provided in Section 2.10(b).

“Senior Secured Parties”: The Bank and any subsequent holder of the Obligations.

“Single Employer Plan”: A Plan that is not a Multiemployer Plan.

“Solvent” shall mean, with respect to any Person on any date of determination,
that on such date:

(a) the fair value of such Person’s tangible and intangible assets is in excess
of the total amount of such Person’s liabilities including, without limitation,
Contingent Obligations; and

(b) such Person is then able to pay its debts as they mature; and

(c) such Person has capital sufficient to carry on its business.

“Subsidiary”: With respect to any described Person, any other Person of which or
in which the described Person and its other Subsidiaries own directly or
indirectly 50% or more of: (a) the combined voting power of all classes of stock
having general voting power under ordinary circumstances to elect a majority of
the board of directors of such Person, if it is a corporation, (b) the capital
interest or profit interest of such Person, if it is a partnership, joint
venture or similar entity, or (c) the beneficial interest of such Person, if it
is a trust, association or other unincorporated organization.

“Substitute Credit Facility”: As provided in the Indenture.

“Taking”: An exercise of the power of eminent domain by a Governmental Person.

“Tendered Bonds”: As provided in the Indenture.

“Termination Event”: Any of: (a) a Reportable Event, (b) the institution of
proceedings to terminate a Single Employer Plan by the PBGC under Section 4042
of ERISA, (c) the appointment by the PBGC of a trustee to administer any Single
Employer Plan or (d) the existence of any other event or condition that would
reasonably be expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment by the PBGC of a trustee to administer, any
Single Employer Plan.

“Title Company”: First American Title Insurance Company.

“Title Policy”: The policy of title insurance issued to the Collateral Agent by
the Title Company with respect to the Property, as assigned by the Collateral
Agent to the Bank.

 

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“Trade Accounts Payable”: The trade accounts payable of the described Person
with a maturity of not greater than 90 days incurred in the ordinary course of
such Person’s business.

“Transaction Documents”: The Loan Documents, the Bond Documents, the Clearwater
Senior Notes Loan Documents, the Clearwater Credit Facility Loan Documents, the
Clearwater Merger Agreement, and the Indemnity.

“Transfer Certificate”: As provided in the Bonds Letter of Credit.

“Transfer Fee”: As provided in Section 2.3(c).

“Trustee”: As provided in the recitals hereto.

“UCC”: The Uniform Commercial Code as enacted in the State of Minnesota, as
amended from time to time; provided, however, that: (a) to the extent that the
UCC is used to define any term herein, and such term is defined differently in
different Articles of the UCC, the definition of such term contained in Article
9 shall govern; and (b) if, by reason of mandatory provisions of law, any or all
of the attachment, perfection or priority of, or remedies with respect to, the
Secured Party’s security interest in any Collateral is governed by the Uniform
Commercial Code as enacted and in effect in a jurisdiction other than the State
of Minnesota, the term “UCC” shall mean the Uniform Commercial Code as enacted
and in effect in such other jurisdiction solely for purposes of the provisions
thereof relating to such attachment, perfection or priority of, or remedies with
respect to, the Secured Party’s security interest and for purposes of
definitions related to such provisions.

“Unreimbursed Amount”: As provided in the definition of “Letter of Credit
Obligations.”

1.2. Accounting Terms and Calculations. Except as may be expressly provided to
the contrary herein, all accounting terms used herein shall be interpreted and
all accounting determinations hereunder (including, without limitation,
determination of compliance with financial ratios and restrictions in ARTICLE
VIII and ARTICLE IX shall be made in accordance with GAAP consistently applied
for the Borrower as used in the preparation of the Borrower’s audited financial
statements described in Section 7.5. To the extent any change in GAAP affects
any computation or determination required to be made pursuant to this Agreement,
such computation or determination shall be made as if such change in GAAP had
not occurred unless the Borrower and the Bank agree in writing on an adjustment
to such computation or determination to account for such change in GAAP.

1.3. Computation of Time Periods. In this Agreement, in the computation of a
period of time from a specified date to a later specified date, unless otherwise
stated, the word “from” means “from and including” and the words “to” or “until”
each means “to but excluding.”

1.4. Other Definitional Provisions. The words “hereof,” “herein,” and
“hereunder” and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. References to Sections, Exhibits, Schedules and like references are
to this Agreement unless otherwise expressly provided. The

 

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words “include,” “includes” and “including” shall be deemed to be followed by
the phrase “without limitation.” Unless the context in which used herein
otherwise clearly requires, “or” has the inclusive meaning represented by the
phrase “and/or.”

ARTICLE II.

BONDS LETTER OF CREDIT

2.1. Bonds Letter of Credit. Pursuant to that certain Reimbursement Agreement,
the Borrower requested that the Bank issue the “Bonds Letter of Credit”
described therein (the “Bonds Letter of Credit”) and the Bank did so; a copy of
the Bonds Letter of Credit and all amendments thereto is attached hereto as
Exhibit A. The Bank issued and delivered the Bonds Letter of Credit on the terms
and conditions contained in this Agreement.

2.2. Repayment of Advances by the Bank to Honor Drafts Drawn on the Letter of
Credit. The Borrower hereby agrees to reimburse the Bank for all Letter of
Credit Obligations arising from Drawings on the Bonds Letter of Credit that are
paid by the Bank in accordance with the terms of this Agreement. Reimbursement
for all such Letter of Credit Obligations shall be immediately due and payable
on the date that the Draw is paid by the Bank. Until fully reimbursed,
Unreimbursed Amounts shall bear interest at a fluctuating rate per annum at all
times equal to the Default Rate.

2.3. Bonds Letter of Credit Fees.

(a) Letter of Credit Fee. Contemporaneously with the execution of the Second
Amendment to Amended and Restated Reimbursement Agreement referred to in
Recital A hereof, the Borrower paid the Bank a fee (the “Letter of Credit Fee”)
for the extension of the Bonds Letter of Credit through February 15, 2012. The
Letter of Credit Fee was fully earned upon receipt and is nonrefundable even
though in Section 2.4 the Borrower has agreed to provide for the return of the
Bonds Letter of Credit, with no draws having been made thereon, by September 30,
2011.

(b) Optional Redemption Fee. If the Borrower exercises its rights under
Section 8.18 of this Agreement and Section 404 of the Indenture to redeem Bonds
(excluding any redemption required by Section 8.17 or made in connection with a
Clearwater Prepayment Event), the Borrower shall pay to the Bank a fee (the
“Optional Redemption Fee”) equal to 1.00% of the principal amount of the Bonds
being optionally redeemed; provided, however, that no Optional Redemption Fee
shall be required if the Bank exercises its rights under Section 4.1 of this
Agreement to require a mandatory redemption of the Bonds.

(c) Transfer Fee. Any transfer of the Bonds Letter of Credit by the Trustee
shall be made by, and be only effective upon, the Trustee’s providing the Bank
with a “Transfer Certificate” described in the Bonds Letter of Credit and
payment to the Bank by the Borrower of a transfer fee (the “Transfer Fee”) of
$3,000.00 for each transfer and the costs payable to the Bank pursuant to
Section 2.3(d) below in respect of each such transfer.

 

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(d) Other Fees. In addition to the Bonds Letter of Credit Fee and the Transfer
Fee, the Borrower shall pay to the Bank, on demand, such fees as are customarily
charged by the Bank from time to time in connection with the issuance, renewal,
amendment and administration of letters of credit (including, without
limitation, a draw fee, renewal fee and amendment fee), as the same may change
from time to time. If the Borrower fails to pay any such fee when due, the
unpaid amount shall bear interest from the date due until paid at the Default
Rate.

2.4. Return of Letter of Credit.

(a) The Bonds Letter of Credit has a Scheduled Expiration Date of February 15,
2012. However, notwithstanding such Scheduled Expiration Date, the Borrower
hereby agrees to return the original Bonds Letter of Credit to the Bank on or
before September 30, 2011 with no draw having been made thereon and to provide a
Substitute Credit Facility to the Trustee pursuant to the Indenture in order
effectuate such return. If the Borrower fails to effectuate such return by
September 30, 2011, the Borrower agrees to pay interest from and after such date
on the Letter of Credit Amount (as defined in the Bonds Letter of Credit) until
such Letter of Credit is returned with no draw having been made thereon at the
Default Rate.

(b) The Borrower acknowledges and agrees that the Bank shall have no obligation
to renew the Bonds Letter of Credit at any time in the future. The Borrower and
the Bank each acknowledges and understands that the Bonds will be subject to
mandatory redemption or purchase pursuant to the Indenture if the Bank does not
renew the Bonds Letter of Credit thereby resulting in a Drawing under the Bonds
Letter of Credit unless a Substitute Credit Facility is delivered to the Trustee
pursuant to the Indenture.

(c) In accordance with the procedures set forth in the Bonds Letter of Credit,
the Letter of Credit Amount of the Bonds Letter of Credit shall be reduced by a
sum equal to the principal of and 35 days’ maximum interest on each Bond which
is no longer “Outstanding” under the Indenture.

2.5. Limited Resolution of Issues by the Bank. The Bank shall not be called upon
to resolve any issues of law or fact with respect to the honoring or dishonoring
of any draft submitted under the Bonds Letter of Credit other than whether a
Draw strictly complies with the Bonds Letter of Credit as determined in
accordance with this Agreement and applicable law.

2.6. Liabilities of the Bank. Neither the Bank nor any of its officers or
directors shall be liable or responsible for: (a) the use which may be made of
the Bonds Letter of Credit or for any acts or omissions of the Issuer, the
Trustee, or any assignee or transferee in connection therewith; (b) the
validity, sufficiency or genuineness of documents, or of any endorsement(s)
thereon, even if such documents should, in fact, prove to be in any or all
respects invalid, insufficient, fraudulent or forged; or (c) any other
circumstances whatsoever in making or failing to make payment under the Letter
of Credit, except only that the Borrower shall have a claim against the Bank,
and the Bank shall be liable to the Borrower, to the extent, but only to the
extent, of any direct, as opposed to consequential, damages suffered by the
Borrower which the

 

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Borrower prove were caused by (i) the Bank’s willful misconduct or gross
negligence in determining whether documents presented under the Bonds Letter of
Credit comply with the terms of such Letter of Credit or (ii) the Bank’s willful
failure to pay under the Bonds Letter of Credit after the presentation to it by
the beneficiary or its permitted assignee or transferee of a sight draft and
certificate strictly complying with the terms and conditions of the Bonds Letter
of Credit. In furtherance and not in limitation of the foregoing, the Bank may
accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary.

2.7. Reinstatement of Letter of Credit for Certain Draws. The Letter of Credit
Amount shall be reduced by each Drawing on the Bonds Letter of Credit; subject,
however, to reinstatement in accordance with the terms of the Bonds Letter of
Credit. The Borrower acknowledges that the Bank shall not have any obligation to
reinstate the amount drawn on the Bonds Letter of Credit pursuant to any “Final
Drawing” described in the Letter of Credit.

2.8. Bond Prepayment Fund.

(a) Prior to the date hereof, the Collateral Agent, at the Borrower’s and the
Bank’s direction, assigned all of its rights in the “Bond Prepayment Fund”
described in the Collateral Agency Agreement (including, without limitation, any
balance thereof) to the Bank as the CITYFOREST Project-Bond Prepayment Fund (the
“Bond Prepayment Fund”) and the Borrower irrevocably directed the Collateral
Agent to effect such assignment and agrees that the Bond Prepayment Fund shall
be maintained with the Bank pursuant to this Agreement.

(b) Subject to Section 2.9(c) below, the Borrower shall cause all Damages to be
deposited promptly into the Bond Prepayment Fund.

(c) Subject to the Borrower’s right to apply Damages to the repair and
rebuilding of property pursuant to Section 2.9(d) below, amounts on deposit from
time to time in the Bond Prepayment Fund shall, at the direction of the Bank or
the Borrower, be transferred to the Trustee and used to redeem outstanding
Bonds.

(d) In the event of any loss, damage or destruction of or to any property of the
Borrower or any condemnation of any property of the Borrower, or a sale thereof
in lieu of or in anticipation of, the exercise of the power of condemnation or
eminent domain, any Damages received by or on behalf of the Borrower in
connection with such loss, damage, destruction or condemnation shall be used to
pay the cost of repairing, rebuilding or restoring such property in accordance
with Section 11 or 12 of the Mortgage, as the case may be.

2.9. Letter of Credit Fee Account.

On the Effective Date (as defined in the Amended and Restated Reimbursement
Agreement), the Collateral Agent, at the Borrower’s and the Bank’s direction,
assigned all of its rights in the “Letter of Credit Fee Account” described in
the Collateral Agency Agreement (including, without limitation, the $189,997.75
then existing balance thereof) to the Bank as the CITYFOREST Project-Letter of
Credit Fee Account (the “Letter of

 

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Credit Fee Account”) and the Borrower irrevocably directed the Collateral Agent
to effect such assignment and agrees that the Letter of Credit Fee Account shall
be maintained with the Bank pursuant to this Agreement.

2.10. Senior Debt Service Reserve Fund.

(a) As described in the Amended and Restated Reimbursement Agreement,
immediately prior to the Cellu Tissue Merger Sub’s (as defined in the Amended
and Restated Reimbursement Agreement) acquisition of the shares of CF
Corporation (as defined in the Amended and Restated Reimbursement Agreement),
the Bank instructed the Collateral Agent to release any amount on deposit in the
“Senior Debt Service Reserve Fund” described in the Collateral Agency Agreement
in excess of $1,000,000.00 to the Borrower and to transfer such amounts to the
Operating Account. On the Effective Date (as defined in the Amended and Restated
Reimbursement Agreement), the Collateral Agent, at the Borrower’s and the Bank’s
direction, assigned all of its rights in such “Senior Debt Service Reserve Fund”
(including, without limitation, the $1,000,000.00 balance thereof) to the Bank
as the CITYFOREST Project-Senior Debt Service Reserve Fund (the “Senior Debt
Service Reserve Fund”) and the Borrower irrevocably directed the Collateral
Agent to effect such assignment and agrees that the Senior Debt Service Reserve
Fund shall be maintained with the Bank pursuant to this Agreement.

(b) On each Semiannual Date, the Borrower shall deposit to the Senior Debt
Service Reserve Fund, an amount equal to the difference, if any, between (a) the
Required Senior Reserve Balance as of such date; minus (b) the amount on deposit
in the Senior Debt Service Reserve Fund immediately prior to the deposit
provided for in this paragraph (but after giving effect to any withdrawals from
the Senior Debt Service Reserve Fund on such date).

(c) Amounts on deposit in the Senior Debt Service Reserve Fund shall be used by
the Bank as necessary from time to time to reimburse the Bank for the account of
the Bank for Drawings in respect of principal or interest on the Bonds or other
Obligations, in each case when due to the extent that there are insufficient
funds available therefor in the Operating Account.

(d) On each Semiannual Date, the Bank shall transfer to the Operating Account
amounts on deposit in the Senior Debt Service Reserve Fund in excess of the sum
of the Required Senior Reserve Balance.

(e) The Bank shall, upon the written request of the Borrower, transfer to the
Trustee any amount requested by the Borrower for the purpose of redeeming Bonds
on the first date available therefor; provided, however, that after giving
effect to such transfer, the balance of the Senior Debt Service Reserve Fund
shall not be less than the Required Senior Reserve Balance.

(f) Interest income earned on amounts in the Senior Debt Service Reserve Fund
shall not be withdrawn from the Senior Debt Service Reserve Fund prior to such

 

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time as the Required Senior Reserve Balance has been met, and once the Required
Senior Reserve Balance has been met, such interest income shall be deposited
into the Operating Account.

(g) The Bank acknowledges that the Senior Debt Service Reserve Fund is being
established by the Borrower as a reasonably required debt service reserve fund
under Section 148 of the Internal Revenue Code of 1986, as amended, funded in
part from “gross proceeds” of the Bonds. The Bank agrees to (A) maintain records
in a form to permit the Borrower and its agents to periodically calculate
rebatable arbitrage, (B) preserve such records for a period of not less than six
months following the date on which the Bonds have been fully redeemed and paid,
(C) to make such records available to the Borrower, the Issuer or the Trustee
upon written request therefor, and (D) upon written directions by the Borrower,
accompanied by a report of the Borrower’s rebate analyst or any opinion of Bond
Counsel, to transfer the “arbitrage rebate amount” set forth therein to the
Trustee for credit to the Rebate Account under the Indenture.

ARTICLE III.

COMPUTATIONS

3.1. Computations. Interest, the Letter of Credit Fee and any other fee
calculated on a per annum basis shall be computed on the basis of actual days
elapsed and a year of 360 days.

ARTICLE IV.

PAYMENTS, PREPAYMENTS AND SETOFF

4.1. Mandatory Redemption of Bonds.

(a) If required by, and as directed by, the Bank, the Borrower,
contemporaneously with the Borrower’s receipt of any Net Proceeds arising from
the issuance of any equity interest in the Borrower or options or warrants or
other rights to acquire the same shall: (i) exercise its rights under
Section 404 of the Indenture to optionally redeem Bonds by the amount of such
Net Proceeds; and/or (ii) deposit such Net Proceeds in the Cash Collateral
Account described in Section 10.4 of this Agreement to secure the payment of the
Obligations in accordance with Section 10.4.

(b) If a Clearwater Prepayment Event occurs, then, by no later than the 180th
calendar day (or, if such day is not a Business Day, the immediately following
Business Day) after the date of the Borrower’s receipt of the Bank’s written
demand for prepayment of the Obligations, the Borrower shall have exercised its
rights under Section 404 of the Indenture to optionally redeem the Bonds or
shall have caused the Bonds Letter of Credit to be replaced by a “Substitute
Credit Facility” permitted by the Indenture.

4.2. Payments. All payments and prepayments of all fees, expenses and other
Obligations under the Loan Documents payable to the Bank shall be made without
deduction, set-off, or counterclaim in immediately available funds not later
than 2:00 p.m., Green Bay time, on the dates due at the main office of the Bank
in Green Bay, Wisconsin. Funds received on any day after such time shall be
deemed to have been received on the next Business Day. Whenever

 

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any payment to be made hereunder shall be stated to be due on a day which is not
a Business Day, such payment shall be made on the next succeeding Business Day
and such extension of time shall be included in the computation of any interest
or fees. The Borrower authorizes the Bank to charge any of the Borrower’s
accounts maintained at the Bank for the amount of any payment or prepayment or
any amount owing pursuant to any of the other Loan Documents.

ARTICLE V.

ADDITIONAL PROVISIONS RELATING TO THE BOND LETTER OF CREDIT

5.1. Increased Costs. In the event that any Regulatory Change reduces or shall
have the effect of reducing the rate of return on the Bank’s capital or the
capital of its parent corporation as a consequence of the Bonds Letter of Credit
issued pursuant hereto to a level below that which the Bank or its parent
corporation could have achieved but for such Regulatory Change (taking into
account Bank’s policies and the policies of its parent corporation with respect
to capital adequacy), then Borrower shall, within twenty days after written
notice and demand from Bank, pay to Bank additional amounts sufficient to
compensate Bank or its parent corporation for such reduction. Determinations by
Bank for purposes of this Section 5.1 of the additional amounts required to
compensate Bank shall be determinative in the absence of manifest error. If the
Bank fails to give such notice within 60 days after it obtains knowledge of such
an event, then the Bank shall, with respect to compensation payable pursuant to
this Section, only be entitled to payment under this Section for costs incurred
from and after the date 60 days prior to the date that the Bank does give such
notice. In determining such amounts, the Bank may use any reasonable averaging,
attribution and allocation methods. Failure on the part of the Bank to demand
compensation under this Section for any period shall not constitute a waiver of
the Bank’s rights to demand compensation for any subsequent period.

5.2. Funding Through the Sale of Participation. The Borrower acknowledges that
the Bank may fund all or any part of the Letter of Credit Obligations by sales
of participation to various participants and agrees that the Bank may, in
invoking its rights under this ARTICLE V, demand and receive payment for
reasonable costs and other amounts incurred by, or allocable to, any such
participant, or take other action arising from circumstances applicable to any
such participant, to the same extent that such participant could demand and
receive payments, or take other action, under this ARTICLE V or if such
participant were the Bank under this Agreement except that no participant’s
claims for payment of costs and other amounts under this Article V shall exceed
the amount which the Bank would have received had the Bank not sold a
participation to such participant.

ARTICLE VI.

CONDITIONS PRECEDENT

6.1. Conditions of Effective Date. The Effective Date of this Agreement shall be
subject to the satisfaction of the conditions precedent in addition to the
applicable conditions precedent set forth in Section 6.2 below, at the
Borrower’s sole cost and expense:

(a) the Clearwater Bank Guaranty in the form provided by the Bank appropriately
completed and duly executed by Clearwater;

 

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(b) the Cellu Tissue Bank Guaranty in the form provided by the Bank
appropriately completed and duly executed by Cellu Tissue;

(c) a certificate of the Secretary of each Loan Party having attached (A) a copy
of the corporate resolution of such Loan Party authorizing the execution,
delivery and performance of the Loan Documents to which such Loan Party is a
party; (B) an incumbency certificate showing the names and titles, and bearing
the signatures of, the officers of such Loan Party authorized to execute such
Loan Documents; and (C) a copy of the bylaws or limited liability company
operating agreement, as applicable, of such Loan Party in effect as of the
Effective Date;

(d) a copy of the articles or certificate of incorporation or organization, as
applicable, of each Loan Party in effect as of the Effective Date, certified by
the appropriate governmental official of the jurisdiction of its incorporation
as of a date acceptable to the Bank;

(e) certificates (or other evidence) of good standing for each Loan Party in the
jurisdiction of its incorporation or formation and, in the case of the Borrower,
a certificate (or other evidence) of authority to do business in the State of
Wisconsin, certified by the appropriate governmental officials as of a date
acceptable to the Bank;

(f) a No Default Certificate in a form provided by the Bank executed by a
Financial Officer of the Borrower;

(g)(i) an opinion of counsel to Cellu Tissue and Clearwater, addressed to the
Bank, substantially in form attached hereto as Exhibit C, and (ii) an opinion of
counsel to the Borrower, addressed to the Bank, substantially in form attached
hereto as Exhibit C;

(h) certified copies of (i) the Clearwater Merger Agreement, (ii) the Clearwater
Senior Notes Loan Documents, and (iii) the Clearwater Credit Facility Loan
Documents, each certified as a true and correct copies by a Financial Officer of
Clearwater;

(i) a Certificate appropriately completed and duly executed by a Financial
Officer of Clearwater stating (A) all conditions precedent to the consummation
of the Clearwater Merger set forth in Section 7.1, Section 7.2 and Section 7.3
of the Clearwater Merger Agreement have been satisfied or waived (including the
condition relating to the HSR Act and other applicable regulatory laws set forth
in Section 7.1(b) of the Clearwater Merger Agreement and the condition relating
to the absence of certain orders set forth in Section 7.1(c) of the Clearwater
Merger Agreement), and (B) the Clearwater Merger has been consummated in
accordance with the terms Clearwater Merger Agreement, together with evidence
that the Certificate of Merger has been filed in the office of the Delaware
Secretary of State; and

(j) evidence of insurance for all insurance required by the Loan Documents.

6.2. Conditions Precedent to Effective Date. The Effective Date of this
Agreement shall be subject to the satisfaction of the following conditions
precedent:

 

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(a) the representations and warranties contained in ARTICLE VII shall be true
and correct as of the Effective Date as though made on such date; and

(b) no Default or Event of Default shall have occurred and be continuing.

ARTICLE VII.

REPRESENTATIONS AND WARRANTIES

To induce the Bank to enter into this Agreement, and to issue the Bonds Letter
of Credit, the Borrower represents and warrants to the Bank:

7.1. Existence. Etc. The Borrower is a limited liability company duly formed and
validly existing under the laws of the State of Minnesota. The Borrower has all
power and authority to do business in, and is in good standing in, the State of
Wisconsin. Other than the States of Minnesota and Wisconsin, there are no other
jurisdictions where the nature of the Borrower’s business or the nature of the
property owned or leased by the Borrower requires the Borrower to qualify for
authorize to do business, except where the failure to effect such qualification
could not reasonably be expected to cause a Material Adverse Occurrence. The
Borrower has all power and authority to own its properties.

7.2. Due Authorization, No Breach, No Liens. The execution, delivery and
performance by the Borrower of each Transaction Document to which the Borrower
is a party are within the Borrower’s powers, have been duly authorized by all
necessary action by the managing member of the Borrower, and do not contravene
(a) the Borrower’s articles of organization, certificate of formation, operating
agreement, member control agreement, limited liability company agreement or
other organizational document, (b) any Governmental Rule or (c) any indenture,
loan or credit agreement or any other material agreement, lease or instrument to
which the Borrower is a party or by which it or any of its properties may be
bound; and such execution, delivery and performance do not result in or require
the creation of any Lien upon or with respect to any of the Borrower’s
properties, other than Permitted Liens. The Borrower is not in default under or
in violation of any such law, statute, rule or regulation, order, writ,
judgment, injunction, decree, determination or award or any such indenture, loan
or credit agreement or other material agreement, lease or instrument in any case
in which the consequences of such default or violation could reasonably be
expected to cause a Material Adverse Occurrence. No Default or Event of Default
has occurred and is continuing.

7.3. Governmental Approvals. No Governmental Approval is required for the due
execution, delivery and performance by the Borrower of the Transaction Documents
to which it is a party, other than those already obtained and those not yet
required but obtainable in the ordinary course as and when required. The
Governmental Approvals set forth on Schedule 7.3 attached hereto and
incorporated herein by reference constitute all of the Governmental Approvals
necessary for the lawful ownership, operation and maintenance of the Plant.

7.4. Transaction Documents. The Transaction Documents to which the Borrower is a
party are the valid and binding obligations of the Borrower enforceable against
the Borrower in accordance with their respective terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws of general application

 

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affecting the enforcement of creditors’ rights or by general principles of
equity limiting the availability of equitable remedies. The Transaction
Documents are in full force and effect in all material respects and no default
under any Transaction Document has occurred and is continuing.

7.5. Financial Condition.

(a) The Borrower’s audited financial statements as at December 31, 2009 and
unaudited financial statements dated October 31, 2010, as heretofore furnished
to the Bank (the “Historical Financial Statements”), have been prepared in
accordance with GAAP on a consistent basis (except, in the case of the unaudited
financial statements, for the omission of footnotes and prior period comparative
data required by GAAP and for variations from GAAP which in the aggregate are
not material) and fairly present the financial condition of the Borrower as at
such dates and the results of its operations and changes in financial position
for the respective periods then ended. Other than the Clearwater Senior Notes
Subsidiary Guarantee, the Borrower has no material liabilities which have not
been disclosed in such financial statements or otherwise disclosed in writing to
the Bank. Since December 31, 2009, no event has occurred which could reasonably
be expected to cause a Material Adverse Occurrence.

(b) The Historical Financial Statements present fairly the financial condition
of the Borrower on a pro forma basis assuming consummation of the Clearwater
Merger Transactions as of the last day of the period covered thereby, except
that the Historical Financial Statements do not reflect (i) the satisfaction and
discharge and release of liens, as of the date hereof, of the Cellu Tissue
Senior Secured Notes Loan Documents and the Cellu Tissue Credit Facility Loan
Document (each as defined in the Original Reimbursement Agreement), (ii) the
Clearwater Senior Notes Subsidiary Guarantee, and (iii) subject to the proviso
in Section 9.13(x)(ii), the restrictions existing on the date hereof in the
Clearwater Senior Notes Indenture.

7.6. Material Contracts. Neither the Borrower nor any of its property is a party
to, or bound by, any Material Contracts.

7.7. Proceedings. There is no pending or, to the best of the Borrower’s
knowledge, threatened action or proceeding which is material before any court,
governmental agency or arbitrator to which the Plant, the Borrower or any
Affiliate thereof, or the property of any of the foregoing, is or may become a
party, which could, if adversely determined, reasonably be expected to cause a
Material Adverse Occurrence or which purports to affect or challenge the
legality, validity or enforceability of any Transaction Document. All pending or
threatened proceedings or claims are disclosed on Schedule 7.7 attached hereto
and incorporated herein by reference.

7.8. Compliance with Laws. Etc. The Borrower is in material compliance with all
statutes and Governmental Rules and Governmental Approvals applicable to the
Borrower, its properties and operations except to the extent that such
noncompliance could not reasonably be expected to constitute a Material Adverse
Occurrence. Without limiting the generality of the foregoing, the Plant complies
in all material respects with all applicable Governmental

 

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Approvals and Governmental Rules, including zoning, environmental protection,
use and land use and building laws, ordinances and regulations, except to the
extent that such noncompliance could not reasonably be expected to constitute a
Material Adverse Occurrence. The Borrower has no knowledge of any notices of
violations of any such laws, ordinances or regulations issued by any
Governmental Person having jurisdiction over the Borrower or its properties.

7.9. Taxes. The Borrower has filed all tax returns (federal, state and local)
required to be filed by it and has paid or caused to be paid all taxes due for
the periods covered thereby, including interest and penalties, except for any
such taxes, interest or penalties which are being timely contested in good faith
and by proper proceedings and in respect of which the Borrower has set aside
adequate cash (or cash equivalent) reserves for the payment thereof.

7.10. ERISA. No Reportable Event has occurred during the five-year period prior
to the date on which this representation is made with respect to any Plan that
has resulted, or could reasonably be expected to result, in a Material Adverse
Occurrence. Each Plan has complied in all material respects with the applicable
provisions of ERISA and the Code. The present value of all accrued benefits
under all Single Employer Plans maintained by the Borrower or any of its ERISA
Affiliates (based on those assumptions used to fund the Plans) did not, as of
the last annual valuation date prior to the date on which this representation is
made, exceed the value of the assets of such Plans by an aggregate amount
greater than $100,000.00. Neither the Borrower nor any of its ERISA Affiliates
has had a complete or partial withdrawal (as defined in Section 4201 of ERISA)
from any Multiemployer Plan that has resulted, or could reasonably be expected
to result, in a Material Adverse Occurrence. The present value (determined using
actuarial and other assumptions that are reasonable in respect of the benefits
provided and the employees participating) of the liability of the Borrower and
each ERISA Affiliate for post-retirement benefits (excluding benefits required
by Section 4980B of the Code and similar Governmental Rules) to be provided to
their current and former employees under any Plans that include “welfare benefit
plans” (as defined in Section 3(1) of ERISA) does not, in the aggregate, exceed
the assets under all such Plans that are allocable to such benefits by an amount
that could reasonably be expected to result in a Material Adverse Occurrence.

7.11. Business. The sole business of the Borrower is the operation of the Plant
and the sale of Inventory.

7.12. Insurance. All insurance required by Section 8.8, in each case required to
be in effect on the Effective Date, is in full force and effect.

7.13. Title to Collateral. The Borrower possesses good and marketable title to
the Collateral that it purports to own, including all properties and assets
referred to in the most recent financial statements of the Borrower referred to
in Section 7.5 (other than property disposed of since the date of such financial
statements in the ordinary course of business). None of the properties, revenues
or assets of any such Person is subject to a Lien, except for Liens permitted
under Section 9.1.

7.14. Security Documents; Liens. The Security Documents: (a) create valid and
first priority security interests in the Collateral, subject only to the Liens
permitted under Section 9.1;

 

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and (b) are “Permitted Liens” as defined in the Clearwater Senior Notes
Indentures and are permitted under Section 10.2.2 of the Clearwater Bank of
America Loan Agreement.

7.15. Sufficiency of Rights. All roads necessary for the full utilization of the
Plant for its intended purpose have been completed. The Borrower has all rights
and property interests that are required to enable the Borrower to obtain all
services, materials and rights required for the operation and maintenance of the
Plant.

7.16. Disclosure. No exhibit, schedule, report or other information (unless
superseded by a subsequently provided, corrected exhibit, schedule or report or
by corrected information) provided by the Borrower or any of its Affiliates or
their respective agents to the Bank in connection with the negotiation and
execution of the Transaction Documents to which the Borrower is party and
otherwise in connection with the transactions contemplated thereby contains any
material misstatement of fact or omits to state a material fact necessary to
make the statements contained therein taken as a whole not misleading, as of the
date provided.

7.17. Use of Bond Proceeds. No Bond Proceeds were used to acquire any security
in any transaction which is subject to Sections 13 and 14 of the Securities
Exchange Act of 1934.

7.18. Margin Stock. The Borrower is not engaged in the business of extending
credit for the purpose of buying or carrying margin stock (within the meaning of
Regulation U issued by the Federal Reserve Board), and no proceeds of any Loan
will be used to purchase or carry any margin stock or to extend credit to others
for the purpose of purchasing or carrying any margin stock.

7.19. Incorporation of Representations and Warranties. Each of the following
representations and warranties were true and correct when made and if any such
representation and warranty is a continuing representation and warranty under
the relevant Transaction Document as of the Effective Date, then such continuing
representation and warranty is true and correct as of the Effective Date:

(a) all representations and warranties of the Borrower in the Bond Documents to
which the Borrower is a party;

(b) all representations and warranties of the Borrower in any Clearwater Senior
Notes Loan Documents to which the Borrower is party or pertaining to the
Borrower or any of its properties in any Clearwater Senior Notes Loan Document
(for purposes of providing an example as to the scope of the representations and
warranties covered by this Section 7.19, but without limiting the terms of this
Section 7.19, any representation of warranty in any Clearwater Senior Notes Loan
Document pertaining to a “Subsidiary”, a “Restricted Subsidiary”, a “Guarantor”,
a “Grantor”, a “Mortgagor”, a “Trustor” or words to similar effect pertaining to
the Borrower shall be deemed covered by this Section 7.19); and

(c) all representations and warranties of, or pertaining relating to, the
Borrower or any of its properties in the Clearwater Merger Agreement.

 

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The Borrower has no knowledge that any of the representations and warranties
made in the Transaction Documents by or on behalf of any party thereto other
than the Borrower is untrue or incorrect in any material respect.

7.20. Status. The Borrower is not an “investment company” or a company
“controlled” by an “investment company” within the meaning of the Investment
Company Act of 1940, as amended, or an “investment advisor” within the meaning
of the Investment Company Act of 1940, as amended.

7.21. Broker’s Fees. The Borrower has not dealt with any Person who may be
entitled to any finder’s fee, brokerage commission, loan commission or other sum
in connection with the transactions contemplated by this Agreement. The Borrower
hereby agrees to indemnify, defend and hold harmless the Bank against any and
all loss, liability, cost or expense, including reasonable attorneys’ fees, that
such parties may suffer or sustain with respect to any finder’s fee, brokerage
commission or other sum due in connection with this Agreement.

7.22. Leases; Other Agreements. Except as set forth on Schedule 7.22 attached
hereto and incorporated herein by reference, there are no leases or subleases
affecting the Plant. As of the date of this Agreement, there are no contracts or
agreements materially affecting the use, operation or maintenance of the Plant.

7.23. Environmental Matters. Except as otherwise disclosed in the Environmental
Reports listed in Schedule 1 to the Environmental Indemnity: (a) to the best
knowledge of the Borrower, there are no facts, circumstances, conditions or
occurrences regarding the Property that could reasonably be anticipated (i) to
form the basis of a Hazardous Materials Claim against the Property, the Borrower
or any of its officers, directors, employees, or agents or, to the best
knowledge of the Borrower, any other Persons occupying or conducting operations
on or about the Property, that individually or in the aggregate could reasonably
be expected to result in a Material Adverse Occurrence, (ii) to cause the
Property to be subject to any restrictions on its ownership, occupancy, use
(other than those imposed pursuant to the Permits described in Schedule 7.3
attached hereto) or transferability under any applicable Environmental Law, or
(iii) to require the filing or recording of any notice, registration, permit or
disclosure documents under any applicable Environmental Law, except for any
necessary recording or filing of the Permits described in Schedule 7.3 attached
hereto; (b) all Governmental Approvals required under Environmental Laws to
operate the Project and the Plant are identified in Schedule 7.3 attached
hereto; and (c) the representations and warranties set forth in Section 2 of the
Environmental Indemnity are incorporated herein by reference as though fully set
forth herein.

7.24. Transactions with Affiliates. Except for the Clearwater Senior Notes
Subsidiary Guarantee or as disclosed in Schedule 7.24, the Borrower is not a
party to any agreement with or subject to any commitment in favor of any
Affiliate of the Borrower.

7.25. Ownership and Control. Clearwater owns 100% of Cellu Tissue’s issued and
outstanding Equity Interests, and Cellu Tissue owns 100% of the Borrower’s
issued and outstanding Equity Interests. All of the issued and outstanding
Equity Interests of the Borrower are duly authorized, validly issued, fully paid
and non-assessable. The Borrower has not granted or issued, and has not agreed
to grant or issue, any options, warrants or similar rights to any

 

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Person to acquire any Equity Interests of, or other securities convertible into,
the Borrower’s Equity Interests.

7.26. Indebtedness. Except for Indebtedness permitted by Section 9.2, the
Borrower does not have any Indebtedness.

7.27. Guaranty or Suretyship. Except for Contingent Obligations permitted by
Section 9.4, the Borrower is not a party to any contract of guaranty or
suretyship and none of its assets is subject to such a contract.

7.28. Trademarks, Patents. The Borrower possesses or has the right to use all of
the patents, trademarks, trade names, service marks and copyrights, and
applications therefor, and all technology, know-how, processes, methods and
designs used in or necessary for the conduct of its business, without known
conflict with the rights of others. Schedule 7.29 attached hereto and
incorporated herein by reference is a complete list of all such patents and
trademarks.

7.29. Subsidiaries. The Borrower does not have any Subsidiaries.

7.30. Partnerships and Joint Ventures. The Borrower is not a partner (limited or
general) or joint venturer in any partnerships or joint ventures.

7.31. Intentionally Deleted.

7.32. Solvency. The Borrower is Solvent after giving effect to the issuance of
the Bonds Letter of Credit, the incurrence of any other Indebtedness pursuant to
the Loan Documents, and the granting of Liens pursuant to the Loan Documents.

7.33. Contracts; Labor Matters. Except as disclosed on Schedule 7.33 attached
hereto and incorporated herein by reference: (a) the Borrower is not a party to
any contract or agreement, or subject to any charge, corporate restriction,
judgment, decree or order, the performance of which could reasonably be expected
to cause a Material Adverse Occurrence; (b) on the Effective Date: (i) the
Borrower is not a party to any labor dispute; and (ii) there are no strikes or
walkouts relating to any labor contracts to which the Borrower is subject.

7.34. Trading with the Enemy Act. The execution of this Agreement does not
violate the Trading with the Enemy Act of 1917, as amended, nor any of the
foreign assets control regulations promulgated thereunder or the under the
International Emergency Economic Powers Act or the U.N. Participation Act of
1945. Neither the Borrower nor any person who owns a controlling interest in or
otherwise controls the Borrower or any Subsidiary of the Borrower is listed on
the Specially Designated Nationals and Blocked Person List or other similar
lists maintained by the Office of Foreign Assets Control (“OFAC”), the
Department of the Treasury or included in any Executive Orders.

7.35. Survival of Representations. All representations and warranties contained
in this ARTICLE VII shall survive the issuance of the Bonds Letter of Credit and
any investigation at any time made by or on behalf of the Bank shall not
diminish the Bank’s rights to rely thereon.

 

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ARTICLE VIII.

AFFIRMATIVE COVENANTS

From the date of this Agreement and thereafter until the Bonds Letter of Credit
are terminated or expired and the Letter of Credit Obligations and all other
Obligations of the Borrower to the Bank hereunder and under the other Loan
Documents or otherwise have been paid in full, unless the Bank shall otherwise
expressly consent in writing:

8.1. Preservation of Existence. Etc. The Borrower shall: (a) preserve and
maintain its legal existence, rights, franchises and privileges in the
jurisdiction of its incorporation except where the failure to do so can be cured
without any adverse effect on the Borrower’s rights, franchises or privileges;
and (b) qualify and remain qualified as a foreign corporation in each
jurisdiction in which such qualification is necessary or desirable in view of
its business and operations or the ownership of its properties, except where the
failure to so qualify or remain qualified could not reasonably be expected to
result in a Material Adverse Occurrence.

8.2. Governmental Approvals. The Borrower shall maintain in effect and comply
with at all times in all material respects, all Governmental Approvals except
where non-compliance could not reasonably be expected to result in a Material
Adverse Occurrence.

8.3. Maintenance of Properties, Etc. The Borrower shall maintain and preserve
all of its properties necessary in the conduct of its business in good working
order and condition, ordinary wear and tear, and obsolescence, excepted.

8.4. Maintenance and Operation of the Plant. The Borrower shall administer,
maintain, repair and operate the Plant (including the making from time to time
of all necessary renewals and replacements), in a sound and workmanlike manner
consistent with good engineering practice and safety standards, ordinary wear
and tear and obsolescence excepted, and substantially in accordance with sound
tissue mill industry practices and in compliance with the Bond Documents and the
Loan Documents and all applicable Governmental Approvals.

8.5. Maintenance of Security Interests. The Borrower shall take or cause to be
taken all actions that may be necessary or that the Bank may reasonably request
to maintain and preserve the security interests and Liens created by the
Security Documents and the priority thereof, including without limitation
executing any and all further instruments (including financing statements,
continuation statements and similar statements with respect to any of the
Security Documents) reasonably requested by the Bank for such purpose.

8.6. Performance of Transaction Documents. The Borrower shall: (a) perform and
observe all material terms and provisions of each Bond Document, each Clearwater
Senior Notes Loan Document and each Clearwater Facility Loan Document to be
performed or observed by the Borrower; (b) maintain each Bond Document in full
force and effect; and (c) enforce each Bond Document in accordance with its
terms and take all actions concerning enforcement of each Bond Document as the
Bank may from time to time reasonably request.

8.7. Payment of Taxes. Etc. The Borrower shall pay and discharge all taxes,
assessments and governmental charges or levies imposed upon any properties
belonging to it, prior to the date on which penalties attach thereto, and all
lawful claims (including claims for

 

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labor, materials and supplies to the extent Liens relating thereto are not
Permitted Liens), which, if unpaid, might become a lien or charge upon any
properties of the Borrower, provided that the Borrower shall not be required to
pay any such tax, assessment, charge, levy or claim which is being timely
contested in good faith and by proper proceedings and in respect of which the
Borrower has set aside adequate cash (or cash equivalent) reserves for the
payment thereof; provided, however that, in all events, the Borrower shall pay
or cause to be paid all such taxes, assessments, charges or levies forthwith
upon the commencement of foreclosure of any Lien which may have attached as
security therefor.

8.8. Maintenance of Insurance.

(a) General Requirements. The Borrower shall maintain or cause to be maintained
in effect, in amounts, from carriers with an A.M. Best Company Key Rating Guide
of “A-IX” or better and authorized to do business in the State of Wisconsin, and
in form satisfactory to the Bank, the insurance described in the Bond Documents
and such other insurance as the Bank shall reasonably request from time to time,
and shall maintain such additional insurance as set forth in Schedule 8.8
attached hereto and incorporated herein by reference.

(b) Certificates of Insurance. By no later than 10 days prior to the then
current expiration date of the polices shown on any insurance certificate
delivered by the Borrower to the Bank, the Borrower shall deliver to the Bank
updated certificates of insurance for all insurance required under any Bond
Document or Loan Document. Such certificates shall be executed by each
respective insurer or by an authorized representative of each insurer. Such
certificates shall identify the underwriters or companies issuing such
insurance, the type of insurance, the policy term and shall specifically list
the special provisions enumerated for such insurance in any of the Bond
Documents or Loan Documents.

(c) Insurance Reports. Concurrently with the delivery of the certificates
required in (b) above at least 10 days prior to the expiration of any insurance
policy, the Borrower shall deliver to the Bank a letter from the Borrower’s
insurance broker, signed by an officer of the broker, stating that all premiums
then due have been paid and that, in the opinion of such broker, the Borrower’s
insurance then carried or to be renewed meets or exceeds the requirements of the
Bond Documents and/or the Loan Documents.

(d) Proceeds of Insurance. All proceeds of any insurance required hereunder
shall be applied in accordance with the terms of the Security Documents.

(e) Certain Requirements Regarding Liability Policies. Liability policies
covering general liability and automobile liability shall include endorsements
providing (i) for additional insured coverage for the Bank, and their respective
officers, directors, employees, agents and representatives; (ii) that insurance
for the Bank as additional insured is primary insurance and any other insurance
available to the Bank shall apply as excess; (iii) thirty days prior written
notice of cancellation by certified mail in the event of cancellation (other
than cancellation for nonpayment of premium, for which the notice period may be
ten days); (iv) a cross-liability or severability of interests provision

 

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stipulating that insurance available to the Bank as an insured applies
separately with respect to insurance available to other insureds as though
separate policies had been issued to each; and (v) a waiver of subrogation by
insurers in favor of the Bank.

(f) Certain Requirements Regarding Property Insurance. Property policies
(including builder’s risk and boiler and machinery coverage) covering real and
personal property of the Plant shall include, (i) a lender’s loss payable
endorsement or a standard first mortgage endorsement in favor of the Bank,
(ii) thirty days prior written notice of cancellation in the event of
cancellation of any policy and (iii) a waiver of subrogation by insurers in
favor of the Bank.

(g) Amendment of Coverage. The Bank, in its reasonable discretion, may at any
time amend the amount and scope of coverage of any of the insurance policies
required hereunder to cover such risks that could not have been foreseen by the
parties hereto on the date of this Agreement and which, in the reasonable
judgment of the Bank, renders such coverage materially inadequate; provided,
however, that the Bank shall not require the Borrower to obtain insurance that
is not reasonably commercially available or which is not commonly maintained by
businesses in the same line of business and geographic location as the Borrower.

8.9. Keeping of Records and Books of Account. The Borrower shall keep adequate
records and books of account, in which full and correct entries shall be made in
accordance with generally accepted accounting principles of all financial
transactions of the Borrower, the assets and business of the Borrower and all
costs and expenses in connection with the Plant.

8.10. Inspection Rights. The Borrower shall, at any reasonable time and from
time to time, permit the Bank and its agents and representatives, upon
reasonable prior notice, to examine and make copies of and abstracts from the
records and books of account of, and visit and inspect the properties of, the
Borrower and to discuss the affairs, finances and accounts of the Borrower and
of the Plant with the Borrower and any of its officers or directors. The
Borrower agrees to pay, or reimburse the Bank for the payment of, the Bank for
its reasonable fees and out-of-pocket expenses incurred with respect to such
examinations for: (a) one (1) examination and inspection during any fiscal year
(the pre-closing examination and inspection not counting as inspection during
the current fiscal year); (b) two (2) examinations and inspections during any
fiscal year in which the Borrower completes a material acquisition or any fiscal
year thereafter; (c) any examination and inspection that reveals that the
Borrower’s financial reports most recently delivered to the Bank contain
significant errors or discrepancies; and/or (d) any examination and inspection
conducted at any time after the occurrence and during the continuance of an
Event of Default. None of the foregoing shall imply that the Bank is under any
duty to examine any books and records. Any inspection or examination by the Bank
is for the sole purpose of protecting the Bank’s security and preserving the
Bank’s rights under the Loan Documents. No Default or Event of Default will be
deemed waived by any such inspection.

8.11. Compliance with Laws. The Borrower shall comply in all material respects
with all applicable Governmental Rules, including all applicable federal, state
and local energy and

 

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labor laws and similar laws, rules, regulations and orders except where such
non-compliance could not reasonably be expected to result in a Material Adverse
Occurrence.

8.12. Banking Accounts. The Borrower shall maintain all of its banking accounts
with the Bank except that the Borrower may maintain its payroll account no.
124599 and its health claims account no. 126332 with Pioneer National Bank,
Ladysmith, Wisconsin so long as such bank has entered into a deposit account
control agreement with the Bank.

8.13. Reporting Requirements. The Borrower shall furnish to the Bank, in each
case in form and substance reasonably acceptable to the Bank:

(a) as soon as available and in any event within 30 days after the end of each
fiscal month, a copy of the unaudited financial statements of the Borrower
prepared in conformity with GAAP on a consistent basis (except (i) for the
omission of footnotes and prior period comparative data required by GAAP and for
variations from GAAP which in the aggregate are not material and (ii) that the
unaudited financial statements for the month ending December 31, 2010 may be
delivered on a non-GAAP historic basis consistent with financial statements
delivered prior to the Clearwater Merger) consisting of a balance sheet of the
Borrower as of the end of such month and statements of income, cash flows and
retained earnings of the Borrower for the period commencing at the end of the
previous fiscal year and ending with the end of such month, setting forth in
each case in comparative form the corresponding figures for the corresponding
period of the preceding fiscal year and the budgets for such period, certified
by a Financial Officer of the Borrower;

(b) as soon as available and in any event within 30 days after the end of each
fiscal quarter of the Borrower, a Compliance Certificate (the “Compliance
Certificate”) in the form of Exhibit B attached hereto certified by a Financial
Officer of the Borrower;

(c) as soon as available and in any event by the 15th day of each fiscal year, a
copy of the operating budget of the Borrower for the then current fiscal year,
certified by a Financial Officer of the Borrower (provided that the operating
budget for the fiscal year commencing January 1, 2011, may be delivered no later
than February 14, 2011;

(d) as soon as available and in any event within 120 days after the end of each
fiscal year of the Borrower, a copy of the annual audited financial statements
for such year for the Borrower prepared in conformity with GAAP, containing
financial statements of the Borrower for such year and statements of income,
cash flows and retained earnings, setting forth in each case in comparative form
corresponding figures from the previous annual audit, certified without
qualification by independent certified public accountants of recognized standing
selected by the Borrower and acceptable to the Bank together with (i) any
management letters, management reports or other supplementary comments or
reports to the Borrower or its board of directors furnished by such accountants;
(ii) a Compliance Certificate certified by a Financial Officer of the Borrower;
and (iii) a statement by the accounting firm performing such audit stating
whether they obtained knowledge during the course of their examination of such
financial statements of any Default or Event of Default (which certificate may
be limited to the

 

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extent required by accounting rules or guidelines and internal policies of such
accounting firm);

(e) as soon as possible and in any event within 5 days after the Borrower
becomes aware of the occurrence of any Default or Event of Default continuing on
the date of such statement, a statement of an authorized officer of the Borrower
setting forth details of such Default or Event of Default and the action which
the Borrower has taken and proposes to take with respect thereto;

(f) as soon as possible and in any event within 5 days after the Borrower
becomes aware of the institution of any action or proceeding affecting the
Borrower or the Plant before any court, Governmental Person or arbitrator which,
if determined adversely to the Borrower or the Plant, as applicable, would
materially adversely affect the performance of the Transaction Documents or
which purports to affect the legality, validity or enforceability of any of the
Transaction Documents, a statement of an authorized officer of the Borrower
setting forth details of such action or proceeding and the action which the
Borrower has taken and proposes to take with respect thereto;

(g) upon preparation for recording, copies of any documents granting easements,
licenses, or other similar rights benefiting or encumbering the Property;

(h) upon delivery or receipt thereof, a copy of any notice required to be
delivered by or to the Borrower under any Bond Document;

(i)(i) as soon as possible and in any event within 30 days after the Borrower
knows or has reason to know that any Termination Event with respect to any
Single Employer Plan has occurred, a statement of a Responsible Officer of the
Borrower describing such Termination Event and the action, if any, that the
Borrower proposes to take with respect thereto; (ii) promptly and in any event
within ten Business Days after receipt thereof by the Borrower or any of its
ERISA Affiliates from the PBGC, copies of each notice received by the Borrower
or any of its ERISA Affiliates of the PBGC’s intention to terminate any Plan or
to have a trustee appointed to administer any Plan; (iii) promptly and in any
event within 30 days after the filing thereof with the Internal Revenue Service,
copies of each Schedule B (Actuarial Information) to the annual report (Form
5500 Series) with respect to each Single Employer Plan maintained for or
covering employees of the Borrower if the present value of the accrued benefits
under the Single Employer Plan exceeds its assets by an amount in excess of
$1,000,000.00 and (iv) promptly and in any event within fifteen Business Days
after receipt thereof by the Borrower or any of its ERISA Affiliates from a
sponsor of a Multiemployer Plan or from the PBGC, a copy of each notice received
by the Borrower or any of its ERISA Affiliates concerning the imposition or
amount of withdrawal liability under Section 4202 of ERISA or indicating that
such Multiemployer Plan may enter reorganization status under Section 4241 of
ERISA;

(j) concurrently with delivery thereof to the Trustee or any Governmental
Person, any report, certificate, request, statement, notice, instrument or
opinion of

 

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counsel required to be delivered by the Borrower pursuant to any Bond Document,
in each case addressed to the Bank;

(k) promptly, and any event by no later than five (5) Business Days prior to the
date on which Cellu Tissue proposes to consummate any transaction described in
clause (a) of the definition of “Clearwater Prepayment Event”, notify the Bank
of Clearwater’s intent to do so and provide the Bank with copies of the relevant
documentation governing such transaction or, in each case, cause Clearwater to
do so;

(l) within five (5) Business Days after making a Permitted Debt Payment, a
certificate from a Financial Officer of the Borrower certifying compliance with
Section 9.7(b)(ii) or Section 9.15(a)(iv), as the case may be; and

(m) such other information respecting the condition or operations, financial or
otherwise, of the Borrower, any other Loan Party or the Plant as the Bank may
from time to time reasonably request.

8.14. Environmental Matters. The Borrower shall at all times: (a) not cause or
permit the Property to be in violation of any Environmental Law which violation
would have a material effect on the ability of the Borrower to perform its
obligations under the Bond Documents or the Loan Documents; and (b) promptly
upon the Borrower’s knowledge thereof, advise the Bank in writing of (i) any and
all enforcement, cleanup, removal, mitigation or other governmental or
regulatory actions affecting the Property instituted in writing against the
Borrower pursuant to any Environmental Laws and (ii) all claims made in writing
by any third party against the Borrower or the Property relating to damage,
contribution, cost recovery, compensation, loss or injury resulting from any
Hazardous Substance Activity at or from the Property in violation of applicable
Environmental Laws (the matters set forth in clauses (a) and (b) above are
hereinafter referred to as “Hazardous Materials Claims”). In addition, the
Borrower shall (i) comply in all material respects and cause all other Persons
constructing, occupying or conducting operations on or about the Property, to
comply in all material respects with all Environmental Laws now or hereafter
applicable to the Property; (ii) obtain, at or prior to the time required by
applicable Environmental Laws, all Governmental Approvals required pursuant to
applicable Environmental Law for the Borrower’s operations, and the
construction, operation and maintenance of the Plant, and maintain such
Governmental Approvals in full force and effect; (iii) not generate, use, treat,
recycle, store, release or dispose of, or permit the generation, use, treatment,
recycling, storage, release or disposal of Hazardous Substances on the Property,
or transport or permit the transportation of Hazardous Substances to or from the
Property, other than in material compliance with all applicable Environmental
Laws; (iv) conduct and complete any reasonable investigation, study, sampling
and testing and undertake any reasonable cleanup, removal, remedial or other
action necessary to remove and clean up all Hazardous Substances released at,
on, in, under or emanating from the Property for which the Borrower is liable,
in accordance with and to the extent necessary under all applicable
Environmental Laws; and (v) provide the Bank with written notice of (A) any
fact, circumstance, condition, occurrence or release at, on, under or from the
Property that results in material noncompliance with any Environmental Law or
that has resulted or could reasonably result in personal injury or material
property damage claims or could have a material adverse effect on the Borrower,
such notice to be given promptly after the condition is discovered by or made
known to the Borrower and (B)

 

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any pending or threatened Hazardous Materials Claim against the Borrower or any
other Persons occupying or conducting operations on the Property, such notice to
be given promptly after such Hazardous Materials Claim is commenced or
threatened against the Borrower. All such notices shall describe in reasonable
detail the nature of the claim, investigation, condition, incident, or
occurrence and the Borrower’s response thereto. In addition, the Borrower will
provide the Bank with copies of all written communications with any Governmental
Person relating to any material violation by the Borrower of any applicable
Environmental Law or any Hazardous Materials Claim commenced against the
Borrower promptly after the giving or receiving of any such written
communications. The Borrower shall also provide such detailed reports of any
Hazardous Materials Claim as may be reasonably requested by the Bank.

8.15. Further Assurances. The Borrower shall, at the request of the Bank,
execute, deliver and furnish such documents or take such further action as the
Bank may reasonably deem necessary or desirable to evidence the Obligations,
perfect the security therefor, or otherwise carry out the terms of this
Agreement or any other Loan Document.

8.16. ERISA. The Borrower shall maintain each Single Employer Plan in material
compliance with all applicable requirements of ERISA and of the Code and with
all applicable rulings and regulations issued under the provisions of ERISA and
of the Code.

8.17. Amortization Schedule. The Borrower shall cause the Bonds to be retired in
accordance with the amortization schedule set forth in Schedule 8.18 attached
hereto and incorporated herein by reference (the “Amortization Schedule”).

8.18. Consent to Optional Redemption. The Borrower hereby agrees that, prior to
the effectiveness of any election by the Borrower to exercise its right of
optional redemption of the Bonds pursuant to the Indenture and the Bond Loan
Agreement (excluding redemptions required by Section 8.18 or made in connection
with a Clearwater Prepayment Event), the Borrower will obtain the Bank’s prior
written consent to such optional redemption of the Bonds, and if consented to by
the Bank, the Bank shall execute such written consents with respect thereto as
may be required by the Trustee under the Indenture. The Bank shall not withhold
its consent to such optional redemption of the Bonds so long as the Borrower
shall satisfy the Bank that the Borrower will have funds available to it in an
amount sufficient to reimburse the Bank for the Drawing under the Bonds Letter
of Credit to pay the redemption price of such Bonds and that such funds will be
on deposit with the Trustee or the Bank at such time as would enable the Bank to
be reimbursed for Drawings made in connection with such redemption on the
proposed redemption date and to pay the Optional Redemption Fee required by
Section 2.3(b), if applicable. The Borrower further agrees to take all action
requested by the Bank to cause Bonds to be redeemed pursuant to Section 4.2(c)
or Section 8.18 of this Agreement.

8.19. Replacement of Trustee. Upon the Bank’s written request, the Borrower
shall take such action as may be necessary to remove the Trustee pursuant to
Section 1107 of the Indenture, in which case the $3,000.00 Transfer Fee shall be
waived.

ARTICLE IX.

NEGATIVE COVENANTS

 

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From the date of this Agreement and thereafter until the Bonds Letter of Credit
is terminated or expired and all other Obligations of the Borrower to the Bank
hereunder and under the other Loan Documents or otherwise have been paid in
full, unless the Bank shall otherwise expressly consent in writing:

9.1. Liens. Etc. The Borrower shall not create or suffer to exist any Lien on
any asset of the Borrower other than:

(a) Liens under the Security Documents, or permitted thereby or by this
Agreement;

(b) Liens securing Purchase Money Indebtedness incurred in connection with
Capital Expenditures made after the date of this Agreement by way of purchase
money security interest, purchase money mortgage, conditional sale or other
title retention agreement, Capitalized Lease or other deferred payment contract,
and attaching only to the property being acquired, provided that the
Indebtedness secured thereby is permitted as a Capital Expenditure at the time
of such incurrence and does not exceed the lesser of the purchase price or the
fair market value of such property at the time of its acquisition;

(c) Liens on equipment leased in a manner not prohibited by any Transaction
Document;

(d) Liens listed on Schedule 7.13 to this Agreement; and

(e) Permitted Liens.

9.2. Indebtedness. The Borrower shall not create or suffer to exist any
Indebtedness except:

(a) Indebtedness under this Agreement;

(b) Current liabilities, other than for borrowed money, incurred in the ordinary
course of business;

(c) Contingent Obligations under the Clearwater Senior Notes Subsidiary
Guarantee;

(d) Other Indebtedness existing on the date of this Agreement and disclosed on
Schedule 9.2 attached hereto and incorporated herein by reference and any
extension, refinancing or renewal thereof that: (i) does not include an increase
in the principal amount thereof; and/or (ii) does not impose any standard of
financial performance on the Borrower that is greater than the standards of
financial performance set forth in this Agreement;

(e) Purchase Money Indebtedness and Capital Leases so long as no Event of
Default has occurred and is continuing on the date of the incurrence of such
Indebtedness;

 

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(f) Indebtedness of the Borrower to Cellu Tissue or Clearwater or its wholly
owned subsidiaries; and

(g) Indebtedness consisting of endorsements for collection, deposit or
negotiation and warranties of products or services, in each case incurred in the
ordinary course of business.

9.3. Lease Obligations. Intentionally Deleted.

9.4. Guaranty Obligations. Except as provided in the Loan Documents or for
Indebtedness permitted by Section 9.2, the Borrower shall not: (a) be or become
liable on any Contingent Obligations; or (b) agree to maintain the net worth or
working capital of, or provide funds to satisfy any other financial test
applicable to, any other Person.

9.5. Mergers, Restriction on Fundamental Changes, Etc. The Borrower shall not
liquidate or dissolve, or merge into or consolidate with or into, or acquire all
or substantially all of the assets of, any Person, except as contemplated in the
Clearwater Merger Transactions. The Borrower shall not permit any material
amendment of its organizational documents, except as contemplated in the
Clearwater Merger Transactions.

9.6. Sales, Etc. of Assets. The Borrower shall not, nor shall it permit any
Person to, whether by operation of law or otherwise, sell, assign, lease,
transfer or otherwise dispose of all or any substantial part of its assets
(whether now owned or hereafter acquired) to any Person, except that the
Borrower may sell any of its assets:

(a) dispositions of Inventory, or used, worn-out or surplus Equipment, all in
the ordinary course of business;

(b) the sale of Equipment to the extent that such Equipment is exchanged for
credit against the purchase price of similar replacement Equipment, or the
proceeds of such sale are applied with reasonable promptness to the purchase
price of such replacement Equipment; or

(c) other dispositions of property during the term of this Agreement so long as
the Net Proceeds to be obtained from any such transaction (or related series of
transactions) does not exceed $100,000.00 or the aggregate Net Proceeds
determined from all such transactions in any fiscal year does not exceed
$100,000.00.

9.7. Restricted Payments. The Borrower shall not declare or make, or agree to
pay or make, directly or indirectly, any Restricted Payment, or incur any
obligation (contingent or otherwise) to do so, except:

(a) the Borrower may declare and pay dividends with respect to its Equity
Interests payable solely in additional Equity Interests; and

(b) so long as no Default or Event of Default has occurred and is continuing at
the time of a proposed payment of a Permitted Tax Distribution or could
reasonably be expected to result from such payment, the Borrower may make
distributions (the

 

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“Permitted Tax Distributions”) to its member for the sole purpose of paying the
tax liabilities of the Borrower’s member resulting from the reported net income
of the Borrower so long as the Borrower is a pass-through tax entity under the
Code; provided, however, that: (A) such member’s federal and state income tax
liability shall be computed on the basis of the highest marginal tax rates under
the Code and the laws of the State of Minnesota; (B) Permitted Tax Distributions
shall be paid in estimated quarterly installments contemporaneously with its
member’s obligations to pay estimated income taxes based upon the Borrower’s
annualized income through the end of its fiscal month immediately preceding such
tax installment’s due date and also contemporaneously with such member’s filing
of its federal and state income tax returns if the estimated Permitted Tax
Distributions paid for any of the Borrower’s fiscal years are not sufficient to
pay such member’s actual income tax liability computed at the highest marginal
rates based on its share of the Borrower’s actual taxable income for such fiscal
year as disclosed by copies of the Borrower’s tax returns and related Schedules
K-1 for such fiscal year delivered to the Bank pursuant to this Agreement; and
(C) if the Permitted Tax Distributions actually paid with respect to any of the
Borrower’s fiscal years exceed the Permitted Tax Distributions permitted by this
Section 9.7(b) based upon the Borrower’s actual taxable net income as disclosed
by copies of such tax returns and schedules described above, then the Borrower
shall immediately recover the excess amount from the recipient and shall not pay
any further Permitted Tax Distributions to any Person until such excess amount
is recovered.

9.8. Investments in Other Persons. Other than Permitted Investments, the
Borrower shall not make any loan or advance to any Person or purchase or
otherwise acquire any capital stock, obligations or other securities of, make
any capital contribution to, or otherwise invest in, any Person (other than the
Borrower).

9.9. Change in Nature of Business. The Borrower shall not engage in any business
other than the operation of the Plant or make any material change in the nature
of its business as carried on at the date hereof.

9.10. Change of Fiscal Year. The Borrower will not change its fiscal year.

9.11. Plans. The Borrower shall not permit any condition to exist in connection
with any Single Employer Plan that could reasonably be expected to constitute
grounds for the PBGC to institute proceedings to have such Single Employer Plan
terminated or a trustee appointed to administer such Single Employer Plan;
permit any Single Employer Plan to terminate under any circumstances that would
cause the Lien provided for in Section 4068 of ERISA to attach to any property,
revenue or asset of the Borrower or any of its ERISA Affiliates; or permit the
underfunded amount of any Single Employer Plan benefits guaranteed under Title
IV of ERISA to exceed $50,000.00.

9.12. Subsidiaries, Partnerships and Joint Ventures. The Borrower shall not:
(a) form or acquire any corporation or company which would thereby become a
Subsidiary; or (b) form or enter into any partnership as a limited or general
partner or form or enter into any joint venture.

 

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9.13. Restrictive Agreements. The Borrower shall not directly or indirectly,
enter into, incur or permit to exist any agreement or other arrangement that
prohibits, restricts or imposes any condition upon:

(a) the ability of the Borrower to create, incur or permit to exist any Lien
upon any of its property or assets in favor of the Bank;

(b) the Bank’s right to impose the conditions set forth in this Agreement upon
the Borrower’s ability to pay dividends or distributions with respect to its
Equity Interests or to repay loans or advances made to the Borrower by Cellu
Tissue or Clearwater;

provided that:

(x) the foregoing shall not apply to:

(i) restrictions and conditions imposed by law or by any Loan Document,

(ii) restrictions and conditions existing on the date hereof identified on
Schedule 9.13 attached hereto and incorporated herein by reference including the
Clearwater Senior Notes Indenture and the Clearwater Bank of America Loan
Agreement; provided further, that in no event shall any such restriction or
condition be breached or violated by: (A) the Borrower’s incurrence of the
Indebtedness under this Agreement and the grant of Liens in its property
pursuant to the Loan Documents; or (B) the Borrower’s performance of its
obligations under the Loan Documents; or (C) the Borrower’s incurrence of any
Indebtedness to refinance the Indebtedness incurred under this Agreement so long
as: (1) the terms of such re-refinancing Indebtedness comply with any
requirement then imposed by the Clearwater Senior Notes Loan Documents and the
Clearwater Credit Facility Loan Documents for permitted re-financing
Indebtedness; (2) with respect to all Letter of Credit Obligations, the Liens
securing such re-financing Indebtedness shall be substantially the same as those
created by the Security Documents; and (3) the applicable restrictions described
in Section 9.13(b) in the documentation for the re-financing Indebtedness are
not materially more restrictive, when taken as a whole, than the applicable
restrictions in this Agreement; and

(iii) customary restrictions and conditions contained in agreements relating to
the sale of the Borrower pending such sale; and

(y) clause (a) of the foregoing shall not apply to: (i) restrictions or
conditions imposed by any agreement relating to secured Indebtedness permitted
by this Agreement if such restrictions or conditions apply only to the property
or assets securing such Indebtedness; and (ii) customary provisions in leases
and other contracts restricting the assignment thereof.

9.14. Payment Terms. The Borrower shall not materially change its selling terms
of payment on Accounts as in effect on the date of this Agreement in any manner
that materially

 

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affects the value of the Accounts as collateral for the Obligations or provide
dating terms that exceed 90 days after the relevant invoice date.

9.15. Transactions with Related Parties. The Borrower shall not: (a) permit the
direct or indirect transfer, distribution or payment of any of its funds, assets
or property to any Related Party, except that the Borrower may pay: (i) bona
fide employee compensation (including benefits) to Related Parties for services
actually rendered to the Borrower; (ii) expenses incurred by an employee in the
ordinary course of business; (iii) expenses or rents for services or property or
the use thereof allocated to the Borrower; provided, however, that all such
payments pursuant to subsections (a)(i), (ii) and (iii) shall not exceed the
amount which would be payable in a comparable arm’s length transaction with a
third party who is not a Related Party; (iv) repayment of Indebtedness permitted
by Section 9.2(g) (such repayments being “Permitted Debt Payments”) so long as:
(A) no Default or Event of Default has occurred and is continuing at the time of
the proposed Permitted Debt Payment; (b) lend or advance money, credit or
property to any Related Party; (c) invest in (by capital contribution or
otherwise) or purchase or repurchase any stock or indebtedness, or any assets or
properties, of any Related Party except otherwise permitted by other subsections
of this Section 9.15; or (d) guarantee, assume, endorse or otherwise become
responsible for, or enter into any agreement or instrument for the purpose of
discharging or assuming (directly or indirectly, through the purchase of goods,
supplies or services or otherwise) the indebtedness, performance, capability,
obligations, dividends or agreement for the furnishing of funds of any Related
Party or any officer, director or employee thereof except for the Contingent
Obligations permitted by Section 9.4.

9.16. Unconditional Purchase Obligations. The Borrower shall not enter into or
be a party to any contract for the purchase or lease of materials, supplies or
other property or services if such contract requires that payment be made by it
regardless of whether or not delivery is ever made of such materials, supplies
or other property or services.

9.17. Intentionally Omitted.

9.18. Leverage Ratio. The Borrower shall not permit, as of any Quarterly
Measurement Date, the Leverage Ratio to be greater than 2.5 to 1.0.

9.19. Fixed Charge Coverage Ratio. The Borrower shall not permit, as of any
Quarterly Measurement Date, the Fixed Charge Coverage Ratio to be less than 1.2
to 1.0.

9.20. Capital Expenditures. The Borrower shall not make any Capital Expenditure
if, after giving effect to such Capital Expenditure, the aggregate Capital
Expenditures made by the Borrower during any of its fiscal years would exceed
$3,000,000.00.

9.21. Sale and Lease. The Borrower shall not enter into any agreement providing
for the leasing by the Borrower of property which has been or is to be sold or
transferred by the Borrower to the lessor thereof, or which is substantially
similar in purpose to property so sold.

9.22. Bonds Interest Rate Mode Election. The Borrower shall not convert the
interest rate on the Bonds from the “Variable Rate” to the “Adjusted Interest
Rate” permitted by Section 302 of the Indenture.

 

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9.23. Bond Status. The Borrower will not take any action or fail to take any
action within its reasonable control that shall cause the Rating Agency to
reduce the rating on the Bonds. The Borrower shall not be responsible for any
change in such rating of the Bonds resulting from the Bank’s actions or a change
in the rating of the Bank.

9.24. Bond Documents. Except as may be required to maintain the tax-exempt
status of the Bonds, the Borrower will not amend, modify or terminate, or agree
to amend, modify or terminate any Bond Document. Unless approved by the Bank in
writing, the Borrower shall not consent to the appointment of any successor to
the Trustee or the Paying Agent and shall not appoint or consent to the
appointment of any other agent appointed pursuant to the Indenture or any
additional Paying Agents or other such agents with respect to the Bonds.

9.25. Certain Transaction Documents. The Borrower will not amend, modify, or
supplement any provision of, or waive any other party’s compliance with any of
the terms of the Clearwater Merger Agreement in any manner that: (a) requires
the Borrower or any of its Subsidiaries to pay any additional consideration
under the Clearwater Merger Agreement or otherwise imposes any financial
obligation or burden on the Borrower of any of its Subsidiaries; (b) could
reasonably be expected to result in a Material Adverse Occurrence; or (c) is
materially adverse to the rights and benefits of the Bank under the Loan
Documents.

ARTICLE X.

EVENTS OF DEFAULT AND REMEDIES

10.1. Events of Default. The occurrence of any one or more of the following
events shall constitute an Event of Default upon the expiration of the cure
period, if any, described in the relevant event:

(a) The Borrower shall fail to pay any Obligation when due, whether by
acceleration or otherwise, including, without limitation, (i) any Letter of
Credit Obligation; or (ii) any fee or other amount required to be made to the
Bank pursuant to any Loan Document; or

(b) Any representation or warranty made or deemed to have been made by or on
behalf of any Loan Party in any of the Loan Documents or by or on behalf of any
Loan Party in any certificate, statement, report or other writing furnished by
or on behalf of such Loan Party to the Bank pursuant to the Loan Documents shall
prove to have been false or misleading in any material respect on the date as of
which the facts set forth are stated or certified or deemed to have been stated
or certified; or

(c) The Borrower shall fail to comply with Sections 8.1(a), 8.8(a) or (b),
8.14(e), or any Section of ARTICLE IX; or

(d) Any Loan Party shall fail to comply with any agreement, covenant, condition,
provision or term contained in the Loan Documents on its part to be performed
(and such failure shall not constitute an Event of Default under any of the
other provisions of this Section 10.1) and such failure to comply shall continue
for 30 calendar days after the earlier to occur of: (i) the Borrower’s receipt
of notice of such failure from

 

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the Bank; or (ii) the date on which the Borrower is required to give notice of
an Event of Default to the Bank pursuant to Section 8.1(e); or

(e) Any Loan Party shall become insolvent or shall generally not pay its debts
as they mature or shall apply for, shall consent to, or shall acquiesce in the
appointment of a custodian, trustee or receiver of any Loan Party or for a
substantial part of its property or, in the absence of such application, consent
or acquiescence, a custodian, trustee or receiver shall be appointed for any
Loan Party or for a substantial part of its property and shall not be discharged
within 30 days; or

(f) Any bankruptcy, reorganization, debt arrangement or other proceedings under
any bankruptcy or insolvency law shall be instituted by or against any Loan
Party and, if instituted against such Loan Party, shall have been consented to
or acquiesced in by such Loan Party, or shall remain undismissed for 60 days, or
an order for relief shall have been entered against any Loan Party, or any Loan
Party shall take any corporate action to approve institution of, or acquiesced
in, such a proceeding; or

(g) Any dissolution or liquidation proceeding shall be instituted by or against
any Loan Party and, if instituted against any Loan Party, shall be consented to
or acquiesced in by such Loan Party or shall remain for 60 days undismissed, or
any Loan Party shall take any corporate action to approve institution of, or
acquiescence in, such a proceeding; or

(h) A judgment or judgments (other than judgment(s) that are covered by
insurance where the insurance company has not reserved its rights against the
Borrower with respect to the insurance company’s payment of such judgment) for
the payment of money in excess of the sum of $250,000.00 in the aggregate shall
be rendered against the Borrower and the Borrower shall not discharge the same
or provide for its discharge in accordance with its terms, or procure a stay of
execution thereof, prior to any execution on such judgments by such judgment
creditor, within 30 days from the date of entry thereof, and within said period
of 30 days, or such longer period during which execution of such judgment shall
be stayed, appeal therefrom and cause the execution thereof to be stayed during
such appeal; or

(i) The Borrower or any ERISA Affiliate institutes steps to terminate any Single
Employer Plan if, in order to effectuate such termination, the Borrower or any
ERISA Affiliate would be required to make a contribution to such Single Employer
Plan, or would incur a liability or obligation to such Single Employer Plan, in
either case, in excess of $250,000.00, or the PBGC terminates any Single
Employer Plan if such termination causes the Borrower or any of its ERISA
Affiliates to incur any liability or obligation in excess of $250,000.00; or
(ii) the Borrower or any ERISA Affiliate incurs any liability in excess of
$250,000.00 in connection with the withdrawal from any Multiemployer Plan; or

(j) The maturity of any Indebtedness of the Borrower (other than Indebtedness
under this Agreement or the other Loan Documents or the Clearwater Senior Notes
Loan Documents or the Clearwater Credit Facility Loan Documents) in the

 

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aggregate amount of more than $250,000.00 shall be accelerated, or the Borrower
shall fail to pay any such Indebtedness when due and any applicable grace period
shall have expired or, in the case of such Indebtedness payable on demand, when
demanded, or any event shall occur or condition shall exist and shall continue
for more than the period of grace, if any, applicable thereto and shall have the
effect of causing, or permitting (any required notice having been given and
grace period having expired) the holder of any such Indebtedness or any trustee
or other Person acting on behalf of such holder to cause such Indebtedness to
become due prior to its stated maturity or to realize upon any collateral given
as security therefor; or

(k) Any Change of Control shall occur; or

(l) If the validity or enforceability of any of the Loan Documents shall be
challenged by any Loan Party or any other party thereto, or any Loan Document
shall fail to remain in full force and effect; or

(m) The Bank shall have reasonably determined in good faith that the Bank’s
interest in any material Collateral has been materially adversely affected or
impaired, or the value thereof to the Bank has been diminished to a material
extent except for depreciation in the ordinary course of business and normal
wear and tear; or

(n) Any “Event of Default” (howsoever defined) shall occur and be continuing
under any Clearwater Senior Notes Loan Document, any Clearwater Credit Facility
Loan Document or any Bond Document.

10.2. Remedies. If: (a) any Event of Default described in Sections 10.1(e), (f),
or (g) shall occur, the Letter of Credit Obligations and all other Obligations
under the Loan Documents shall automatically become immediately due and payable;
or (b) any other Event of Default shall occur and be continuing, then the Bank
may take any or all of the following actions: (i) declare that the Letter of
Credit Obligations and all other Obligations under the Loan Documents to be
forthwith due and payable, whereupon the Letter of Credit Obligations and all
such Obligations shall immediately become due and payable, in each case without
demand or notice of any kind, all of which are hereby expressly waived, anything
in this Agreement or in any Loan Document to the contrary notwithstanding;
(iii) exercise all rights and remedies under any other instrument, document or
agreement between the Borrower and the Bank; and (iv) enforce all rights and
remedies under any applicable law.

In addition to the remedies set forth in the preceding paragraph, the Bank may:

(x) Notify the Trustee that the amount of a Drawing under the Bonds Letter of
Credit will not be reinstated in accordance with the terms of the Bonds Letter
of Credit;

(y) Notify the Trustee that an Event of Default has occurred and is continuing
and direct the Trustee to: (i) cancel any Bonds then owned or held by the
Borrower including, but not limited to, any Pledged Bonds and (ii) forthwith
accelerate payment of all other Bonds all in accordance with Section 1003 of the
Indenture or to purchase the Bonds in accordance with Section 1205 of the
Indenture; and

 

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(z) Notify the Trustee to cancel all applicable Pledged Bonds. Any such
cancellation pursuant to this Section 10.2 shall not be deemed to discharge or
extinguish any of the Borrower’s Letter of Credit Obligations.

10.3. Offset. In addition to the remedies set forth in Section 10.2, upon the
occurrence of any Event of Default or at any time thereafter while such Event of
Default continues, the Bank may offset any and all balances, credits, deposits
(general or special, time or demand, provisional or final), accounts or monies
of the Borrower then or thereafter with the Bank or such other holder, or any
obligations of the Bank against the Indebtedness then owed by the Borrower to
the Bank. The Borrower hereby grants to the Bank a security interest in all such
balances, credits, deposits, accounts or monies.

10.4. Prepayment Obligations. The Borrower agrees that if the Obligations become
immediately due and payable in full at a time when the Bond Letter of Credit is
outstanding the Borrower shall thereupon automatically be obligated to pay the
Bank, in addition to all other amounts owing under this Agreement, the aggregate
face amount of the Bonds Letter of Credit then outstanding. The foregoing
obligation to pay in advance for amounts which the Bank may later have to pay
pursuant to the Bonds Letter of Credit is and shall at all times constitute a
part of the “Obligations”. Amounts paid by the Borrower pursuant to this
Section 10.4 shall be made directly to an interest-bearing collateral account
(the “Cash Collateral Account”) maintained at the Bank for application to the
Borrower’s reimbursement obligations under Section 2.2 as payments are made on
the Bonds Letter of Credit, with the balance, if any, to be applied to the other
Obligations if any Event of Default has occurred and is continuing, or if no
Event of Default has occurred and is continuing, returned to the Borrower.

10.5. Right of the Bank to Cure Defaults under Bond Loan Agreement. If the
Borrower shall fail to make any required payment under the Bond Loan Agreement
on the day such payment is first due and payable, or shall fail to comply with
any other covenant or agreement of the Borrower under the Bond Loan Agreement,
the Bank shall have the option, in the Bank’s sole discretion, to cure any such
failure by taking action reasonably required to effect such cure including,
without limitation, making the required payment directly to the Trustee;
provided, however, that nothing herein shall be deemed to require the Bank to
cure any such failure. Any such payment by the Bank shall constitute Obligations
payable upon demand, and shall bear interest from the date such payment is made
by the Bank (regardless of whether a demand for payment by the Borrower is made
by the Bank) at the Default Rate.

ARTICLE XI.

MISCELLANEOUS

11.1. Waiver and Amendment. No failure on the part of the Bank to exercise and
no delay in exercising any power or right hereunder or under any other Loan
Document shall operate as a waiver thereof; nor shall any single or partial
exercise of any power or right preclude any other or further exercise thereof or
the exercise of any other power or right. The remedies herein and in any other
instrument, document or agreement delivered or to be delivered to the Bank
hereunder or in connection herewith are cumulative and not exclusive of any
remedies provided by law. No notice to or demand on the Borrower not required
hereunder or under any Loan Document shall in any event entitle the Borrower to
any other or further notice or demand

 

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in similar or other circumstances or constitute a waiver of the right of the
Bank or the holder of any Note to any other or further action in any
circumstances without notice or demand. No amendment, modification or waiver of
any provision of this Agreement or consent to any departure by the Borrower
therefrom shall be effective unless the same shall be in writing and signed by
the Bank, and then such amendment, modification, waiver or consent shall be
effective only in the specific instances and for the specific purpose for which
given.

11.2. Expenses and Indemnities.

(a) Loan Documents. The Borrower agrees to pay and reimburse the Bank upon
demand and/or on the Effective Date for all reasonable expenses paid or incurred
by the Bank (including filing and recording costs and fees and expenses of legal
counsel, who may be employees of the Bank, and including the costs of any
appraisals and environmental assessments) in connection with the preparation,
review, execution, delivery, amendment, modification or interpretation of the
Loan Documents. The Borrower agrees to pay and reimburse the Bank upon demand
for all reasonable expenses paid or incurred by the Bank (including reasonable
fees and expenses of legal counsel, who may be employees of the Bank) in
connection with the collection and enforcement of the Loan Documents. The
Borrower agrees to pay, and save the Bank harmless from all liability for, any
stamp or other taxes which may be payable with respect to the execution or
delivery of the Loan Documents.

(b) General Indemnity. In addition to the payment of expenses pursuant to
Section 11.2(a), whether or not the transactions contemplated hereby shall be
consummated, the Borrower hereby indemnifies, and agrees to pay and hold the
Bank, its affiliates and their respective officers, directors, employees,
agents, successors and assigns (collectively called the “Indemnitees”) harmless
from and against, any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and disbursements
of any kind or nature whatsoever (including, without limitation, the reasonable
fees and disbursements of counsel for any of such Indemnitees in connection with
any investigative, administrative or judicial proceeding commenced or
threatened, whether or not any of such Indemnitees shall be designated a party
thereto), that may be imposed on, incurred by, or asserted against the
Indemnitees (or any of them), in any manner relating to or arising out of the
Loan Documents, the statements contained in any commitment letters delivered by
the Bank, the Bank’s agreement to issue the Bonds Letter of Credit, or the use
or intended use of the proceeds of the Bonds Letter of Credit (the “Indemnified
Liabilities”); provided, however, that the Borrower shall have no obligation to
an Indemnitee hereunder with respect to Indemnified Liabilities arising from the
gross negligence or willful misconduct of an Indemnitee. To the extent that the
undertaking to indemnify, pay and hold harmless set forth in the preceding
sentence may be unenforceable because it is violative of any law or public
policy, the Borrower shall contribute the maximum portion that it is permitted
to pay and satisfy under applicable law, to the payment and satisfaction of all
Indemnified Liabilities incurred by the Indemnitees or any of them.

(c) Survival. The obligations of the Borrower under this Section 11.2 shall
survive any termination of this Agreement.

 

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11.3. Notices. Except when telephonic notice is expressly authorized by this
Agreement, any notice or other communication to any party in connection with
this Agreement shall be in writing and shall be sent by manual delivery,
telegram, telex, facsimile transmission, overnight courier or United States mail
(postage prepaid) addressed to such party at the address specified on the
signature page hereof, or at such other address as such party shall have
specified to the other party hereto in writing. All periods of notice shall be
measured from the date of delivery thereof if manually delivered, from the date
of sending thereof if sent by telegram, telex or facsimile transmission, from
the first Business Day after the date of sending if sent by overnight courier,
or from four days after the date of mailing if mailed; provided, however, that
any notice to the Bank under Article II shall be deemed to have been given only
when received by the Bank. The Borrower hereby authorizes the Bank to rely upon
the telephone or written instructions of any person identifying himself as an
authorized officer of the Borrower and upon any signature which the Bank
believes to be genuine, and the Borrower shall be bound thereby in the same
manner as if the Borrower were authorized or such signature were genuine.

11.4. Successors. This Agreement shall be binding upon the Borrower, the Bank
and their respective successors and assigns, and shall inure to the benefit of
the Borrower, the Bank and the successors and assigns of the Borrower and the
Bank. The Borrower shall not assign its rights or duties hereunder without the
consent of the Bank. With the prior written consent of the Borrower (other than
with respect to any of the transactions described in the proviso clause hereto
(an “Exempt Transfer”)), which consent shall not be unreasonably withheld or
delayed by the Borrower, the Bank may assign its rights and obligations under
this Agreement and the Loan Documents to any Person; provided, however, that no
Borrower consent shall be required with respect to any assignment made:
(a) during any period when an Event of Default has occurred and is continuing;
provided further, however, that the Borrower’s consent shall be required for any
assignment to any Person that has been engaged in all or one of the business
lines of the Borrower during the preceding two (2) years except where the
assignment is made after the Obligations have become due and payable at
maturity, upon acceleration or otherwise; (b) to another subsidiary or affiliate
of Associated Bancorp; (c) in connection with the sale of all or substantially
all of the Bank’s assets; or (d) in response to any regulatory action affecting
the Bank.

11.5. Participations. The Bank may sell participation interests in any or all of
the Bonds Letter of Credit to any Person; provided, however, that the Borrower’s
prior written consent shall be required for any sale of a participation to any
Person that has been engaged in all or one of the business lines of the Borrower
during the preceding two (2) years except where such sale is made after the
Obligations have become due and payable at maturity, upon acceleration or
otherwise.

11.6. Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction.

11.7. Captions. The captions or headings herein and any table of contents hereto
are for convenience only and in no way define, limit or describe the scope or
intent of any provision of this Agreement.

 

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11.8. Entire Agreement. This Agreement, and the other Loan Documents embody the
entire agreement and understanding between the Borrower and the Bank with
respect to the subject matter hereof and thereof. This Agreement supersedes all
prior agreements and understandings relating to the subject matter hereof.

11.9. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and either of the parties hereto may execute this Agreement by
signing any such counterpart.

11.10. Governing Law. THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH THE BORROWER IS A PARTY SHALL BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT
TO CONFLICT OF LAWS PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF THE
UNITED STATES APPLICABLE TO NATIONAL BANKS.

11.11. Consent to Jurisdiction. AT THE OPTION OF THE BANK, THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS TO WHICH THE BORROWER IS A PARTY MAY BE ENFORCED IN ANY
FEDERAL COURT OR MINNESOTA STATE COURT SITTING IN MINNEAPOLIS OR ST. PAUL,
MINNESOTA; OR ANY FEDERAL COURT SITTING IN GREEN BAY, WISCONSIN OR WISCONSIN
STATE COURT SITTING IN GREEN BAY, WISCONSIN AND THE BORROWER CONSENTS TO THE
JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE IN
SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT THE BORROWER COMMENCES ANY ACTION IN
ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY
OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT, THE BANK, AT ITS
OPTION, SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF THE
JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE
ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE.

11.12. Waiver of Jury Trial. THE BORROWER AND THE BANK WAIVE ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS
(a) UNDER THIS AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR
AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION
HEREWITH, OR (b) ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION
WITH THIS AGREEMENT, AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY.

11.13. Document Construction. This Agreement and each other Loan Document has
been reviewed by all the parties hereto and incorporates the requirements of
such parties. Each party waives the rule of construction that any ambiguities
are to be resolved against the party drafting the same and agrees such rules
will not be employed in the interpretation of this Agreement or any other Loan
Document.

 

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11.14. Customer Identification - USA Patriot Act Notice. The Bank hereby
notifies the Borrower that pursuant to the requirements of the USA Patriot Act
(Title III of Pub. L. 107-56, signed into law October 26, 2001) (the “Act”), and
the Bank’s policies and practices, the Bank is required to obtain, verify and
record certain information and documentation that identifies the Borrower, which
information includes the name and address of the Borrower and such other
information that will allow the Lender to identify the Borrower in accordance
with the Act.

11.15. Confidentiality. The Bank shall use reasonable efforts to assure that
information about the Borrower and its operations, affairs and financial
condition, not generally disclosed to the public or to trade and other
creditors, which is furnished to the Bank pursuant to the provisions hereof is
used only for the purposes of this Agreement any other relationship between the
Borrower, on the one hand, and the Bank and its Affiliates, on the other hand,
and shall not be divulged to any Person other than the Bank, its Affiliates and
their respective officers, directors, employees and agents, except: (a) to their
attorneys and accountants, (b) in connection with the enforcement of the rights
of the Bank hereunder and under the Loan Documents or otherwise in connection
with applicable litigation, (c) in connection with assignments and
participations and the solicitation of prospective assignees and participants
referred to in Sections 11.4 or 11.5 of this Agreement, (d) if such information
is generally available to the public other than as a result of disclosure by the
Bank, (e) to any direct or indirect contractual counterparty in any hedging
arrangement or such contractual counterparty’s professional advisor, (f) to any
nationally recognized rating agency that requires information about the Bank’s
investment portfolio in connection with ratings issued with respect to such
Bank, and (g) as may otherwise be required or requested by any regulatory
authority having jurisdiction over the Bank or by any applicable law, rule,
regulation or judicial process, the opinion of the Bank’s counsel concerning the
making of such disclosure to be binding on the parties hereto. The Bank shall
not incur any liability to the Borrower by reason of any disclosure permitted by
this Section 11.15.

11.16. Effect on Amended and Restated Reimbursement Agreement. On the Effective
Date, the Amended and Restated Reimbursement Agreement shall be completely
amended and restated by this Agreement, and each reference to the “Reimbursement
Agreement,” “Credit Agreement,” “Loan Agreement,” “therein,” “thereof,”
“thereby,” or words of like import referring to the Amended and Restated
Reimbursement Agreement in any other Loan Document shall mean and be a reference
to this Agreement.

11.17. Consent. On the Effective Date, the Bank consents to the consummation of
the Clearwater Merger and the consummation of the other Clearwater Merger
Transactions.

11.18. Reaffirmation of Loan Documents. The Borrower hereby reaffirms its
obligations under all of the Loan Documents executed prior to the date hereof
and acknowledges and agrees that all such documents remain in full force and
effect. Any and all references in Loan Documents to the Reimbursement Agreement
shall be deemed to refer to this Agreement.

11.19. Release. The Borrower and each Guarantor by signing the Acknowledgment
and Agreement of Guarantors set forth below, each hereby absolutely and
unconditionally releases and forever discharges the Bank, and any and all
participants, parent corporations, subsidiary corporations, affiliated
corporations, insurers, indemnitors, successors and assigns thereof,

 

53

--------------------------------------------------------------------------------

together with all of the present and former directors, officers, agents and
employees of any of the foregoing, from any and all claims, demands or causes of
action of any kind, nature or description, whether arising in law or equity or
upon contract or tort or under any state or federal law or otherwise, which the
Borrower or such Guarantor has had, now has or has made claim to have against
any such person for or by reason of any act, omission, matter, cause or thing
whatsoever arising from the beginning of time to and including the date of this
Agreement, whether such claims, demands and causes of action are matured or
unmatured or known or unknown.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

54

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first above.

 

CELLU TISSUE CITY-FOREST LLC By:  

/s/ Linda K. Massman

Name:   Linda K. Massman Its:  
Vice President, Finance and Chief Financial Officer Address: 1215 East Worden
Avenue Ladysmith, WI 54848
Attn: Chief Financial Officer, Clearwater Paper Corporation Telephone:
(509) 344-5900 Facsimile: (509) 342-2551 ASSOCIATED BANK, NATIONAL ASSOCIATION
By:  

/s/ Paul E. Way

Name:  

Paul E. Way

Its:  

Senior Vice President

Address: 740 Marquette Avenue Minneapolis, MN 55402 Attn: Paul Way Telephone:
(612) 359-4452 Facsimile: (612) 338-3950

Signature Page to Second Amended and Restated Reimbursement Agreement

--------------------------------------------------------------------------------

ACKNOWLEDGEMENT AND AGREEMENT OF GUARANTORS

The undersigned, each a guarantor of the indebtedness of CELLU TISSUE-CITYFOREST
LLC (the “Borrower”) to Associated Bank, National Association (the “Bank”)
pursuant to a separate Guaranty each dated as of December 27, 2010 (each, a
“Guaranty”), hereby (i) acknowledges receipt of the foregoing Agreement;
(ii) consents to the terms (including without limitation the release set forth
in the Agreement) and execution thereof; (iii) reaffirms its obligations to the
Bank pursuant to the terms of its Guaranty; and (iv) acknowledges that the Bank
may amend, restate, extend, renew or otherwise modify the Agreement and any
indebtedness or agreement of the Borrower, or enter into any agreement or extend
additional or other credit accommodations, without notifying or obtaining the
consent of the undersigned and without impairing the liability of the
undersigned under its Guaranty for all of the Borrower’s present and future
indebtedness to the Bank.

 

CELLU TISSUE HOLDINGS, INC. By:  

/s/ Linda K. Massman

Name:   Linda K. Massman Its:  
Vice President, Finance and Chief Financial Officer CLEARWATER PAPER CORPORATION
By:  

/s/ Linda K. Massman

Name:   Linda K. Massman Its:   Vice President, Finance and Chief Financial
Officer

Signature Page to Acknowledgment and Agreement of Guarantors

--------------------------------------------------------------------------------

EXHIBIT A

(BONDS LETTER OF CREDIT INCLUDING AMENDMENT NO. 2 EXTENDING THE

EXPIRATION DATE TO FEBRUARY 15, 2012)

Exhibit A

--------------------------------------------------------------------------------

EXHIBIT B

FORM OF COMPLIANCE CERTIFICATE

Pursuant to Section 8.13(b) of the Second Amended and Restated Reimbursement
Agreement dated as of December 27, 2010, (the Second Amended and Restated
Reimbursement Agreement as it may be amended, modified, supplemented or restated
from time to time being the “Reimbursement Agreement”; the terms defined therein
being used herein as therein defined) by and between the undersigned and
Associated Bank, National Association (the “Bank”), the undersigned certifies to
the Bank as follows:

1. For December 2010 monthly financial statements: The unaudited financial
statements for the month ending December 31, 2010 have been prepared a non-GAAP
historic basis consistent with financial statements delivered prior to the
Clearwater Merger. For all subsequent monthly financial statements: The
financial statements of the Borrower attached hereto for the period ending
            , 20     (the “Financial Statements”) have been prepared in
accordance with GAAP applied on a consistent basis subject only year-end
adjustments which in the aggregate are not expected to be materially adverse and
the omission of footnotes.

2. The representations and warranties contained in Article VII of the
Reimbursement Agreement are true and correct as of the date hereof as though
made on that date except that the representations and warranties set forth in
Section 7.5 to the financial statements of the Borrower shall be deemed a
reference to the audited and unaudited financial statements of the Borrower, as
the case may be, then most recently delivered to the Bank pursuant to
Section 8.13(a) or 8.13(b), as the case may be.

3. As of             , 20    , (the “Measurement Date”) no Default or Event of
Default has occurred and is continuing [except (describe here any Default or
Event of Default and the action which the undersigned proposes to take with
respect thereto.)].

4. Section 1.1. for purposes of this Certificate, EBITDA was calculated as
follows in accordance with the Reimbursement Agreement:

 

(i)    Net Income    $                           (ii)    Non-operating
Gains/Losses    $                           (iii)    Non-distributed income from
Subsidiaries    $                           (iv)   

Adjusted Net Income

(Sum of (i) minus (ii) minus (iii))

      $                        (v)    Interest Expense       $                  
     (vi)    Depreciation and Amortization       $                        (vii)
  

Federal, state and local income taxes

and/or Permitted Tax Distributions

      $                        (viii)   

EBITDA (Sum of (iv) plus (v) plus

(vi) plus (vii))

      $                       

5. Section 9.18. If the Measurement Date is a Quarterly Measurement Date, the
undersigned’s maximum permitted Leverage Ratio at the Measurement Date was not
greater than

 

Exhibit B

--------------------------------------------------------------------------------

2.50 to 1.00 and the undersigned’s actual ratio at such Measurement Date was
                     to 1,.00 and was computed in accordance with the
Reimbursement Agreement as follows:

 

(i)    Revolving Loans    $                           (ii)    Unreimbursed
Amount    $                           (iii)    Bonds Promissory Note   
$                           (iv)    Inter-company Loans    $                  
        (v)    Capitalized Leases    $                           (vi)    Other
interest-bearing Indebtedness    $                           (vii)   

Total Debt (Sum of (i) plus (ii) plus

(iii) plus (iv) plus (v) plus (vi))

      $                        (viii)    EBITDA       $                       
(ix)    Leverage Ratio (Ratio of (vii) plus (vi))                to 1.00

6. Section 9.19. If the Measurement Date is a Quarterly Measurement Date, the
undersigned’s minimum required Fixed Charge Coverage Ratio for the Measurement
Period ending at the Measurement Date was not less than 1.20 to 1.00 and the
undersigned’s actual ratio at such Measurement Date was                      to
1.00 and was computed in accordance with the Reimbursement Agreement as follows:

 

(i)    EBITA    $                           (ii)    Operating Lease rent expense
   $                           (iii)    Non-cash corporate allocations   
$                           (iv)   

Numerator

(Sum of (i) plus (ii) plus (iii))

      $                        (v)    Interest Expense    $                     
     (vi)    Mandatory Principal Payments    $                           (vii)
   Operating Lease rent expense    $                           (viii)   

Non-Financed Capital Expenditures

But not less than $500,000

   $                           (ix)   

Federal, state and local income taxes

and/or Permitted Tax Distributions

   $                           (x)   

Denominator (Sum of (v) plus

(vi) plus (vii) plus (viii) plus (ix))

      $                        (xi)    Fixed Charge Coverage Ratio (Ratio of
(iv) to (x))                to 1.00

7. Section 9.20. The undersigned’s maximum permitted Capital Expenditures for
its current fiscal year is $3,000,000 and, as of the Measurement Date, the
undersigned has made the following Capital Expenditures during the undersigned’s
current fiscal year:

 

(i)    Purchase Money Indebtedness    $                           (ii)   
Capitalized Leases    $                           (iii)    Non-Financed Capital
Expenditures    $                           (iv)    Sum of (i) plus (ii) plus
(iii)       $                       

 

Dated:             , 20    .   CELLU TISSUE-CITY FOREST LLC

 

59

--------------------------------------------------------------------------------

By:  

 

  Its:  

 

 

60

--------------------------------------------------------------------------------

SCHEDULE 7.3

Governmental Approvals & Permits

The Company is the owner of the following material licenses and permits, issued
by the authority indicated opposite thereto:

 

Name

  

Issuing Authority

 

1. WPDES Permit

2. Operations permit # 855009540-P20 Air Permit

3. Solid Waste Facility Operation License

  

 

Wisconsin Dept of Natural Resources

Wisconsin Dept of Natural Resources

Wisconsin Dept of Natural Resources

Schedule 7.3

--------------------------------------------------------------------------------

SCHEDULE 7.7

Proceedings

None.

Schedule 7.7

--------------------------------------------------------------------------------

SCHEDULE 7.13

Liens

 

Secured Party

  

Date

  

Filing Number

  

Collateral

Description

Associated Bank National Association   

06-29-05

(Original Filing)

03-21-07

(Amendment)

04-07-10

(Continuation)

   200517089130   

The City of Ladysmith,

Wisconsin Variable

Rate Demand Solid

Waste Disposal

Facility Revenue

Bonds, Series 1998

Associated Bank National Association   

06-29-05

(Original Filing)

03-23-07

(Assignment)

03-23-07

(Amendment)

03-23-07

(Amendment)

04-07-10

(Continuation)

   200517089205    All personal property Associated Bank National Association   

06-30-05

(Original Filing)

03-23-07

(Assignment)

03-23-07

(Amendment)

04-07-10

(Continuation)

   200517102843    All real property Associated Bank National Association   

03-21-07

(Original Filing)

   200716009260   

The City of Ladysmith,

Wisconsin Variable

Rate Demand Solid

Waste Disposal

Facility Revenue

Bonds, Series 1998

Associated Bank National Association   

03-21-07

(Original Filing)

   200716009296    All real property Associated Bank National Association   

03-23-07

(Original Filing)

   200716048772    All personal property GFV Leasing   

06-25-08

(Original Filing)

   200812286737    Copier NMHG Financial Services LLC   

08-07-08

(Original Filing)

   200812790849   

All equipment leased

from NMHG

Schedule 7.13

--------------------------------------------------------------------------------

 

Secured Party

  

Date

  

Filing Number

  

Collateral Description

NMHG Financial Services Inc.   

01-21-10

(Original Filing)

   201018822124   

All equipment leased

from NMHG

Schedule 7.13

--------------------------------------------------------------------------------

SCHEDULE 7.22

Leases

None.

Schedule 7.22

--------------------------------------------------------------------------------

SCHEDULE 7.24

Transactions with Affiliates

None.

Schedule 7.24

--------------------------------------------------------------------------------

SCHEDULE 7.28

Trademarks and Patents

 

Country

  

Trademark

  

Ser./Reg./App No.

  

Status

USA    CITYFOREST   

SN: 75-622691

RN: 2,321,203

   Registered: Feb 22 2000 USA    MISC DESIGN    SN:75-623636    Registered: Mar
7 2000

Schedule 7.28

--------------------------------------------------------------------------------

SCHEDULE 7.33

Labor Matters

None.

Schedule 7.33

--------------------------------------------------------------------------------

SCHEDULE 8.8

Additional Insurance

See attached certificate.

Schedule 8.8

--------------------------------------------------------------------------------

SCHEDULE 8.17

Amortization Schedule

 

#   Semiannual Dates   Payments   Balance

1.

  9/1/2010   380,000   15,790,000

2.

  3/1/2011   380,000   15,410,000

3.

  9/1/2011   380,000   15,030,000

4.

  3/1/2012   380,000   14,650,000

5.

  9/1/2012   380,000   14,270,000

6.

  3/1/2013   380,000   13,890,000

7.

  9/1/2013   380,000   13,510,000

8.

  3/1/2014   380,000   13,130,000

9.

  9/1/2014   380,000   12,750,000

10.

  3/1/2015   380,000   12,370,000

11.

  9/1/2015   380,000   11,990,000

12.

  3/1/2016   380,000   11,610,000

13.

  9/1/2016   380,000   11,230,000

14.

  3/1/2017   380,000   10,850,000

15.

  9/1/2017   380,000   10,470,000

16.

  3/1/2018   380,000   10,090,000

17.

  9/1/2018   380,000   9,710,000

18.

  3/1/2019   380,000   9,330,000

19.

  9/1/2019   380,000   8,950,000

20.

  3/1/2020   380,000   8,570,000

21.

  9/1/2020   380,000   8,190,000

22.

  3/1/2021   380,000   7,810,000

23.

  9/1/2021   380,000   7,430,000

24.

  3/1/2022   380,000   7,050,000

25.

  9/1/2022   380,000   6,670,000

26.

  3/1/2023   380,000   6,290,000

27.

  9/1/2023   380,000   5,910,000

28.

  3/1/2024   380,000   5,530,000

29.

  9/1/2024   380,000   5,150,000

30.

  3/1/2025   380,000   4,770,000

31.

  9/1/2025   380,000   4,390,000

32.

  3/1/2026   380,000   4,010,000

33.

  9/1/2026   380,000   3,630,000

34.

  3/1/2027   380,000   3,250,000

35.

  9/1/2027   380,000   2,870,000

36.

  3/1/2028   2,870,000  

Schedule 8.17

--------------------------------------------------------------------------------

SCHEDULE 9.2

Indebtedness

 

1. Loan Agreement, dated March 1, 1998, between Cellu Tissue - CityForest, LLC,
f/k/a CityForest Corporation, and City of Ladysmith, Wisconsin.

 

2. Irrevocable Letter of Credit No. DCN3886, dated June 29, 2005, between
Cellu-Tissue- CityForest LLC f/k/a CityForest Corporation and Wells Fargo Bank,
National Association, as Trustee, as amended by Amendment No. 1, dated March 21,
2007.

 

3. Indenture, dated March 1, 1998, between City of Ladysmith, Wisconsin and
Wells Fargo Bank, N.A., as successor to Norwest Bank Wisconsin, N.A.

 

4. Replacement Revolving Note, dated March 21, 2007, between Cellu
Tissue-CityForest LLC and Associated Bank, National Association.

 

5. Security Agreement, dated June 29, 2005, between CityForest Corporation and
Associated Bank, National Association.

 

6. Pledge and Security Agreement, dated June 29, 2005, by and among CityForest
Corporation, Associated Bank, National Association, and Wells Fargo Bank,
National Association, as success to Norwest Bank Wisconsin, N.A.

 

7. Irrevocable Letter of Credit No. DCN3886, dated June 29, 2005, between
Cellu-Tissue- CityForest LLC f/k/a CityForest Corporation and Wells Fargo Bank,
National Association, as Trustee, as amended by Amendment No. 1, dated March 21,
2007.

 

8. Assignment of Leases and Rents, dated June 29, 2005, between CityForest
Corporation and Associated Bank, National Association, as assigned and amended
by the Assignment of Assignment of Leases and Rents and Amendment, dated
March 21, 2007, by and among Cellu-Tissue CityForest LLC, Associated Bank,
National Association, as collateral agent, and Associated Bank, National
Association, as bank.

 

9. Mortgage, Security Agreement, Financing Statement and Assignment of Rents and
Leases, dated June 29, 2005, between CityForest Corporation and Associated Bank,
National Association, as assigned and amended by the Assignment of Mortgage,
Security, Financing Statement and Assignment of Rents and Leases and Amendment,
dated March 21, 2007, by and among Cellu-Tissue CityForest LLC, Associated Bank
National Association, as collateral agent, and Associated Bank, National
Association, as bank.

Schedule 9.2

--------------------------------------------------------------------------------

SCHEDULE 9.13

Restrictions and Conditions

 

1. Subject to the proviso in Section 9.13(x)(ii), the Clearwater Senior Notes
Indenture and the Clearwater Bank of America Loan Agreement.

Schedule 9.13