Exhibit 10.2

CELLU TISSUE HOLDINGS, INC.

ANNUAL EXECUTIVE BONUS PROGRAM

§ 1

PURPOSE

The purpose of the Program is to give each Participant the opportunity to
receive an annual bonus for each Fiscal Year payable in cash if, and to the
extent, the Committee determines that the Performance Goals set by the Committee
for such Participant for such year have been met.

§ 2

DEFINITIONS

Code. The term “Code” for purposes of this Program means the Internal Revenue
Code of 1986, as amended from time to time.

Committee. The term “Committee” for purposes of this Program means the
compensation committee of the Board of Directors of the Company or, for periods
after the reliance period in Treas. Reg. § 1.162-27(f)(2) expires, if all the
members of such committee fail to satisfy the requirements to be an “outside
director” under § 162(m) of the Code, a sub-committee of such committee which
consists solely of members who satisfy such requirements.

Company. The term “Company” for purposes of this Program means Cellu Tissue
Holdings, Inc., a Delaware corporation and any successor to Cellu Tissue
Holdings, Inc.

Covered Executive. A “Covered Executive” for purposes of this Program means for
each Fiscal Year an executive of the Company whose compensation for such Fiscal
Year is subject to the compensation deduction limitations under § 162(m) of the
Code.

Fiscal Year. The term “Fiscal Year” for purposes of this Program means the
Company’s fiscal year.

Participant. The term “Participant” for purposes of this Program means for each
Fiscal Year each individual who is designated as such by the Committee under
§ 3.

Performance Criteria. The term “Performance Criteria” means (1) the Company’s
return over capital costs or increases in return over capital costs, (2) the
Company’s total earnings or the growth in such earnings, (3) the Company’s
consolidated earnings or the growth in such earnings, (4) the Company’s earnings
per

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share or the growth in such earnings, (5) the Company’s net earnings or the
growth in such earnings, (6) the Company’s earnings before interest expense,
taxes, depreciation, amortization and other non-cash items or the growth in such
earnings, (7) the Company’s earnings before interest and taxes or the growth in
such earnings, (8) the Company’s consolidated net income or the growth in such
income, (9) the value of the Company’s stock or the growth in such value,
(10) the Company’s stock price or the growth in such price, (11) the Company’s
return on assets or the growth on such return, (12) the Company’s cash flow or
the growth in such cash flow, (13) the Company’s total shareholder return or the
growth in such return, (14) the Company’s expenses or the reduction of such
expenses, (15) the Company’s sales growth, (16) the Company’s overhead ratios or
changes in such ratios, (17) the Company’s expense-to-sales ratios or the
changes in such ratios, or (18) the Company’s economic value added or changes in
such value added.

Performance Goals. The term “Performance Goals” for purposes of this Program
means the goal, or the combination of goals, set under § 4 by the Committee for
each Participant for each Fiscal Year based on the Performance Criteria selected
by the Committee for such Fiscal Year.

Program. The term “Program” means this Cellu Tissue Holdings, Inc. Annual
Executive Bonus Program as in effect from time to time.

§ 3

PARTICIPATION

The Committee for each Fiscal Year shall have the right to designate any
executive officer of the Company and any other employee of the Company who the
Committee deems a key employee as a Participant in this Program for such Fiscal
Year if (1) such designation is made no later than 90 days after the beginning
of such Fiscal Year or (2) such designation is effective on the date an
individual is first employed if he or she will be a key employee on the date he
or she is first employed.

§ 4

PERFORMANCE GOALS

The Committee shall set in writing the Performance Goals for each Participant
for each Fiscal Year based on such Performance Criteria as the Committee deems
appropriate under the circumstances, and such Performance Goals shall be set
(1) for each Participant described in §3(1) no later than 90 days after the
beginning of such Fiscal Year and (2) for each Participant described in §3(2) no
later than the end of the 30 day period which starts on the date he or she is
first employed by the Company. The Committee shall have the right to use
different Performance Criteria for different Participants, and the Committee
shall have the right to set different Performance Goals for Participants whose
goals look to the same Performance Criteria. The Performance Goals for a
Participant may be based on company-wide performance, division-specific

 

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performance, department-specific performance, region-specific performance,
personal performance or on any combination of such criteria or other criteria
the Committee deems appropriate under the circumstances. A Performance Goal may
be set in any manner determined by the Committee, including looking to
achievement on an absolute or relative basis in relation to peer groups or
indexes, and the Committee may set more than one goal. No change may be made to
a Performance Goal after the goal has been set. However, the Committee may
express any goal in terms of alternatives, or a range of alternatives, as the
Committee deems appropriate under the circumstances, such as including or
excluding (1) any acquisitions or dispositions, restructuring, discontinued
operations, extraordinary items and other unusual or non-recurring charges,
(2) any event either not directly related to the operations of the Company or
not within the reasonable control of the Company’s management or (3) the effects
of tax or accounting changes. Finally, no Performance Goal shall be treated as
satisfied under this § 4 until the Committee certifies that such goal has been
satisfied in accordance with § 5.

§ 5

CERTIFICATION AND RIGHT TO PAYMENT

The Committee at the end of each Fiscal Year shall certify the extent, if any,
to which the Performance Goals set for each Participant for such Fiscal Year
have been met and shall determine the bonus payable to each Participant based on
the extent, if any, to which he or she met his or her Performance Goals.
However, the Committee shall have the right to reduce a Participant’s bonus as
determined under this § 5 to the extent that the Committee acting in its
discretion determines that such a reduction is appropriate. If the Committee
certifies that a bonus is payable to a Participant for any Fiscal Year, such
bonus shall be paid in cash as soon as practical after such certification has
been made. However, no Participant shall have a right to the payment of a bonus
for any Fiscal Year if his or her employment with the Company has terminated for
any reason whatsoever before the date the bonus is actually paid unless the
Committee in the exercise of its absolute discretion expressly waives this
employment requirement; provided, however, if the Committee so waives this
requirement for any Participant for any Fiscal Year, his or her bonus, if any,
earned under this Program shall be paid no later than 2 1/2 months after the end
of such Fiscal Year.

§ 6

BONUS CAP

No bonus shall be paid to any Participant for any Fiscal Year under this Program
to the extent such bonus would exceed 200% of the Participant’s base salary paid
to the Participant during such Fiscal Year or $2,000,000, whichever is less.
However, the Committee shall have the discretion to set a lower cap on the bonus
payable to any Participant for any Fiscal Year.

 

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§ 7

ADMINISTRATION

The Committee shall have the power to interpret and administer this Program as
the Committee in its absolute discretion deems in the best interest of the
Company, and the Committee to the extent practicable shall do so to protect the
Company’s right to deduct any bonus payable to a Covered Executive in light of
§ 162(m) of the Code.

§ 8

AMENDMENT AND TERMINATION

The Committee shall have the power to amend this Program from time to time as
the Committee deems necessary or appropriate and to terminate this Program if
the Committee deems that such termination is in the best interest of the
Company.

§ 9

MISCELLANEOUS

9.1. General Assets. Any bonus payable under this Program shall be paid
exclusively from the Company’s general assets.

9.2. General Creditor Status. The status of each Participant with respect to his
or her claim for the payment of a bonus under this Program shall be the same as
the status of a general and unsecured creditor of the Company.

9.3. No Assignment. No Participant shall have the right to assign or otherwise
alienate or commute all or any part of the bonus which might be payable to such
Participant under this Program, and any attempt to do so shall be null and void.

9.4. No Contract of Employment. The designation of any individual as a
Participant in this Program shall not constitute an agreement by the Company to
employ any such individual for any period of time or affect the Company’s right
to terminate his or her employment at any time and for any reason or for no
reason.

 

CELLU TISSUE HOLDINGS, INC. By:  

/s/ Russell C. Taylor

Title:  

Chief Executive Officer and President

Date:  

January 27, 2010

 

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