**Exhibit10.1**

EMPLOYMENTAGREEMENT

THIS EMPLOYMENT AGREEMENT (the “Agreement”)made and entered into by and between Cellu Tissue Holdings, Inc., a Delawarecorporation (the “Company”), and Mr. David J. Morris (the “Executive”),effective as of August 6, 2007, and which is hereafter referred to as the “EffectiveDate.

WHEREAS, the operations of the Company and itsAffiliates are a complex matter requiring direction and leadership in a varietyof areas, including financial, strategic planning, regulatory, communityrelations and others;

WHEREAS, the Executive is possessed of certainexperience and expertise that qualify the Executive to provide the directionand leadership required by the Company and its Affiliates;

WHEREAS, subject to the terms and conditions hereinafterset forth, the Company wishes to employ the Executive as its Chief FinancialOfficer and the Executive wishes to accept such continued employment;

NOW, THEREFORE, in consideration of the foregoingpremises and the mutual promises, terms, provisions and conditions set forth inthis Agreement, the parties hereby agree:

# 1.             Employment.  Subject to the terms and conditions set forthin this Agreement, the Company hereby offers and the Executive hereby acceptsemployment.

# 2.             Term.      Subject to earlier terminationas hereinafter provided, the Executive’s employment hereunder shall be for aterm of four (4) years, commencing on the Effective Date, and shall beautomatically extended thereafter for successive terms of one year each, unlesseither party provides notice to the other at least sixty (60) days prior to theexpiration of the original or any extension term that the Agreement is not tobe extended.  The term of this Agreement,as from time to time extended or renewed, is hereafter referred to as “theterm of this Agreement” or “the term hereof.”

# 3.             Capacity andPerformance.

## (a)           Subjectto earlier termination as hereinafter provided, during the term of thisAgreement, the Executive shall serve the Company as its Chief FinancialOfficer, reporting to the Company’s Chief Executive Officer.  In addition, and without furthercompensation, the Executive shall serve as a director and/or officer of one ormore of the Company’s Affiliates (as defined below) if so elected or appointedfrom time to time.

## (b)           Duringthe term hereof, the Executive shall be employed by the Company on a full-timebasis and shall perform such duties and responsibilities on behalf of theCompany and its Affiliates consistent with the Executive’s position with theCompany as may be designated from time to time by the Chief Executive Officer.

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## (c)           Duringthe term of the Executive’s employment, the Executive shall devote theExecutive’s full business time and the Executive’s best efforts, businessjudgment, skill and knowledge exclusively to the advancement of the businessand interests of the Company and its Affiliates and to the discharge of theExecutive’s duties and responsibilities hereunder.  The Executive shall not engage in any otherbusiness activity or serve in any industry, trade, professional, governmentalor academic position during the term of this Agreement, except as may beexpressly approved in advance by the Chief Executive Officer in writing.

# 4.             Compensation andBenefits.  As compensation for allservices performed by the Executive under and during the term hereof andsubject to performance of the Executive’s duties and of the obligations of theExecutive to the Company and its Affiliates, pursuant to this Agreement orotherwise:

## (a)           BaseSalary.  During the term hereof, theCompany shall pay the Executive a base salary at the rate of Two Hundred FiftyThousand Dollars ($250,000) per annum, payable in accordance with the normalpayroll practices of the Company for its executives and subject to increase(but not decrease).  The Company’s Boardof Directors (the “Board”) at the request of the Chief Executive Officer willreview the Executive’s base salary each year. Such base salary, as from time to time increased, is hereafter referredto as the “Base Salary”.

## (b)         Annual BonusCompensation.

##### (i)            During the term hereofand beginning with the first fiscal year after the Effective Date, Executiveshall be eligible to receive an annual bonus of 50% of Base Salary (the “TargetBonus”), subject to the achievement of an EBITDA target set by the Company,approved by the Board and subject to the terms and conditions of any applicableannual incentive program in effect from time to time (the “Incentive Plan”).  The amount of any bonus awarded (whether morethan or less than the Target Bonus) shall be determined by the Company, andsubject to Board approval, based upon the achievement of the EBITDA target,after the completion of the Company’s annual audit and the Board’s reviewthereof, and shall further be subject to the terms of the Incentive Plan as ineffect from time to time.  Except asotherwise expressly provided under this Agreement or under the terms of theIncentive Plan as in effect from time to time, the Executive shall not beentitled to earn bonus compensation for any period of service less than a fullyear, except; (1) the Executive shallbe entitled to earn a pro rated share of bonus compensation for the time periodof employment from the Effective Date until the end of that first fiscal year;and (2) as set forth in Sections 5(a), 5(b), 5(d), 5(e), 5 (g) and 5 (h).

### (ii)           Any bonus due hereundershall be payable not later than two and one half months following the fiscalyear for which the bonus was earned or as soon as is

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## practicable within the meaning of Section409A of the Internal Revenue Code of 1986, as amended, (“Section 409A”).

## (c)           EquityArrangements.  On the Effective Date,the Company will make a grant of restricted stock to the Executive under theCompany’s Stock Option and Restricted Stock Plan (the “Plan”).  The terms and conditions of such restrictedstock grant shall be subject to the terms of the Plan and the Restricted StockAward Agreement in the form attached hereto as Exhibit A.

## (d)           Vacations.  During the term hereof, the Executive shallbe entitled to four (4) weeks of vacation per annum, to be taken at such timesand intervals as shall be determined by the Executive, subject to thereasonable business needs of the Company.

## (e)           OtherBenefits.  During the term hereof andsubject to any contribution generally required of employees of the Company, theExecutive shall be entitled to participate in any and all employee benefitplans from time to time in effect for employees of the Company generally,except to the extent such plans are in a category of benefit otherwise providedto the Executive.  Such participationshall be subject to (i) the terms of the applicable plan documents, (ii)generally applicable Company policies and (iii) the discretion of the Board orany administrative or other committee provided for in or contemplated by suchplan.  The Company may alter, modify, addto or delete its employee benefit plans at any time as it, in its solejudgment, determines to be appropriate, without recourse by the Executive.

## (f)            Perquisites.  During the term hereof, the Executive shallbe entitled to receive any and all perquisites in effect from time to time forsenior executives of the Company generally, except to the extent suchperquisite is otherwise provided to the Executive.  Such receipt shall be subject to (i)generally applicable Company policies and (ii) the discretion of theBoard.  The Company may alter, modify,add to or delete any such perquisite at any time as it, in its sole judgment,determines to be appropriate without recourse by the Executive.

## (g)           BusinessExpenses.  The Company shall pay orreimburse the Executive for reasonable, customary and necessary businessexpenses incurred or paid by the Executive in the performance of the Executive’sduties and responsibilities hereunder, subject to such reasonablesubstantiation and documentation as may be specified by the Board or Companypolicy from time to time.

# 5.             Termination ofEmployment and Severance Benefits. The Executive’s employment hereunder shall terminate under the followingcircumstances:

## (a)           Death.  In the event of the Executive’s death duringthe term hereof, the Executive’s employment hereunder shall terminate and theCompany shall pay or provide to the Executive’s designated beneficiary or, ifno beneficiary has been designated by the Executive, to the Executive’sestate:  (i) any earned, but unpaid, BaseSalary through the date of termination; (ii) any earned, but unpaid annualbonus for any fiscal year prior to the fiscal year

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of the Executive’s termination; (iii) a pro rata portion (based on thenumber of days preceding the Executive’s termination in the fiscal year oftermination) of the Target Bonus; (iv) a lump sum equal to the lesser of (A)twelve (12) months of Base Salary or (B) Base Salary for the remainder of theterm hereof; and (v) any unreimbursed business expenses.  In addition, subject to any employeecontribution applicable to employees and their dependents generally, for thetwelve (12) month period following termination, the Company shall continue tocontribute to the premium cost of coverage for the Executive’s dependents underthe Company’s medical and dental plans provided that a timely COBRA election ismade.  The payments referred to inclauses (i), (ii) and (v) above shall be payable in a lump-sum within thirty(30) days after the date of termination. The Company’s payments under clauses (iii) and (iv) above, as well asthe continued contribution toward medical and dental premiums, are expresslyconditioned upon the Executive’s designated beneficiary, or if no beneficiaryhas been designated, a representative of the Executive’s estate executing anddelivering to the Company a timely and effective general release of claims, in form and substance satisfactory to theCompany (“Separation Agreement”). Payment under clauses (iii) and (iv) will be made within thirty (30)days after the Company’s receipt of such release of claims in form andsubstance satisfactory to the Company. Other than as set forth in this clause (a), the Company shall have nofurther obligation to the Executive’s beneficiary or the Executive’s estate.

 

## (b)         Disability.

### (i)            TheCompany may terminate the Executive’s employment hereunder, upon notice to theExecutive, in the event that the Executive becomes disabled during theExecutive’s employment hereunder through any illness, injury, accident orcondition of either a physical or psychological nature and, as a result, isunable to perform substantially all of the Executive’s material duties andresponsibilities hereunder for (x) ninety (90) consecutive calendar days or (y)one hundred and twenty (120) total days during any period of three hundred andsixty-five (365) consecutive calendar days. The Board may designate another employee to act in the Executive’s placeduring any period of the Executive’s disability.

### (ii)           Ifany question shall arise as to whether during any period the Executive isdisabled through any illness, injury, accident or condition of either aphysical or psycholog­ical nature so as to be unable to perform substantiallyall of the Executive’s duties and responsibilities hereunder, the Executivemay, and at the request of the Company shall, submit to a medical examinationby a physician selected by the Company to whom the Executive or the Executive’sduly appointed guardian, if any, has no reasonable objection to determinewhether the Executive is so disabled and such determination shall for thepurposes of this Agreement be conclusive of the issue.  If such question shall arise and theExecutive shall fail to submit to such medical examination, the Company’sdetermination of the issue shall be binding on the Executive.

### (iii)          Uponthe giving of notice of termination of the Executive’s employment due todisability hereunder, the Company shall have no further obligation or

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### liability to theExecutive, other than for (i) any earned, but unpaid, Base Salary through thedate of termination; (ii) any earned, but unpaid annual bonus for any fiscalyear prior to the fiscal year of the Executive’s termination; (iii) a pro rataportion (based on the number of days preceding the Executive’s termination inthe fiscal year of termination) of the Target Bonus; (iv) a lump sum paymentequal to the lesser of (A) twelve (12) months of Base Salary or (B) Base Salaryfor the remainder of the term hereof; and (v) any unreimbursed businessexpenses.  In addition, (x) the Companyshall continue the benefits contemplated by Section 4(h) for the periodcontemplated therein, and (y) subject to any employee contribution applicableto active employees and their dependents generally, for the twelve (12) monthperiod following termination, the Company shall continue to contribute to thepremium cost of coverage for the Executive and the Executive’s dependents underthe Company’s medical and dental plans provided that a timely COBRA election ismade.  The payments referred to inclauses (i), (ii) and (v) above shall be payable in a lump-sum within thirty(30) days after the date of termination. The Company’s payments under clauses (iii) and (iv) above, as well asthe continued contribution toward medical and dental premiums, are expresslyconditioned upon the Executive (or the Executive’s duly appointed guardian, ifany) executing and delivering to the Company a timely and effective Separation Agreement.  Payment under clauses (iii) and (iv) will bemade within thirty (30) days after the Company’s receipt of the SeparationAgreement.  Other than as set forth inthis clause (b), the Company shall have no further obligation to the Executive.

## (c)           Bythe Company for Cause.  The Companymay terminate the Executive’s employment hereunder for Cause at any time uponnotice to the Executive setting forth in reasonable detail the nature of suchCause.  The following, as determined bythe Board in its reasonable judgment, shall constitute Cause for termination:

### (i)            the Executive’s repeated and willful refusalor failure (other than during periods of illness, disability or vacation) toperform the Executive’s duties hereunder or under any lawful directive of theBoard (consistent with the terms of this Agreement;

### (ii)           the Executive’s willful misconduct or gross neglect in the performanceof the Executive’s duties hereunder which in either case is materiallyinjurious to the Company or any of its Subsidiaries, monetarily or otherwise;

### (iii)          the willful material breach of this Agreement by the Executive;

### (iv)          except as provided in clause (v) below, the conviction of the Executiveof any felony or any other crime involving dishonesty or moral turpitude or the Executive’s pleading guilty to anyfelony, other than motor vehicle offenses, or any other crime involvingdishonesty or moral turpitude;

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### (v)           the commission offraud, embezzlement, theft or other dishonesty by the Executive with respect tothe Company or any of its Affiliates;

### (vi)          any other conduct thatinvolves a breach of fiduciary obligation on the part of the Executive orotherwise could reasonably be expected to have a material adverse effect uponthe business, interests or reputation of the Company or any of its Affiliates;or

### (vii)         a previous employer of Executive shall commence against Executiveand/or Cellu Tissue an action, suit, proceeding or demand arising from analleged violation of a non-competition or other similar agreement betweenExecutive and such previous employer.

##### Forpurposes of this Section 5(c), no act, or failure to act, on the Executive’spart, will be considered “willful” unless done or omitted to be done by him notin good faith and without a reasonable belief that the Executive’s action oromission was in furtherance of the Company’s business. If the Company desiresto terminate the Executive’s employment pursuant to clause (i), (ii), (iii) or(v) above, it shall first give the Executive written notice of the facts andcircumstances providing Cause and shall allow the Executive no less than twenty(20) days (x) in the case of a proposed termination pursuant to clause (i),(ii) or (iii) above to remedy, cure or rectify the situation giving rise toCause and (y) in the case of a proposed termination pursuant to clause (v)above to explain the circumstances of the Executive’s actions or to show thatthe circumstances underlying the indictment do not constitute the type offelony described in clause (v). Termination by the Company for Cause pursuantto clause (iv) above may be effected by written notice of the Company to theExecutive.  Upon the giving ofnotice of termination of the Executive’s employment hereunder for Cause, theCompany shall have no further obligation to the Executive, other than for (i) Base Salary earned, but unpaid at thedate of termination; (ii) any earned, but unpaid annual bonus for any fiscalyear prior to the fiscal year of the termination of the Executive’s employment;and (iii) any unreimbursed business expenses.

## (d)           Bythe Company without Cause.  TheCompany may terminate the Executive’s employment hereunder without Cause at anytime upon notice to the Executive.  Inthe event of such termination, the Company shall have no further obligation orliability to the Executive, other than for (i) any earned, but unpaid, BaseSalary through the date of termination; (ii) any earned, but unpaid annualbonus for any fiscal year prior to the fiscal year of the Executive’stermination; (iii) a pro rata portion (based on the number of days preceding theExecutive’s termination in the fiscal year of termination) of the Target Bonus;(iv) a lump sum equal to the greater of (x) twenty-four (24) months of BaseSalary or (y) Base Salary for a period equal to the remainder of the term ofthis Agreement; (v) a lump sum equal to the greater of (x) one times the TargetBonus or (y) payment of the Target Bonus with respect to a period equal to theremainder of the term of this Agreement; and (vi) any unreimbursed businessexpenses.  In addition, (x) the Company shallcontinue the benefits contemplated by Section 4(h) for the period contemplatedtherein, and (y) subject to any employee contribution applicable to employeesand their dependents generally, for the period following termination

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specified in clause (iv) above, or if earlier, until the date that theExecutive becomes eligible for coverage with a subsequent employer, the Companyshall continue to contribute to the premium cost of coverage for the Executiveand the Executive’s dependents under the Company’s medical and dental plansprovided that a timely COBRA election is made. The payments referred to in clauses (i), (ii) and (vi) above shall bepayable in a lump-sum within thirty (30) days after the date of termination.  The Company’s payments under clauses (iii),(iv) and (v) above, as well as the continued contribution toward medical anddental premiums, are expressly conditioned upon the Executive executing anddelivering to the Company a timely and effective Separation Agreement.  Payment under clauses (iii), (iv) and (v)will be made within thirty (30) days after the Company’s receipt of theSeparation Agreement.  Other than as setforth in this clause (d), the Company shall have no further obligation to theExecutive.

 

## (e)           By the Executive for Good Reason.  The Executive may terminate the Executive’semployment hereunder for Good Reason, provided that the Executive shall havegiven written notice setting forth in reasonable detail the nature of such GoodReason to the Company upon the Executive’s becoming aware or at such time asExecutive should have been aware of the occurrence of any such event orcondition, and the Company shall not have fully corrected the situation withinten (10) days after such notice of Good Reason. The following shall constitute “Good Reason” for termination bythe Executive:

### (i)            failure by the Company to pay anycompensation when due hereunder;

### (ii)           any significant reduction by the Company’s of the Executive’s title,duties or responsibilities (except in connection with termination of theExecutive’s employment for Cause, as a result of Disability, as a result of theExecutive’s death or by the Executive other than for Good Reason);

### (iii)          a reduction by the Company in the Executive’s Base Salary or any othercompensation due hereunder; or

### (iv)          any material breach by the Company of any other provision of thisAgreement.

## Ifthe Executive desires to terminate the Executive’s employment with the Companypursuant to this Section 5(e), the Executive shall first give written notice ofthe facts and circumstances providing Good Reason to the Company, and shallallow the company no less than twenty (20) days to remedy, cure or rectify thesituation giving rise to Good Reason.  TheCompany’s failure to continue the Executive’s appointment or election as adirector or officer of any of its Affiliates shall not constitute Good Reason. In the event of termination in accordance with this Section 5(e),then the Executive will be entitled to receive the payments and benefits inaccordance with Section 5(d) hereof provided the Executive complies with therequirement of executing and delivering the Separation Agreement.  Other than as set forth in this clause (e),the Company shall have no further obligation to the Executive.

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## (f)            By the Executive Without Good Reason.  The Executive may terminate the Executive’semployment hereunder at any time upon sixty (60) days’ written notice to theCompany.  In the event of termination ofthe Executive pursuant to this Section 5(f), the Board may elect to waive theperiod of notice, or any portion thereof, and, if the Board so elects, theCompany will pay the Executive the Executive’s Base Salary for the noticeperiod (or for any remaining portion of the period).  The Company shall also pay the Executive (i)any earned, but unpaid annual bonus for any fiscal year prior to the fiscalyear of the termination of the Executive’s employment, and (ii) anyunreimbursed business expenses.

## (g)           Non-Renewal by Company.  The Company may elect not to renew thisAgreement in accordance with Section 2 above. In the event of such non-renewal for a reason other than Cause (asdefined in Section 5(c) above), the Company shall have no further obligation orliability to the Executive other than for (i) any earned, but unpaid, BaseSalary through the date of termination; (ii) any earned, but unpaid annualbonus for any fiscal year prior to the fiscal year of the Executive’stermination; (iii) a pro rata portion (based on the number of days precedingthe Executive’s termination in the fiscal year of termination) of the TargetBonus; (iv) a lump sum equal totwenty-four (24) months of Base Salary and (v) any unreimbursed businessexpenses.  In addition, subject to anyemployee contribution applicable to employees and their dependents generally,for the twenty-four (24) monthperiod following termination, or if earlier until the date that the Executivebecomes eligible for coverage with a subsequent employer, the Company shallcontinue to contribute to the premium cost of coverage for the Executive andthe Executive’s dependents under the Company’s medical and dental plansprovided that a timely COBRA election is made. The payments referred to in clauses (i), (ii) and (v) above shall bepayable in a lump-sum within thirty (30) days after the date oftermination.  The Company’s paymentsunder clauses (iii) and (iv) above, as well as the continued contributiontoward medical and dental premiums, are expressly conditioned upon theExecutive executing and delivering to the Company a timely and effectiveSeparation Agreement.  Payment underclauses (iii) and (iv) will be made within thirty (30) days after the Company’sreceipt of such Separation Agreement. Other than as set forth in this clause (g), the Company shall have nofurther obligation to the Executive or the Executive’s estate hereunder.

## (h)           Change of Control/Gross Up Payment.  The Company and the Executive agree that inthe event that any of the severance payments or severance benefits underSections 5(d), 5(e), 5(g) or 5(h) of this Agreement might be characterized asparachute payments under Section 280G of the Internal Revenue Code of 1986, asamended (“Section 280G”), the parties shall timely take reasonable stepsto avoid the tax liability under Section 280G and Section 4999 of the InternalRevenue Code of 1986, as amended (the “Code”) to the extent permitted bylaw.  Accordingly, the Executive agreesto cooperate fully in procuring a shareholder vote (including, but not limitedto, providing any required consents or waivers) to approve the severancepayments or severance benefits under this Agreement received, to be receivedby, or payable on behalf of, the Executive in satisfaction of the shareholderapproval requirements described in Treas. Reg. Section 1.280G-1, Q&A-7, tothe extent applicable.  If theshareholder approval requirements described in Treas. Reg. Section 1.280G-1,Q&A-7 cannot be satisfied and if the Company determines that any of theseverance payments or severance benefits under

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this Agreement received, to be received by, or payable on behalf of,the Executive would be subject to the excise tax imposed by Section 4999 of theCode, (the “Excise Tax”), then the Company will, on or prior to the dateon which the Excise Tax must be paid or withheld, make an additional lump sumpayment (the “gross up payment”) to the Executive.  The gross up payment will be sufficient,after giving effect to federal, state, and local income taxes (excluding anytaxes imposed under or as a result of Section 409A, but otherwise includinginterest and penalties, if any) with respect to the gross up payment, to makethe Executive whole for such taxes and associated interest and penaltiesimposed under or as a result of Section 4999. Determinations under this Section 5(h) will be made by the Company’ sindependent auditors unless the Executive has reasonable objections to the useof that firm, in which case the determinations will be made by a comparablefirm chosen by the Executive after consultation with the Company (the firmmaking the determinations to be referred to as the “Firm”).  The determinations of the Firm will bebinding upon the Company and the Executive except as the determinations areestablished in resolution (including by settlement) of a controversy with theInternal Revenue Service to have been incorrect.  All fees and expenses of the Firm will bepaid by the Company.  If the InternalRevenue Service asserts a claim that, if successful, would require the Companyto make a gross up payment or an additional gross up payment, the Company andthe Executive will cooperate fully in resolving the controversy with theInternal Revenue Service.  The Companywill make or advance such gross up payments as are necessary to prevent theExecutive from having to bear the cost of the payments to the Internal RevenueService in the course of, or as a result of, the controversy.  The Firm will determine the amount of suchgross up payments or advances and will determine after resolution of thecontroversy whether any advances must be returned by the Executive to theCompany.  The Company will bear allexpenses of the controversy.

 

## (i)            Timingof Payments.  If at the time of theExecutive’s separation from service, the Executive is a “specified employee,”as hereinafter defined, any and all amounts payable under this Section 5 inconnection with such separation from service that constitute deferredcompensation subject to Section 409A, as determined by the Company in its solediscretion, and that would (but for this sentence) be payable within six monthsfollowing such separation from service, shall instead be paid on the date thatfollows the date of such separation from service by six (6) months.  For purposes of the preceding sentence, “separationfrom service” shall be determined in a manner consistent with subsection(a)(2)(A)(i) of Section 409A and the term “specified employee” shall mean anindividual determined by the Company to be a specified employee as defined insubsection (a)(2)(B)(i) of Section 409A.

# 6.             Effectof Termination.  The provisions ofthis Section 6 shall apply to a termination pursuant to Section 5 or otherwise.

## (a)           A condition precedent to the Company’sobligations to provide any severance payments or severance benefits hereunder,including lump-sum payments, vesting of restricted stock and contributionstoward health insurance premiums, shall be the Executive’s executing anddelivering (and not revoking) a timely and effective Separation Agreement, orin the case of a termination due to the death of the Executive, the Executive’sbeneficiary or

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representative of the Executive’s estate executing and delivering ageneral release of claims in form and substance satisfactory to the Company.

 

## (b)           Upon termination of the Executive’semployment with the Company, unless otherwise specifically provided herein, theExecutive’s rights to benefits and payments under any benefits or welfare planor under any stock option, restricted stock, stock appreciation right, bonusunit, management or bonus incentive or other plan of the Company shall bedetermined in accordance with the terms and provisions of such plans and anyagreements under which such stock options, restricted stock or other awardswere granted.

## (c)           Provisions of this Agreement shall surviveany termination if so provided herein or if necessary or desirable fully toaccomplish the purposes of such provision, including without limitation theobligations of the Executive under Sections 7, 8 and 9 hereof.  The obligation of the Company to provide anyseverance payment or benefit is expressly conditioned upon the Executive’scontinued full performance of obligations under Sections 7, 8 and 9hereof.  The Executive recognizes that,except as expressly provided in Sections 5(d), 5(e), 5(g) or 5(h), no compen­sationis earned after termination of employment.

## (d)           Except as expressly provided herein,Executive is entitled to no payments or benefits in connection with atermination of the Executive’s employment.

# 7.             ConfidentialInformation.

## (a)           The Executive acknowledges that the Companyand its Affiliates continually develop “Trade Secrets” and “ConfidentialInformation” that the Executive may develop Trade Secrets and ConfidentialInformation for the Company or its Affiliates and that the Executive may learnof Trade Secrets and Confidential Information during the course ofemployment.  The Executive will complywith the policies and procedures of the Company and its Affiliates forprotecting Trade Secrets and Confidential Information and shall never discloseto any Person (except as required by applicable law or for the properperformance of the Executive’s duties and responsibilities to the Company andits Affiliates), or use for the Executive’s own benefit or gain, any TradeSecrets or Confidential Information obtained by the Executive incident to theExecutive’s employment or other association with the Company or any of itsAffiliates.

## (b)           For purposes of this Agreement, “TradeSecrets mean all information that constitutes a trade secret within the meaningof the Georgia Trade Secrets Act, as amended (the “Georgia Act”).  Under the Georgia Act, a trade secret isdefined as:  “Information without regardto form, including, but not limited to, technical or non-technical data, aformula, a pattern, a compilation, a program, a device, a method, a technique,a drawing, a process, financial data, financial plans, product plans, or a listof actual or potential customers or suppliers which is not commonly known by oravailable to the public and which information: (i) derives economic value, actual or potential, from not beinggenerally known to, and not being readily ascertainable by proper means by,other persons who can obtain economic value

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from its disclosure or use; and (ii) is the subject of efforts that arereasonable under the circumstances to maintain its secrecy.”

 

## (c)           For purposes of this Agreement, “ConfidentialInformation” means any and all information of the Company and itsAffiliates other than Trade Secrets that is not generally known by others withwhom they compete or do business, or with whom they plan to compete or dobusiness and any and all information, not publicly known, which, if disclosedby the Company or its Affiliates would assist in competition against them.  Confidential Information includes withoutlimitation such information relating to (i) the development, research, testing,manufacturing, marketing and financial activities of the Company and itsAffiliates, (ii) the Products, (iii) the costs, sources of supply, financialperformance and strategic plans of the Company and its Affiliates, (iv) theidentity and special needs of the customers of the Company and its Affiliatesand (v) the people and organizations with whom the Company and its Affiliateshave business relationships and those relationships.  Confidential Information also includescomparable information that the Company or any of its Affiliates have receivedbelonging to others or which was received by the Company or any of itsAffiliates with any understanding that it would not be disclosed.

## (d)           The foregoing obligations do not apply to theextent that the Confidential Information is or becomes generally available tothe public through no fault of the Executive. The Executive understands and agrees that the Executive’s obligationsunder this Agreement with regard to Trade Secrets shall remain in effect for aslong as such information shall remain a trade secret under applicable law.  The Executive acknowledge that the Executive’sobligations with regard to the Confidential Information shall remain in effectwhile employed or retained by the Company and for three (3) years after thetermination of employment, regardless of the reason for such termination.

## (e)           All documents, records, tapes and othermedia of every kind and description relating to the business, present orotherwise, of the Company or its Affiliates and any copies, in whole or inpart, thereof (the “Documents”), whether or not prepared by theExecutive, shall be the sole and exclusive property of the Company and itsAffiliates.  The Executive shallsafeguard all Documents and shall surrender to the Company at the time theExecutive’s employment terminates, or at such earlier time or times as theBoard or its designee may specify, all Documents then in the Executive’spossession or control.

# 8.             Assignmentof Rights to Intellectual Property. The Executive shall promptly and fully disclose all IntellectualProperty to the Company.  The Executivehereby assigns and agrees to assign to the Company (or as otherwise directed bythe Company) the Executive’s full right, title and interest in and to allIntellectual Property.  The Executiveagrees to execute any and all applications for domestic and foreign patents,copyrights or other proprietary rights and to do such other acts (includingwithout limitation the execution and delivery of instruments of furtherassurance or confirmation) requested by the Company to assign the IntellectualProperty to the Company and to permit the Company to enforce any patents,copyrights or other proprietary rights to the Intellectual Property.  The Executive will not charge the Company fortime spent in

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complying with these obligations. All copyrightable works that the Executive creates shall be considered “workmade for hire.”

 

# 9.             RestrictedActivities.  In exchange for good andvaluable consideration including, without limitation, the grant of restrictedstock hereunder, the Executive agrees that some restrictions on the Executive’sactivities during and after the Executive’s employment are necessary to protectthe goodwill, Confidential Information and other legitimate interests of theCompany and its Affiliates:

(a)           While the Executive isemployed by the Company and for a period of twenty-four (24) months after the Executive’s employmentterminates (the “Non-Competition Period”), the Executive shall not, directly orindirectly, provide services in a Restricted Capacity to any Person withrespect to any product or service of that Person which directly competes with,or may be used in substitution for, one or more of the products of the Companyand/or its Subsidiaries with respect to which the Executive has had access toConfidential Information or customer goodwill as a result of the Executive’semployment or other association with the Company and/or its Subsidiaries, but thisrestriction shall apply only with respect to the followingstates:  Alabama, Alaska, California,Colorado, Connecticut, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa,Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan,Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Jersey, New Mexico, NewYork, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, RhodeIsland, South Carolina, Tennessee, Texas, Utah, Virginia, Washington andWisconsin.  For the purposes of this Section 9,the business of the Company and its Subsidiaries shall include, withoutlimitation, all Products and the Executive’s undertaking shall encompass allitems, products and services that may be used in substitution for Products.

## (b)           The Executive furtheragrees that while the Executive is employed by the Company and during theNon-Competition Period, the Executive will not, and will not assist anyone elseto solicit for hiring any employee of the Company or any of its Affiliates, orseek to persuade any employee of the Company or any of its Affiliates todiscontinue employment.  For purposes ofthis Agreement, an “employee” of the Company or any of its Affiliates is anyperson who was such at any time within the preceding one year.

## (c)         TheExecutive further agrees that while the Executive is employed by the Companyand during the Non-Competition Period, the Executive will not directly orindirectly (1) solicit or encourage any customer of the Company or any of itsAffiliates to terminate or diminish its relationship with them, or, (2) seek topersuade any customer or prospective customer of the Company or any of itsAffiliates to conduct with any Person any business or activity which suchcustomer or prospective customer conducts or could conduct with the Company;provided that these restrictions shall apply (a) only with respect to thosePersons who are or have been a customer of the Company of any of its Affiliatesat any time within the immediately preceding one year period or whose

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## business hasbeen solicited on behalf of the Company or any of its Affiliates by any oftheir officers, employees or agents within said one year period, other than byform letter, blanket mailing or published advertisement, and (b) only if theExecutive had a business relationship with such Person as a result of theExecutive’s employment or other associations with the Company or one of itsAffiliates.  Notwithstanding anything tothe contrary contained in this Section 9, after termination of Executive’semployment, this restriction shall apply only to customers or prospectivecustomers located in those states within the United States in which the Companywas doing business during the year preceding Executive’s termination.

## (d)         TheExecutive further agrees that while the Executive is employed by the Companyand during the Non-Competition Period the Executive shall not willfully makefalse, misleading or disparaging statements about the Company including,without limitation, its products, services, management, direct or indirectequity holders, employees and customers.

# 10.           Enforcementof Covenants.  The Executiveacknowledges that the Executive has carefully read and considered all the termsand conditions of this Agreement, including the restraints imposed upon theExecutive’s pursuant to Sections 7, 8 and 9 hereof.  The Executive agrees without reservation thateach of the restraints contained herein is necessary for the reasonable andproper protection of the goodwill, Confidential Information and otherlegitimate interests of the Company and its Affiliates; that each and every oneof those restraints is reasonable in respect to subject matter, length of timeand geographic area; and that these restraints, individually or in theaggregate, will not prevent the Executive from obtaining other suitableemployment during the period in which the Executive is bound by theserestraints.  The Executive further agreesthat the Executive will never assert, or permit to be asserted on the Executive’sbehalf, in any forum, any position contrary to the foregoing.   The Executive further acknowledges that,were the Executive to breach any of the covenants contained in Sections 7, 8 or9 hereof, the damage to the Company would be irreparable.  The Executive therefore agrees that the Company,in addition to any other remedies available to it, shall be entitled topreliminary and permanent injunctive relief against any breach or threatenedbreach by the Executive of any of said covenants, without having to post bond.  The parties further agree that, in the eventthat any provision of Section 7, 8 or 9 hereof shall be determined by any courtof competent jurisdiction to be unenforceable by reason of its being extendedover too great a time, too large a geographic area or too great a range of activities,such provision shall be deemed to be modified to permit its enforcement to themaximum extent permitted by law.

# 11.           ConflictingAgreements.  The Executive herebyrepresents and warrants that the execution of this Agreement and theperformance of the Executive’s obligations hereunder will not breach or be inconflict with any other agreement to which the Executive is a party or is boundand that the Executive is not now subject to any covenants against competitionor similar covenants that would affect the performance of the Executive’sobligations hereunder.  The Executivewill not disclose to or use on behalf of the Company any proprietaryinformation of a third party without such party’s consent.

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# 12.           Indemnification.  The Executive shall be entitled, at all times(including after the termination of this Agreement for any reason), to thebenefit of the maximum indemnification and advancement of expenses availablefrom time to time under the Company’s certificate of incorporation and Bylaws,and if not set forth therein, to the maximum extent available under the laws ofthe State of Delaware. In addition, the Company shall maintain in full forceand effect the directors’ and officers’ liability insurance policy currently ineffect or such other insurance with reputable insurance carriers which mayprovide for a reduced level of coverage for the Executive, provided that suchcoverage is identical to that provided by the Company for the benefit of theother directors of the Company and its other executive officers.  The Executive agrees to promptly notify theCompany of any actual or threatened claim arising out of or as a result of theExecutive’s employment with the Company. The Executive hereby represents and warrants to the Company that, as ofthe date hereof, the Executive has no and is aware of no such claim.

# 13.           Definitions.  Words or phrases which are initiallycapitalized or are within quotation marks shall have the meanings provided inthis Section 13 and as provided elsewhere herein.  For purposes of this Agreement, the followingdefinitions apply:

## (a)           “Affiliates” means all persons andentities directly or indirectly controlling, controlled by or under commoncontrol with the Company, where control may be by either management authorityor equity interest.

## (b)           “Change of Control” means (i) a saleof all or substantially all of the assets of the Company, Cellu Paper or CelluParent to a Person in which the shareholders of Cellu Parent immediately priorto such transaction do not, directly or indirectly, own securities representingmore than 50% of the voting power of the Person acquiring such assetsimmediately following the transaction, (ii) a sale of shares of capital stockof Cellu Parent by Cellu Parent or its shareholders resulting in more than 50%of the voting power of Cellu Parent being held, directly or indirectly, by aPerson other than the shareholders of Cellu Parent immediately prior to suchsale, (iii) a sale by Cellu Parent of the equity securities of Cellu Paper orthe Company resulting in more than 50% of the voting power of Cellu Paper orCellu Tissue (as the case may be) being held directly or indirectly by a Personother than Cellu Parent or the shareholders of Cellu Parent immediately priorto such sale, or (iv) a merger or consolidation of the Company, Cellu Paper orCellu Parent with or into another Person, if and only if, after such merger orconsolidation, more than 50% of the voting power of the Company, Cellu Paper orCellu Parent (as the case may be) is directly or indirectly owned by a Personother than Cellu Parent or the shareholders of Cellu Parent immediately priorto such merger or consolidation.  For theavoidance of doubt, the transaction contemplated by the Merger Agreement shallnot constitute a Change of Control.

## (c)            “Intellectual Property” meansinventions, discoveries, developments, methods, processes, compositions, works,concepts and ideas (whether or not patentable or copyrightable or constitutingtrade secrets) conceived, made, created, developed or reduced to practice bythe Executive (whether alone or with others, whether or not during normalbusiness

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## hours or on or off Company premises) during the Executive’s employmentand during the period of six (6) months immediately following termination ofthe Executive’s employment that relate to either the Products or anyprospective activity of the Company or any of its Affiliates.

## (d)            “Person” means an individual, acorporation, an association, a partnership, an estate, a trust and any otherentity or organization, other than the Company or any of its Affiliates.

## (e)           “Products” mean all products planned,researched, developed, tested, manufactured, sold, licensed, leased orotherwise distributed or put into use by the Company or any of its Affiliates,together with all services provided or planned by the Company or any of itsAffiliates, during the Executive’s employment.

## (f)            “Restricted Capacity” means aposition with a competitor of the Company or its Subsidiaries which is the sameor comparable to the position the Executive held with the Company or in whichthe Confidential Information or customer goodwill which the Executive createdor to which the Executive had access during the Executive’s employment with theCompany would give that competitor an unfair competitive advantage.  For the avoidance of doubt, this definitionas used herein shall in no way diminish the Executive’s obligations underSection 7.

# 14.           Withholding.  All payments made by the Company under thisAgreement shall be reduced by any tax or other amounts required to be withheldby the Company under applicable law.

# 15.           Assignment.  Neither the Company nor the Executive maymake any assignment of this Agreement or any interest herein, by operation oflaw or otherwise, without the prior written consent of the other; provided,however, that the Company may assign its rights and obligations underthis Agreement without the consent of the Executive in the event that theCompany shall hereafter affect a reorganization, consolidate with, or mergeinto, any other Person or transfer all or substantially all of its propertiesor assets to any other Person.  ThisAgreement shall inure to the benefit of and be binding upon the Company and theExecutive, their respective successors, executors, administrators, heirs andpermitted assigns.

# 16.           Severability.  If any portion or provision of this Agreementshall to any extent be declared illegal or unenforceable by a court ofcompetent jurisdiction, then the remainder of this Agreement, or theapplication of such portion or provision in circumstances other than those asto which it is so declared illegal or unenforceable, shall not be affectedthereby, and each portion and provision of this Agreement shall be valid andenforceable to the fullest extent permitted by law.

# 17.           Waiver.  No waiver of any provision hereof shall beeffective unless made in writing and signed by the waiving party.  The failure of either party to require theperformance of any term or obligation of this Agreement, or the waiver byeither party of any breach of this

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Agreement, shall not prevent any subsequent enforcement of such term orobligation or be deemed a waiver of any subsequent breach.

 

# 18.           Notices.  Any and all notices, requests, demands andother communications provided for by this Agreement shall be in writing andshall be effective when delivered in person or deposited in the United Statesmail, postage prepaid, registered or certified, and addressed to the Executiveat the Executive’s last known address on the books of the Company or, in thecase of the Company, at its principal place of business, attention of theChairman of the Board, or to such other address as either party may specify bynotice to the other actually received.

# 19.           EntireAgreement.  This Agreementconstitutes the entire agreement between the parties and supersedes andterminates all prior communications, agreements and understandings, written ororal, with respect to the terms and conditions of the Executive’s employmentwith the Company.

# 20.           Amendment;Section 409A.  This Agreement may beamended or modified only by a written instrument signed by the Executive and byan expressly authorized representative of the Company.  The parties acknowledge that certain provisions of this Agreementmay be required to be amended, following the issuance of additional guidance bythe Internal Revenue Service with respect to Section 409A, to avoid thepossible imposition of additional tax under Section 409A with respect tocertain payments and benefits under this Agreement.  The Company agrees that it will notunreasonably withhold its consent to any such amendments which in itsdetermination are (i) feasible and necessary to avoid adverse tax treatmentunder Section 409A for the Executive, and (ii) not adverse to the interests ofthe Company.

# 21.           DisputeResolution.  In theevent of any dispute relating to Executive’s employment, the terminationthereof, or this Agreement, other than a dispute in which the primary reliefsought is an equitable remedy such as an injunction, the parties shall berequired to have the dispute, controversy or claim settled by alternativedispute resolution conducted by JAMS (or, if JAMS is not available, anothermutually agreeable alternative dispute resolution organization), in the city ofExecutive’s principal place of employment. Any award entered by JAMS (or such other organization) shall be final,binding and nonappealable, and judgment may be entered thereon by either partyin accordance with applicable law in any court of competent jurisdiction.  This Section 21 shall be specificallyenforceable.  JAMS (or such otherorganization) shall have no authority to modify any provision of thisAgreement.  The Company shall reimbursethe Executive the Executive’s reasonable attorney’s fees and costs in the eventthat the Executive prevails in an action brought by the Executive’s against theCompany to enforce the terms of this Agreement. THE PARTIES IRREVOCABLY WAIVE ANY RIGHT TO TRIAL BY JURY AS TO ALLCLAIMS HEREUNDER.

# 22.           Headings.  The headings and captions in this Agreementare for convenience only and in no way define or describe the scope or contentof any provision of this Agreement.

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# 23.           Counterparts.  This Agreement may be executed in two or morecounterparts, each of which shall be an original and all of which togethershall constitute one and the same instrument.

# 24.           GoverningLaw, Choice of Forum.  This is a New York contract and shall beconstrued and enforced under and be governed in all respects by the laws of theState of New York, without regardto the conflict of laws principles thereto. The parties consent to the jurisdiction of any state or federal courtsitting in the State of New Yorkand waive any objection either party may have to the laying of venue of anysuch suit, action or proceeding in any such court.  The Company and the Executive each alsoirrevocably and unconditionally consent to service of any process, pleadings,notices or other papers in a manner permitted by the notice provisions ofSection 18 of this Agreement.

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IN WITNESSWHEREOF, this Agreement has been executed as a sealed instrument by theCompany, by its duly authorized representative, and by the Executive, as of thedate first above written.
| THE EXECUTIVE:      | THE COMPANY:                |
|---------------------|-----------------------------|
|                |                        |
|                | CELLU TISSUE HOLDINGS, INC. |
|                |                        |   |
|                |                        |   |
| /s/ David J. Morris |                        | By: | /s/ Russell C. Taylor |   |
| David J. Morris     |                        |   |
|                | Title:                      | President & CEO |   |
|                     |                             |  |  |  |  |

 

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EXHIBIT A

THE SHARES RECEIVEDPURSUANT TO THIS STOCK OPTION SHALL BE SUBJECT TO THE RIGHTS, RESTRICTIONS, ANDOBLIGATIONS APPLICABLE TO SUCH SECURITIES, ALL AS PROVIDED IN THE SHAREHOLDERSAGREEMENT DATED AS OF JUNE 12, 2006 BETWEEN THE COMPANY AND IT SHAREHOLDERS, ASAMENDED AND IN EFFECT FROM TIME TO TIME (THE “SHAREHOLDERS AGREEMENT”).

Mr. David J. Morris

**CELLUPARENT CORPORATION2006 STOCK OPTION AND RESTRICTED STOCK PLAN**

Restricted StockAward Agreement

Cellu Parent Corporationc/o Weston PresidioPier 1, Bay 2San Francisco, CA 94111

Attn:       Chief Executive Officer

Ladies and Gentlemen:

The undersigned(i) acknowledges that he has received and award (the “Award”) of restrictedstock From Cellu Parent Corporation (the “Company”) under the Cellu parent Corporation2006 Stock Option and Restricted Stock Plan (the “Plan”), subject to the termsset forth below and in the Plan; (ii) further acknowledges receipt of a copyo0f the Plan as in effect on the date hereof; and (iii) agrees with the Companyas follows:

1.               *Effective Date*.  This Agreement shall take effect as of August6, 2007, which is the date of the grant of the Award.

2.               *Shares Subject to Award*.  The Award consists of 700 shares (the “Shares”)of common stock of the Company (“Stock”). The undersigned’s rights to the Shares are subject to the restrictionsdescribed in this Agreement and the Plan (which is incorporated herein byreference with the same effect as if set forth herein in full) in addition tosuch other restrictions, if any, as may be imposed by law.

3.               *Meaning of Certain Terms*.  Except as otherwise expressly provided, allterms used herein shall have the same meaning as in the Plan.  The term “vest” as used herein with respectto any Shares means the lapsing of the restrictions described herein withrespect to such Share.

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4.               *Nontransferability of Shares*.  The Shares acquired by the undersignedpursuant to this Agreement shall not be sold, transferred, pledged, assigned orotherwise encumbered or disposed of except as provided below and in the Plan.

5.               *Forfeiture Risk*.  If the undersigned ceases to be employed bythe Company and its subsidiaries any then outstanding and unvested Sharesacquired by the undersigned hereunder shall be automatically and immediatelyforfeited; *provided, however,* that if theundersigned ceases to be employed by the Company due to the undersigned’s deathor disability, fifty percent (50%) of the Shares granted under this Agreementthat are not already vested shall vest; *and further provided*that if the undersigned ceases to be employed by the Company by reason of theCompany’s election not to renew the undersigned’s employment agreement with theCompany dated August 6, 2007 (the “Employment Agreement”) and at the time theCompany elects not to renew such Employment Agreement there exists no Cause forthe termination of the undersigned, one hundred percent (100%) of the Sharesgranted under this Award that are not then already vested shall vest.  For purposes of the preceding sentence, Causeshall be defined in the Employment Agreement. The undersigned hereby (i) appoints the Company as the attorney-in-factof the undersigned to take such actions as may be necessary or appropriate toeffectuate a transfer of the record ownership of any such shares that areunvested and forfeited hereunder, (ii) agrees to deliver to the Company, as aprecondition to the issuance of any certificate or certificates with respect tounvested Shares, and (iii) agrees to sign such other powers and take such otheractions as the Company may reasonably request to accomplish the transfer orforfeiture of any unvested Shares that are forfeited hereunder.

6.               *Retention of Certificate*.  Any certificates representing unvested Sharesshall be held by the Company.  Ifunvested Shares are held in book entry form, the undersigned agrees that theCompany may give stop transfer instructions to the depository to ensurecompliance with the provisions hereof.

7.               *Vesting of Shares*.  The Shares acquired hereunder shall vest inaccordance with the provisions of this Paragraph 7 and applicable provisions ofthe Plan, as follows:

25% of the Shares on and after one (1) yearfrom the Effective Date;

an additional 25% of the Shares on and aftertwo (2) years from the Effective Date;

an additional 25% of the Shares on and afterthree (3) years from the Effective Date; and

an additional 25% of the Shares on and afterfour (4) years from the Effective Date.

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Notwithstanding the foregoing, no Shares shall vest on any vesting datespecified above unless the undersigned is then, and since the date of grant hascontinuously been, employed by the Company or its subsidiaries.

8.               *Shareholders Agreement*.  The granting of this Award and the issuanceof Shares received under this Award shall be subject to the Plan and theShareholders Agreement, and the issuance of this Award shall be conditionalupon the exe3cution and delivery by the undersigned of the ShareholdersAgreement.  Any Shares received underthis Award shall be subject to the rights, restrictions and obligationsapplicable to options and shares of Stock of the Company as provided from timeto time in such Shareholders Agreement.

9.               *Legend*.  Any certificates representing unvested Sharesshall be held by the Company, and such certificate shall contain a legendsubstantially in the following form:

THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES OF STOCKREPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS (INCLUDINGFORFEITURE) OF THE CELLU PARENT CORPORATION 2006 STOCK OPTION AND RESTRICTEDSTOCK PLAN AND A RESTRICTED STOCK AWARD AGREEMENT ENTERED INTO BETWEEN THEREGISTERED OWNERAND CELLU PARENT CORPORATION. COPIES OF SUCH PLAN AND AGREEMENT ARE ON FILE IN THE OFFICES OF CELLUPARNET CORPORATION.

THE SECURITITES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMSAND CONDITIONS, INCLUDING CERTAIN RESTRICTIONS ON TRANSFER, OR A SHAREHOLDERSAGREEMENT DATED AS OF JUNE 12, 2006 BETWEEN CELLU TISSUE CORPORATION AND ITSSHAREHOLDERS, AS AMENDED FROM TIME TO TIME, AND NONE OF SUCH SECURITIES, OR ANYINTEREST THEREIN, SHALL BE TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISEDISPOSED OF EXCEPT AS PROVIDED IN THAT AGREEMENT.  A COPY OF THE SHAREHOLDERS AGREEMENT IS ONFILE IN THE OFFICES OF CELLU PARENT CORPORATION.

As soon as practicable following the vesting of any such Shares theCompany shall cause a certificate or certificates covering such Shares, withoutthe aforesaid legend, to be issued and delivered to the undersigned.  If any Shares are held in book-entry form,the Company may take such steps as it deems necessary or appropriate to recordand manifest the restrictions applicable to such Shares.

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10.         *Dividends,etc.*.  The undersignedshall be entitled to (i) receive any and all dividends or other distributionspaid with respect to those Shares of which he is the record owner on the recorddate for such dividend or other distribution, and (ii) vote any Shares of whichhe is the record owner on the record date for such vote; *provided,however*, that any property (other than cash) distributed withrespect to a share of Stock (the “associated share”) acquired hereunder,including without limitation a distribution of Stock by reason of a stockdividend, stock split or otherwise, or a distribution of other securities withrespect to an associated share, shall be subject to the restrictions of thisAgreement in the same manner and for so long as the associated share remainssubject to such restrictions, and shall be promptly forfeited if and when theassociated share is so forfeited; *and further provided,*that the Administrator may require that any cash distribution with respect tothe Shares other than a normal cash dividend be placed in escrow or otherwisemade subject to such restrictions as the Administrator deems appropriate tocarry out the intent of the Plan, consistent with Section 409A of the Code tothe extent applicable.  References inthis Agreement to the Shares shall refer, *mutatis mutandis,*to any such restricted amounts.

11.         *Sale ofVested Shares*.  Theundersigned understands that he will be free to sell any Share once it hasvested, subject to (i) satisfaction of any applicable tax withholdingrequirements with respect to the vesting or transfer of such Share; (ii) thecompletion of any administrative steps (for example, but without limitation,the transfer of certificates) that the Company may reasonably impose; (iii)applicable requirements of federal and state securities laws; and (iv) theterms and conditions of the Shareholders Agreement.

12.         *CertainTax Matters*.  Theundersigned expressly acknowledges the following:

a.               The undersigned hasbeen advised to confer promptly with a professional tax advisor to considerwhether the undersigned should make a so-called “83(b) election” with respectto the Shares.  Any such election, to beeffective, must be made in accordance with applicable regulations and withinthirty (30) days following the date of this Award.  The Company has made no recommendation to theundersigned with respect to the advisability of making such an election.  In the event that the undersigned makes an83(b) election and incurs a tax liability as a result, the Company will, on adate prior to the date on which the taxes must be paid or withheld, make a lumpsum payment (a “Gross Up Payment”) to the undersigned that will be sufficient,after giving effect to federal, state, and local income taxes with respect tothe Gross Up Payment, to pay any marginal increase in tax liability of theundersigned as a result of such 83(b) election. For this purpose, a tax liability will be treated as incurred only tothe extent that the inclusion of the income by reason of the grant willincrease the undersigned’s tax liability for the year of inclusion, aftergiving effect

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to all losses, credits, carry-forwards, carry-backs,etc. that the undersigned may be able to utilize in such year and withoutregard to any decrease in losses, credits, carry-forwards, carry-backs, etc.and the effect of any such decrease on other tax years.

b.              The award or vestingof the Shares acquired hereunder, and the payments of dividends with respect tosuch Shares, may give rise to “wages” subject to withholding.  The undersigned expressly acknowledges andagrees that his rights hereunder are subject to his promptly paying to theCompany in cash (or by such other means as may be acceptable to the Company inits discretion, including, if the Administrator so determines, by the deliveryof previously acquired Stock or shares of Stock acquired hereunder or by thewithholding of amounts from any payment hereunder) all taxes required to be withheldin connection with such award, vesting or payment.

 
|                                      | Very truly  yours, |
|--------------------------------------|--------------------|
|                                 |               |
|                                 |               |   |
|                                 | David J. Morris    |
|                                 |               |
|                                 |               |
| Dated:                               |
|                                 |
| The foregoing  Restricted Stock      |
| Award Agreement  is hereby accepted: |
|                                 |
| CELLU PARENT CORPORATION             |
|                                 |
|                                 |
| By:                                  |               |   |
| Name: R. Sean  Honey                 |
| Title: President                     |
|                                      |                    |  |  |  |

 

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