**Exhibit 10.7**

 

**THIRD AMENDMENT**

 

THIRD AMENDMENT, dated as of September 26, 2008(this “Amendment”), to the CREDIT AGREEMENT, dated as of June 12,2006 (as amended on March 21, 2007 and July 2, 2008 and as furtheramended, supplemented or otherwise modified from time to time, the “CreditAgreement”), by and among CELLU PAPER HOLDINGS, INC., CELLU TISSUEHOLDINGS, INC. (the “Borrower”), INTERLAKE ACQUISITION CORPORATIONLIMITED, the Loan Guarantors party thereto, the lenders party thereto (the “Lenders”),JPMORGAN CHASE BANK, N.A., as US Administrative Agent (in such capacity, the “AdministrativeAgent”) and JPMORGAN CHASE BANK, N.A., TORONTO BRANCH, as CanadianAdministrative Agent (the “Canadian Administrative Agent”).

 

**RECITALS**

 

A.            WHEREAS, theBorrower has requested that the Lenders increase the amount of the CanadianCommitments by $2,000,000 and reduce the amount of the US Commitments by anequal amount;

 

B.            WHEREAS, theLenders are willing to agree to such amendments and provide certain otherwaivers and amendments, in each casesubject to the terms and conditions setforth herein.

 

NOW, THEREFORE, in consideration of the foregoingRecitals and for other good and valuable consideration, the receipt andadequacy of which are hereby acknowledged, the parties hereto hereby agree asfollows:

 

**AGREEMENT**

 

1.            Defined Terms. Terms defined inthe Credit Agreement and used herein shall have the meanings given to them inthe Credit Agreement.

 

2.            Amendments toSection 1.01. Section 1.01 of the Credit Agreement is hereby amended by:

 

(a) inthe definition of “US Commitment”, deleting the amount “US$57,000,000”and substituting therefor the amount “US$55,000,000”; and

 

(b) inthe definition of “Canadian Commitment”, deleting the amount“US$3,000,000” and substituting therefor the amount “US$5,000,000”.

 

3.            Amendments toSection 5.09. Section 5.09 of the Credit Agreement is hereby amended by deletingthe word “A+” in the second line thereof and substituting therefor the word“A-”.

 

4.            Waiver. The Lendershereby waive for the purpose of Section 2 of this Amendment therequirement under Section 2.10(c) of the Credit Agreement that eachreduction of the US Commitments be in a minimum amount equal to US$3,000,000.

 

5.            Condition toEffectiveness. This Amendment shall become effective on the date on which theAdministrative Agent shall have received this Amendment, duly executed anddelivered by the Loan Parties and the Lender.

 

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6.            Counterparts. This Amendmentmay be executed in any number of counterparts, each of which when so executedshall be deemed to be an**original and all ofwhich when taken together shall constitute one and the same agreement.

 

7.            Representations andWarranties. The Borrower hereby represents and warrants to the Lenders and theAdministrative Agent as follows:

 

(a)           The Borrower has the corporate power andauthority and the legal right to execute, deliver and perform this Amendmentand has taken all necessary corporate action to authorize the execution,delivery and performance of this Amendment. This Amendment has been dulyexecuted and delivered on behalf of the Borrower and constitutes the legal,valid and binding obligation of the Borrower enforceable against the Borrower inaccordance with its terms, subject to applicable bankruptcy, insolvency,reorganization, moratorium or other laws affecting creditors’ rights generallyand subject to general principles of equity, regardless of whether consideredin a proceeding in equity or at law.

 

(b)           The representations and warranties of theBorrower set forth in Article III of the Credit Agreement as amendedhereby are true and correct in all material respects as of the date hereof.

 

8.            Fees, Costs andExpenses. The Borrower agrees to (i) pay to the Administrative Agent anyamendment fees previously agreed in connection with this Amendment and(ii) reimburse the Administrative Agent for all reasonable fees, costs andexpenses incurred by it in connection with this Amendment, including but notlimited to the reasonable fees, costs and expenses of counsel.

 

9.            Governing Law. This Amendmentand the rights and obligations of the parties hereunder shall be governed by,and construed and interpreted in accordance with, the laws of the State of NewYork.

 

*[Signaturepages follow]*

 

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IN WITNESS WHEREOF, the parties hereto have causedthis Amendment to be duly executed by their respective authorized officers asof the day and year first above written.

 
|   | CELLU PAPER HOLDINGS,  INC. |
|--------|-----------------------------|
|   |                        |
|   |                        |
|   | By:                         | /s/  David J. Morris |
|   |                        | Name:  David J. Morris |
|   |                        | Title:  Senior Vice President and Chief Financial  Officer |

 

 
|   | CELLU  TISSUE HOLDINGS, INC. |
|--------|------------------------------|
|   |                         |
|   |                         |
|   | By:                          | /s/  David J. Morris |
|   |                         | Name:  David J. Morris |
|   |                         | Title:  Senior Vice President and Chief Financial  Officer |

 

 
|   | INTERLAKE  ACQUISITION CORPORATION |
|--------|------------------------------------|
|   | LIMITED                            |
|   |                               |
|   |                               |
|   | By:                                | /s/  David J. Morris |
|   |                               | Name:  David J. Morris |
|   |                               | Title:  Senior Vice President and Chief Financial  Officer |

 

 
|   | CELLU  TISSUE LLC |
|--------|-------------------|
|   |              |
|   |              |
|   | By:               | /s/  David J. Morris |
|   |              | Name:  David J. Morris |
|   |              | Title:  Senior Vice President and Chief Financial  Officer |

 

 
|   | CELLU  TISSUE CORPORATION – NATURAL DAM |
|--------|----------------------------------------------|
|   |                                         |
|   |                                         |
|   | By:                                          | /s/  David J. Morris |
|   |                                         | Name:  David J. Morris |
|   |                                         | Title:  Senior Vice President and Chief Financial  Officer |

 

*Signature Page to Third Amendment*

 

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|   | CELLU  TISSUE CORPORATION – NEENAH |
|--------|-----------------------------------------|
|   |                                    |
|   |                                    |
|   | By:                                     | /s/  David J. Morris |
|   |                                    | Name:  David J. Morris |
|   |                                    | Title:  Senior Vice President and Chief Financial  Officer |

 

 
|   | COASTAL  PAPER COMPANY |
|--------|------------------------|
|   |                   |
|   | By:                    | Van  Paper Company, |
|   |                   | its  Managing Partner |
|   |                   |
|   | By:                    | /s/  David J. Morris |
|   |                   | Name:  David J. Morris |
|   |                   | Title:  Senior Vice President and Chief Financial  Officer |

 

 
|   | VAN  PAPER COMPANY |
|--------|--------------------|
|   |               |
|   |               |
|   | By:                | /s/  David J. Morris |
|   |               | Name:  David J. Morris |
|   |               | Title:  Senior Vice President and Chief Financial  Officer |

 

 
|   | VAN  TIMBER COMPANY |
|--------|---------------------|
|   |                |
|   |                |
|   | By:                 | /s/  David J. Morris |
|   |                | Name:  David J. Morris |
|   |                | Title:  Senior Vice President and Chief Financial  Officer |

 

 
|   | MENOMINEE  ACQUISITION CORPORATION |
|--------|------------------------------------|
|   |                               |
|   |                               |
|   | By:                                | /s/  David J. Morris |
|   |                               | Name:  David J. Morris |
|   |                               | Title:  Senior Vice President and Chief Financial  Officer |

 

 
|   | CELLU  TISSUE-CITYFOREST LLC |
|--------|------------------------------|
|   |                         |
|   |                         |
|   | By:                          | /s/  David J. Morris |
|   |                         | Name:  David J. Morris |
|   |                         | Title:  Senior Vice President and Chief Financial  Officer |

 

*Signature Page to Third Amendment*

 

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|   | CELLU  TISSUE - HAUPPAUGE, LLC |
|--------|--------------------------------|
|   |                           |
|   |                           |
|   | By:                            | /s/  David J. Morris |
|   |                           | Name:  David J. Morris |
|   |                           | Title:  Senior Vice President and Chief Financial  Officer |

 

 
|   | CELLU  TISSUE - THOMASTON, LLC |
|--------|--------------------------------|
|   |                           |
|   |                           |
|   | By:                            | /s/  David J. Morris |
|   |                           | Name:  David J. Morris |
|   |                           | Title:  Senior Vice President and Chief Financial  Officer |

 

*Signature Page to Third Amendment*

 

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|   | JPMORGAN  CHASE BANK, N.A., individually, as US       |
|--------|-------------------------------------------------------|
|   | Administrative  Agent, Issuing Bank, Swingline Lender |
|   | and  a Lender                                         |
|   |                                                  |
|   |                                                  |
|   | By:                                                   | /s/  John M. Hariaczyi |
|   |                                                  | Name:  John M. Hariaczyi |
|   |                                                  | Title:  Vice President |

 

 
|   | JPMORGAN  CHASE BANK, N.A., TORONTO                  |
|--------|------------------------------------------------------|
|   | BRANCH,  individually and as Canadian Administrative |
|   | Agent  and a Lender                                  |
|   |                                                 |
|   |                                                 |
|   | By:                                                  |   |
|   |                                                 | Name: |
|   |                                                 | Title: |

 

*Signature Page to Third Amendment*

 

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|   | JPMORGAN  CHASE BANK, N.A., individually, as US       |
|--------|-------------------------------------------------------|
|   | Administrative  Agent, Issuing Bank, Swingline Lender |
|   | and  a Lender                                         |
|   |                                                  |
|   |                                                  |
|   | By:                                                   |   |
|   |                                                  | Name: |
|   |                                                  | Title: |

 

 
|   | JPMORGAN  CHASE BANK, N.A., TORONTO                  |
|--------|------------------------------------------------------|
|   | BRANCH,  individually and as Canadian Administrative |
|   | Agent  and a Lender                                  |
|   |                                                 |
|   |                                                 |
|   | By:                                                  | /s/  Michael N. Tam |
|   |                                                 | Name:  Michael N. Tam |
|   |                                                 | Title:  Senior Vice President |

 

*Signature Page to Third Amendment*

 

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