**Exhibit 10.2**

AGREEMENT

AGREEMENT (this “Agreement”) made and enteredinto by and between Cellu Tissue Holdings, Inc., a Delaware corporation(the “Company”), and Ms. Dianne Scheu (the “Executive”),effective as of the Closing Date as defined in the Agreement and Plan ofMerger, dated May 8, 2006, (the “Merger Agreement”) by and amongCellu Parent Corporation, a Delaware corporation (“Cellu Parent”), CelluAcquisition Corporation, a Delaware corporation and a wholly owned subsidiaryof Cellu Parent Corporation (“Cellu Acquisition”), and Cellu Paper Holdings, Inc.,a Delaware corporation (“Cellu Paper”), and which is hereafter referredto as the “Effective Date.

WHEREAS, the Company is a wholly owned subsidiary ofCellu Paper; and Cellu Acquisition is a wholly owned subsidiary of CelluParent;

WHEREAS, the Merger Agreement contemplates that CelluAcquisition will merge with and into Cellu Paper, with Cellu Paper as thesurviving entity (the “Merger”);

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, prior to the closing under the MergerAgreement, the Executive was employed by the Company as its Chief FinancialOfficer; and

WHEREAS, subject to the terms and conditionshereinafter set forth, the Company wishes to employ the Executive as itsPresident of Finance and Chief Financial Officer and the Executive wishes toaccept such continued employment, effective as of the Closing;

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 forth in this Agreement, the Companyhereby offers and the Executive hereby accepts employment.

2.             Term.      Subject to earlier termination ashereinafter provided, the Executive’s employment hereunder shall be for a termof 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 orrenewed, is hereafter referred to as “the term of this Agreement” or “theterm hereof.”   Notwithstandinganything in this Agreement to the contrary, this Agreement shall be null, voidand without effect upon termination of the Merger Agreement prior toconsummation of the Merger.

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3.             Capacityand Performance.

## (a)         Subject to earliertermination as hereinafter provided, during the term of this Agreement, theExecutive shall serve the Company as its President of Finance and Chief FinancialOfficer, reporting to the Company’s Chief Executive Officer. In addition,during the term hereof, and without further compensation, the Executive shallserve as a director and/or officer of one or more of the Company’s Affiliates(as defined below) if so elected or appointed from time to time.

## (b)         During the termhereof, the Executive shall be employed by the Company on a full-time basis andshall perform such duties and responsibilities on behalf of the Company and itsAffiliates consistent with the Executive’s position with the Company as may bedesignated from time to time by the Board or by its designees.

## (c)         During the term of theExecutive’s employment, the Executive shall devote the Executive’s fullbusiness time and the Executive’s best efforts, business judgment, skill andknowledge exclusively to the advancement of the business and interests of theCompany and its Affiliates and to the discharge of the Executive’s duties andresponsibilities 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 Board in writing.

4.             Compensationand Benefits. As compensation for all services performed by the Executiveunder and during the term hereof and subject to performance of the Executive’sduties and of the obligations of the Executive to the Company and itsAffiliates, pursuant to this Agreement or otherwise:

## (a)         Base Salary. Duringthe term hereof, the Company shall pay the Executive a base salary at the rateof Two Hundred Thirty Thousand Dollars ($230,000) per annum, payable inaccordance with the normal payroll practices of the Company for its executivesand subject to increase (but not decrease) from time to time by the Board, inits discretion. The Board will review the Executive’s base salary each year. Suchbase salary, as from time to time increased, is hereafter referred to as the “BaseSalary”.

## (b)         Annual BonusCompensation.

##### (i)            During the term hereof and beginningwith the first fiscal year after the Closing Date, Executive shall be eligibleto receive an annual bonus of 100% of Base Salary (the “Target Bonus”),subject to the achievement of an EBITDA target set by the Chairman of the Board(after consultation with the Executive), approved by the Board and subject tothe terms and conditions of any applicable annual incentive program in effectfrom time to time (the “Incentive Plan”). The amount of any bonus awarded(whether more than or less than the Target Bonus) shall be determined by theBoard, based upon the achievement of the EBITDA target, after the completion ofthe 

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##### Company’sannual audit and the Board’s review thereof, and shall further be subject to theterms of the Incentive Plan as in effect from time to time. Except as otherwiseexpressly provided under this Agreement or under the terms of the IncentivePlan as in effect from time to time, the Executive shall not be entitled toearn bonus compensation for any period of service less than a full year, exceptas set forth in Sections 5(a), 5(b), 5(d), 5(e), 5(g) and 5(h).

### (ii)           Any bonus duehereunder shall be payable not later than two and one half months following thefiscal year for which the bonus was earned or as soon as is practicable withinthe meaning of Section 409A of the Internal Revenue Code of 1986, asamended, (“Section 409A”).

## (c)         Equity Arrangements.On the Effective Date, the Company will make a grant of restricted stock to theExecutive under the Company’s Stock Option and Restricted Stock Plan (the “Plan”).The terms and conditions of such restricted stock grant shall be subject to theterms of the Plan and the Restricted Stock Award Agreement in the form attachedhereto as Exhibit A.

## (d)         Vacations. Duringthe term hereof, the Executive shall be entitled to four (4) weeks ofvacation per annum, to be taken at such times and intervals as shall bedetermined by the Executive, subject to the reasonable business needs of theCompany.

## (e)         Other Benefits.During the term hereof and subject to any contribution therefor generallyrequired of employees of the Company, the Executive shall be entitled toparticipate in any and all employee benefit plans from time to time in effectfor employees of the Company generally, except to the extent such plans are ina category of benefit otherwise provided to the Executive. Such participationshall be subject to (i) the terms of the applicable plan documents, (ii) generallyapplicable Company policies and (iii) the discretion of the Board or anyadministrative or other committee provided for in or contemplated by such plan.The Company may alter, modify, add to or delete its employee benefit plans atany time as it, in its sole judgment, determines to be appropriate, withoutrecourse by the Executive.

## (f)          Perquisites. Duringthe term hereof, the Executive shall be entitled to receive any and allperquisites in effect from time to time for senior executives of the Companygenerally, except to the extent such perquisite is otherwise provided to theExecutive. Such receipt shall be subject to (i) generally applicableCompany policies and (ii) the discretion of the Board. The Company mayalter, modify, add to or delete any such perquisite at any time as it, in its solejudgment, determines to be appropriate without recourse by the Executive.

## (g)         AutomobileAllowance. During the term hereof, the Company will pay the Executive anautomobile allowance of Six Hundred and Fifty Dollars ($650.00) per month,payable in accordance with the normal payroll practices of the Company for itsexecutives and subject to increase (but not decrease) from time to time by theBoard, in its discretion.

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## (h)         Term Life Insurance.During the term hereof, and, except as otherwise provided herein, for a periodof one (1) year thereafter, the Company shall bear the cost of a term lifeinsurance policy covering Executive in the amount of $1,000,000. All benefitsof such term life insurance policy shall inure to the Executive’s designatedbeneficiaries. Such term life insurance policy shall become effective as soonas possible after Executive has complied with the requirements of the insurancecompany underwriting such policy (including but not limited to submission toand satisfactory results of a physical evaluation).

## (i)          Business Expenses.The Company shall pay or reimburse the Executive for reasonable, customary andnecessary business expenses incurred or paid by the Executive in theperformance of the Executive’s duties and responsibilities hereunder, subjectto such reasonable substantiation and documentation as may be specified by theBoard or Company policy from time to time.

5.             Terminationof Employment and Severance Benefits. The Executive’s employment hereundershall terminate under the following circumstances:

## (a)         Death. In theevent of the Executive’s death during the term hereof, the Executive’semployment hereunder shall terminate and the Company shall pay or provide tothe Executive’s designated beneficiary or, if no beneficiary has beendesignated by the Executive, to the Executive’s estate:  (i) any earned, but unpaid, Base Salarythrough the date of termination; (ii) any earned, but unpaid annual bonusfor any fiscal year prior to the fiscal year of the Executive’s termination; (iii) apro rata portion (based on the number of days preceding the Executive’stermination in the fiscal year of termination) of the Target Bonus; (iv) alump sum equal to the lesser of (A) twelve (12) months of Base Salary or (B) BaseSalary for the remainder of the term hereof; and (v) any unreimbursedbusiness expenses. In addition, subject to any employee contribution applicableto employees and their dependents generally, for the twelve (12) month periodfollowing termination, the Company shall continue to contribute to the premiumcost of coverage for the Executive’s dependents under the Company’s medical anddental plans provided that a timely COBRA election is made. The paymentsreferred to in clauses (i), (ii) and (v) above shall be payable in alump-sum within thirty (30) days after the date of termination. The Company’spayments under clauses (iii) and (iv) above, as well as the continuedcontribution toward medical and dental premiums, are expressly conditioned uponthe Executive’s designated beneficiary, or if no beneficiary has beendesignated, a representative of the Executive’s estate executing and deliveringto the Company a timely and effective separation agreement, including a generalrelease of claims, in form and substance satisfactory to the Company (“SeparationAgreement”). Payment under clauses (iii) and (iv) will be madewithin thirty (30) days after the Company’s receipt of such release of claimsin form and substance satisfactory to the Company. Other than as set forth inthis clause (a), the Company shall have no further obligation to the Executive’sbeneficiary or the Executive’s estate.

## (b)         Disability.

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### (i)            The Company mayterminate the Executive’s employment hereunder, upon notice to the Executive,in the event that the Executive becomes disabled during the Executive’semployment hereunder through any illness, injury, accident or condition ofeither a physical or psychological nature and, as a result, is unable toperform substantially all of the Executive’s material duties and responsibilitieshereunder for (x) ninety (90) consecutive calendar days or (y) onehundred and twenty (120) total days during any period of three hundred andsixty-five (365) consecutive calendar days. The Board may designate anotheremployee to act in the Executive’s place during any period of the Executive’sdisability.

### (ii)           If any questionshall arise as to whether during any period the Executive is disabled throughany illness, injury, accident or condition of either a physical or psycholog­icalnature so as to be unable to perform substantially all of the Executive’sduties and responsibilities hereunder, the Executive may, and at the request ofthe Company shall, submit to a medical examination by a physician selected bythe Company to whom the Executive or the Executive’s duly appointed guardian,if any, has no reasonable objection to determine whether the Executive is sodisabled and such determination shall for the purposes of this Agreement beconclusive of the issue. If such question shall arise and the Executive shallfail to submit to such medical examination, the Company’s determination of theissue shall be binding on the Executive.

### (iii)          Upon the giving ofnotice of termination of the Executive’s employment due to disabilityhereunder, the Company shall have no further obligation or liability to theExecutive, other than for (i) any earned, but unpaid, Base Salary throughthe date of termination; (ii) any earned, but unpaid annual bonus for anyfiscal year prior to the fiscal year of the Executive’s termination; (iii) apro rata portion (based on the number of days preceding the Executive’stermination in the fiscal year of termination) of the Target Bonus; (iv) alump sum payment equal to the lesser of (A) twelve (12) months of BaseSalary or (B) Base Salary for the remainder of the term hereof; and (v) anyunreimbursed business expenses. In addition, (x) the Company shallcontinue the benefits contemplated by Section 4(h) for the periodcontemplated therein, and (y) subject to any employee contributionapplicable to active employees and their dependents generally, for the twelve(12) month period following termination, the Company shall continue tocontribute to the premium cost of coverage for the Executive and the Executive’sdependents under the Company’s medical and dental plans provided that a timelyCOBRA election is made. The payments referred to in clauses (i), (ii) and (v) aboveshall be payable in a lump-sum within thirty (30) days after the date oftermination. The Company’s payments under clauses (iii) and (iv) above,as well as the continued contribution toward medical and dental premiums, areexpressly conditioned upon the Executive (or the Executive’s duly appointedguardian, if any) executing and delivering to the Company a timely and effectiveSeparation 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 in this clause (b), the Company shall haveno further obligation to the Executive.

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## (c)         By the Company forCause. The Company may terminate the Executive’s employment hereunder forCause at any time upon notice to the Executive setting forth in reasonabledetail the nature of such Cause. The following, as determined by the Board inits reasonable judgment, shall constitute Cause for termination:

### (i)            the Executive’s repeated and willfulrefusal or failure (other than during periods of illness, disability orvacation) to perform the Executive’s duties hereunder or under any lawfuldirective of the Board (consistent with the terms of this Agreement;

### (ii)           the Executive’s willful misconduct orgross neglect in the performance of the Executive’s duties hereunder which ineither case is materially injurious to the Company or any of its Subsidiaries,monetarily or otherwise;

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

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

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

### (vi)          any other conductthat involves 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 shallcommence against Executive and/or Cellu Tissue an action, suit, proceeding ordemand arising from an alleged violation of a non-competition or other similaragreement between Executive and such previous employer.

##### For purposes of this Section 5(c),no act, or failure to act, on the Executive’s part, will be considered “willful”unless done or omitted to be done by him not in good faith and without areasonable belief that the Executive’s action or omission was in furtherance ofthe Company’s business. If the Company desires to terminate the Executive’semployment pursuant to clause (i), (ii), (iii) or (v) above, it shallfirst give the Executive written notice of the facts and circumstancesproviding Cause and shall allow the Executive no less than twenty (20) days (x) inthe case of a proposed termination pursuant to clause (i), (ii) or (iii) aboveto remedy, cure or rectify the situation giving rise to Cause and (y) inthe case of a proposed termination pursuant to clause (v) above to explainthe circumstances of the Executive’s actions or to show that the circumstancesunderlying the indictment do not constitute the type of felony described inclause (v). Termination by the Company for Cause pursuant to clause (iv) abovemay be effected by 

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##### written notice of theCompany to the Executive. Upon the giving of notice of termination ofthe Executive’s employment hereunder for Cause, the Company shall have nofurther obligation to the Executive, other than for (i) Base Salaryearned, but unpaid at the date of termination, (ii) any earned, but unpaidannual bonus for any fiscal year prior to the fiscal year of termination of theExecutive’s employment; and (iii) any unreimbursed business expenses.

## (d)         By the Companywithout Cause. The Company may terminate the Executive’s employmenthereunder without Cause at any time upon notice to the Executive. In the eventof such termination, the Company shall have no further obligation or liabilityto the Executive, other than for (i) any earned, but unpaid, Base Salarythrough the date of termination; (ii) any earned, but unpaid annual bonusfor any fiscal year prior to the fiscal year of the Executive’s termination; (iii) apro rata portion (based on the number of days preceding the Executive’stermination in the fiscal year of termination) of the Target Bonus; (iv) alump sum equal to twenty-four (24) months of Base Salary; (v) a lump sumequal to one times the Target Bonus; and (vi) any unreimbursed businessexpenses. In addition, (x) the Company shall continue the benefitscontemplated by Section 4(h) for the period contemplated therein, and(y) subject to any employee contribution applicable to employees and theirdependents generally, for the twelve (12) month period following termination,or if earlier, until the date that the Executive becomes eligible for coveragewith a subsequent employer, 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 in clauses (i), (ii) and (vi) aboveshall be payable in a lump-sum within thirty (30) days after the date oftermination. The Company’s payments under clauses (iii), (iv) and (v) above,as well as the continued contribution toward medical and dental premiums, areexpressly conditioned upon the Executive executing and delivering to theCompany a timely and effective Separation Agreement. Payment under clauses(iii), (iv) and (v) will be made within thirty (30) days after theCompany’s receipt of the Separation Agreement. Other than as set forth in thisclause (d), the Company shall have no further obligation to the Executive.

## (e)         By the Executivefor Good Reason. The Executive may terminate the Executive’s employmenthereunder for Good Reason, provided that the Executive shall have given writtennotice setting forth in reasonable detail the nature of such Good Reason to theCompany upon the Executive’s becoming aware or at such time as Executive shouldhave been aware of the occurrence of any such event or condition, and theCompany shall not have fully corrected the situation within ten (10) daysafter such notice of Good Reason. The following shall constitute “GoodReason” for termination by the Executive:

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

### (ii)           any significant reduction by theCompany’s of the Executive’s title, duties or responsibilities (except inconnection with termination of the Executive’s 

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### employmentfor Cause, as a result of Disability, as a result of the Executive’s death orby the Executive other than for Good Reason);

### (iii)          a reduction by the Company in theExecutive’s Base Salary or any other compensation due hereunder; or

### (iv)          any material breach by the Company ofany other provision of this Agreement.

## If the Executive desires to terminate theExecutive’s employment with the Company pursuant to this Section 5(e), theExecutive shall first give written notice of the facts and circumstancesproviding Good Reason to the Company, and shall allow the company no less thantwenty (20) days to remedy, cure or rectify the situation giving rise to GoodReason. The Company’s failure to continue the Executive’s appointment orelection as a director or officer of any of its Affiliates, a change inreporting relationships resulting from the direct or indirect control of theCompany (or a successor corporation) by another corporation (in the absence ofan independent change constituting Good Reason as defined above) and anydiminution of the business of the Company or any of its Affiliates or any saleor transfer of equity, property or other assets of the Company or any of itsAffiliates (in the absence of an independent change constituting Good Reason asdefined above) shall not constitute Good Reason. In the event of termination inaccordance with this Section 5(e), then the Executive will be entitled toreceive the payments and benefits in accordance with Section 5(d) hereofprovided the Executive complies with the requirement of executing anddelivering the Separation Agreement. Other than as set forth in this clause(e), the Company shall have no further obligation to the Executive.

## (f)          By the ExecutiveWithout Good Reason. The Executive may terminate the Executive’s employmenthereunder at any time upon sixty (60) days’ written notice to the Company. Inthe event of termination of the Executive pursuant to this Section 5(f),the Board may elect to waive the period of notice, or any portion thereof, and,if the Board so elects, the Company will pay the Executive the Executive’s BaseSalary for the notice period (or for any remaining portion of the period). TheCompany shall also pay the Executive (i) any earned, but unpaid annualbonus for any fiscal year prior to the fiscal year of the termination of theExecutive’s employment, and (ii) any unreimbursed business expenses.

## (g)         Non-Renewal byCompany. The Company may elect not to renew this Agreement in accordancewith Section 2 above. In the event of such non-renewal for a reason otherthan Cause (as defined in Section 5(c) above), the Company shall haveno further obligation or liability to the Executive other than for (i) anyearned, but unpaid, Base Salary through the date of termination; (ii) anyearned, but unpaid annual bonus for any fiscal year prior to the fiscal year ofthe Executive’s termination; (iii) a pro rata portion (based on the numberof days preceding the Executive’s termination in the fiscal year oftermination) of the Target Bonus; (iv) a lump sum equal to twenty-four(24) months of Base Salary and (v) any unreimbursed business expenses. Inaddition, subject to any employee contribution applicable to employees andtheir dependents generally, for the twenty-four (24) month period following 

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## termination, or if earlier until the date that the Executive becomeseligible for coverage with a subsequent employer, the Company shall continue tocontribute to the premium cost of coverage for the Executive and the Executive’sdependents under the Company’s medical and dental plans provided that a timelyCOBRA election is made. The payments referred to in clauses (i), (ii) and (v) aboveshall be payable in a lump-sum within thirty (30) days after the date oftermination. The Company’s payments under clauses (iii) and (iv) above,as well as the continued contribution toward medical and dental premiums, areexpressly conditioned upon the Executive executing and delivering to theCompany a timely and effective Separation Agreement. Payment under clauses (iii) and(iv) will be made within thirty (30) days after the Company’s receipt ofsuch Separation Agreement. Other than as set forth in this clause (g), theCompany shall have no further obligation to the Executive or the Executive’sestate hereunder.

## (h)         Change ofControl/Gross Up Payment. The Company and the Executive agree that in theevent that any of the severance payments or severance benefits under Sections5(d), 5(e) or 5(g) of this Agreement might be characterized asparachute payments under Section 280G of the Internal Revenue Code of1986, as amended (“Section 280G”), the parties shall timely takereasonable steps to avoid the tax liability under Section 280G and Section 4999of the Internal Revenue Code of 1986, as amended (the “Code”) to theextent permitted by law. Accordingly, the Executive agrees to cooperate fullyin procuring a shareholder vote (including, but not limited to, providing anyrequired consents or waivers) to approve the severance payments or severancebenefits under this Agreement received, to be received by, or payable on behalfof, the Executive in satisfaction of the shareholder approval requirementsdescribed in Treas. Reg. Section 1.280G-1, Q&A-7, to theextent applicable. If the shareholder approval requirements described in Treas.Reg. Section 1.280G-1, Q&A-7 cannot be satisfied and ifthe Company determines that any of the severance payments or severance benefitsunder this Agreement received, to be received by, or payable on behalf of, theExecutive would be subject to the excise tax imposed by Section 4999 ofthe Code, (the “Excise Tax”), then the Company will, on or prior to thedate on which the Excise Tax must be paid or withheld, make an additional lumpsum payment (the “gross up payment”) to the Executive. The gross uppayment will be sufficient, after giving effect to federal, state, and localincome taxes (excluding any taxes imposed under or as a result of Section 409A,but otherwise including interest and penalties, if any) with respect to thegross up payment, to make the Executive whole for such taxes and associatedinterest and penalties imposed under or as a result of Section 4999. Determinationsunder this Section 5(h) will be made by the Company’ s independentauditors unless the Executive has reasonable objections to the use of thatfirm, in which case the determinations will be made by a comparable firm chosenby the Executive after consultation with the Company (the firm making thedeterminations to be referred to as the “Firm”). The determinations ofthe Firm will be binding upon the Company and the Executive except as thedeterminations are established in resolution (including by settlement) of acontroversy with the Internal Revenue Service to have been incorrect. All feesand expenses of the Firm will be paid by the Company. If the Internal RevenueService asserts a claim that, if successful, would require the Company to makea gross up payment or an additional gross up payment, the Company and theExecutive will cooperate fully in resolving the controversy with the InternalRevenue Service. The Company will make or advance such gross up payments as arenecessary 

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## to prevent the Executive from having to bear the cost of the paymentsto the Internal Revenue Service in the course of, or as a result of, thecontroversy. The Firm will determine the amount of such gross up payments oradvances and will determine after resolution of the controversy whether anyadvances must be returned by the Executive to the Company. The Company willbear all expenses of the controversy.

## (i)          Timing of Payments.If at the time of the Executive’s separation from service, the Executive is a “specifiedemployee,” as hereinafter defined, any and all amounts payable under this Section 5in connection with such separation from service that constitute deferredcompensation subject to Section 409A, as determined by the Company in itssole discretion, and that would (but for this sentence) be payable within sixmonths following such separation from service, shall instead be paid on thedate that follows the date of such separation from service by six (6) months.For purposes of the preceding sentence, “separation from service” shall bedetermined in a manner consistent with subsection (a)(2)(A)(i) of Section 409Aand the term “specified employee” shall mean an individual determined by theCompany to be a specified employee as defined in subsection (a)(2)(B)(i) ofSection 409A.

6.             Effectof Termination. The provisions of this Section 6 shall apply to atermination pursuant to Section 5 or otherwise.

## (a)         A condition precedentto the Company’s obligations to provide any severance payments or severancebenefits hereunder, including lump-sum payments, vesting of restricted stockand contributions toward health insurance premiums, shall be the Executive’sexecuting and delivering (and not revoking) a timely and effective SeparationAgreement, or in the case of a termination due to the death of the Executive,the Executive’s beneficiary or representative of the Executive’s estateexecuting and delivering a general release of claims in form and substancesatisfactory to the Company.

## (b)         Upon termination ofthe Executive’s employment with the Company, unless otherwise specificallyprovided herein, the Executive’s rights to benefits and payments under anybenefits or welfare plan or under any stock option, restricted stock, stockappreciation right, bonus unit, management or bonus incentive or other plan ofthe Company shall be determined in accordance with the terms and provisions ofsuch plans and any agreements under which such stock options, restricted stockor other awards were granted.

## (c)         Provisions of thisAgreement shall survive any termination if so provided herein or if necessary ordesirable fully to accomplish the purposes of such provision, including withoutlimitation the obligations of the Executive under Sections 7, 8 and 9 hereof. Theobligation of the Company to provide any severance payment or benefit isexpressly conditioned upon the Executive’s continued full performance ofobligations under Sections 7, 8 and 9 hereof. The Executive recognizes that,except as expressly provided in Sections 5(d), 5(e) or 5(g), no compen­sationis earned after termination of employment.

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## (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)         TheExecutive acknowledges that the Company and its Affiliates continually develop “TradeSecrets” and “Confidential Information” that the Executive may develop TradeSecrets and Confidential Information for the Company or its Affiliates and thatthe Executive may learn of Trade Secrets and Confidential Information during thecourse of employment. The Executive will comply with the policies andprocedures of the Company and its Affiliates for protecting Trade Secrets andConfidential Information and shall never disclose to any Person (except asrequired by applicable law or for the proper performance of the Executive’sduties and responsibilities to the Company and its Affiliates), or use for theExecutive’s own benefit or gain, any Trade Secrets or Confidential Informationobtained by the Executive incident to the Executive’s employment or otherassociation with the Company or any of its Affiliates.

## (b)         For purposes of thisAgreement, “Trade Secrets means all information that constitutes a trade secretwithin the meaning of the Georgia Trade Secrets Act, as amended (the “GeorgiaAct”). Under the Georgia Act, a trade secret is defined as:  “Information without regard to form,including, but not limited to, technical or non-technical data, a formula, apattern, a compilation, a program, a device, a method, a technique, a drawing,a process, financial data, financial plans, product plans, or a list of actualor potential customers or suppliers which is not commonly known by or availableto the public and which information:  (i) deriveseconomic value, actual or potential, from not being generally known to, and notbeing readily ascertainable by proper means by, other persons who can obtaineconomic value from its disclosure or use; and (ii) is the subject ofefforts that are reasonable under the circumstances to maintain its secrecy.”

## (c)            For purposes ofthis Agreement, “Confidential Information” means any and all informationof the Company and its Affiliates other than Trade Secrets that is notgenerally known by others with whom they compete or do business, or with whomthey plan to compete or do business and any and all information, not publiclyknown, which, if disclosed by the Company or its Affiliates would assist incompetition against them. Confidential Information includes without limitationsuch 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,financial performance 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 itsAffiliates have business relationships and those relationships. ConfidentialInformation also includes comparable information that the Company or any of itsAffiliates have received belonging to others or which was received by theCompany or any of its Affiliates with any understanding that it would not bedisclosed.

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## (d)           The foregoingobligations do not apply to the extent that the Confidential Information is orbecomes generally available to the public through no fault of the Executive. TheExecutive understands and agrees that the Executive’s obligations under thisAgreement with regard to Trade Secrets shall remain in effect for as long assuch information shall remain a trade secret under applicable law. TheExecutive acknowledge that the Executive’s obligations with regard to theConfidential Information shall remain in effect while employed or retained bythe Company and for three (3) years after the termination 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 shall safeguard all Documents and shall surrender tothe Company at the time the Executive’s employment terminates, or at suchearlier time or times as the Board or its designee may specify, all Documentsthen in the Executive’s possession or control.

8.    Assignmentof Rights to Intellectual Property. The Executive shall promptly and fullydisclose all Intellectual Property to the Company. The Executive hereby assignsand agrees to assign to the Company (or as otherwise directed by the Company)the Executive’s full right, title and interest in and to all IntellectualProperty. The Executive agrees to execute any and all applications for domesticand foreign patents, copyrights or other proprietary rights and to do suchother acts (including without limitation the execution and delivery of instrumentsof further assurance or confirmation) requested by the Company to assign theIntellectual Property to the Company and to permit the Company to enforce anypatents, copyrights or other proprietary rights to the Intellectual Property.The Executive will not charge the Company for time spent in complying withthese obligations. All copyrightable works that the Executive creates shall beconsidered “work made for hire.”

9.    RestrictedActivities. In exchange for good and valuable consideration including,without limitation, the grant of restricted stock hereunder, the Executiveagrees that some restrictions on the Executive’s activities during and afterthe Executive’s employment are necessary to protect the goodwill, ConfidentialInformation and other legitimate interests of the Company and its Affiliates:

## (a)         While the Executive is employed by theCompany and for a period of twenty-four (24) months after the Executive’semployment terminates (the “Non-Competition Period”), the Executive shall not,directly or indirectly, provide services in a Restricted Capacity to any Personwith respect to any product or service of that Person which directly competeswith, or may be used in substitution for, one or more of the Products of theCompany and/or its Subsidiaries with respect to which the Executive has hadaccess to Confidential Information or customer goodwill as a result of theExecutive’s employment or other association with the Company and/or itsSubsidiaries, but this restriction shall apply only with respect to thefollowing states:  Alabama, Alaska,Arizona, Arkansas, California, Colorado, Connecticut,

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##  

## 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 the research,development, testing, manufacture, sale, license, lease or distribution of allProducts and the Executive’s undertaking shall encompass all items, productsand services that may be used in substitution for Products.

## (b)         The Executive further agrees that whilethe Executive is employed by the Company and during the Non-Competition Period,the Executive will not, and will not assist anyone else to solicit for hiringany employee of the Company or any of its Affiliates, or seek to persuade anyemployee of the Company or any of its Affiliates to discontinue employment. Forpurposes of this Agreement, an “employee” of the Company or any of itsAffiliates is any person who was such at any time within the preceding oneyear.

## (c)         The Executive further agrees that whilethe Executive is employed by the Company and during the Non-Competition Period,the Executive will not directly or indirectly (1) solicit or encourage anycustomer of the Company or any of its Affiliates to terminate or diminish itsrelationship with them, or, (2) seek to persuade any customer orprospective customer of the Company or any of its Affiliates to conduct withany Person any business or activity which such customer or prospective customerconducts or could conduct with the Company; provided that these restrictionsshall apply (a) only with respect to those Persons who are or have been acustomer of the Company of any of its Affiliates at any time within theimmediately preceding one year period or whose business has been solicited onbehalf of the Company or any of its Affiliates by any of their officers,employees or agents within said one year period, other than by form letter,blanket mailing or published advertisement, and (b) only if the Executivehad a business relationship with such Person as a result of the Executive’semployment or other associations with the Company or one of its Affiliates. Notwithstandinganything to the contrary contained in this Section 9, after termination ofExecutive’s employment, this restriction shall apply only to customers orprospective customers located in those states within the United States in whichthe Company was doing business during the year preceding Executive’stermination.

## (d)         The Executive further agrees that whilethe Executive is employed by the Company and during the Non-Competition Periodthe Executive shall not willfully make false, misleading or disparagingstatements about the Company including, without limitation, its products,services, management, direct or indirect equity holders, employees andcustomers.

10.  Enforcementof Covenants. The Executive acknowledges that the Executive has carefullyread and considered all the terms and conditions of this Agreement, includingthe restraints imposed upon the Executive’s pursuant to Sections 7, 8 and 9hereof. The Executive agrees without reservation that each of the restraintscontained herein is necessary for the reasonable and proper protection of thegoodwill, Confidential Information and other legitimate 

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interests of the Companyand its Affiliates; that each and every one of those restraints is reasonablein respect to subject matter, length of time and geographic area; and thatthese restraints, individually or in the aggregate, will not prevent theExecutive from obtaining other suitable employment during the period in whichthe Executive is bound by these restraints. The Executive further agrees thatthe 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, werethe Executive to breach any of the covenants contained in Sections 7, 8 or 9hereof, the damage to the Company would be irreparable. The Executive thereforeagrees that the Company, in addition to any other remedies available to it,shall be entitled to preliminary and permanent injunctive relief against anybreach or threatened breach by the Executive of any of said covenants, withouthaving to post bond. The parties further agree that, in the event that anyprovision of Section 7, 8 or 9 hereof shall be determined by any court ofcompetent jurisdiction to be unenforceable by reason of its being extended overtoo great a time, too large a geographic area or too great a range ofactivities, such provision shall be deemed to be modified to permit itsenforcement to the maximum extent permitted by law.

11.  ConflictingAgreements. The Executive hereby represents and warrants that the executionof this Agreement and the performance of the Executive’s obligations hereunderwill not breach or be in conflict with any other agreement to which theExecutive is a party or is bound and that the Executive is not now subject toany covenants against competition or similar covenants that would affect theperformance of the Executive’s obligations hereunder. The Executive will notdisclose to or use on behalf of the Company any proprietary information of athird party without such party’s consent.

12.  Indemnification.The Executive shall be entitled, at all times (including after the terminationof this Agreement for any reason), to the benefit of the maximumindemnification and advancement of expenses available from time to time underthe Company’s certificate of incorporation and Bylaws, and if not set forththerein, to the maximum extent available under the laws of the State ofDelaware. In addition, the Company shall maintain in full force and effect thedirectors’ and officers’ liability insurance policy currently in effect or suchother insurance with reputable insurance carriers which may provide for areduced level of coverage for the Executive, provided that such coverage isidentical to that provided by the Company for the benefit of the other directorsof the Company and its other executive officers. The Executive agrees topromptly notify the Company of any actual or threatened claim arising out of oras a result of the Executive’s employment with the Company. The Executivehereby represents and warrants to the Company that, as of the date hereof, theExecutive has no and is aware of no such claim.

13.  Definitions.Words or phrases which are initially capitalized or are within quotation marksshall have the meanings provided in this Section 13 and as providedelsewhere herein. For purposes of this Agreement, the following definitionsapply:

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## (a)         “Affiliates”means all persons and entities directly or indirectly controlling, controlledby or under common control with the Company, where control may be by eithermanagement authority or equity interest.

## (b)         “Change of Control”means (i) a sale of all or substantially all of the assets of the Company,Cellu Paper or Cellu Parent to a Person in which the shareholders of CelluParent immediately prior to such transaction do not, directly or indirectly,own securities representing more than 50% of the voting power of the Personacquiring such assets immediately following the transaction, (ii) a saleof shares of capital stock of Cellu Parent by Cellu Parent or its shareholdersresulting in more than 50% of the voting power of Cellu Parent being held,directly or indirectly, by a Person other than the shareholders of Cellu Parentimmediately prior to such sale, (iii) a sale by Cellu Parent of the equitysecurities of Cellu Paper or the Company resulting in more than 50% of thevoting power of Cellu Paper or Cellu Tissue (as the case may be) being helddirectly or indirectly by a Person other than Cellu Parent or the shareholdersof Cellu Parent immediately prior to such sale, or (iv) a merger orconsolidation of the Company, Cellu Paper or Cellu Parent with or into anotherPerson, if and only if, after such merger or consolidation, more than 50% ofthe voting power of the Company, Cellu Paper or Cellu Parent (as the case maybe) is directly or indirectly owned by a Person other than Cellu Parent or theshareholders of Cellu Parent immediately prior to such merger or consolidation.For the avoidance of doubt, the transaction contemplated by the MergerAgreement shall not constitute a Change of Control.

## (c)         “IntellectualProperty” means inventions, discoveries, developments, methods, processes,compositions, works, concepts and ideas (whether or not patentable orcopyrightable or constituting trade secrets) conceived, made, created,developed or reduced to practice by the Executive (whether alone or withothers, whether or not during normal business hours or on or off Companypremises) during the Executive’s employment and during the period of six (6) monthsimmediately following termination of the Executive’s employment that relate toeither the Products or any prospective activity of the Company or any of itsAffiliates.

## (d)         “Person” meansan individual, a corporation, an association, a partnership, an estate, a trustand any other entity or organization, other than the Company or any of itsAffiliates.

## (e)         “Products” meanall specialty paper products, tissue hard rolls, tissue converted productsand/or deep colored napkin products planned, researched, developed, tested,manufactured, sold, licensed, leased or otherwise distributed or put into useby the Company or any of its Affiliates, together with all services provided orplanned by the Company or any of its Affiliates, during the Executive’semployment.

## (f)          “RestrictedCapacity” means a position which is the same or comparable to the positionthe Executive held with the Company or in which the Confidential Information orcustomer goodwill which the Executive created or to which the Executive hadaccess during the Executive’s employment with the Company would give that competitoran unfair

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##  

## competitive advantage. For the avoidance of doubt, this definition asused herein shall in no way diminish the Executive’s obligations under Section 7.

14. Withholding. All payments made by theCompany under this Agreement shall be reduced by any tax or other amountsrequired to be withheld by the Company under applicable law.

15. Assignment. Neither the Company nor theExecutive may make any assignment of this Agreement or any interest herein, byoperation of law or otherwise, without the prior written consent of the other; *provided*, *however*, thatthe Company may assign its rights and obligations under this Agreement withoutthe consent of the Executive in the event that the Company shall hereafteraffect a reorganization, consolidate with, or merge into, any other Person ortransfer all or substantially all of its properties or assets to any otherPerson. This Agreement shall inure to the benefit of and be binding upon theCompany and the Executive, their respective successors, executors,administrators, heirs and permitted assigns.

*16.  Severability.If any portion or provision of this Agreement shall to any extent be declaredillegal or unenforceable by a court of competent jurisdiction, then theremainder of this Agreement, or the application of such portion or provision incircumstances other than those as to which it is so declared illegal orunenforceable, shall not be affected thereby, and each portion and provision ofthis Agreement shall be valid and enforceable to the fullest extent permittedby law.*

17*. *Waiver. No waiver of any provision hereof shallbe effective unless made in writing and signed by the waiving party. Thefailure of either party to require the performance of any term or obligation ofthis Agreement, or the waiver by either party of any breach of this Agreement,shall not prevent any subsequent enforcement of such term or obligation or bedeemed a waiver of any subsequent breach.

18.  Notices.Any and all notices, requests, demands and other communications provided for bythis Agreement shall be in writing and shall be effective when delivered inperson or deposited in the United States mail, postage prepaid, registered orcertified, and addressed to the Executive at the Executive’s last known addresson the books of the Company or, in the case of the Company, at its principalplace of business, attention of the Chairman of the Board, or to such otheraddress as either party may specify by notice to the other actually received.

19.  EntireAgreement. This Agreement constitutes the entire agreement between theparties and supersedes and terminates all prior communications, agreements andunderstandings, written or oral, with respect to the terms and conditions ofthe Executive’s employment with the Company. For the avoidance of doubt, inconsideration of the benefits to which the Executive is entitled under thisAgreement and other good and valuable consideration, the Executive herebywaives any and all rights to any severance payment, change of control paymentor any other payment or benefit that the Executive may have under any agreementwith, or policy of, the

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Company.

20.* *Amendment; Section 409A*.*This Agreement may be amended or modified only by a written instrument signedby the Executive and by an expressly authorized representative of the Company. Theparties 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 itwill not unreasonably withhold its consent to any such amendments which in itsdetermination are (i) feasible and necessary to avoid adverse taxtreatment under Section 409A for the Executive, and (ii) not adverseto the interests of the Company.

21.  Dispute Resolution. Inthe event 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 suchother organization) shall be final, binding and nonappealable, and judgment maybe entered thereon by either party in accordance with applicable law in anycourt of competent jurisdiction. This Section 21 shall be specificallyenforceable. JAMS (or such other organization) shall have no authority tomodify any provision of this Agreement. THE PARTIES IRREVOCABLY WAIVE ANY RIGHTTO TRIAL BY JURY AS TO ALL CLAIMS HEREUNDER.

*22  Headings. The headings and captions in this Agreement are forconvenience only and in no way define or describe the scope or content of anyprovision of this Agreement*.

*23.  Counterparts.This Agreement may be executed in two or more counterparts, each of which shallbe an original and all of which together shall constitute one and the same instrument.*

*24.  GoverningLaw, Choice of Forum. This is a New York contract and shall be construedand enforced under and be governed in all respects by the laws of the State ofNew York, without regard to the conflict of laws principles thereto. Theparties consent to the jurisdiction of any state or federal court sitting inthe State of New York and waive any objection either party may have to thelaying of venue of any such suit, action or proceeding in any such court. TheCompany and the Executive each also irrevocably and unconditionally consent toservice of any process, pleadings, notices or other papers in a mannerpermitted by the notice provisions of Section 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/ Dianne M.  Scheu |   | By: /s/ Russell C.  Taylor   |
| Dianne M. Scheu      |   |                         |
|                 |   | Title: President             |

 

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**EXHIBIT A**

[Form ofRestricted Stock Award Agreement]

 

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THE SHARESRECEIVED PURSUANT TO THIS AWARD SHALL BE SUBJECT TO THE RIGHTS, RESTRICTIONS,AND OBLIGATIONS APPLICABLE TO SUCH SECURITIES, ALL AS PROVIDED IN THESHAREHOLDERS AGREEMENT DATED AS OF JUNE 12, 2006 BETWEEN THE COMPANY AND ITSHAREHOLDERS, AS AMENDED AND IN EFFECT FROM TIME TO TIME (THE “SHAREHOLDERSAGREEMENT”).

Ms. Dianne Scheu

**CELLUPARENT CORPORATION**

**2006 STOCK OPTION AND RESTRICTED STOCK PLAN**

Restricted Stock Award Agreement

Cellu Parent Corporation

c/o Weston Presidio

Pier 1, Bay 2

SanFrancisco, CA 94111

Attn:       Chief ExecutiveOfficer

Ladiesand Gentlemen:

The undersigned (i) acknowledges that she has received an award(the “Award”) of restricted stock from Cellu Parent Corporation (the “Company”)under the Cellu Parent Corporation 2006 Stock Option and Restricted Stock Plan(the “Plan”), subject to the terms set forth below and in the Plan; (ii) furtheracknowledges receipt of a copy of the Plan as in effect on the date hereof; and(iii) agrees with the Company as follows:

1.               *Effective Date*. This Agreement shall take effect as of June 12,2006, which is the date of grant of the Award.

2.               *Shares Subject to Award*. The Award consists of 1,349 shares (the “Shares”)of common stock of the Company (“Stock”). The undersigned’s rights to theShares are subject to the restrictions described in this Agreement and the Plan(which is incorporated herein by reference with the same effect as if set forthherein in full) in addition to such other restrictions, if any, as may beimposed 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 respect to any Share means the lapsing of the restrictionsdescribed herein with respect to such Share.

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%) ofthe Shares granted under this Award that are not then already vested shall

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vest;*and further provided* that if theundersigned ceases to be employed by the Company by reason of the Company’selection not to renew the undersigned’s employment agreement with the Companydated June 12, 2006 (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. Forpurposes of the preceding sentence, Cause shall be as defined in the EmploymentAgreement. The undersigned hereby (i) appoints the Company as theattorney-in-fact of the undersigned to take such actions as may be necessary orappropriate to effectuate a transfer of the record ownership of any such sharesthat are unvested and forfeited hereunder, (ii) agrees to deliver to theCompany, as a precondition to the issuance of any certificate or certificateswith respect to unvested Shares hereunder, one or more stock powers, endorsedin blank, with respect to such Shares, and (iii) agrees to sign such otherpowers and take such other actions as the Company may reasonably request toaccomplish the transfer or forfeiture of any unvested Shares that are forfeitedhereunder.

6.               *Retention of Certificates*. Any certificates representing unvestedShares shall be held by the Company. If unvested Shares are held in book entryform, the undersigned agrees that the Company may give stop transferinstructions to the depository to ensure compliance 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 andafter June 12, 2007;

an additional 25% of theShares on and after June 12, 2008;

an additional 25% of theShares on and after June 12, 2009; and

an additional 25% of theShares on and after June 12, 2010.

Notwithstanding the foregoing, no sharesshall vest on any vesting date specified above unless the undersigned is then,and since the date of grant has continuously been, employed by the Company orits 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 execution and delivery by the undersigned of the ShareholdersAgreement. Any Shares received under this Award shall be subject to the rights,restrictions and obligations applicable to options and shares of Stock of theCompany as provided from time to time in such Shareholders Agreement.

9.               *Legend*. Any certificates representing unvestedShares shall be held by the Company, and any such certificate shall contain alegend substantially in the following form:

THE TRANSFERABILITY OF THIS CERTIFICATE ANDTHE SHARES OF STOCK REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS(INCLUDING FORFEITURE) OF THE CELLU PARENT CORPORATION 2006 STOCK OPTION ANDRESTRICTED STOCK PLAN AND A RESTRICTED STOCK AWARD AGREEMENT ENTERED INTOBETWEEN THE REGISTERED OWNER

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AND CELLU PARENT CORPORATION. COPIES OF SUCHPLAN AND AGREEMENT ARE ON FILE IN THE OFFICES OF CELLU PARENT CORPORATION.

THE SECURITIESREPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS,INCLUDING CERTAIN RESTRICTIONS ON TRANSFER, OF A SHAREHOLDERS AGREEMENT DATEDAS OF JUNE 12, 2006 BETWEEN CELLU TISSUE CORPORATION AND ITS SHAREHOLDERS, ASAMENDED FROM TIME TO TIME, AND NONE OF SUCH SECURITIES, OR ANY INTERESTTHEREIN, SHALL BE TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OFEXCEPT AS PROVIDED IN THAT AGREEMENT. A COPY OF THE SHAREHOLDERS AGREEMENT ISON FILE IN THE OFFICES OF CELLU PARENT CORPORATION.

As soon as practicablefollowing the vesting of any such Shares the Company shall cause a certificateor certificates covering such Shares, without the aforesaid legend, to beissued and delivered to the undersigned. If any Shares are held in book-entryform, the Company may take such steps as it deems necessary or appropriate torecord and manifest the restrictions applicable to such Shares.

10.         *Dividends, etc.*.The undersigned shall be entitled to (i) receive any and all dividends orother distributions paid with respect to those Shares of which she is therecord owner on the record date for such dividend or other distribution, and (ii) voteany Shares of which she is the record owner on the record date for such vote; *provided, however*, that any property (other than cash)distributed with respect to a share of Stock (the “associated share”) acquiredhereunder, including without limitation a distribution of Stock by reason of astock dividend, stock split or otherwise, or a distribution of other securitieswith respect to an associated share, shall be subject to the restrictions ofthis Agreement in the same manner and for so long as the associated shareremains subject to such restrictions, and shall be promptly forfeited if andwhen the associated 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 Codeto the extent applicable. References in this Agreement to the Shares shall  refer, *mutatis mutandis*,to any such restricted amounts.

11.         *Sale of Vested Shares**.*The undersigned understandsthat she will be free to sell any Share once it has vested, subject to (i) satisfactionof any applicable tax withholding requirements with respect to the vesting ortransfer of such Share; (ii) the completion of any administrative steps(for example, but without limitation, the transfer of certificates) that theCompany may reasonably impose; (iii) applicable requirements of federaland state securities laws; and (iv) the terms and conditions of theShareholders Agreement.

12.         *Certain Tax Matters*.The undersigned expressly acknowledges the following:

a.               The undersigned has been advised to conferpromptly with a professional tax advisor to consider whether the undersignedshould make a so-called “83(b) election” with respect to the Shares. Anysuch election, to be effective, must be made in accordance with applicableregulations and within thirty (30) days following the date of this Award. TheCompany has made no recommendation to the undersigned with respect to theadvisability of making such an election. In the event that the undersigned

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makes an 83(b) electionand incurs a tax liability as a result, the Company will, on a date prior tothe date on which the taxes must be paid or withheld, make a lump sum payment(a “Gross Up Payment”) to the undersigned that will be sufficient, after givingeffect to federal, state, and local income taxes with respect to the Gross UpPayment, to pay any marginal increase in tax liability of the undersigned as aresult of such 83(b) election. For this purpose, a tax liability will betreated as incurred only to the extent that the inclusion of the income byreason of the grant will increase the undersigned’s tax liability for the yearof inclusion, after giving effect to all losses, credits, carry-forwards,carry-backs, etc. that the undersigned may be able to utilize in such year andwithout regard 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 vesting of the Shares acquiredhereunder, and the payment of dividends with respect to such Shares, may giverise to “wages” subject to withholding. The undersigned expressly acknowledgesand agrees that her rights hereunder are subject to her 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 bewithheld in connection with such award, vesting or payment.

 
|                                 |   |   | Very truly yours,        |   |
|--------------------------------------|--------|--------|--------------------------|--------|
|                                 |   |   |                     |   |
|                                 |   |   |                     |   |
|                                 |   |   |                     |   |
|                                 |   |   | (Signature of  Employee) |   |
|                                 |   |   |                     |   |
| Dated:  June 12, 2006           |   |   |                     |
|                                 |   |   |                     |   |
| The foregoing  Restricted Stock      |   |   |                     |
| Award Agreement  is hereby accepted: |   |   |                     |
|                                 |   |   |                     |   |
| CELLU PARENT  CORPORATION            |   |   |                     |
|                                 |   |   |                     |
|                                 |   |   |                     |
| By                                   |   |   |                     |   |

 

**4**

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