**Exhibit10.4**

**CELLU TISSUEHOLDINGS, INC.**

3442 FRANCIS ROAD, SUITE 220  ALPHARETTA, GA 30004     PHONE: 678-393-2651          FAX:678-393-265333 EAST RIVER DRIVE, SUITE 304      EASTHARTFORD, CT 06108       PHONE:860-289-2131          FAX: 860-291-0184

June 22, 2006

Hugo Vivero4 Settlers LaneColchester, CT 06415

Dear Hugo,

This letter constitutes the agreement("Agreement") between you and Cellu Tissue Holdings, Inc., includingany and all of its past and present affiliated companies, divisions,subdivisions, parent companies, successors, assigns, officers, directors,employees and contractors (collectively referred to hereinafter as "CelluTissue" or "Company"), with respect to your separation fromemployment with Cellu Tissue effective July 14, 2006.

**PLEASE READ THISAGREEMENT CAREFULLY**

Should you agree to the terms and conditions set forthherein, please sign this Agreement and return it to the undersigned no laterthan July 13, 2006. You are afforded twenty-one (21) days from the date of yourreceipt of this letter to consider this Agreement ("AcceptancePeriod"). This should provide you with adequate time to review the termsand conditions of this Agreement and to consult with an attorney, which you arehereby advised to do. If you determine that you do not need the entire twenty-one(21) days to consider the Agreement, you may sign this Agreement and return itto me before July 13, 2006. Upon your execution of this Agreement, you willhave seven (7) days from the date of your signature to revoke the Agreement("Revocation Period"). The provisions of this Agreement will not takeeffect until after the seven (7) day period has expired. Any revocation must bereceived by the undersigned in writing no later than the close of business onthe seventh day. Thereafter, the Agreement is final and may not be revoked ormodified. Please note however, that your revocation of this Agreement does notalter or change the fact that your employment with Cellu Tissue is terminatedas of July 14, 2006. It is understood that for the time period between the dateof this letter and July 14, 2006 you will be on vacation. If you intend to signthis Agreement, you should do so by July 13, 2006 and return the fully executedoriginal to me, either in person or by certified mail, return receiptrequested, postmarked no later than July 13, 2006. Failure to return thedocument by July 13, 2006 or mail the document postmarked by July 13, 2006shall result in the expiration of the offer contained in the Agreement.

Your last day of employment is July 14, 2006. Shouldyou opt to execute this Agreement within the Acceptance Period and not revokesuch during the Revocation Period, you will be entitled to receive the EnhancedSeverance Package. If you opt not to execute this Agreement within theAcceptance Period or subsequently decide to revoke 

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the Agreement,within the Revocation Period, you shall receive the Company's StandardSeverance Package.

1.      StandardSeverance Package*.* Payment oftwo (2) weeks pay at your current annual rate, which is equal to $7,522, minusthe applicable taxes and withholdings that are required to be withheld understate and federal law. These payments will be made on the regularly scheduledpay dates. Your health benefits will be continued through the end of thisseverance period. You will also be paid for any accrued, but unused vacationpay, which is equal to $15,044.

2.      EnhancedSeverance Package*.* In theEnhanced Severance Package Cellu Tissue agrees to:

a)           payyou a total of $195,572 which is equal to your base salary at your current rateof pay for fifty two (52) weeks, minus the applicable taxes and withholdingsthat are required to be withheld under state and federal law. These paymentswill be made on the current regularly scheduled pay dates;

b)           continueyour health, dental, life and LTD benefits in effect as of your terminationdate (or those in effect for active employees) for a period coinciding with theterm of the payments made pursuant to Paragraph 2(a), with no charge to youother than the normal contribution portion you have been paying, subject to anyincrease/decrease in premiums or benefits that are imposed by the provider orthat incur as a result of the Company changing providers;

c)           paythe monthly lease payments of $686.73 for the Company automobile that youcurrently utilize, through the end of the lease in December, 2006. At the endof the lease, you will return the vehicle to the local BMW dealership in yourarea for disposal. For the remainder of severance period, an amount of $650.00,minus applicable taxes and withholdings, will continue to be included in yourpay checks, pro-rated on a monthly basis, through the term of the payments madepursuant to Paragraph 2(a);

d)           provideyou with a check in the amount of $1,073.52 to pay for the monthly fee andsurcharges on your cell phone for the term of the payments made pursuant toParagraph 2(a). You will make arrangements to transfer the phone and charges toan account in your name immediately.

e)           paythe monthly premiums for the supplemental life insurance program and thedisability program currently held by you through Northwestern Mutual LifeInsurance Company for a period coinciding with the term of the payments madepursuant to Paragraph 2(a);

f)            acknowledgesthat it has no basis for contesting your application for unemployment benefits,and agrees not to contest any application.

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3.      **COBRA BENEFITS.**Regardless ofwhether you sign this Agreement or subsequently revoke same, you may still beeligible for COBRA medical and/or dental coverage upon payment by you of thefull premium for up to eighteen (18) months or the date on which you becomecovered for medical and/or dental benefits under another group health plan,whichever occurs first.

4.      **ADEQUATE CONSIDERATION.**You agreethat except for you executing this Agreement and accepting the terms andconditions set forth herein, you are not otherwise entitled to the paymentsand/or benefits provided in the Enhanced Severance Package. You also agree thatthese payments and benefits are adequate and valid consideration for yourpromises and the releases contained in this Agreement, and that no furtherpayments or benefits are due you except those provided for in this Agreement.

5.      **RELEASE AND WAIVER.**Inconsideration of the payments and benefits provided in Paragraph 2 above, youagree, except as may be necessary to enforce the provisions of this Agreement,not to make any claims of any kind against Cellu Tissue, before any agency,court of other forum and to release Cellu Tissue, from any claim, known orunknown, arising in any way from any actions taken by Cellu Tissue up to thedate of the signing of this Agreement including, without limitation, any claimfor wrongful discharge, breach of contract or other common law claims, or anyclaims arising under the Age Discrimination in Employment Act of 1967, asamended by the Older Workers Benefit Protection Act of 1990, the OccupationalSafety and Health Act of 1970, the Americans with Disabilities Act of 1990, theFamily and Medical Leave Act of 1993, Title VII of the Civil Rights Act of 1964*,*as amended, the Workers Adjustment and RetrainingNotification Act of 1988, the Connecticut Fair Employment Practices Act, or anyother federal, state, or local statute or regulation dealing withdiscrimination on any bases, including sex, race, national origin, maritalstatus, religion, disability, sexual orientation, or age, and any claims forattorney's fees, expenses or costs. This paragraph does not restrict your rightto file a charge of discrimination with the EEOC or to assist the EEOC in anyinvestigation, however, by executing this Agreement, you waive any right thatyou may have to receive of any monetary award resulting from any action broughtagainst Cellu Tissue by the EEOC or any other agency, person or entity and youexpressly waive any right to bring a lawsuit or other action in your name.

**THIS MEANS THAT,BY SIGNING THIS AGREEMENT, YOU WAIVE ANY AND ALL RIGHTS YOU MAY HAVE TO BRING ALAWSUIT OR MAKE ANY CLAIM OF ANY KIND WHATSOEVER AGAINST CELLU TISSUE, OR ITSPAST AND PRESENT, AFFILIATES, DIVISIONS, SUBDIVISIONS, TRUSTEES, OFFICIALS,OFFICERS, DIRECTORS, AGENTS, CONTRACTORS, ATTORNEYS OR EMPLOYEES, PERSONALLY ORIN THEIR OFFICIAL CAPACITY, BASED ON ANY ACTION, EVENT OR CONDUCT OCCURRINGPRIOR THE DATE OF YOUR SIGNING OF THIS AGREEMENT.**

Further, this Agreement shall inure to the benefit ofand be binding upon you, your heirs, administrators, representatives,executors, successors and assigns, and shall inure to the benefit of and bebinding upon Cellu Tissue, it successors and assigns.

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7.    **DAMAGES IN EVENT OF BREACH.**In theevent that you breach or violate any obligation under this Agreement, you willbe obligated pay reasonable attorneys' fees, expenses and costs of litigationincurred by Cellu Tissue, in enforcing the terms and conditions of thisAgreement.

8.      **NONCOMPETITION; NONSOLICITATION; AND NONHIRE.**For purposes of this Agreement, you acknowledge and agree that: (1) toassist and enable you to perform your services and duties for Cellu Tissue, youwere given access to Confidential Information regarding Cellu Tissue and/or itsAffiliates; (2) use of such Confidential Information in competition with CelluTissue and/or its Affiliates would be detrimental to the business interests ofCellu Tissue and/or its Affiliates; (3) you would not have been permittedaccess to the Confidential Information or employed by Cellu Tissue without yourpromise not to engage in competition against Cellu Tissue and/or itsAffiliates; (4) you would not have received the benefits set forth in Paragraph2 without agreeing to the provisions of this paragraph.

Accordingly, you agree that for the period coincidingwith the term of the payments made in Paragraph 2, you shall not: (i) engage orparticipate, either as an employee, employer, independent contractor,consultant, agent, principal, partner, corporate officer, director, or in anyother individual or representative capacity, in any business which competes ina material manner with Cellu Tissue and/or its Affiliates anywhere in thefollowing states: Alabama, Alaska, Arizona, Arkansas, 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, New York,North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, RhodeIsland, South Carolina, Tennessee, Texas, Utah, Virginia, Washington andWisconsin; (ii) contact, solicit or attempt to solicit the business orpatronage of any of Cellu Tissue's customers, or prospective customers, or anyperson, firm, corporation, company, partnership, association or entity whichwas contacted or whose business was solicited, serviced or maintained by CelluTissue during the term of your employment with Cellu Tissue; or (iii) solicit,recruit, induce, encourage or in any way cause any employee of Cellu Tissue toterminate his employment with Cellu Tissue.

Confidential information shall mean non-publicinformation concerning Cellu Tissue's financial data, strategic business plans,product development (or other discoveries), practices, processes, methods,marketing plans and other material non­public, proprietary and confidentialinformation of Cellu Tissue, that, in any case, is not otherwise generallyavailable to the public or others in the paper products industry.

You acknowledge that the restrictions specified inthis Section are reasonable in view of the nature of Cellu Tissue's business,the position you held within the Company and the services you performed for CelluTissue. You further recognize that Cellu Tissue's willingness to provide youwith Confidential Information, and with this Agreement, constitute valid andsufficient consideration for your agreement in this Section and that you willnot be subjected to undue hardship by reason of your agreements in thisSection.

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9.    **NO MODIFICATION WITHOUT WRITING.**Theterms of this Agreement cannot be changed or modified in any respect except inwriting signed by you and Cellu Tissue.

10.    **FULL AND ENTIRE AGREEMENT.**ThisAgreement represents the full and entire Agreement between you and Cellu Tissueand supersedes all prior understandings, agreements and obligations between youand Cellu Tissue. In the event that any provision of this Agreement is held tobe void or unenforceable by a court of competent jurisdiction, the remainingprovisions of the Agreement shall nevertheless be binding upon the parties withthe same effect as though the void or unenforceable part had been severed anddeleted.

11.    **SURRENDER OF MATERIALS.**Youacknowledge that you have returned all Cellu Tissue related reports, files,memoranda, notes, records, and other documents (whether stored electronicallyor otherwise) as well as door and file keys, and any other property that you receivedor prepared or helped to prepare in connection with your employment. You alsoagree that your expense account and use of Company credit and telephone cardswill cease immediately and you will promptly return such cards or other similarCompany property in your possession and submit your final expense account,including an accounting for any advances. You further acknowledge that you havenot and will not retain any copies or excerpts of the materials describedabove, and that you will not attempt to retrieve or recreate any of thematerials described above after the termination of your employment.

12.    **RELATIONSHIP WITH CELLU TISSUE.**Youacknowledge that you have no right to rehire into any job with Cellu Tissue atany time in the future. You also agree that this Agreement is sufficient reasonfor Cellu Tissue to reject any application you might make for futureemployment.

13.    **CONFIDENTIALITY**. You agree to keepconfidential and not to reveal the terms of this Agreement or the events,documents, or discussions which led to the Agreement, except as may be requiredby law, to anyone not a party to this Agreement, except your attorneys,financial advisors, and immediate family, provided these persons also agree tokeep confidential and not to reveal the terms of this Agreement or any events,documents, or discussions related to the Agreement to anyone not a party tothis Agreement. You also agree that you will not publicly disparage CelluTissue. For purposes of this paragraph, "disparage" shall mean any statements,actions or insinuations, made either directly or through a third party, thatwould tend to lessen the standing or stature of an institution or individual inthe eyes of an ordinary citizen.

14.    **FURTHER ACKNOWLEDGMENT.**Youacknowledge that you have read this Agreement carefully, and fully understandits terms. You have been advised to seek counsel and have had an opportunity todo so and you are executing this Agreement knowingly and voluntarily. You fullyunderstand that by signing this Agreement, you waive all claims of any kindwhatsoever against Cellu Tissue, whether known or unknown, asserted orunasserted, suspected or unsuspected, including all claims for attorneys' fees,and expenses based upon any actions taken by Cellu Tissue up to the date of thesigning of this Agreement.

**[SIGNATURES ONFOLLOWING PAGE.]**

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If you agree with the terms and conditions as setforth herein, you must sign this Agreement in the space provided below andreturn the original to me no later than July 13, 2006.
| Sincerely,                       |   |
|----------------------------------|--------|
|                             |   |
|                             |   |
| /s/ Zaya Oshana                  |   |
| Zaya Oshana                      |   |
| Vice President,  Human Resources |

 

Voluntarily accepted and agreed to on this, the 5thof July, 2006:
| /s/ Hugo Vivero |   |
|-----------------|--------|
| Hugo Vivero     |   |

 

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