**Exhibit 10.7**

 

**THIRD AMENDMENT**

 

THIRDAMENDMENT, 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 “Credit Agreement”), by and among CELLU PAPER HOLDINGS, INC.,CELLU TISSUE HOLDINGS, INC. (the “Borrower”), INTERLAKE ACQUISITION CORPORATION LIMITED,the Loan Guarantors party thereto, the lenders party thereto (the “Lenders”), JPMORGAN CHASE BANK, N.A., as USAdministrative Agent (in such capacity, the “Administrative Agent”) and JPMORGANCHASE BANK, N.A., TORONTO BRANCH, as Canadian Administrative Agent (the “Canadian Administrative Agent”).

 

**RECITALS**

 

A.            WHEREAS, the Borrower has requested that theLenders increase the amount of the Canadian Commitments by $2,000,000 andreduce the amount of the US Commitments by an equal amount;

 

B.            WHEREAS, the Lenders are willing to agree tosuch amendments and provide certain other waivers and amendments, in each casesubject to the terms and conditions set forth 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 in the Credit Agreement and used herein shall have the meaningsgiven to them in the Credit Agreement.

 

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

 

(a) in the definitionof “US Commitment”, deleting the amount “US$57,000,000” andsubstituting therefor the amount “US$55,000,000”; and

 

(b) in the definitionof “CanadianCommitment”, deleting theamount “US$3,000,000” and substituting therefor the amount “US$5,000,000”.

 

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

 

4.             Waiver. The Lenders herebywaive for the purpose of Section 2 of this Amendment the requirement underSection 2.10(c) of the Credit Agreement that each reduction of the USCommitments be in a minimum amount equal to US$3,000,000.

 

5.             Condition to Effectiveness.This Amendment shall become effective on the date on which the AdministrativeAgent shall have received this Amendment, duly executed and delivered by theLoan Parties and the Lender.

 

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6.             Counterparts.This Amendment may be executed in any number of counterparts, each of whichwhen so executed shall be deemed to be an original and all of which when takentogether shall constitute one and the same agreement.

 

7.             Representations and Warranties.The Borrower hereby represents andwarrants to the Lenders and the Administrative Agent as follows:

 

(a)           The Borrower has the corporate power and authority and the legal rightto execute, deliver and perform this Amendment and has taken all necessarycorporate action to authorize the execution, delivery and performance of thisAmendment. This Amendment has been duly executed and delivered on behalf of theBorrower and constitutes the legal, valid and binding obligation of theBorrower enforceable against the Borrower in accordance with its terms, subjectto applicable bankruptcy, insolvency, reorganization, moratorium or other lawsaffecting creditors’ rights generally and subject to general principles ofequity, regardless of whether considered in a proceeding in equity or at law.

 

(b)           The representations and warranties of the Borrower set forth in Article IIIof the Credit Agreement as amended hereby are true and correct in all materialrespects as of the date hereof.

 

8.             Fees, Costs and Expenses.The Borrower agrees to (i) pay to the Administrative Agent any amendment fees previously agreed in connection with this Amendment and (ii) reimburse the AdministrativeAgent for all reasonable fees, costs and expenses incurred by it in connectionwith this Amendment, including but not limited to the reasonable fees, costsand expenses of counsel.

 

9.             Governing Law.This Amendment and the rightsand obligations of the parties hereunder shall be governed by, and construedand interpreted in accordance with, the laws of the State of New York.

 

*[Signature pages 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. Hariaczyl |
|   |                                                  | Name: | John M. Hariaczyl |
|   |                                                  | 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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