**Exhibit 10.1**

AGREEMENT

AGREEMENT (this “Agreement”) made and enteredinto by and between Cellu Tissue Holdings, Inc., a Delaware corporation(the “Company”), and Mr. Russell Taylor (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 PaperHoldings, Inc., a Delaware corporation (“Cellu Paper”), and whichis hereafter referred to 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 President and ChiefExecutive Officer; and

WHEREAS, subject to the terms and conditionshereinafter set forth, the Company wishes to continue to employ the Executiveas its President and Chief Executive Officer and the Executive wishes to acceptsuch 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 as hereinafter provided, the Executive’semployment hereunder shall be for a term of four (4) years, commencing onthe Effective Date, and shall be automatically extended thereafter forsuccessive terms of one year each, unless either party provides notice to theother at least sixty (60) days prior to the expiration of the original or anyextension term that the Agreement is not to be extended. The term of this Agreement,as from time to time extended or renewed, is hereafter referred to as “theterm of this Agreement” or “the term hereof.”   Notwithstanding anything in this Agreementto the contrary, this Agreement shall be null, void and without effect upontermination of the Merger Agreement prior to consummation of the Merger.

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# 3.             Capacityand Performance.

## (a)           Subjectto earlier termination as hereinafter provided, during the term of thisAgreement, the Executive shall serve the Company as its President and ChiefExecutive Officer, reporting to the Board of Directors of the Company (the “Board”).In addition, and without further compensation, the Executive shall serve as amember of the Board during the term hereof. In addition, during the termhereof, and without further compensation, the Executive shall serve as adirector and/or officer of one or more of the Company’s Affiliates (as definedbelow) if so elected or appointed from time to time.

## (b)           Duringthe term hereof, the Executive shall be employed by the Company on a full-timebasis and shall perform such duties and responsibilities on behalf of theCompany and its Affiliates consistent with the Executive’s position with theCompany as may be designated from time to time by the Board or by its designees.In addition, all senior executives of the Company shall report to theExecutive, unless the Executive chooses an alternate reporting relationship forany such senior executive.

## (c)           Duringthe term of the Executive’s employment, the Executive shall devote the Executive’sfull business time and the Executive’s best efforts, business judgment, skilland knowledge exclusively to the advancement of the business and interests ofthe Company and its Affiliates and to the discharge of the Executive’s dutiesand responsibilities hereunder. The Executive shall not engage in any otherbusiness activity or serve in any industry, trade, professional, governmentalor academic position during the term of this Agreement, except as may beexpressly approved in advance by the 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 its Affiliates,pursuant to this Agreement or otherwise:

## (a)           BaseSalary. During the term hereof, the Company shall pay the Executive a basesalary at the rate of Four Hundred Seventy-Five Thousand Dollars ($475,000) perannum, payable in accordance with the normal payroll practices of the Companyfor its executives and subject to increase (but not decrease) from time to timeby the Board, in its discretion. The Board will review the Executive’s basesalary each year. Such base salary, as from time to time increased, ishereafter referred to as the “Base Salary”.

## (b)           AnnualBonus Compensation.

##### (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

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##### effect from time to time (the “IncentivePlan”). The amount of any bonus awarded (whether more than or less than theTarget Bonus) shall be determined by the Board, based upon the achievement ofthe EBITDA target, after the completion of the Company’s annual audit and theBoard’s review thereof, and shall further be subject to the terms of theIncentive Plan as in effect from time to time. Except as otherwise expresslyprovided under this Agreement or under the terms of the Incentive Plan as ineffect from time to time, the Executive shall not be entitled to earn bonuscompensation for any period of service less than a full year, except as setforth in Sections 5(a), 5(b), 5(d), 5(e), 5(g) and 5(h).

##### (ii)           Any bonus due hereunder shall bepayable not later than two and one half months following the fiscal year forwhich the bonus was earned or as soon as is practicable within the meaning of Section 409Aof the Internal Revenue Code of 1986, as amended, (“Section 409A”).

## (c)           EquityArrangements. On the Effective Date, the Company will make a grant ofrestricted stock to the Executive under the Company’s Stock Option andRestricted Stock Plan (the “Plan”). The terms and conditions of suchrestricted stock grant shall be subject to the terms of the Plan and theRestricted Stock Award Agreement in the form attached hereto as Exhibit A.

## (d)           Vacations.During the term hereof, the Executive shall be entitled to four (4) weeksof vacation 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)           OtherBenefits. During the term hereof and subject to any contribution thereforgenerally required of employees of the Company, the Executive shall be entitledto participate in any and all employee benefit plans from time to time ineffect for employees of the Company generally, except to the extent such plansare in a category of benefit otherwise provided to the Executive. Suchparticipation shall be subject to (i) the terms of the applicable plandocuments, (ii) generally applicable Company policies and (iii) thediscretion of the Board or any administrative or other committee provided forin or contemplated by such plan. The Company may alter, modify, add to ordelete its employee benefit plans at any time as it, in its sole judgment,determines to be appropriate, without recourse by the Executive.

## (f)            Perquisites.During the 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 itssole judgment, determines to be appropriate without recourse by the Executive.

## (g)           [IntentionallyOmitted].

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## (h)           TermLife Insurance. During the term hereof, and, except as otherwise providedherein, for a period of one (1) year thereafter, the Company shall bearthe cost of a term life insurance policy covering Executive in the amount of$1,000,000. It is understood that Executive shall establish a trust for thepurpose of purchasing such policy, and that the Company’s contributions shallbe made directly to such trust. All benefits of such term life insurance policyshall inure to the Executive’s designated beneficiaries. Such term lifeinsurance policy shall become effective as soon as possible after Executive hascomplied with the requirements of the insurance company underwriting suchpolicy (including but not limited to submission to and satisfactory results ofa physical evaluation).

## (i)            BusinessExpenses. The Company shall pay or reimburse the Executive for reasonable,customary and necessary business expenses incurred or paid by the Executive inthe performance of the Executive’s duties and responsibilities hereunder,subject to such reasonable substantiation and documentation as may be specifiedby the Board or Company policy from time to time.

## (j)            CostsRelated to Employment Agreement. The Company will reimburse the Executiveup to Twenty-Five Thousand Dollars ($25,000.00) for fees and expenses incurredin negotiating this Agreement, subject to receipt of reasonable substantiationand documentation by the Company.

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

## (a)           Death.In the event 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 made

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## within thirty (30) days after the Company’s receipt of such release ofclaims in form and substance satisfactory to the Company. Other than as setforth in this clause (a), the Company shall have no further obligation to the Executive’sbeneficiary or the Executive’s estate.

## (b)           Disability.

##### (i)            The Company may terminate theExecutive’s employment hereunder, upon notice to the Executive, in the eventthat the Executive becomes disabled during the Executive’s employment hereunderthrough any illness, injury, accident or condition of either a physical orpsychological nature and, as a result, is unable to perform substantially allof the Executive’s material duties and responsibilities hereunder for (x) ninety(90) consecutive calendar days or (y) one hundred and twenty (120) totaldays during any period of three hundred and sixty-five (365) consecutivecalendar days. The Board may designate another employee to act in the Executive’splace during any period of the Executive’s disability.

##### (ii)           If any question shall arise as towhether during any period the Executive is disabled through any illness,injury, accident or condition of either a physical or psycholog­ical nature soas to be unable to perform substantially all of the Executive’s duties andresponsibilities hereunder, the Executive may, and at the request of theCompany shall, submit to a medical examination by a physician selected by theCompany to whom the Executive or the Executive’s duly appointed guardian, ifany, 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 of notice oftermination of the Executive’s employment due to disability hereunder, theCompany shall have no further obligation or liability to the Executive, otherthan for (i) any earned, but unpaid, Base Salary through the date oftermination; (ii) any earned, but unpaid annual bonus for any fiscal yearprior to the fiscal year of the Executive’s termination; (iii) a pro rataportion (based on the number of days preceding the Executive’s termination inthe fiscal year of termination) of the Target Bonus; (iv) a lump sumpayment 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, (x) the Company shall continue thebenefits contemplated by Section 4(h) for the period contemplatedtherein, and (y) subject to any employee contribution applicable to activeemployees 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 and the Executive’s dependents under theCompany’s medical and dental plans provided that a timely COBRA election ismade. 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

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##### contribution toward medical and dentalpremiums, are expressly conditioned upon the Executive (or the Executive’s dulyappointed guardian, if any) executing and delivering to the Company a timelyand effective Separation Agreement. Payment under clauses (iii) and (iv) willbe made 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.

## (c)           Bythe Company for Cause. The Company may terminate the Executive’s employmenthereunder for Cause at any time upon notice to the Executive setting forth inreasonable detail the nature of such Cause. The following, as determined by theBoard in its reasonable judgment, shall constitute Cause for termination:

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

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

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

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

##### (v)          the commission of fraud, embezzlement,theft or other dishonesty by the Executive with respect to the Company or anyof its Affiliates;

##### (vi)         any other conduct that involves abreach of fiduciary obligation on the part of the Executive or otherwise couldreasonably be expected to have a material adverse effect upon the business,interests or reputation of the Company or any of its Affiliates; or

##### (vii)        a previous employer of Executive shall commence againstExecutive and/or Cellu Tissue an action, suit, proceeding or demand arisingfrom an alleged violation of a non-competition or other similar agreementbetween 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),

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##### (ii), (iii) or (v) above,it shall first 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 written notice of the Company to the Executive. Uponthe giving of notice of termination of the Executive’s employment hereunder forCause, the Company shall have no further obligation to the Executive, otherthan for (i) Base Salary earned, but unpaid at the date of termination, (ii) anyearned, but unpaid annual bonus for any fiscal year prior to the fiscal year oftermination of the Executive’s employment; and (iii) any unreimbursedbusiness expenses.

## (d)           Bythe Company without Cause. The Company may terminate the Executive’semployment hereunder without Cause at any time upon notice to the Executive. Inthe event of such termination, the Company shall have no further obligation orliability to the Executive, other than for (i) any earned, but unpaid,Base Salary through the date of termination; (ii) any earned, but unpaidannual bonus for any fiscal year prior to the fiscal year of the Executive’stermination; (iii) a pro rata portion (based on the number of dayspreceding the Executive’s termination in the fiscal year of termination) of theTarget Bonus; (iv) a lump sum equal to the greater of (x) twenty-four(24) months of Base Salary or (y) Base Salary for a period equal to theremainder of the term of this Agreement; (v) a lump sum equal to thegreater of (x) one times the Target Bonus or (y) payment of theTarget Bonus with respect to a period equal to the remainder of the term ofthis Agreement; and (vi) any unreimbursed business expenses. In addition, (x) theCompany shall continue the benefits contemplated by Section 4(h) forthe period contemplated therein, and (y) subject to any employeecontribution applicable to employees and their dependents generally, for theperiod following termination specified in clause (iv) above, or ifearlier, until the date that the Executive becomes eligible for coverage with asubsequent employer, the Company shall continue to contribute to the premiumcost of coverage for the Executive and the Executive’s dependents under theCompany’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)           Bythe Executive for Good Reason. The Executive may terminate the Executive’semployment hereunder for Good Reason, provided that the Executive shall havegiven written notice setting forth in reasonable detail the nature of such GoodReason to the Company upon the Executive’s becoming aware or at such time asExecutive should have been aware of the occurrence of any such event orcondition, and the Company shall not have fully

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## corrected the situation within ten (10) days after such notice ofGood Reason. The following shall constitute “Good Reason” for terminationby the Executive:

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

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

##### (iii)          a reduction by the Company in the Executive’sBase Salary or any other compensation due hereunder; or

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

## If theExecutive desires to terminate the Executive’s employment with the Companypursuant to this Section 5(e), the Executive shall first give writtennotice of the facts and circumstances providing Good Reason to the Company, andshall allow the company no less than twenty (20) days to remedy, cure orrectify the situation giving rise to Good Reason. The Company’s failure tocontinue the Executive’s appointment or election as a director or officer ofany of its Affiliates, a change in reporting relationships resulting from thedirect or indirect control of the Company (or a successor corporation) byanother corporation (in the absence of an independent change constituting GoodReason as defined above) and any diminution of the business of the Company orany of its Affiliates or any sale or transfer of equity, property or otherassets of the Company or any of its Affiliates (in the absence of anindependent change constituting Good Reason as defined above) shall notconstitute Good Reason. In the event of termination in accordance with this Section 5(e),then the Executive will be entitled to receive the payments and benefits inaccordance with Section 5(d) hereof provided the Executive complieswith the requirement of executing and delivering the Separation Agreement. Otherthan as set forth in this clause (e), the Company shall have no furtherobligation to the Executive.

## (f)            Bythe Executive Without Good Reason. The Executive may terminate theExecutive’s employment hereunder at any time upon sixty (60) days’ writtennotice to the Company. In the event of termination of the Executive pursuant tothis Section 5(f), the Board may elect to waive the period of notice, orany portion thereof, and, if the Board so elects, the Company will pay theExecutive the Executive’s Base Salary for the notice period (or for anyremaining portion of the period). The Company shall also pay the Executive (i) anyearned, but unpaid annual bonus for any fiscal year prior to the fiscal year ofthe termination of the Executive’s employment, and (ii) any unreimbursedbusiness expenses.

## (g)           Non-Renewalby Company. The Company may elect not to renew this Agreement in accordancewith Section 2 above. In the event of such non-renewal for a reason

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## other than Cause (as defined in Section 5(c) above), theCompany shall have no further obligation or liability to the Executive otherthan for (i) any earned, but unpaid, Base Salary through the date oftermination; (ii) any earned, but unpaid annual bonus for any fiscal yearprior to the fiscal year of the Executive’s termination; (iii) a pro rataportion (based on the number of days preceding the Executive’s termination inthe fiscal year of termination) of the Target Bonus; (iv) a lump sum equalto twenty-four (24) months of Base Salary and (v) any unreimbursedbusiness expenses. In addition, subject to any employee contribution applicableto employees and their dependents generally, for the twenty-four (24) monthperiod following termination, or if earlier until the date that the Executivebecomes eligible for coverage with a subsequent employer, the Company shallcontinue to contribute to the premium cost of coverage for the Executive andthe Executive’s dependents under the Company’s medical and dental plansprovided that a timely COBRA election is made. The payments referred to inclauses (i), (ii) and (v) above shall be payable in a lump-sum withinthirty (30) days after the date of termination. The Company’s payments under clauses(iii) and (iv) above, as well as the continued contribution towardmedical and dental premiums, are expressly conditioned upon the Executiveexecuting and delivering to the Company a timely and effective SeparationAgreement. Payment under clauses (iii) and (iv) will be made withinthirty (30) days after the Company’s receipt of such Separation Agreement. Otherthan as set forth in this clause (g), the Company shall have no furtherobligation to the Executive or the Executive’s estate hereunder.

## (h)           Changeof Control/Gross Up Payment.

##### (i)            If a Change of Control occurs and,within three (3) months before and two (2) years following suchChange of Control, the Company terminates the Executive’s employment other thanfor Cause or by reason of death or disability, or the Executive terminates theExecutive’s employment for Good Reason, then, in lieu of any payments to or onbehalf of Executive under Sections 5(d), 5(e) or 5(g) hereof, theCompany shall have no further obligation or liability to the Executive, otherthan for (i) any earned, but unpaid, Base Salary through the date oftermination; (ii) any earned, but unpaid annual bonus for any fiscal yearprior to the fiscal year of the Executive’s termination; (iii) a pro rataportion (based on the number of days preceding the Executive’s termination inthe fiscal year of termination) of the Target Bonus; (iv) a lump sum equalto the greater of (x) Base Salary for the remainder of the term or (y) thirty-six(36) months of Base Salary; (v) a lump sum equal to one times the TargetBonus; and (vi) any unreimbursed business expenses. In addition, subjectto any employee contribution applicable to employees and their dependents generally, for thethirty-six (36) month period following termination, or if earlier, until thedate that the Executive becomes eligible for coverage with a subsequentemployer, the Company shall continue to contribute to the premium cost ofcoverage for the Executive and the Executive’s dependents under the Company’smedical and dental plans provided that a timely COBRA election is made. Thepayments referred to in clauses (i), (ii) and (vi) above shall bepayable in a lump-sum within thirty (30) days after the date of termination. TheCompany’s payments under clauses (iii), (iv) and (v) above, as wellas the continued contribution toward medical and dental premiums, are expresslyconditioned upon the

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##### 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 (h), the Company shall have no further obligation to the Executive.

##### (ii)           The Company and the Executive agreethat in the event that any of the severance payments or severance benefitsunder Sections 5(d), 5(e), 5(g) or 5(h) of this Agreement might becharacterized as parachute payments under Section 280G of the InternalRevenue Code of 1986, as amended (“Section 280G”), the parties shalltimely take reasonable steps to avoid the tax liability under Section 280Gand Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”)to the extent permitted by law. Accordingly, the Executive agrees to cooperatefully in procuring a shareholder vote (including, but not limited to, providingany required consents or waivers) to approve the severance payments orseverance benefits under this Agreement received, to be received by, or payableon behalf of, the Executive in satisfaction of the shareholder approvalrequirements described in Treas. Reg. Section 1.280G-1, Q&A-7,to the extent applicable. If the shareholder approval requirements described inTreas. Reg. Section 1.280G-1, Q&A-7 cannot be satisfiedand if the Company determines that any of the severance payments or severancebenefits under this Agreement received, to be received by, or payable on behalfof, the Executive would be subject to the excise tax imposed by Section 4999of the Code, (the “Excise Tax”), then the Company will, on or prior tothe date on which the Excise Tax must be paid or withheld, make an additionallump sum 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 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

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##### controversy whether any advances must bereturned by the Executive to the Company. The Company will bear all expenses ofthe controversy.

## (i)            Timingof Payments. If at the time of the Executive’s separation from service, theExecutive is a “specified employee,” as hereinafter defined, any and allamounts payable under this Section 5 in connection with such separationfrom service that constitute deferred compensation subject to Section 409A,as determined by the Company in its sole discretion, and that would (but forthis sentence) be payable within six months following such separation fromservice, shall instead be paid on the date that follows the date of suchseparation from service by six (6) months. For purposes of the precedingsentence, “separation from service” shall be determined in a manner consistentwith subsection (a)(2)(A)(i) of Section 409A and the term “specifiedemployee” shall mean an individual determined by the Company to be a specifiedemployee as defined in subsection (a)(2)(B)(i) of Section 409A.

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

## (a)           Acondition precedent to the Company’s obligations to provide any severancepayments or severance benefits hereunder, including lump-sum payments, vestingof restricted stock and contributions toward health insurance premiums, shallbe the Executive’s executing and delivering (and not revoking) a timely andeffective Separation Agreement, or in the case of a termination due to thedeath of the Executive, the Executive’s beneficiary or representative of theExecutive’s estate executing and delivering a general release of claims in formand substance satisfactory to the Company.

## (b)           Upontermination of the Executive’s employment with the Company, unless otherwisespecifically provided herein, the Executive’s rights to benefits and paymentsunder any benefits or welfare plan or under any stock option, restricted stock,stock appreciation right, bonus unit, management or bonus incentive or otherplan of the Company shall be determined in accordance with the terms andprovisions of such plans and any agreements under which such stock options,restricted stock or other awards were granted.

## (c)           Provisionsof this Agreement shall survive any termination if so provided herein or ifnecessary or desirable fully to accomplish the purposes of such provision,including without limitation the obligations of the Executive under Sections 7,8 and 9 hereof. The obligation of the Company to provide any severance paymentor benefit is expressly conditioned upon the Executive’s continued fullperformance of obligations under Sections 7, 8 and 9 hereof. The Executiverecognizes that, except as expressly provided in Sections 5(d), 5(e), 5(g) or5(h), no compen­sation is earned after termination of employment.

## (d)           Exceptas expressly provided herein, Executive is entitled to no payments or benefitsin connection with a termination of the Executive’s employment.

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# 7.             ConfidentialInformation.

## (a)           The Executive acknowledges that theCompany and its Affiliates continually develop “Trade Secrets” and “ConfidentialInformation” that the Executive may develop Trade Secrets and ConfidentialInformation for the Company or its Affiliates and that the Executive may learnof Trade Secrets and Confidential Information during the course of employment. TheExecutive will comply with the policies and procedures of the Company and itsAffiliates for protecting Trade Secrets and Confidential Information and shallnever disclose to any Person (except as required by applicable law or for theproper performance of the Executive’s duties and responsibilities to theCompany and its Affiliates), or use for the Executive’s own benefit or gain,any Trade Secrets or Confidential Information obtained by the Executiveincident to the Executive’s employment or other association with the Company orany of its Affiliates.

## (b)           For purposes of this Agreement, “TradeSecrets means all information that constitutes a trade secret within themeaning of the Georgia Trade Secrets Act, as amended (the “Georgia Act”). Underthe 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, a pattern, a compilation, aprogram, a device, a method, a technique, a drawing, a process, financial data,financial plans, product plans, or a list of actual or potential customers orsuppliers which is not commonly known by or available to the public and whichinformation:  (i) derives economicvalue, actual or potential, from not being generally known to, and not beingreadily ascertainable by proper means by, other persons who can obtain economicvalue from its disclosure or use; and (ii) is the subject of efforts thatare reasonable under the circumstances to maintain its secrecy.”

## (c)           For purposes of this Agreement, “ConfidentialInformation” means any and all information of the Company and itsAffiliates other than Trade Secrets that is not generally known by others withwhom they compete or do business, or with whom they plan to compete or dobusiness and any and all information, not publicly known, which, if disclosedby the Company or its Affiliates would assist in competition against them. ConfidentialInformation includes without limitation such information relating to (i) thedevelopment, research, testing, manufacturing, marketing and financialactivities of the Company and its Affiliates, (ii) the Products, (iii) thecosts, sources of supply, financial performance and strategic plans of theCompany and its Affiliates, (iv) the identity and special needs of thecustomers of the Company and its Affiliates and (v) the people andorganizations with whom the Company and its Affiliates have businessrelationships and those relationships. Confidential Information also includescomparable information that the Company or any of its Affiliates have receivedbelonging to others or which was received by the Company or any of its Affiliateswith any understanding that it would not be disclosed.

## (d)           The foregoing obligations do notapply to the extent that the Confidential Information is or becomes generallyavailable to the public through no fault of the Executive. The Executiveunderstands and agrees that the Executive’s obligations under this Agreement

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## with regard toTrade Secrets shall remain in effect for as long as such information shallremain a trade secret under applicable law. The Executive acknowledge that theExecutive’s obligations with regard to the Confidential Information shallremain in effect while employed or retained by the Company and for three (3) yearsafter the termination of employment, regardless of the reason for suchtermination.

## (e)           All documents, records, tapes andother media 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 ofinstruments of further assurance or confirmation) requested by the Company toassign the Intellectual Property to the Company and to permit the Company to enforceany patents, copyrights or other proprietary rights to the IntellectualProperty. The Executive will not charge the Company for time spent in complyingwith these obligations. All copyrightable works that the Executive createsshall be considered “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 bythe Company 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, 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,

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## Pennsylvania,Rhode Island, 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 thatwhile the Executive is employed by the Company and during the Non-CompetitionPeriod, the Executive will not, and will not assist anyone else to solicit forhiring any employee of the Company or any of its Affiliates, or seek topersuade any employee of the Company or any of its Affiliates to discontinueemployment. For purposes of this Agreement, an “employee” of the Company or anyof its Affiliates is any person who was such at any time within the precedingone year.

## (c)           The Executive further agrees thatwhile the Executive is employed by the Company and during the Non-CompetitionPeriod, the Executive will not directly or indirectly (1) solicit orencourage any customer of the Company or any of its Affiliates to terminate ordiminish its relationship with them, or, (2) seek to persuade any customeror prospective 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 thatwhile the Executive is employed by the Company and during the Non-CompetitionPeriod the 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 interests of theCompany and its Affiliates; that each and every one of those restraints isreasonable in respect to subject matter, length of time and geographic area;and that these restraints, individually or in the aggregate, will not preventthe Executive from obtaining other

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# suitableemployment during the period in which the Executive is bound by these restraints.The Executive further agrees that the Executive will never assert, or permit tobe asserted on the Executive’s behalf, in any forum, any position contrary tothe foregoing.  The Executive furtheracknowledges that, were the Executive to breach any of the covenants containedin Sections 7, 8 or 9 hereof, the damage to the Company would be irreparable. TheExecutive therefore agrees that the Company, in addition to any other remediesavailable to it, shall be entitled to preliminary and permanent injunctiverelief against any breach or threatened breach by the Executive of any of saidcovenants, without having to post bond. The parties further agree that, in theevent that any provision of Section 7, 8 or 9 hereof shall be determinedby any court of competent jurisdiction to be unenforceable by reason of itsbeing extended over too great a time, too large a geographic area or too greata range of activities, such provision shall be deemed to be modified to permitits enforcement 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 the Executiveis a party or is bound and that the Executive is not now subject to anycovenants 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 otherdirectors of the Company and its other executive officers. The Executive agreesto promptly notify the Company of any actual or threatened claim arising out ofor as 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:

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

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## (b)           “Changeof Control” means (i) a sale of all or substantially all of the assetsof the Company, Cellu Paper or Cellu Parent to a Person in which theshareholders of Cellu Parent immediately prior to such transaction do not,directly or indirectly, own securities representing more than 50% of the votingpower of the Person acquiring such assets immediately following thetransaction, (ii) a sale of shares of capital stock of Cellu Parent byCellu Parent or its shareholders resulting in more than 50% of the voting powerof Cellu Parent being held, directly or indirectly, by a Person other than theshareholders of Cellu Parent immediately prior to such sale, (iii) a saleby Cellu Parent of the equity securities of Cellu Paper or the Companyresulting in more than 50% of the voting power of Cellu Paper or Cellu Tissue(as the case may be) being held directly or indirectly by a Person other thanCellu Parent or the shareholders of Cellu Parent immediately prior to suchsale, or (iv) a merger or consolidation of the Company, Cellu Paper orCellu Parent with or into another Person, if and only if, after such merger orconsolidation, more than 50% of the voting power of the Company, Cellu Paper orCellu Parent (as the case may be) is directly or indirectly owned by a Personother than Cellu Parent or the shareholders of Cellu Parent immediately priorto such merger or consolidation. For the avoidance of doubt, the transactioncontemplated by the Merger Agreement shall not constitute a Change of Control.

## (c)           “Intellectual Property” meansinventions, discoveries, developments, methods, processes, compositions, works,concepts and ideas (whether or not patentable or copyrightable or constitutingtrade secrets) conceived, made, created, developed or reduced to practice bythe Executive (whether alone or with others, whether or not during normalbusiness hours or on or off Company premises) during the Executive’s employmentand during the period of six (6) months immediately following terminationof the Executive’s employment that relate to either the Products or anyprospective activity of the Company or any of its Affiliates.

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

## (e)           “Products” mean all specialtypaper products, tissue hard rolls, tissue converted products and/or deepcolored napkin products planned, researched, developed, tested, manufactured,sold, licensed, leased or otherwise distributed or put into use by the Companyor any of its Affiliates, together with all services provided or planned by theCompany or any of its Affiliates, during the Executive’s employment.

## (f)            “Restricted Capacity” means aposition which is the same or comparable to the position the Executive heldwith the Company or in which the Confidential Information or customer goodwillwhich the Executive created or to which the Executive had access during theExecutive’s employment with the Company would give that competitor an unfaircompetitive advantage. For the avoidance of doubt, this definition as usedherein shall in no way diminish the Executive’s obligations under Section 7.

# 14.           Withholding.All payments made by the Company under this Agreement shall be

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# reduced by any taxor other amounts required to be withheld by the Company under applicable law.

# 15.           Assignment.Neither the Company nor the Executive may make any assignment of this Agreementor any interest herein, by operation of law or otherwise, without the priorwritten consent of the other; provided, however, that the Companymay assign its rights and obligations under this Agreement without the consentof the Executive in the event that the Company shall hereafter affect areorganization, consolidate with, or merge into, any other Person or transferall or substantially all of its properties or assets to any other Person. ThisAgreement shall inure to the benefit of and be binding upon the Company and theExecutive, their respective successors, executors, administrators, heirs andpermitted assigns.

# 16.           Severability.If any portion or provision of this 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 shall be effective unless made in writing andsigned by the waiving party. The failure of either party to require theperformance of any term or obligation of this Agreement, or the waiver byeither party of any breach of this Agreement, shall not prevent any subsequentenforcement of such term or obligation or be deemed a waiver of any subsequentbreach.

# 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 Company.

# 20.           Amendment;Section 409A. This Agreement may be amended or modified only by awritten instrument signed by the Executive and by an expressly authorizedrepresentative

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# of the Company. Theparties acknowledge that certain provisions of this Agreement maybe required to be amended, following the issuance of additional guidance by theInternal Revenue Service with respect to Section 409A, to avoid the possibleimposition of additional tax under Section 409A with respect to certainpayments and benefits under this Agreement. The Company agrees that it will notunreasonably withhold its consent to any such amendments which in itsdetermination are (i) feasible and necessary to avoid adverse taxtreatment under Section 409A for the Executive, and (ii) not adverseto the interests of the Company.

# 21.           DisputeResolution. In the event of any dispute relating toExecutive’s employment, the termination thereof, or this Agreement, other thana dispute in which the primary relief sought is an equitable remedy such as aninjunction, the parties shall be required to have the dispute, controversy orclaim settled by alternative dispute resolution conducted by JAMS (or, if JAMSis not available, another mutually agreeable alternative dispute resolutionorganization), in the city of Executive’s principal place of employment. Anyaward entered by JAMS (or such other organization) shall be final, binding andnonappealable, and judgment may be entered thereon by either party inaccordance with applicable law in any court of competent jurisdiction. This Section 21shall be specifically enforceable. JAMS (or such other organization) shall haveno authority to modify any provision of this Agreement. The Company shallreimburse the Executive the Executive’s reasonable attorney’s fees and costs inthe event that the Executive prevails in an action brought by the Executive’sagainst the Company to enforce the terms of this Agreement. THE PARTIESIRREVOCABLY WAIVE ANY RIGHT TO TRIAL BY JURY AS TO ALL CLAIMS HEREUNDER.

# 22.           Headings.The headings and captions in this Agreement are for convenience only and in noway define or describe the scope or content of any provision 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 sameinstrument.

# 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 WITNESS WHEREOF, this Agreement has been executedas a sealed instrument by the Company, by its duly authorized representative,and by the Executive, as of the date first above written.
| THE EXECUTIVE:        | THE COMPANY:                |
|-----------------------|-----------------------------|
|                  |                        |
|                  | CELLU TISSUE HOLDINGS, INC. |
|                  |                        |
|                  |                        |
| /s/ Russell C. Taylor |                        | By: | /s/ Dianne M. Scheu |   |
| Russell C. Taylor     |                        |
|                  | Title:                      | Chief Financial Officer |   |
|                       |                             |  |  |  |  |  |

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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”).

Mr. Russell Taylor

**CELLU PARENT CORPORATION2006 STOCK OPTION AND RESTRICTED STOCK PLAN**

Restricted Stock Award Agreement

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

Attn:       Chief ExecutiveOfficer

Ladiesand Gentlemen:

The undersigned (i) acknowledges that he 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 3,778shares (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 furtherprovided* that if the undersigned ceases to be employed by the Companyby reason of the Company’s election not to renew the undersigned’s employmentagreement with the Company dated June 12, 2006 (the “Employment Agreement”)and at the time the Company elects not to renew such Employment Agreement thereexists no Cause for the termination of the undersigned, one hundred percent(100%) of the Shares granted under this Award that are not then already vestedshall vest. For purposes of the preceding sentence, Cause shall be as definedin the Employment Agreement. The undersigned hereby (i) appoints theCompany as the attorney-in-fact of the undersigned to take such actions as maybe necessary or appropriate to effectuate a transfer of the record ownership ofany such shares that are unvested and forfeited hereunder, (ii) agrees todeliver to the Company, as a precondition to the issuance of any certificate orcertificates with respect to unvested Shares hereunder, one or more stockpowers, endorsed in blank, with respect to such Shares, and (iii) agreesto sign such other powers and take such other actions as the Company mayreasonably request to accomplish the transfer or forfeiture of any unvestedShares that are forfeited hereunder.

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 he is the recordowner on the record date for such dividend or other distribution, and (ii) voteany Shares of which he 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 he 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 by reasonof the grant will increase the undersigned’s tax liability for the year ofinclusion, 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 his rights hereunder are subject to his promptly paying to theCompany in cash (or by such other means as may be acceptable to the Company inits discretion, including, if the Administrator so determines, by the deliveryof previously acquired Stock or shares of Stock acquired hereunder or by thewithholding of amounts from any payment hereunder) all taxes required to 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                                   |   |                     |   |
|                                      |        |                          |  |

 

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