Exhibit 10.7


 


THIRD AMENDMENT


 


THIRD AMENDMENT, dated as of September 26, 2008
(this “Amendment”), to the CREDIT AGREEMENT, dated as of June 12,
2006 (as amended on March 21, 2007 and July 2, 2008 and as further
amended, 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 US Administrative Agent (in such capacity, the “Administrative
Agent”) and JPMORGAN CHASE BANK, N.A., TORONTO BRANCH, as Canadian
Administrative Agent (the “Canadian Administrative Agent”).


 


RECITALS


 


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


 


B.            WHEREAS, the
Lenders are willing to agree to such amendments and provide certain other
waivers and amendments, in each case
subject to the terms and conditions set
forth herein.


 


NOW, THEREFORE, in consideration of the foregoing
Recitals and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto hereby agree as
follows:


 


AGREEMENT


 


1.            Defined Terms. Terms defined in
the Credit Agreement and used herein shall have the meanings given 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 definition of “US Commitment”, deleting the amount “US$57,000,000”
and substituting therefor the amount “US$55,000,000”; and


 


(b) in
the definition of “Canadian Commitment”, deleting the amount
“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
the word “A+” in the second line thereof and substituting therefor the word
“A-”.


 


4.            Waiver. The Lenders
hereby waive for the purpose of Section 2 of this Amendment the
requirement under Section 2.10(c) of the Credit Agreement that each
reduction of the US Commitments 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
Administrative Agent shall have received this Amendment, duly executed and
delivered by the Loan Parties and the Lender.


 

















 


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


 


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


 


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


 


(b)           The representations and warranties of the
Borrower set forth in Article III of the Credit Agreement as amended
hereby are true and correct in all material respects 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 Administrative Agent for all reasonable fees, costs and
expenses incurred by it in connection with this Amendment, including but not
limited to the reasonable fees, costs and expenses of counsel.


 


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


 


[Signature
pages follow]


 

















 


IN WITNESS WHEREOF, the parties hereto have caused
this Amendment to be duly executed by their respective authorized officers as
of 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


 

















 


	
   

  	
  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


 

















 


	
   

  	
  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


 

















 


	
   

  	
  JPMORGAN
  CHASE BANK, N.A., individually, as US 

  
	
   

  	
  Administrative
  Agent, Issuing Bank, Swingline Lender

  
	
   

  	
  and
  a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/
  John M. Hariaczyi

  
	
   

  	
   

  	
  Name:
  John M. Hariaczyi

  
	
   

  	
   

  	
  Title:
  Vice President

  



 


 


	
   

  	
  JPMORGAN
  CHASE BANK, N.A., TORONTO

  
	
   

  	
  BRANCH,
  individually and as Canadian Administrative

  
	
   

  	
  Agent
  and a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
   

  
	
   

  	
   

  	
  Name:
  

  
	
   

  	
   

  	
  Title:
  

  



 


Signature Page to Third Amendment


 

















 


	
   

  	
  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