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**Exhibit 10.1**

**BLUERIDGE PAPER PRODUCTS INC.**

#### **ANNUAL PERFORMANCE and SALES INCENTIVE PLAN**

 

(Participant Name)

TARGET INCENTIVE(% OF BASE SALARY):  **%**

PAYOUT PERIOD(check appropriate boxes):

o            QUARTERLY

o            SEMI-ANNUAL

o            ANNUAL

JANUARY 1, 2006 THROUGHDECEMBER 31, 2006

Thisdocument contains confidential information for use only within Blue Ridge PaperProducts Inc. The reproduction or distribution of this document, eitherelectronically or in hard copy, without the prior approval of theVice-President of Human Resources of Blue Ridge Paper Products Inc. is strictlyprohibited.

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# **PURPOSE**

The Annual PerformanceIncentive Plan (PIP Plan) and Sales Incentive Plan (SIP) is designed to provideincentive compensation to individuals who make an important contribution to theCompany’s performance. Specific Plan objectives are to:

1)              Reward selectedindividuals for enhancing shareholder value by creating a strong linkage of payto performance, and achievement of Company and business objectives;

2)              Attract, motivateand retain highly talented and competent individuals by providing a competitiverange of performance based payout opportunities; and

3)              Provide significantfinancial award potential for achieving outstanding performance.

The Blue Ridge PIP/SIPPlan is an integral part of each participants total compensation package, andwhen combined with base salary, results in incentive opportunities that are animportant component of your total compensation and benefits package.

# **GENERALPLAN DESCRIPTION**

The Plan provides the opportunityfor selected individuals to receive cash awards based on achievement ofsignificant goals and objectives during the relevant period that arealigned with overall corporate goals and objectives. Incentive awardopportunities are expressed as a percent of base salary and may be earned by aParticipant provided the Participant achieves the agreed upon goals andobjectives within the relevant time frame, subject to Plan Administrationguidelines herein.

At the beginning of, orduring, the Plan year, certain key employees may be selected to participate inthe Plan. Participation in the Plan is subject to approval by the CEO. Suchapproval must be obtained prior to offering the opportunity to participate inthe Plan to any employee or applicant for employment.

Each participant will beinformed of his/her target incentive award, expressed as a percent of salary,and the individual and their immediate supervisor will agree upon the goals andobjectives for that individual to achieve in the relevant period, whether thosebe quarterly, semi-annual or annual, or a combination of each. Within ninety(90) days of the beginning of each calendar year, an “Award Grid” for therelevant year will be published.

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For the year 2006, theAward Grid will be based on the Company’s EBITDA performance in the relevantperiod. The grid will be used to determine the payout multiple for whichparticipants are eligible during the relevant time period. Attached to thisdocument are the relevant Award Grids for 2006.

# **PLANDESIGN AND OPERATION**

Corporate Officers willrecommend to the CEO and VP-Human Resources (HR), those positions, andincumbents in those positions, within their respective business units, thathave a significant impact on the operating success of their organization. Factorssuch as salary grade, level of financial responsibility, ability to impactresults, ability to establish objectively measurable goals for the position,etc. will be considered in making those recommendations. The final decision asto whether a particular individual will be selected as a Plan Participantresides with the CEO and VP-HR. Once selected, employees will be notified inwriting of their selection as a participant in the Plan.

I.                                         Priorto the beginning of the relevant period.

Prior to, or as soon aspossible after the beginning of the relevant period, each Participant will,with the approval of his/her immediate supervisor, establish performanceobjectives and goals that warrant incentive compensation. Such goals andobjectives should be specific, measurable, achievable in the requisite timeframe, and require effort above and beyond that required for the individual toperform the essential functions of the position.  Personal professional goals, such as careerdevelopment activities are not to be included in this program.

Goals and objectivesestablished under the Plan shall be in alignment with overall Company andbusiness unit, goals and objectives, and will include performance in variablesand measures such as SAFETY, Quality, Cost, Productivity, Sales Volume, etc.,as appropriate.

Continuous improvementactivities, such as 6 Sigma, Lean Manufacturing, or EBITDA Enhancement projectprojects should also be considered. Such goals and objectives should beessentially within the ability of the individual to influence the achievementof those goals.

Each agreed upon goalshould be assigned a relative weighting for the period, and the sum of theweighting of all goals/objectives will equal 100%. This should be communicatedwith the Participant at the beginning of the period.

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II.                                     Atthe conclusion of the relevant period.

Each supervisor of aParticipant will review whether such goals and objectives were achieved at theconclusion of the relevant time frame, and evaluate the effectiveness of the individual’sachievement of those goals, using the following rating scale (refer toIncentive Award Grid attachment):

4.               Outstanding—the individual’s results demonstrably exceed the Superior level withperformance exceeding all goals and expectations. Achieving this level ofperformance requires significant “stretch”.

3.               Superior—theaccomplishment of goals for the period with as good or better than expectedresults, and generally requires considerable effort above and beyond thecompletion of essential functions of the position. Most goals are met orsurpassed.

2.               Acceptable—performancedemonstrates progress relative to goals in the short term and on a year-to-yearcomparative basis, but still falls below the Superior level. Performance atlevel requiring little “stretch.”

1.               Marginal—performancejudged minimally acceptable in the short term, is unacceptable in thelonger-term and requires corrective action. Overall performance at this levelresults in no payout.

A Sample PayoutCalculation is attached to aid you in calculating the payout for an individualParticipant.

Incentive Awards willnormally be distributed as soon as practical following the end of the relevanttime frame, which is either quarterly, semi-annually or annually. Such timedepends on the filing of Company results with the SEC, and determination ofwhether the Company’s financial performance justifies the payment of incentiveawards for that time frame.

**PLAN ADMINISTRATION**

The Plan shall beadministered jointly by the VP-HR and the CEO, whose decisions are final. TheVP-HR will be responsible for the administrative procedures governing the Plan,including ensuring that each Participant is informed and understands theoperation of the Plan and their individual responsibilities under the Plan. EachCorporate Officer shall submit appropriate documentation to the CEO reflectingthe proposed incentive award for the eligible participants in their respectivebusiness units. Such documentation will include the proposed payout for eachindividual and be signed by the responsible Corporate Officer confirming thateach Participant did in fact earn the proposed incentive award.

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The followingadministrative procedures govern the operation of the Plan:

1. All individual payoutsare subject to approval by the CEO.

2. Incentive awards willbe made in cash, by separate check, with applicable payroll deductions.

3. A new Participant whobegins participation during the Incentive Year may be eligible for a pro-rataincentive award from the date of entry into the Plan, provided suchparticipation is for at least one calendar quarter.

4. In case of death,total disability or retirement under a BRPP retirement plan, a pro-rataincentive award can be made.

5. A Participant who isterminated and who subsequently received severance pay under a BRPP severanceplan may be eligible for a pro-rata incentive award. Management will determinethe amount of the pro-rata incentive award based upon the facts andcircumstances related to the participant’s termination as well as the amount oftime actively employed during the Incentive period.

6. Any Participant whoresigns or is terminated during the relevant Incentive period (except asprovided above), or prior to the payment of awards for that period, will not beentitled to any incentive award attributable to that Incentive period.

7. Any Participant whoviolates the Company’s Code of Conduct shall forfeit any claim to unpaidIncentive award(s).

8. BRPP reserves theright to offset any funds to which it has a “claim of right” from any incentiveaward due a terminating or terminated Participant.

9. Nothing herein shallbe construed as an agreement or commitment to employ any Participant or toemploy a Participant for any fixed period of time, or constitute a commitmentby BRPP that any Participant will continue to receive an incentive award orwill continue as a Participant in the Plan. No Participant or his/her legalrepresentatives, beneficiaries, or heirs will have any right or interest in thePlan or in its continuance, or in the Participant’s continued participation inthe Plan.

10. BRPP reserves theright to amend or terminate the Plan at any time, without prior notice to anyParticipant.

11. Incentive Awards willnormally be distributed as soon as practical following the end of the relevanttime frame, which is either quarterly, semi-annually or annually.

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**DEFINITIONS**

1. **Base Salary**—shall mean base salary,including overtime (if applicable) **earned**by the Participant during the relevant Plan time frame, and shall not includepremiums, allowances, expense reimbursements, commissions, incentives, notice,severance, or termination pay.

2. **EBITDA**—Earnings Before Interest, Taxes,Depreciation, and Amortization.

3. **Exclusions** means the automatic exclusion ofthe following from relevant financial data for purposes of measuring corporateperformance:

·                  Extraordinaryor unusual charges (GAAP definition)

·                  Changesin generally accepted accounting (GAAP) principles

·                  Gainsor losses from discontinued operations (GAAP) definition

·                  Restructuringcharges

·                  Anyother extraordinary or unusual changes that are quantified and identifiedseparately on the face of the Income Statement for the relevant time frame.

4. **Relevant period**—shall mean the time frameduring which Participant’s goals and accomplishments of same are measured forthe purposes of determining whether an incentive award has been earned and canbe recommended. There are 3 relevant time frames:

·                  Quarterly

·                  Semi-Annual

·                  Annual

Supervisors andParticipant’s may agree to have goals established to be accomplished in varioustime frames during the year. In such cases, the Supervisor must calculateearned payouts for the relevant time frame by utilizing the appropriate payoutgrid.

5. **Participant** in the Plan shall mean anyindividual designated by Corporate Officers of the Company and approved by theCEO.

6. **Total Disability** is as defined under theBRPP Long Term Disability (LTD) Plan.

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**Sample calculation of an incentive award**

Assumptions:  Participant’s base salary is $50,000 andhe/she is in 10% target incentive category, and has 4 goals toaccomplish during the 1st quarter and EBITDA for the quarter is lessthan $7.0 million. NOTE: The same methodology applies to semi-annual, or annualgoals. Be sure to use the correct payout calculation grid.

Step 1: Rate theParticipant’s performance against each goal for that period, using the ratingdefinitions in Section II of the Plan, and weight each goal relative toits importance/impact in the period:

Goal #1: Rating =  “3.0”, with20% weight =     .6

Goal #2: Rating =  “2.5”, with20% weight =     .5

Goal #3: Rating =  “3.5”, with30% weight = 1.05

Goal #4: Rating =  “2.5”, with 30%weight =   .75

100%

Overall rating = sum of individual ratings   =  2.9

Step 2. Refer to theappropriate PIP Grid for that Participant, which is either quarterly,semi-annual, or annual.

Step 3. The percentpayout for the rating earned by the individual in this example is 1.50%. (2.9 rating, with <$7.0M EBITDA, 1st Qtr. = 1.50% payout.)

Step 4. Multiply the %Payout times the individual’s annual salary and that will be the dollar amountof the Participant’s payout for that period. Here’s the payout for theindividual in the example:  1.50% X$50,000 = $750.

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Please comply with thefollowing Acknowledgement and return it (hard copy) promptly to the VicePresident-Human Resources at the following address:

Darrell Douglas

VP-Human Resources

41 Main Street

Canton,NC 28716

## **ACKNOWLEDGEMENT**

By signing below, youacknowledge that you have read and fully understand the foregoing Blue RidgePaper Products Inc. Annual Performance and Sales Incentive Plan, including theadministrative procedures governing the Plan. You further acknowledge that youare in agreement with and accept all of the terms, conditions, and provisionscontained herein.

Name (Printed):_______________________________________

Name (signature):_____________________________________

Date: _______________________________________________

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