Exhibit
10.1


EMPLOYMENT
AGREEMENT


THIS EMPLOYMENT AGREEMENT (the “Agreement”)
made and entered into by and between Cellu Tissue Holdings, Inc., a Delaware
corporation (the “Company”), and Mr. David J. Morris (the “Executive”),
effective as of August 6, 2007, and which is hereafter referred to as the “Effective
Date.


WHEREAS, the operations of the Company and its
Affiliates are a complex matter requiring direction and leadership in a variety
of areas, including financial, strategic planning, regulatory, community
relations and others;


WHEREAS, the Executive is possessed of certain
experience and expertise that qualify the Executive to provide the direction
and leadership required by the Company and its Affiliates;


WHEREAS, subject to the terms and conditions hereinafter
set forth, the Company wishes to employ the Executive as its Chief Financial
Officer and the Executive wishes to accept such continued employment;


NOW, THEREFORE, in consideration of the foregoing
premises and the mutual promises, terms, provisions and conditions set forth in
this Agreement, the parties hereby agree:


1.             Employment.  Subject to the terms and conditions set forth
in this Agreement, the Company hereby offers and the Executive hereby accepts
employment.


2.             Term.      Subject to earlier termination
as hereinafter provided, the Executive’s employment hereunder shall be for a
term of four (4) years, commencing on the Effective Date, and shall be
automatically extended thereafter for successive terms of one year each, unless
either party provides notice to the other at least sixty (60) days prior to the
expiration of the original or any extension 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 “the
term of this Agreement” or “the term hereof.”


3.             Capacity and
Performance.


(a)           Subject
to earlier termination as hereinafter provided, during the term of this
Agreement, the Executive shall serve the Company as its Chief Financial
Officer, reporting to the Company’s Chief Executive Officer.  In addition, and without further
compensation, the Executive shall serve as a director and/or officer of one or
more of the Company’s Affiliates (as defined below) if so elected or appointed
from time to time.


(b)           During
the term hereof, the Executive shall be employed by the Company on a full-time
basis and shall perform such duties and responsibilities on behalf of the
Company and its Affiliates consistent with the Executive’s position with the
Company as may be designated from time to time by the Chief Executive Officer.













(c)           During
the term of the Executive’s employment, the Executive shall devote the
Executive’s full business time and the Executive’s best efforts, business
judgment, skill and knowledge exclusively to the advancement of the business
and interests of the Company and its Affiliates and to the discharge of the
Executive’s duties and responsibilities hereunder.  The Executive shall not engage in any other
business activity or serve in any industry, trade, professional, governmental
or academic position during the term of this Agreement, except as may be
expressly approved in advance by the Chief Executive Officer in writing.


4.             Compensation and
Benefits.  As compensation for all
services performed by the Executive under and during the term hereof and
subject to performance of the Executive’s duties and of the obligations of the
Executive to the Company and its Affiliates, pursuant to this Agreement or
otherwise:


(a)           Base
Salary.  During the term hereof, the
Company shall pay the Executive a base salary at the rate of Two Hundred Fifty
Thousand Dollars ($250,000) per annum, payable in accordance with the normal
payroll practices of the Company for its executives and subject to increase
(but not decrease).  The Company’s Board
of Directors (the “Board”) at the request of the Chief Executive Officer will
review the Executive’s base salary each year. 
Such base salary, as from time to time increased, is hereafter referred
to as the “Base Salary”.


(b)         Annual Bonus
Compensation.


(i)            During the term hereof
and beginning with the first fiscal year after the Effective Date, Executive
shall be eligible to receive an annual bonus of 50% of Base Salary (the “Target
Bonus”), subject to the achievement of an EBITDA target set by the Company,
approved by the Board and subject to the terms and conditions of any applicable
annual incentive program in effect from time to time (the “Incentive Plan”).  The amount of any bonus awarded (whether more
than or less than the Target Bonus) shall be determined by the Company, and
subject to Board approval, based upon the achievement of the EBITDA target,
after the completion of the Company’s annual audit and the Board’s review
thereof, and shall further be subject to the terms of the Incentive Plan as in
effect from time to time.  Except as
otherwise expressly provided under this Agreement or under the terms of the
Incentive Plan as in effect from time to time, the Executive shall not be
entitled to earn bonus compensation for any period of service less than a full
year, except; (1) the Executive shall
be entitled to earn a pro rated share of bonus compensation for the time period
of employment from the Effective Date until the end of that first fiscal year;
and (2) as set forth in Sections 5(a), 5(b), 5(d), 5(e), 5 (g) and 5 (h).


(ii)           Any bonus due hereunder
shall be payable not later than two and one half months following the fiscal
year for which the bonus was earned or as soon as is



 2
 









practicable within the meaning of Section
409A of the Internal Revenue Code of 1986, as amended, (“Section 409A”).


(c)           Equity
Arrangements.  On the Effective Date,
the Company will make a grant of restricted stock to the Executive under the
Company’s Stock Option and Restricted Stock Plan (the “Plan”).  The terms and conditions of such restricted
stock grant shall be subject to the terms of the Plan and the Restricted 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) weeks of vacation per annum, to be taken at such times
and intervals as shall be determined by the Executive, subject to the
reasonable business needs of the Company.


(e)           Other
Benefits.  During the term hereof and
subject to any contribution generally required of employees of the Company, the
Executive shall be entitled to participate in any and all employee benefit
plans from time to time in effect for employees of the Company generally,
except to the extent such plans are in a category of benefit otherwise provided
to the Executive.  Such participation
shall be subject to (i) the terms of the applicable plan documents, (ii)
generally applicable Company policies and (iii) the discretion of the Board or
any administrative or other committee provided for in or contemplated by such
plan.  The Company may alter, modify, add
to or delete 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 all perquisites in effect from time to time for
senior executives of the Company generally, except to the extent such
perquisite is otherwise provided to the Executive.  Such receipt shall be subject to (i)
generally applicable Company policies and (ii) the discretion of the
Board.  The Company may alter, modify,
add to or delete any such perquisite at any time as it, in its sole judgment,
determines to be appropriate without recourse by the Executive.


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


5.             Termination of
Employment and Severance Benefits. 
The Executive’s employment hereunder shall terminate under the following
circumstances:


(a)           Death.  In the event of the Executive’s death during
the term hereof, the Executive’s employment hereunder shall terminate and the
Company shall pay or provide to the Executive’s designated beneficiary or, if
no beneficiary has been designated by the Executive, to the Executive’s
estate:  (i) any earned, but unpaid, Base
Salary through the date of termination; (ii) any earned, but unpaid annual
bonus for any fiscal year prior to the fiscal year



 3
 









of the Executive’s termination; (iii) a pro rata portion (based on the
number of days preceding the Executive’s termination in the fiscal year of
termination) of the Target Bonus; (iv) a lump sum equal to the lesser of (A)
twelve (12) months of Base Salary or (B) Base Salary for the remainder of the
term hereof; and (v) any unreimbursed business expenses.  In addition, subject to any employee
contribution applicable to employees and their dependents generally, for the
twelve (12) month period following termination, the Company shall continue to
contribute to the premium cost of coverage for the Executive’s dependents under
the Company’s medical and dental plans provided that a timely COBRA election is
made.  The payments referred to in
clauses (i), (ii) and (v) above shall be payable in a lump-sum within thirty
(30) days after the date of termination. 
The Company’s payments under clauses (iii) and (iv) above, as well as
the continued contribution toward medical and dental premiums, are expressly
conditioned upon the Executive’s designated beneficiary, or if no beneficiary
has been designated, a representative of the Executive’s estate executing and
delivering to the Company a timely and effective general release of claims, in form and substance satisfactory to the
Company (“Separation Agreement”). 
Payment under clauses (iii) and (iv) will be made within thirty (30)
days after the Company’s receipt of such release of claims in form and
substance satisfactory to the Company. 
Other than as set forth in this clause (a), the Company shall have no
further obligation to the Executive’s beneficiary or the Executive’s estate.


 


(b)         Disability.


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


(ii)           If
any question shall arise as to whether during any period the Executive is
disabled through any illness, injury, accident or condition of either a
physical or psycholog­ical nature so as to be unable to perform substantially
all of the Executive’s duties and responsibilities hereunder, the Executive
may, and at the request of the Company shall, submit to a medical examination
by a physician selected by the Company to whom the Executive or the Executive’s
duly appointed guardian, if any, has no reasonable objection to determine
whether the Executive is so disabled and such determination shall for the
purposes of this Agreement be conclusive of the issue.  If such question shall arise and the
Executive shall fail to submit to such medical examination, the Company’s
determination of the issue shall be binding on the Executive.


(iii)          Upon
the giving of notice of termination of the Executive’s employment due to
disability hereunder, the Company shall have no further obligation or



 4
 









liability to the
Executive, other than for (i) any earned, but unpaid, Base Salary through the
date of termination; (ii) any earned, but unpaid annual bonus for any fiscal
year prior to the fiscal year of the Executive’s termination; (iii) a pro rata
portion (based on the number of days preceding the Executive’s termination in
the fiscal year of termination) of the Target Bonus; (iv) a lump sum payment
equal to the lesser of (A) twelve (12) months of Base Salary or (B) Base Salary
for the remainder of the term hereof; and (v) any unreimbursed business
expenses.  In addition, (x) the Company
shall continue the benefits contemplated by Section 4(h) for the period
contemplated therein, and (y) subject to any employee contribution applicable
to active employees and their dependents generally, for the twelve (12) month
period following termination, the Company shall continue to contribute to the
premium cost of coverage for the Executive and the Executive’s dependents under
the Company’s medical and dental plans provided that a timely COBRA election is
made.  The payments referred to in
clauses (i), (ii) and (v) above shall be payable in a lump-sum within thirty
(30) days after the date of termination. 
The Company’s payments under clauses (iii) and (iv) above, as well as
the continued contribution toward medical and dental premiums, are expressly
conditioned upon the Executive (or the Executive’s duly appointed guardian, if
any) executing and delivering to the Company a timely and effective Separation Agreement.  Payment under clauses (iii) and (iv) will be
made within thirty (30) days after the Company’s receipt of the Separation
Agreement.  Other than as set forth in
this clause (b), the Company shall have no further obligation to the Executive.


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


(i)            the Executive’s repeated and willful refusal
or failure (other than during periods of illness, disability or vacation) to
perform the Executive’s duties hereunder or under any lawful directive of the
Board (consistent with the terms of this Agreement;


(ii)           the Executive’s willful misconduct or gross neglect in the performance
of the Executive’s duties hereunder which in either case 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 crime involving dishonesty or moral turpitude or the Executive’s pleading guilty to any
felony, other than motor vehicle offenses, or any other crime involving
dishonesty or moral turpitude;



 5
 









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


(vi)          any other conduct that
involves a breach of fiduciary obligation on the part of the Executive or
otherwise could reasonably 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 against Executive
and/or Cellu Tissue an action, suit, proceeding or demand arising from an
alleged violation of a non-competition or other similar agreement between
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 a reasonable belief that the Executive’s action or
omission was in furtherance of the Company’s business. If the Company desires
to terminate the Executive’s employment pursuant to clause (i), (ii), (iii) or
(v) above, it shall first give the Executive written notice of the facts and
circumstances providing Cause and shall allow the Executive no less than twenty
(20) days (x) in the case of a proposed termination pursuant to clause (i),
(ii) or (iii) above to remedy, cure or rectify the situation giving rise to
Cause and (y) in the case of a proposed termination pursuant to clause (v)
above to explain the circumstances of the Executive’s actions or to show that
the circumstances underlying the indictment do not constitute the type of
felony described in clause (v). Termination by the Company for Cause pursuant
to clause (iv) above may be effected by written notice of the Company to the
Executive.  Upon the giving of
notice of termination of the Executive’s employment hereunder for Cause, the
Company shall have no further obligation to the Executive, other than for (i) Base Salary earned, but unpaid at the
date of termination; (ii) any earned, but unpaid annual bonus for any fiscal
year prior to the fiscal year of the termination of the Executive’s employment;
and (iii) any unreimbursed business expenses.


(d)           By
the Company without Cause.  The
Company may terminate the Executive’s employment hereunder without Cause at any
time upon notice to the Executive.  In
the event of such termination, the Company shall have no further obligation or
liability to the Executive, other than for (i) any earned, but unpaid, Base
Salary through the date of termination; (ii) any earned, but unpaid annual
bonus for any fiscal year prior to the fiscal year of the Executive’s
termination; (iii) a pro rata portion (based on the number of days preceding the
Executive’s termination in the fiscal year of termination) of the Target 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 the remainder of the term of
this Agreement; (v) a lump sum equal to the greater of (x) one times the Target
Bonus or (y) payment of the Target Bonus with respect to a period equal to the
remainder of the term of this Agreement; and (vi) any unreimbursed business
expenses.  In addition, (x) the Company shall
continue the benefits contemplated by Section 4(h) for the period contemplated
therein, and (y) subject to any employee contribution applicable to employees
and their dependents generally, for the period following termination



 6
 









specified in clause (iv) above, or if earlier, until the date that the
Executive becomes eligible for coverage with a subsequent employer, the Company
shall continue to contribute to the premium cost of coverage for the Executive
and the Executive’s dependents under the Company’s medical and dental plans
provided that a timely COBRA election is made. 
The payments referred to in clauses (i), (ii) and (vi) above shall be
payable in a lump-sum within thirty (30) days after the date of termination.  The Company’s payments under clauses (iii),
(iv) and (v) above, as well as the continued contribution toward medical and
dental premiums, are expressly conditioned upon the Executive executing and
delivering to the Company a timely and effective Separation Agreement.  Payment under clauses (iii), (iv) and (v)
will be made within thirty (30) days after the Company’s receipt of the
Separation Agreement.  Other than as set
forth in this clause (d), the Company shall have no further obligation to the
Executive.


 


(e)             By the Executive for Good Reason.  The Executive may terminate the Executive’s
employment hereunder for Good Reason, provided that the Executive shall have
given written notice setting forth in reasonable detail the nature of such Good
Reason to the Company upon the Executive’s becoming aware or at such time as
Executive should have been aware of the occurrence of any such event or
condition, and the Company shall not have fully corrected the situation within
ten (10) days after such notice of Good Reason. 
The following shall constitute “Good Reason” for termination by
the Executive:


(i)            failure by the Company to pay any
compensation when due hereunder;


(ii)           any significant reduction by the Company’s of the Executive’s title,
duties or responsibilities (except in connection with termination 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 Good Reason);


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


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


If
the Executive desires to terminate the Executive’s employment with the Company
pursuant to this Section 5(e), the Executive shall first give written notice of
the facts and circumstances providing Good Reason to the Company, and shall
allow the company no less than twenty (20) days to remedy, cure or rectify the
situation giving rise to Good Reason.  The
Company’s failure to continue the Executive’s appointment or election as a
director or officer of any of its Affiliates shall not constitute 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 in
accordance with Section 5(d) hereof provided the Executive complies with the
requirement of executing and delivering the Separation Agreement.  Other than as set forth in this clause (e),
the Company shall have no further obligation to the Executive.



 7
 









(f)            By the Executive Without Good Reason.  The Executive may terminate the Executive’s
employment hereunder at any time upon sixty (60) days’ written notice to the
Company.  In the event of termination of
the Executive pursuant to this Section 5(f), the Board may elect to waive the
period of notice, or any portion thereof, and, if the Board so elects, the
Company will pay the Executive the Executive’s Base Salary for the notice
period (or for any remaining portion of the period).  The Company shall also pay the Executive (i)
any earned, but unpaid annual bonus for any fiscal year prior to the fiscal
year of the termination of the Executive’s employment, and (ii) any
unreimbursed business expenses.


(g)           Non-Renewal by Company.  The Company may elect not to renew this
Agreement in accordance with Section 2 above. 
In the event of such non-renewal for a reason other than Cause (as
defined in Section 5(c) above), the Company shall have no further obligation or
liability to the Executive other than for (i) any earned, but unpaid, Base
Salary through the date of termination; (ii) any earned, but unpaid annual
bonus for any fiscal year prior to the fiscal year of the Executive’s
termination; (iii) a pro rata portion (based on the number of days preceding
the Executive’s termination in the fiscal year of termination) of the Target
Bonus; (iv) a lump sum equal to
twenty-four (24) months of Base Salary and (v) any unreimbursed business
expenses.  In addition, subject to any
employee contribution applicable to employees and their dependents generally,
for the twenty-four (24) month
period following termination, or if earlier until the date that the Executive
becomes eligible for coverage with a subsequent employer, the Company shall
continue to contribute to the premium cost of coverage for the Executive and
the Executive’s dependents under the Company’s medical and dental plans
provided that a timely COBRA election is made. 
The payments referred to in clauses (i), (ii) and (v) above shall be
payable in a lump-sum within thirty (30) days after the date of
termination.  The Company’s payments
under clauses (iii) and (iv) above, as well as the continued contribution
toward medical and dental premiums, are expressly conditioned upon the
Executive executing and delivering to the Company a timely and effective
Separation Agreement.  Payment under
clauses (iii) and (iv) will be made within thirty (30) days after the Company’s
receipt of such Separation Agreement. 
Other than as set forth in this clause (g), the Company shall have no
further obligation to the Executive or the Executive’s estate hereunder.


(h)           Change of Control/Gross Up Payment.  The Company and the Executive agree that in
the event that any of the severance payments or severance benefits under
Sections 5(d), 5(e), 5(g) or 5(h) of this Agreement might be characterized as
parachute payments under Section 280G of the Internal Revenue Code of 1986, as
amended (“Section 280G”), the parties shall timely take reasonable steps
to avoid the tax liability under Section 280G and Section 4999 of the Internal
Revenue Code of 1986, as amended (the “Code”) to the extent permitted by
law.  Accordingly, the Executive agrees
to cooperate fully in procuring a shareholder vote (including, but not limited
to, providing any required consents or waivers) to approve the severance
payments or severance benefits under this Agreement received, to be received
by, or payable on behalf of, the Executive in satisfaction of the shareholder
approval requirements described in Treas. Reg. Section 1.280G-1, Q&A-7, to
the extent applicable.  If the
shareholder approval requirements described in Treas. Reg. Section 1.280G-1,
Q&A-7 cannot be satisfied and if the Company determines that any of the
severance payments or severance benefits under



 8
 









this Agreement received, to be received by, or payable on behalf of,
the Executive would be subject to the excise tax imposed by Section 4999 of the
Code, (the “Excise Tax”), then the Company will, on or prior to the date
on which the Excise Tax must be paid or withheld, make an additional lump sum
payment (the “gross up payment”) to the Executive.  The gross up payment will be sufficient,
after giving effect to federal, state, and local income taxes (excluding any
taxes imposed under or as a result of Section 409A, but otherwise including
interest and penalties, if any) with respect to the gross up payment, to make
the Executive whole for such taxes and associated interest and penalties
imposed under or as a result of Section 4999. 
Determinations under this Section 5(h) will be made by the Company’ s
independent auditors unless the Executive has reasonable objections to the use
of that firm, in which case the determinations will be made by a comparable
firm chosen by the Executive after consultation with the Company (the firm
making the determinations to be referred to as the “Firm”).  The determinations of the Firm will be
binding upon the Company and the Executive except as the determinations are
established in resolution (including by settlement) of a controversy with the
Internal Revenue Service to have been incorrect.  All fees and expenses of the Firm will be
paid by the Company.  If the Internal
Revenue Service asserts a claim that, if successful, would require the Company
to make a gross up payment or an additional gross up payment, the Company and
the Executive will cooperate fully in resolving the controversy with the
Internal Revenue Service.  The Company
will make or advance such gross up payments as are necessary to prevent the
Executive from having to bear the cost of the payments to the Internal Revenue
Service in the course of, or as a result of, the controversy.  The Firm will determine the amount of such
gross up payments or advances and will determine after resolution of the
controversy whether any advances must be returned by the Executive to the
Company.  The Company will bear all
expenses of the controversy.


 


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


6.             Effect
of Termination.  The provisions of
this Section 6 shall apply to a termination pursuant to Section 5 or otherwise.


(a)           A condition precedent to the Company’s
obligations to provide any severance payments or severance benefits hereunder,
including lump-sum payments, vesting of restricted stock and contributions
toward health insurance premiums, shall be the Executive’s executing and
delivering (and not revoking) a timely and effective Separation Agreement, or
in the case of a termination due to the death of the Executive, the Executive’s
beneficiary or



 9
 









representative of the Executive’s estate executing and delivering a
general release of claims in form and substance satisfactory to the Company.


 


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


(c)           Provisions of this Agreement shall survive
any termination if so provided herein or if necessary 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 payment or benefit is expressly conditioned upon the Executive’s
continued full performance of obligations under Sections 7, 8 and 9
hereof.  The Executive recognizes that,
except as expressly provided in Sections 5(d), 5(e), 5(g) or 5(h), no compen­sation
is earned after termination of employment.


(d)           Except as expressly provided herein,
Executive is entitled to no payments or benefits in connection with a
termination of the Executive’s employment.


7.             Confidential
Information.


(a)           The Executive acknowledges that the Company
and its Affiliates continually develop “Trade Secrets” and “Confidential
Information” that the Executive may develop Trade Secrets and Confidential
Information for the Company or its Affiliates and that the Executive may learn
of Trade Secrets and Confidential Information during the course of
employment.  The Executive will comply
with the policies and procedures of the Company and its Affiliates for
protecting Trade Secrets and Confidential Information and shall never disclose
to any Person (except as required by applicable law or for the proper
performance of the Executive’s duties and responsibilities to the Company and
its Affiliates), or use for the Executive’s own benefit or gain, any Trade
Secrets or Confidential Information obtained by the Executive incident to the
Executive’s employment or other association with the Company or any of its
Affiliates.


(b)           For purposes of this Agreement, “Trade
Secrets mean all information that constitutes a trade secret within the meaning
of the Georgia Trade Secrets Act, as amended (the “Georgia Act”).  Under the 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, a program, a device, a method, a technique,
a drawing, a process, financial data, financial plans, product plans, or a list
of actual or potential customers or suppliers which is not commonly known by or
available to the public and which information: 
(i) derives economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by proper means by,
other persons who can obtain economic value



 10
 









from its disclosure or use; and (ii) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy.”


 


(c)           For purposes of this Agreement, “Confidential
Information” means any and all information of the Company and its
Affiliates other than Trade Secrets that is not generally known by others with
whom they compete or do business, or with whom they plan to compete or do
business and any and all information, not publicly known, which, if disclosed
by the Company or its Affiliates would assist in competition against them.  Confidential Information includes without
limitation such information relating to (i) the development, research, testing,
manufacturing, marketing and financial activities of the Company and its
Affiliates, (ii) the Products, (iii) the costs, sources of supply, financial
performance and strategic plans of the Company and its Affiliates, (iv) the
identity and special needs of the customers of the Company and its Affiliates
and (v) the people and organizations with whom the Company and its Affiliates
have business relationships and those relationships.  Confidential Information also includes
comparable information that the Company or any of its Affiliates have received
belonging to others or which was received by the Company or any of its
Affiliates with any understanding that it would not be disclosed.


(d)           The foregoing obligations do not apply to the
extent that the Confidential Information is or becomes generally available to
the public through no fault of the Executive. 
The Executive understands and agrees that the Executive’s obligations
under this Agreement with regard to Trade Secrets shall remain in effect for as
long as such information shall remain a trade secret under applicable law.  The Executive acknowledge that the Executive’s
obligations with regard to the Confidential Information shall remain in effect
while employed or retained by the Company and for three (3) years after the
termination of employment, regardless of the reason for such termination.


(e)           All documents, records, tapes and other
media of every kind and description relating to the business, present or
otherwise, of the Company or its Affiliates and any copies, in whole or in
part, thereof (the “Documents”), whether or not prepared by the
Executive, shall be the sole and exclusive property of the Company and its
Affiliates.  The Executive shall
safeguard all Documents and shall surrender to the Company at the time the
Executive’s employment terminates, or at such earlier time or times as the
Board or its designee may specify, all Documents then in the Executive’s
possession or control.


8.             Assignment
of Rights to Intellectual Property. 
The Executive shall promptly and fully disclose all Intellectual
Property to the Company.  The Executive
hereby assigns and 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
Intellectual Property.  The Executive
agrees to execute any and all applications for domestic and foreign patents,
copyrights or other proprietary rights and to do such other acts (including
without limitation the execution and delivery of instruments of further
assurance or confirmation) requested by the Company to assign the Intellectual
Property to the Company and to permit the Company to enforce any patents,
copyrights or other proprietary rights to the Intellectual Property.  The Executive will not charge the Company for
time spent in



 11
 









complying with these obligations. 
All copyrightable works that the Executive creates shall be considered “work
made for hire.”


 


9.             Restricted
Activities.  In exchange for good and
valuable consideration including, without limitation, the grant of restricted
stock hereunder, the Executive agrees that some restrictions on the Executive’s
activities during and after the Executive’s employment are necessary to protect
the goodwill, Confidential Information and other legitimate interests of the
Company and its Affiliates:


(a)           While the Executive is
employed by the Company and for a period of twenty-four (24) months after the Executive’s employment
terminates (the “Non-Competition Period”), the Executive shall not, directly or
indirectly, provide services in a Restricted Capacity to any Person with
respect to any product or service of that Person which directly competes with,
or may be used in substitution for, one or more of the products of the Company
and/or its Subsidiaries with respect to which the Executive has had access to
Confidential Information or customer goodwill as a result of the Executive’s
employment or other association with the Company and/or its Subsidiaries, but this
restriction shall apply only with respect to the following
states:  Alabama, Alaska, California,
Colorado, Connecticut, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa,
Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan,
Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Jersey, New Mexico, New
York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode
Island, South Carolina, Tennessee, Texas, Utah, Virginia, Washington and
Wisconsin.  For the purposes of this Section 9,
the business of the Company and its Subsidiaries shall include, without
limitation, all Products and the Executive’s undertaking shall encompass all
items, products and services that may be used in substitution for Products.


(b)           The Executive further
agrees that while the Executive is employed by the Company and during the
Non-Competition Period, the Executive will not, and will not assist anyone else
to solicit for hiring any employee of the Company or any of its Affiliates, or
seek to persuade any employee of the Company or any of its Affiliates to
discontinue employment.  For purposes of
this Agreement, an “employee” of the Company or any of its Affiliates is any
person who was such at any time within the preceding one year.


(c)         The
Executive further agrees that while the Executive is employed by the Company
and during the Non-Competition Period, the Executive will not directly or
indirectly (1) solicit or encourage any customer of the Company or any of its
Affiliates to terminate or diminish its relationship with them, or, (2) seek to
persuade any customer or prospective customer of the Company or any of its
Affiliates to conduct with any Person any business or activity which such
customer or prospective customer conducts or could conduct with the Company;
provided that these restrictions shall apply (a) only with respect to those
Persons who are or have been a customer of the Company of any of its Affiliates
at any time within the immediately preceding one year period or whose



 12
 









business has
been solicited on behalf 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
Executive had a business relationship with such Person as a result of the
Executive’s employment or other associations with the Company or one of its
Affiliates.  Notwithstanding anything to
the contrary contained in this Section 9, after termination of Executive’s
employment, this restriction shall apply only to customers or prospective
customers located in those states within the United States in which the Company
was doing business during the year preceding Executive’s termination.


(d)         The
Executive further agrees that while the Executive is employed by the Company
and during the Non-Competition Period the Executive shall not willfully make
false, misleading or disparaging statements about the Company including,
without limitation, its products, services, management, direct or indirect
equity holders, employees and customers.


10.           Enforcement
of Covenants.  The Executive
acknowledges that the Executive has carefully read and considered all the terms
and conditions of this Agreement, including the restraints imposed upon the
Executive’s pursuant to Sections 7, 8 and 9 hereof.  The Executive agrees without reservation that
each of the restraints contained herein is necessary for the reasonable and
proper protection of the goodwill, Confidential Information and other
legitimate interests of the Company and its Affiliates; that each and every one
of those restraints is reasonable in respect to subject matter, length of time
and geographic area; and that these restraints, individually or in the
aggregate, will not prevent the Executive from obtaining other suitable
employment during the period in which the Executive is bound by these
restraints.  The Executive further agrees
that the Executive will never assert, or permit to be asserted on the Executive’s
behalf, in any forum, any position contrary to the foregoing.   The Executive further acknowledges that,
were the Executive to breach any of the covenants contained in Sections 7, 8 or
9 hereof, the damage to the Company would be irreparable.  The Executive therefore agrees that the Company,
in addition to any other remedies available to it, shall be entitled to
preliminary and permanent injunctive relief against any breach or threatened
breach by the Executive of any of said covenants, without having to post bond.  The parties further agree that, in the event
that any provision of Section 7, 8 or 9 hereof shall be determined by any court
of competent jurisdiction to be unenforceable by reason of its being extended
over too great a time, too large a geographic area or too great a range of activities,
such provision shall be deemed to be modified to permit its enforcement to the
maximum extent permitted by law.


11.           Conflicting
Agreements.  The Executive hereby
represents and warrants that the execution of this Agreement and the
performance of the Executive’s obligations hereunder will not breach or be in
conflict with any other agreement to which the Executive is a party or is bound
and that the Executive is not now subject to any covenants against competition
or similar covenants that would affect the performance of the Executive’s
obligations hereunder.  The Executive
will not disclose to or use on behalf of the Company any proprietary
information of a third party without such party’s consent.



 13
 









12.           Indemnification.  The Executive shall be entitled, at all times
(including after the termination of this Agreement for any reason), to the
benefit of the maximum indemnification and advancement of expenses available
from time to time under the Company’s certificate of incorporation and Bylaws,
and if not set forth therein, to the maximum extent available under the laws of
the State of Delaware. In addition, the Company shall maintain in full force
and effect the directors’ and officers’ liability insurance policy currently in
effect or such other insurance with reputable insurance carriers which may
provide for a reduced level of coverage for the Executive, provided that such
coverage is identical to that provided by the Company for the benefit of the
other directors of the Company and its other executive officers.  The Executive agrees to promptly notify the
Company of any actual or threatened claim arising out of or as a result of the
Executive’s employment with the Company. 
The Executive hereby represents and warrants to the Company that, as of
the date hereof, the Executive has no and is aware of no such claim.


13.           Definitions.  Words or phrases which are initially
capitalized or are within quotation marks shall have the meanings provided in
this Section 13 and as provided elsewhere herein.  For purposes of this Agreement, the following
definitions apply:


(a)           “Affiliates” means all persons and
entities directly or indirectly controlling, controlled by or under common
control with the Company, where control may be by either management authority
or equity interest.


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


(c)            “Intellectual Property” means
inventions, discoveries, developments, methods, processes, compositions, works,
concepts and ideas (whether or not patentable or copyrightable or constituting
trade secrets) conceived, made, created, developed or reduced to practice by
the Executive (whether alone or with others, whether or not during normal
business



 14
 









hours or on or off Company premises) during the Executive’s employment
and during the period of six (6) months immediately following termination of
the Executive’s employment that relate to either the Products or any
prospective 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 other
entity or organization, other than the Company or any of its Affiliates.


(e)           “Products” mean all products planned,
researched, developed, tested, manufactured, sold, licensed, leased or
otherwise distributed or put into use by the Company or any of its Affiliates,
together with all services provided or planned by the Company or any of its
Affiliates, during the Executive’s employment.


(f)            “Restricted Capacity” means a
position with a competitor of the Company or its Subsidiaries which is the same
or comparable to the position the Executive held with the Company or in which
the Confidential Information or customer goodwill which the Executive created
or to which the Executive had access during the Executive’s employment with the
Company would give that competitor an unfair competitive advantage.  For the avoidance of doubt, this definition
as used herein 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 reduced by any tax or 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 Agreement or any interest herein, by operation of
law or otherwise, without the prior written consent of the other; provided,
however, that the Company may assign its rights and obligations under
this Agreement without the consent of the Executive in the event that the
Company shall hereafter affect a reorganization, consolidate with, or merge
into, any other Person or transfer all or substantially all of its properties
or assets to any other Person.  This
Agreement shall inure to the benefit of and be binding upon the Company and the
Executive, their respective successors, executors, administrators, heirs and
permitted assigns.


16.           Severability.  If any portion or provision of this Agreement
shall to any extent be declared illegal or unenforceable by a court of
competent jurisdiction, then the remainder of this Agreement, or the
application of such portion or provision in circumstances other than those as
to which it is so declared illegal or unenforceable, shall not be affected
thereby, and each portion and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.


17.           Waiver.  No waiver of any provision hereof shall be
effective unless made in writing and signed by the waiving party.  The failure of either party to require the
performance of any term or obligation of this Agreement, or the waiver by
either party of any breach of this



 15
 









Agreement, shall not prevent any subsequent enforcement of such term or
obligation or be deemed a waiver of any subsequent breach.


 


18.           Notices.  Any and all notices, requests, demands and
other communications provided for by this Agreement shall be in writing and
shall be effective when delivered in person or deposited in the United States
mail, postage prepaid, registered or certified, and addressed to the Executive
at the Executive’s last known address on the books of the Company or, in the
case of the Company, at its principal place of business, attention of the
Chairman of the Board, or to such other address as either party may specify by
notice to the other actually received.


19.           Entire
Agreement.  This Agreement
constitutes the entire agreement between the parties and supersedes and
terminates all prior communications, agreements and understandings, written or
oral, with respect to the terms and conditions of the Executive’s employment
with the Company.


20.           Amendment;
Section 409A.  This Agreement may be
amended or modified only by a written instrument signed by the Executive and by
an expressly authorized representative of the Company.  The parties acknowledge that certain provisions of this Agreement
may be required to be amended, following the issuance of additional guidance by
the Internal Revenue Service with respect to Section 409A, to avoid the
possible imposition of additional tax under Section 409A with respect to
certain payments and benefits under this Agreement.  The Company agrees that it will not
unreasonably withhold its consent to any such amendments which in its
determination are (i) feasible and necessary to avoid adverse tax treatment
under Section 409A for the Executive, and (ii) not adverse to the interests of
the Company.


21.           Dispute
Resolution.  In the
event of any dispute relating to Executive’s employment, the termination
thereof, or this Agreement, other than a dispute in which the primary relief
sought is an equitable remedy such as an injunction, the parties shall be
required to have the dispute, controversy or claim settled by alternative
dispute resolution conducted by JAMS (or, if JAMS is not available, another
mutually agreeable alternative dispute resolution organization), in the city of
Executive’s principal place of employment. 
Any award entered by JAMS (or such other organization) shall be final,
binding and nonappealable, and judgment may be entered thereon by either party
in accordance with applicable law in any court of competent jurisdiction.  This Section 21 shall be specifically
enforceable.  JAMS (or such other
organization) shall have no authority to modify any provision of this
Agreement.  The Company shall reimburse
the Executive the Executive’s reasonable attorney’s fees and costs in the event
that the Executive prevails in an action brought by the Executive’s against the
Company to enforce the terms of this Agreement. 
THE PARTIES IRREVOCABLY 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 no way define or describe the scope or content
of any provision of this Agreement.



 16
 









23.           Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be an original and all of which together
shall constitute one and the same instrument.


24.           Governing
Law, Choice of Forum.  This is a New York contract and shall be
construed and enforced under and be governed in all respects by the laws of the
State of New York, without regard
to the conflict of laws principles thereto. 
The parties consent to the jurisdiction of any state or federal court
sitting in the State of New York
and waive any objection either party may have to the laying of venue of any
such suit, action or proceeding in any such court.  The Company and the Executive each also
irrevocably and unconditionally consent to service of any process, pleadings,
notices or other papers in a manner permitted by the notice provisions of
Section 18 of this Agreement.



 17















IN WITNESS
WHEREOF, this Agreement has been executed as 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/ David J. Morris

  	
   

  	
  By:

  	
  /s/ Russell C. Taylor

  	
   

  
	
  David J. Morris

  	
   

  	
   

  
	
   

  	
  Title:

  	
  President & CEO

  	
   

  
						



 
















EXHIBIT A


THE SHARES RECEIVED
PURSUANT TO THIS STOCK OPTION SHALL BE SUBJECT TO THE RIGHTS, RESTRICTIONS, AND
OBLIGATIONS APPLICABLE TO SUCH SECURITIES, ALL AS PROVIDED IN THE SHAREHOLDERS
AGREEMENT DATED AS OF JUNE 12, 2006 BETWEEN THE COMPANY AND IT SHAREHOLDERS, AS
AMENDED AND IN EFFECT FROM TIME TO TIME (THE “SHAREHOLDERS AGREEMENT”).


Mr. David J. Morris


CELLU
PARENT CORPORATION

2006 STOCK OPTION AND RESTRICTED STOCK PLAN


Restricted Stock
Award Agreement


Cellu Parent Corporation

c/o Weston Presidio

Pier 1, Bay 2

San Francisco, CA 94111


Attn:       Chief Executive Officer


Ladies and Gentlemen:


The undersigned
(i) acknowledges that he has received and 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) further acknowledges receipt of a copy
o0f 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 August
6, 2007, which is the date of the grant of the Award.


2.               Shares Subject to Award.  The Award consists of 700 shares (the “Shares”)
of common stock of the Company (“Stock”). 
The undersigned’s rights to the Shares 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 forth herein in full) in addition to
such other restrictions, if any, as may be imposed by law.


3.               Meaning of Certain Terms.  Except as otherwise expressly provided, all
terms used herein shall have the same meaning as in the Plan.  The term “vest” as used herein with respect
to any Shares means the lapsing of the restrictions described herein with
respect to such Share.



 1
 









4.               Nontransferability of Shares.  The Shares acquired by the undersigned
pursuant to this Agreement shall not be sold, transferred, pledged, assigned or
otherwise encumbered or disposed of except as provided below and in the Plan.


5.               Forfeiture Risk.  If the undersigned ceases to be employed by
the Company and its subsidiaries any then outstanding and unvested Shares
acquired by the undersigned hereunder shall be automatically and immediately
forfeited; provided, however, that if the
undersigned ceases to be employed by the Company due to the undersigned’s death
or disability, fifty percent (50%) of the Shares granted under this Agreement
that are not already vested shall vest; and further provided
that if the undersigned ceases to be employed by the Company by reason of the
Company’s election not to renew the undersigned’s employment agreement with the
Company dated August 6, 2007 (the “Employment Agreement”) and at the time the
Company elects not to renew such Employment Agreement there exists no Cause for
the termination of the undersigned, one hundred percent (100%) of the Shares
granted under this Award that are not then already vested shall vest.  For purposes of the preceding sentence, Cause
shall be defined in the Employment Agreement. 
The undersigned hereby (i) appoints the Company as the attorney-in-fact
of the undersigned to take such actions as may be necessary or appropriate to
effectuate a transfer of the record ownership of any such shares that are
unvested and forfeited hereunder, (ii) agrees to deliver to the Company, as a
precondition to the issuance of any certificate or certificates with respect to
unvested Shares, and (iii) agrees to sign such other powers and take such other
actions as the Company may reasonably request to accomplish the transfer or
forfeiture of any unvested Shares that are forfeited hereunder.


6.                 Retention of Certificate.  Any certificates representing unvested Shares
shall be held by the Company.  If
unvested Shares are held in book entry form, the undersigned agrees that the
Company may give stop transfer instructions to the depository to ensure
compliance with the provisions hereof.


7.               Vesting of Shares.  The Shares acquired hereunder shall vest in
accordance with the provisions of this Paragraph 7 and applicable provisions of
the Plan, as follows:


25% of the Shares on and after one (1) year
from the Effective Date;


an additional 25% of the Shares on and after
two (2) years from the Effective Date;


an additional 25% of the Shares on and after
three (3) years from the Effective Date; and


an additional 25% of the Shares on and after
four (4) years from the Effective Date.



 2
 









Notwithstanding the foregoing, no Shares shall 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 or its subsidiaries.


8.               Shareholders Agreement.  The granting of this Award and the issuance
of Shares received under this Award shall be subject to the Plan and the
Shareholders Agreement, and the issuance of this Award shall be conditional
upon the exe3cution and delivery by the undersigned of the Shareholders
Agreement.  Any Shares received under
this Award shall be subject to the rights, restrictions and obligations
applicable to options and shares of Stock of the Company as provided from time
to time in such Shareholders Agreement.


9.               Legend.  Any certificates representing unvested Shares
shall be held by the Company, and such certificate shall contain a legend
substantially in the following form:


THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES OF STOCK
REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING
FORFEITURE) OF THE CELLU PARENT CORPORATION 2006 STOCK OPTION AND RESTRICTED
STOCK PLAN AND A RESTRICTED STOCK AWARD AGREEMENT ENTERED INTO BETWEEN THE
REGISTERED OWNERAND CELLU PARENT CORPORATION. 
COPIES OF SUCH PLAN AND AGREEMENT ARE ON FILE IN THE OFFICES OF CELLU
PARNET CORPORATION.


THE SECURITITES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS
AND CONDITIONS, INCLUDING CERTAIN RESTRICTIONS ON TRANSFER, OR A SHAREHOLDERS
AGREEMENT DATED AS OF JUNE 12, 2006 BETWEEN CELLU TISSUE CORPORATION AND ITS
SHAREHOLDERS, AS AMENDED FROM TIME TO TIME, AND NONE OF SUCH SECURITIES, OR ANY
INTEREST THEREIN, SHALL BE TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF EXCEPT AS PROVIDED IN THAT AGREEMENT.  A COPY OF THE SHAREHOLDERS AGREEMENT IS ON
FILE IN THE OFFICES OF CELLU PARENT CORPORATION.


As soon as practicable following the vesting of any such Shares the
Company shall cause a certificate or certificates covering such Shares, without
the aforesaid legend, to be issued and delivered to the undersigned.  If any Shares are held in book-entry form,
the Company may take such steps as it deems necessary or appropriate to record
and manifest the restrictions applicable to such Shares.



 3
 









10.         Dividends,
etc..  The undersigned
shall be entitled to (i) receive any and all dividends or other distributions
paid with respect to those Shares of which he is the record owner on the record
date for such dividend or other distribution, and (ii) vote any 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”) acquired hereunder,
including without limitation a distribution of Stock by reason of a stock
dividend, stock split or otherwise, or a distribution of other securities with
respect to an associated share, shall be subject to the restrictions of this
Agreement in the same manner and for so long as the associated share remains
subject to such restrictions, and shall be promptly forfeited if and when the
associated share is so forfeited; and further provided,
that the Administrator may require that any cash distribution with respect to
the Shares other than a normal cash dividend be placed in escrow or otherwise
made subject to such restrictions as the Administrator deems appropriate to
carry out the intent of the Plan, consistent with Section 409A of the Code to
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 understands that he will be free to sell any Share once it has
vested, subject to (i) satisfaction of any applicable tax withholding
requirements with respect to the vesting or transfer of such Share; (ii) the
completion of any administrative steps (for example, but without limitation,
the transfer of certificates) that the Company may reasonably impose; (iii)
applicable requirements of federal and state securities laws; and (iv) the
terms and conditions of the Shareholders Agreement.


12.         Certain
Tax Matters.  The
undersigned expressly acknowledges the following:


a.               The undersigned has
been advised to confer promptly with a professional tax advisor to consider
whether the undersigned should make a so-called “83(b) election” with respect
to the Shares.  Any such election, to be
effective, must be made in accordance with applicable regulations and within
thirty (30) days following the date of this Award.  The Company has made no recommendation to the
undersigned with respect to the advisability of making such an election.  In the event that the undersigned makes an
83(b) election and incurs a tax liability as a result, the Company will, on a
date prior to the 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 giving effect to federal, state, and local income taxes with respect to
the Gross Up Payment, to pay any marginal increase in tax liability of the
undersigned as a result of such 83(b) election. 
For this purpose, a tax liability will be treated as incurred only to
the extent that the inclusion of the income by reason of the grant will
increase the undersigned’s tax liability for the year of inclusion, after
giving effect



 4
 









to all losses, credits, carry-forwards, carry-backs,
etc. that the undersigned may be able to utilize in such year and without
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 acquired hereunder, and the payments of dividends with respect to
such Shares, may give rise to “wages” subject to withholding.  The undersigned expressly acknowledges and
agrees that his rights hereunder are subject to his promptly paying to the
Company in cash (or by such other means as may be acceptable to the Company in
its discretion, including, if the Administrator so determines, by the delivery
of previously acquired Stock or shares of Stock acquired hereunder or by the
withholding of amounts from any payment hereunder) all taxes required to be withheld
in connection with such award, vesting or payment.


 


	
  

  	
  Very truly
  yours,

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  David J. Morris

  
	
   

  	
   

  
	
   

  	
   

  
	
  Dated:

  
	
   

  
	
  The foregoing
  Restricted Stock

  
	
  Award Agreement
  is hereby accepted:

  
	
   

  
	
  CELLU PARENT CORPORATION

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Name: R. Sean
  Honey

  
	
  Title: President

  
					



 



 5