Document:

Exhibit 10.1

Cellu
Parent Corporation

2006 STOCK OPTION AND RESTRICTED STOCK PLAN

1.             DEFINED
TERMS

Exhibit A,
which is incorporated by reference, defines the terms used in the Plan and sets
forth certain operational rules related to those terms.

2.             PURPOSE

The Plan has been
established to advance the interests of the Company by providing for the grant
to Participants of Restricted Stock and Stock Options.

3.             ADMINISTRATION

The Administrator has discretionary
authority, subject only to the express provisions of the Plan, to interpret the
Plan; determine eligibility for and grant Awards; determine, modify or waive
the terms and conditions of any Award; prescribe forms, rules and
procedures; and otherwise do all things necessary to carry out the purposes of
the Plan. Determinations of the Administrator made under the Plan will be
conclusive and will bind all parties.

4.             LIMITS
ON AWARDS UNDER THE PLAN

(a)           Number
of Shares. A maximum of 8,095 shares of Stock may
be delivered in satisfaction of Awards under the Plan. The number of shares of
Stock delivered in satisfaction of Awards shall, for purposes of the preceding
sentence, be determined net of shares of Stock withheld by the Company in
payment of the exercise price of the Award or in satisfaction of tax withholding
requirements with respect to the Award. The limit set forth in this Section 4(a) shall
be construed to comply with Section 422 of the Code and regulations
thereunder. To the extent consistent with the requirements of Section 422
of the Code and regulations thereunder, Stock issued under awards of an
acquired company that are converted, replaced or adjusted in connection with
the acquisition shall not reduce the number of shares available for Awards
under the Plan.

(b)           Type
of Shares. Stock delivered by the Company under
the Plan may be authorized but unissued Stock or previously issued Stock
acquired by the Company. No fractional shares of Stock will be delivered under
the Plan.

 

 

5.             ELIGIBILITY
AND PARTICIPATION

The Administrator will
select Participants from among those key Employees and directors of, and
consultants and advisors to, the Company or its Affiliates who, in the opinion
of the Administrator, are in a position to make a significant contribution to
the success of the Company and its Affiliates. Eligibility for ISOs is limited
to employees of the Company or of a “parent corporation” or “subsidiary
corporation” of the Company as those terms are defined in Section 424 of
the Code.

6.             RULES
APPLICABLE TO AWARDS

(a)           All
Awards

(1)  Award Provisions.
The Administrator will determine the terms of all Awards, subject to the
limitations provided herein. By accepting any Award granted hereunder, the
Participant agrees to the terms of the Award and the Plan. Notwithstanding any
provision of this Plan to the contrary, awards of an acquired company that are
converted, replaced or adjusted in connection with the acquisition may contain
terms and conditions that are inconsistent with the terms and conditions
specified herein, as determined by the Administrator.

(2)  Term of Plan.
No Awards may be made after June 12, 2016, but previously granted Awards
may continue beyond that date in accordance with their terms.

(3)  Transferability.
Neither ISOs nor, except as the Administrator otherwise expressly provides, other
Awards may be transferred other than by will or by the laws of descent and
distribution, and during a Participant’s lifetime ISOs (and, except as the
Administrator otherwise expressly provides, other non-transferable Stock
Options) may be exercised only by the Participant.

(4)  Vesting, Etc.  The Administrator may determine the time or
times at which an Award will vest or (in the case of a Stock Option) become
exercisable and the terms on which a Stock Option will remain exercisable. Without
limiting the foregoing, the Administrator may at any time accelerate the
vesting or exercisability of an Award, regardless of any adverse or potentially
adverse tax consequences resulting from such acceleration. Unless the
Administrator expressly provides otherwise, however, the following rules will
apply: immediately upon the cessation of the Participant’s Employment, each
Stock Option that is then held by the Participant or by the Participant’s
permitted transferees, if any, will cease to be exercisable and will terminate,
and all other Awards that are then held by the Participant or by the
Participant’s permitted transferees, if any, to the extent not already vested
will be forfeited, except that:

(A) subject to (B) and (C) below, all Stock Options held
by the Participant or the Participant’s permitted transferees, if any,
immediately prior to the cessation of the Participant’s Employment, to the
extent then exercisable, will remain exercisable for the lesser of (i) a
period of three months or (ii) the period ending on the latest date on
which such Stock Option could have been exercised without regard to this Section 6(a)(4),
and 

 2
 

 

will thereupon
terminate;

(B) all Stock Options held by a Participant or the Participant’s
permitted transferees, if any, immediately prior to the Participant’s death, to
the extent then exercisable, will remain exercisable for the lesser of (i) the
one year period ending with the first anniversary of the Participant’s death or
(ii) the period ending on the latest date on which such Stock Option could
have been exercised without regard to this Section 6(a)(4), and will
thereupon terminate; and

(C) all Stock Options held by a Participant or the Participant’s
permitted transferees, if any, immediately prior to the cessation of the
Participant’s Employment will immediately terminate upon such cessation if the
Administrator in its sole discretion determines that such cessation of
Employment has resulted for reasons which constitute cause for termination of
employment.

(5)  Taxes.
The Administrator will make such provision for the withholding of taxes as it
deems necessary. The Administrator may, but need not, hold back shares of Stock
from an Award or permit a Participant to tender previously owned shares of
Stock in satisfaction of tax withholding requirements (but not in excess of the
minimum withholding required by law).

(6)  Dividend Equivalents, Etc. The
Administrator may provide for the payment of amounts in lieu of cash dividends
or other cash distributions with respect to Stock subject to an Award. Any
entitlement to dividend equivalents or similar entitlements shall be
established and administered consistent either with exemption from, or
compliance with, the requirements of Section 409A of the Code.

(7)  Rights Limited.
Nothing in the Plan will be construed as giving any person the right to
continued employment or service with the Company or its Affiliates, or any
rights as a stockholder except as to shares of Stock actually issued under the
Plan.

(b)           Stock
Option

(1)  Code Section 409A Exemption.
Except as the Administrator otherwise determines, no Stock Option shall have
deferral features, or shall be administered in a manner, that would cause such
Stock Option to fail to qualify for exemption from Section 409A of the
Code.

(2)  Time And Manner Of Exercise.
Unless the Administrator expressly provides otherwise, a Stock Option will
not be deemed to have been exercised until the Administrator receives a notice
of exercise (in form acceptable to the Administrator) signed by the appropriate
person and accompanied by any payment required under the Award. If the Award is
exercised by any person other than the Participant, the Administrator may
require satisfactory evidence that the person exercising the Award has the
right to do so.

 3
 

 

 

(3)  Exercise Price.
The exercise price of each Stock Option shall be 100% (in the case of an ISO
granted to a ten-percent shareholder within the meaning of Section 422(b)(6) of
the Code, 110%) of the fair market value of the Stock subject to the Stock
Option, determined as of the date of grant, or such higher amount as the
Administrator may determine in connection with the grant. Fair market value
shall be determined by the Administrator consistent with the requirements of Section 422
and Section 409A of the Code, as applicable.

(4)  Payment Of Exercise Price.
The Administrator may determine the required or permitted forms of payment
under a Stock Option, subject to the following: 
all payments will be by cash or check acceptable to the Administrator,
or, if so permitted by the Administrator, (i) through the delivery of
shares of Stock that have been outstanding for at least six months (unless the
Administrator approves a shorter period) and that have a fair market value
equal to the exercise price, (ii) by delivery to the Company of a
promissory note of the person exercising the Award, payable on such terms as
are specified by the Administrator, (iii) at such time, if any, as the
Stock is publicly traded, through a broker-assisted exercise program acceptable
to the Administrator, (iv) by other means acceptable to the Administrator,
or (v) by any combination of the foregoing permissible forms of payment. The
delivery of shares in payment of the exercise price under clause (a)(i) above
may be accomplished either by actual delivery or by constructive delivery
through attestation of ownership, subject to such rules as the
Administrator may prescribe.

(c)           Restricted
Stock

(1)  Grant or Sale. The
Administrator may grant or sell Restricted Stock to any Participant (including,
but not limited to, upon exercise of Stock Options) on such conditions and
restrictions and for such purchase price, if any, as the Administrator
determines.

(2)  Payment. Awards
of Restricted Stock may be made in exchange for such lawful consideration, including
services, as the Administrator determines.

(3)  Risk of Forfeiture. Except
as otherwise determined by the Administrator, upon termination for any reason,
including death, of a Participant’s Employment with the Company the Company
will have the right (but not the obligation) to reacquire any shares of
Restricted Stock outstanding at the time at the Participant’s original purchase
price, if any, for such shares. If there is no purchase price, then the
Restricted Stock will be forfeited upon such termination.

(4)  Rights as Shareholder. Subject
to the other provisions of this Section 6(c), a Participant will have all
the rights of a shareholder with respect to shares of Restricted Stock granted
or sold to the Participant hereunder.

 4
 

 

7.             EFFECT OF CERTAIN TRANSACTIONS

(a)           Mergers, etc. Except
as otherwise provided in an Award, the following provisions shall apply in the
event of a Covered Transaction:

(1)   Assumption
or Substitution. If the Covered Transaction is one in which
there is an acquiring or surviving entity, the Administrator may provide for
the assumption of some or all outstanding Awards or for the grant of new awards
in substitution therefor by the acquiror or survivor or an affiliate of the
acquiror or survivor.

(2)   Cash-Out
of Awards. If the Covered Transaction is one in which holders of
Stock will receive upon consummation a payment (whether cash, non-cash or a
combination of the foregoing), the Administrator may provide for payment (a “cash-out”),
with respect to some or all Awards, equal in the case of each affected Award to
the excess, if any, of (A) the fair market value of one share of Stock (as
determined by the Administrator in its reasonable discretion) times the number
of shares of Stock subject to the Award, over (B) the aggregate exercise
price, if any, under the Award, in each case on such payment terms (which need
not be the same as the terms of payment to holders of Stock) and other terms,
and subject to such conditions, as the Administrator determines.

(3)  Acceleration of Stock Options.
If the Covered Transaction (whether or not there is an acquiring or surviving
entity) is one in which there is no assumption, substitution or cash-out, the
Administrator may provide that each Stock Option will become fully exercisable,
prior to the Covered Transaction on a basis that gives the holder of the Stock
Option a reasonable opportunity, as determined by the Administrator, following
exercise of the Stock Option to participate as a stockholder in the Covered
Transaction.

(4)  Acceleration of Vesting of
Restricted Stock. In the event of a Covered
Transaction or an Initial Public Offering, one hundred percent (100%) of the Shares granted under this Award that
are not then already vested shall vest prior to the Change in Control or
Initial Public Offering but subject to the consummation thereof.

(5)  Termination of Stock Options
Upon Consummation of Covered Transaction. Each
Stock Option (unless assumed pursuant to Section 7(a)(1) above) will
terminate upon consummation of the Covered Transaction.

(6)  Additional Limitations.
Any share of Stock delivered pursuant to Section 7(a)(2) or Section 7(a)(3) above
with respect to an Award may, in the discretion of the Administrator, contain
such restrictions, if any, as the Administrator deems appropriate to reflect
any performance or other vesting conditions to which the Award was subject. In
the case of Restricted Stock, the Administrator may require that any amounts
delivered, exchanged or otherwise paid in respect of such Stock in connection
with the Covered Transaction be placed in escrow or otherwise made subject to
such restrictions as the Administrator deems appropriate to carry out the
intent of the Plan, provided that, to the extent the restrictions on such Stock
lapse and such Stock becomes vested prior to or as a result of such Covered
Transaction, the Administrator shall not require consideration otherwise paid
in respect of such unrestricted Stock 

 5
 

 

in connection with the Covered Transaction to be reinvested in the
acquiring entity in such Covered Transaction or entity resulting from such
Covered Transaction, unless the consideration so paid in such transaction
consists of securities of such entity.

(b)           Changes in and Distributions With
Respect to the Stock

(1)  Basic
Adjustment Provisions. In the event of a stock
dividend, stock split or combination of shares (including a reverse stock
split), recapitalization or other change in the Company’s capital structure,
the Administrator will make appropriate adjustments to the maximum number of
shares specified in Section 4(a) that may be delivered under the Plan
and will also make appropriate adjustments to the number and kind of shares of
stock or securities subject to Awards then outstanding or subsequently granted,
any exercise prices relating to Awards and any other provision of Awards
affected by such change.

(2)  Certain
Other Adjustments. The Administrator may also make
adjustments of the type described in Section 7(b)(1) above to take
into account distributions to stockholders other than those provided for in Section 7(a) and
7(b)(1), or any other event, if the Administrator determines that adjustments
are appropriate to avoid distortion in the operation of the Plan and to
preserve the value of Awards made hereunder, having due regard for requirements
of Section 409A of the Code and the qualification of ISOs under Sections
422, where applicable.

(3)  Continuing
Application of Plan Terms. References in the Plan
to shares of Stock will be construed to include any stock or securities
resulting from an adjustment pursuant to this Section 7.

8.             LEGAL CONDITIONS ON DELIVERY OF
STOCK

The Company will
not be obligated to deliver any shares of Stock pursuant to the Plan or to
remove any restriction from shares of Stock previously delivered under the Plan
until: (i) the Company is satisfied that all legal matters in connection
with the issuance and delivery of such shares have been addressed and resolved;
(ii) if the outstanding Stock is at the time of delivery listed on any
stock exchange or national market system, the shares to be delivered have been
listed or authorized to be listed on such exchange or system upon official
notice of issuance; and (iii) all conditions of the Award have been
satisfied or waived. If the sale of Stock has not been registered under the
Securities Act of 1933, as amended, the Company may require, as a condition to
exercise of the Award, such representations or agreements as counsel for the
Company may consider appropriate to avoid violation of such Act. The Company
may require that certificates evidencing Stock issued under the Plan bear an
appropriate legend reflecting any restriction on transfer applicable to such
Stock, and the Company may hold the certificates pending lapse of the
applicable restrictions.

9.             AMENDMENT AND TERMINATION

The Administrator
may at any time or times amend the Plan or any outstanding Award 

 6
 

 

for any purpose which may
at the time be permitted by law, and may at any time terminate the Plan as to
any future grants of Awards; provided, that
except as otherwise expressly provided in the Plan the Administrator may not,
without the Participant’s consent, alter the terms of an Award so as to affect
adversely the Participant’s rights under the Award, unless the Administrator
expressly reserved the right to do so at the time of the Award. Any amendments
to the Plan shall be conditioned upon stockholder approval only to the extent,
if any, such approval is required by law (including the Code), as determined by
the Administrator.

10.          OTHER COMPENSATION ARRANGEMENTS

The existence of
the Plan or the grant of any Award will not in any way affect the Company’s
right to Award a person bonuses or other compensation in addition to Awards
under the Plan.

11.          MISCELLANEOUS

(a)           Waiver of Jury Trial. By accepting an Award under the
Plan, each Participant waives any right to a trial by jury in any action,
proceeding or counterclaim concerning any rights under the Plan and any Award,
or under any amendment, waiver, consent, instrument, document or other
agreement delivered or which in the future may be delivered in connection
therewith, and agrees that any such action, proceedings or counterclaim shall
be tried before a court and not before a jury. By accepting an Award under the
Plan, each Participant certifies that no officer, representative, or attorney
of the Company has represented, expressly or otherwise, that the Company would
not, in the event of any action, proceeding or counterclaim, seek to enforce
the foregoing waivers.

(b)           Limitation of Liability. Notwithstanding anything to the contrary
in the Plan, neither the Company, any Affiliate, nor the Administrator, nor any
person acting on behalf of the Company, any Affiliate,  or the Administrator, shall be liable to any
Participant or to the estate or beneficiary of any Participant or to any other
holder of an Award by reason of any acceleration of income, or any additional
tax, asserted by reason of the failure of an Award to satisfy the requirements
of Section 422 or Section 409A or by reason of Section 4999 of
the Code; provided, that nothing in the Section 11(b) shall limit the
ability of the Administrator or the Company to provide by separate express
written agreement with a Participant for a gross-up payment or other payment in
connection with any such tax or additional tax.

 7
 

 

EXHIBIT A

Definition
of Terms

The following
terms, when used in the Plan, will have the meanings and be subject to the
provisions set forth below:

“Administrator”:  The Board, except that the Board may delegate
its authority under the Plan to a committee of the Board, in which case
references herein to the Board shall refer to such committee. The Board may
delegate (i) to one or more of its members such of its duties, powers and
responsibilities as it may determine; (ii) to one or more officers of the Company
the power to grant rights or options to the extent permitted by Section 157(c) of
the Delaware General Corporation Law; (iii) to one or more officers of the
Company the authority to allocate other Awards among such persons (other than
officers of the Company) eligible to receive Awards under the Plan as such
delegated officer or officers determine consistent with such delegation; provided, that with respect to any delegation described in
this clause (iii) the Board (or a properly delegated member or members of
the Board) shall have authorized the issuance of a specified number of shares
of Stock under such Awards and shall have specified the consideration, if any,
to be paid therefor; and (iv) to such Employees or other persons as it
determines such ministerial tasks as it deems appropriate. In the event of any
delegation described in the preceding sentence, the term “Administrator” shall
include the person or persons so delegated to the extent of such delegation.

“Affiliate”:  Except as otherwise provided in an Award, any
corporation or other entity that stands in a relationship to the Company such
that the Company and such corporation or other entity would be treated as part
of a single employer under Section 414(b) or Section 414(c) of
the Code; provided, that in determining
eligibility for the grant of a Stock Option by reason of service for an
Affiliate, Sections 414(b) and 414(c) of the Code shall be applied by
substituting “at least 50%” for “at least 80%” under Section 1563(a)(1), (2) and
(3) of the Code and Treas. Regs. § 1.414(c)-2; and further
provided, that the lower ownership threshold described in this definition shall
apply only if the same definition of affiliation is used consistently with
respect to all compensatory stock options or stock awards (whether under the
Plan or another plan). The Company may at any time by amendment provide that
different ownership thresholds (consistent with Section 409A) apply.

“Award”:  Any or a combination of the following:

(i) Stock Options.

(ii) Restricted Stock.

“Board”:  The Board of Directors of the Company.

“Cellu
Paper”:   Cellu Paper Holdings, Inc., a Delaware
corporation.

 8
 

 

“Cellu
Tissue”:   Cellu Tissue
Holdings, Inc., a Delaware corporation.

“Code”:  The U.S. Internal Revenue Code of 1986 as
from time to time amended and in effect, or any successor statute as from time
to time in effect.

“Company”:  Cellu Parent Corporation.

“Covered
Transaction”:  Any of (i) a
sale of all or substantially all of the assets of the Company, Cellu Paper or
Cellu Tissue to a person or entity in which the shareholders of the Company
immediately prior to such transaction do not, directly or indirectly, own
securities representing more than 50% of the voting power of the person or
entity acquiring such assets immediately following the transaction, (ii) a
sale of shares of capital stock by the Company or the shareholders of the
Company resulting in more than 50% of the voting power of the Company being
held, directly or indirectly, by a person or entity other than the shareholders
of the Company immediately prior to such sale, (iii) a sale by the Company
of the equity securities of Cellu Paper or Cellu Tissue 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 or entity other than the Company
or the shareholders of the Company immediately prior to such sale, or (iv) a
merger or consolidation of the Company, Cellu Paper or Cellu Tissue with or
into another person or entity, if and only if, after such merger or
consolidation, more than 50% of the voting power of the Company, Cellu Paper or
Cellu Tissue (as the case may be) is directly or indirectly owned by a person
or entity other than the Company or the shareholders of the Company immediately
prior to such merger or consolidation. Where a Covered Transaction involves a
tender offer that is reasonably expected to be followed by a merger described
in clause (iv) (as determined by the Administrator), the Covered
Transaction shall be deemed to have occurred upon consummation of the tender
offer.

“Employee”:  Any person who is employed by the Company or
an Affiliate.

“Employment”:  A Participant’s employment
or other service relationship with the Company and its Affiliates. Employment
will be deemed to continue, unless the Administrator expressly provides
otherwise, so long as the Participant is employed by, or otherwise is providing
services in a capacity described in Section 5 to the Company or its
Affiliates. If a Participant’s employment or other service relationship is with
an Affiliate and that entity ceases to be an Affiliate, the Participant’s
Employment will be deemed to have terminated when the entity ceases to be an
Affiliate unless the Participant transfers Employment to the Company or its
remaining Affiliates.

“Initial
Public Offering”:  A
public offering and sale of equity securities of any successor to the Company
for cash pursuant to an effective registration statement under the Securities
Act of 1933, as amended, registered on Form S-1 (or any successor
form under said Securities Act).

 9
 

 

“ISO”:  A Stock Option intended to be an “incentive
stock option” within the meaning of Section 422 of the Code. Each option
granted pursuant to the Plan will be treated as providing by its terms that it
is to be a non-incentive stock option unless, as of the date of grant, it is
expressly designated as an ISO.

“Participant”:  A person who is granted an Award under the
Plan.

“Performance
Criteria”:  Specified
criteria the satisfaction of which is a condition for  the grant, exercisability, vesting or full
enjoyment of an Award.

“Plan”:  The Cellu Parent Corporation 2006 Stock
Option and Restricted Stock Plan as from time to time amended and in effect.

“Restricted
Stock”:  Stock subject
to restrictions requiring that it be redelivered or offered for sale to the
Company if specified conditions are not satisfied.

“Stock”:  Common Stock of the Company, par value $
0.001 per share.

“Stock
Option”:  An option
entitling the recipient to acquire shares of Stock upon payment of the exercise
price.

 10Exhibit 10.2

MANAGEMENT
AGREEMENT

This MANAGEMENT AGREEMENT
(this “Agreement”) is entered into as of June 12, 2006 by and among Cellu Parent Corporation, a Delaware
corporation (“Parent”), Cellu Acquisition Corporation, a Delaware
corporation (“Merger Sub”), Cellu Tissue Holdings, Inc., a Delaware
corporation (the “Company”, and together with Parent and Merger Sub, the
“Companies”), and Weston Presidio Service Company, LLC, a Delaware limited liability company
(“Sponsor”).

RECITALS

WHEREAS, Parent and Merger Sub have been formed
for the purpose of engaging in a transaction in which Merger Sub will be merged
with and into Cellu Paper Holdings, Inc., a Delaware corporation and the
parent of the Company (“Cellu Paper”), with Cellu Paper surviving (the “Merger”)
pursuant to an Agreement and Plan of Merger by and between Parent, Merger Sub
and Cellu Paper (the “Merger Agreement”);

WHEREAS, to enable Merger Sub to engage in the
Merger and related transactions, Sponsor provided financial and structural
advice and analysis as well as assistance with due diligence investigations and
negotiations (the “Financial Advisory Services”); and

WHEREAS, the Companies desire to retain Sponsor
to provide certain management, consulting and financial and other advisory
services to the Companies, and Sponsor is willing to provide such services on
the terms set forth below.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual
covenants contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:

1.             Services. Sponsor hereby
agrees that it will provide the following management, consulting and financial
and other advisory services to the Companies:

(a)           advice
in connection with the negotiation and consummation of agreements, contracts,
documents and instruments necessary to provide the Companies with financing on
terms and conditions satisfactory to the Companies;

(b)           financial,
managerial and operational advice in connection with the Companies’ day-to-day
operations, including, without limitation, advice with respect to the
development and implementation of strategies for improving the operating,
marketing and financial performance of the Company and its subsidiaries;

 
 

 

(c)           advice
in connection with financing, acquisition, disposition, merger, combination and
change of control transactions involving any of the Companies (however
structured); and

(d)           such
other services (which may include financial and strategic planning and
analysis, consulting services, human resources and executive recruitment
services and other services) as Sponsor and the Companies may from time to time
agree in writing.

Sponsor will
devote such time and efforts to the performance of services contemplated hereby
as Sponsor deems reasonably necessary or appropriate; provided, however, that no
minimum number of hours is required to be devoted by Sponsor on a weekly,
monthly, annual or other basis. The Companies acknowledge that Sponsor’s
services are not exclusive and that Sponsor will render similar services to
other persons and entities. Sponsor and the Companies understand that the
Companies may, at times, engage one or more investment bankers or financial
advisers to provide services in addition to, but not in lieu of, services
provided by Sponsor under this Agreement. In providing services to the
Companies, Sponsor will act as an independent contractor and it is expressly
understood and agreed that this Agreement is not intended to create, and does
not create, any partnership, agency, joint venture or similar relationship and
that neither Sponsor, on the one hand, nor the Companies, on the other, has the
right or ability to contract for or on behalf of each other or to effect any
transaction for each other’s account.

2.             Payment of Fees.

(a)           The
Companies will jointly and severally pay to Sponsor (or an affiliate of Sponsor
designated by it) in consideration of Sponsor providing the Financial Advisory
Services a fee in the amount of $2,000,000, such fee being payable upon the
closing of the Merger;

(b)           The
Companies will jointly and severally pay to Sponsor (or an affiliate of Sponsor
designated by it) an annual fee, such fee being payable quarterly in advance on
or prior to the first day of each calendar quarter beginning on each January 1,
April 1, July 1 and October 1, the first such payment to be made
by wire transfer on July 1, 2006 for the pro-rated amount of such fee for
the time from the closing through July 1, 2006. The annual fee will be
$450,000 (the “Periodic Fee”).

Each payment made pursuant to
this Section 2 will be paid by wire transfer of immediately available
federal funds to the account specified on Schedule 1 hereto, or to such
other account(s) as Sponsor may specify to the Companies in writing prior
to such payment.

3.             Term. This Agreement will continue
in full force and effect until June 12, 2016; provided that this
Agreement shall be automatically extended each anniversary of such date for an
additional year unless the Companies or Sponsor provide written notice of their
desire not to automatically extend the term of this Agreement to the other
parties hereto at least 90 days prior to such anniversary; provided, however, that (a) either party may terminate this Agreement
following a material breach of the terms of this Agreement by the other party
hereto and a failure to cure such breach within 30 days following written
notice thereof, (b) Sponsor may terminate this Agreement upon not less
than 10 days written notice to the Companies and (c) this Agreement shall
terminate upon the consummation of an initial Public Offering (as defined in
the 

 2
 

 

Registration Rights
Agreement) or Change of Control (as defined in the Shareholders Agreement) (the
period on and after the date hereof through the termination hereof being
referred to herein as the “Term”); and provided, further, that each of (x) Sections 4,
5 and 8 (whether in respect of or relating to services rendered during or after
the Term) and (y) any and all accrued and unpaid obligations of the
Companies owed under Section 2 will all survive any termination of this
Agreement to the maximum extent permitted under applicable law.

4.             Expenses;
Indemnification.

(a)           Expenses.
The Companies will jointly and severally pay on demand all expenses incurred by
Sponsor and those certain funds affiliated with or advised by Sponsor or its affiliates
who are providing equity financing to Parent to help effectuate the
transactions contemplated by the Merger Agreement (such funds the “Sponsor
Funds” and their investments the “Equity Investments”) (or any of
them) (i) in connection with this Agreement, the transactions contemplated
by the Merger Agreement or any related transactions, (ii) relating to
operations of, or services provided by Sponsor to, the Companies or any of
their affiliates from time to time or (iii) otherwise in any way relating
to the Companies or in any way relating to, or arising out of, the equity
investments or the ownership or sale thereof by any Sponsor Fund. Without
limiting the generality of the foregoing, the Companies jointly and severally
agree to pay on demand all expenses incurred by Sponsor and the Sponsor Funds
(or any of them) in connection with, or relating to, (x) the preparation,
negotiation and execution of this Agreement and any other agreement executed in
connection with, or related to, this Agreement, the Merger Agreement, the
financing of the transactions contemplated by the Merger Agreement, Equity
Investments or the consummation of the transactions contemplated hereby and
thereby or (y) any and all amendments, modifications, restructurings and
waivers, and exercises and preservations of rights and remedies relating to any
of the foregoing, and in each case will specifically include the fees and
disbursements of counsel, accountants, consultants or advisors retained by
Sponsor, the Sponsor Funds or their respective consultants or advisors and any
out-of-pocket expenses incurred by Sponsor in connection with the provision of
services to the Companies from time to time or the attendance at any meeting of
the managers or board of directors (or any committee thereof) of any of  the Companies or any of their affiliates.

(b)           Indemnity
and Liability. The Companies hereby jointly and severally indemnify and
agree to exonerate and hold each of Sponsor, each Sponsor Fund, and each of
their respective partners, shareholders, members, affiliates, directors,
officers, fiduciaries, managers, controlling persons, employees and agents and
each of the partners, shareholders, members, affiliates, directors, officers,
fiduciaries, managers, controlling persons, employees and agents of each of the
foregoing (collectively, the “Indemnitees”), each of whom is an intended
third party beneficiary of this Agreement, free and harmless from and against
any and all actions, causes of action, suits, claims, liabilities, losses,
damages and costs and expenses in connection therewith, including without
limitation reasonable attorneys’ fees and expenses (collectively, the “Indemnified
Liabilities”), incurred by the Indemnitees or any of them as a result of,
arising out of, or in any way relating to (i) this Agreement, the
transactions contemplated by the Merger Agreement, any transaction to which the
Companies are a party, the Equity Investments or the ownership thereof by any
Sponsor Fund or any related transactions (it being acknowledged and agreed that
the Indemnitees shall not seek indemnification from the Companies pursuant to
this Agreement for matters for which 
indemnification is provided under the Merger Agreement) or 

 3
 

 

(ii) operations of, or services provided by Sponsor to, any of the
Companies or any affiliate of any of the Companies from time to time (including
but not limited to any indemnification obligations assumed or incurred by any
Indemnitee to or on behalf of any of the Companies or any of their accountants
or other representatives, agents or affiliates) except for any such Indemnified
Liabilities arising on account of such Indemnitee’s gross negligence or willful
misconduct, and if and to the extent that the foregoing undertaking may be
unavailable or unenforceable for any reason, each of the Companies hereby
agrees to make the maximum contribution to the payment and satisfaction of each
of the Indemnified Liabilities that is permissible under applicable law. For
purposes of this Section 4(b), none of the circumstances described in the
limitations contained in the immediately preceding sentence shall be deemed to
apply absent a final non-appealable judgment of a court of competent
jurisdiction to such effect, in which case to the extent any such limitation is
so determined to apply to any Indemnitee as to any previously advanced
indemnity payments made by the Companies, then such payments shall be promptly
repaid by such Indemnitee to the Companies. The rights of any Indemnitee to
indemnification hereunder will be in addition to any other rights any such
person may have under any other agreement or instrument referenced above or any
other agreement or instrument to which such Indemnitee is or becomes a party or
is or otherwise becomes a beneficiary or under law or regulation. None of the
Indemnitees will be liable to the Companies or any of their affiliates for any
act or omission suffered or taken by such Indemnitee that does not constitute
gross negligence or willful misconduct.

5.             Disclaimer and Limitation of Liability; Opportunities.

(a)           Disclaimer;
Standard of Care. Sponsor makes no representations or warranties, express
or implied, in respect of the services to be provided by it hereunder. In no
event will Sponsor or any of the Indemnitees be liable to any of the Companies
or any of their affiliates for any act, alleged act, omission or alleged
omission that does not constitute gross negligence or willful misconduct of
Sponsor as determined by a final, non-appealable determination of a court of
competent jurisdiction.

(b)           Freedom
to Pursue Opportunities. In recognition that Sponsor and its affiliates
currently have, and will in the future have or will consider acquiring,
investments in numerous companies with respect to which Sponsor or its
affiliates may serve as an advisor, a director or in some other capacity, and
in recognition that Sponsor and its affiliates have myriad duties to various
investors and partners, and in anticipation that the Companies and Sponsor (or
one or more affiliates, associated investment funds or portfolio companies, or
clients of Sponsor) may engage in the same or similar activities or lines of
business and have an interest in the same areas of corporate opportunities, and
in recognition of the benefits to be derived by the Companies hereunder and in
recognition of the difficulties that may confront any advisor who desires and
endeavors fully to satisfy such advisor’s duties in determining the full scope
of such duties in any particular situation, the provisions of this Section 5(b) are
set forth to regulate, define and guide the conduct of certain affairs of the
Companies as they may involve Sponsor. Except as Sponsor may otherwise agree in
writing after the date hereof:

(i)    Sponsor and its affiliates
will have the right:  (A) to
directly or indirectly engage in any business (including, without limitation,
any business activities or lines of business that are the same as or similar to
those pursued by, or competitive with, 

 4
 

 

any of the
Companies and their subsidiaries), (B) to directly or indirectly do business
with any client or customer of any of the Companies and their subsidiaries, (C) to
take any other action that Sponsor believes in good faith is necessary or
appropriate to fulfill its obligations as described in the first sentence of
this Section 5(b), and (D) not to present potential transactions,
matters or business opportunities to any of the Companies or any of their
subsidiaries, and to pursue, directly or indirectly, any such opportunity for
itself, and to direct any such opportunity to another person.

(ii)   Sponsor and its officers,
employees, partners, members, other clients, affiliates and other associated
entities will have no duty (contractual or otherwise) to communicate or present
any corporate opportunities to the Companies or any of their affiliates or to
refrain from any action specified in Section 5(b)(i), and the Companies on
their own behalf and on behalf of their affiliates, hereby renounce and waive
any right to require Sponsor or any of its affiliates to act in a manner
inconsistent with the provisions of this Section 5(b).

(iii)  Neither Sponsor nor any
officer, director, employee, partner, member, stockholder, affiliate or
associated entity thereof will be liable to the Companies or any of their
affiliates for breach of any duty (contractual or otherwise) by reason of any
activities or omissions of the types referred to in this Section 5(b) or
of any such person’s participation therein.

(c)   Limitation
of Liability. In no event will Sponsor or any
of its affiliates be liable to the Companies or any of their affiliates for any
indirect, special, incidental or consequential damages, including, without
limitation, lost profits or savings, whether or not such damages are
foreseeable, or for any third party claims (whether based in contract, tort or
otherwise), relating to the services to be provided by Sponsor hereunder.

6.             Assignment, etc. Except as
provided below, no party hereto has the right to assign this Agreement without
the prior written consent of the other parties. Notwithstanding the foregoing, (a) Sponsor
may assign all or part of its rights and obligations hereunder to any affiliate
of Sponsor that provides services similar to those called for by this
Agreement, in which event Sponsor will be released of all of its rights and obligations
hereunder and (b) the provisions hereof for the benefit of Indemnitees
other than Sponsor shall also inure to the benefit of such other Indemnitees
and their successors and assigns.

7.            Amendments
and Waivers. No amendment or waiver of any term, provision or
condition of this Agreement will be effective, unless in writing and executed
by each of Sponsor and the Companies. No waiver on any one occasion will extend
to or effect or be construed as a waiver of any right or remedy on any future
occasion. No course of dealing of any person nor any delay or omission in
exercising any right or remedy will constitute an amendment of this Agreement
or a waiver of any right or remedy of any party hereto.

 5
 

 

8.             Governing
Law; Jurisdiction.

(a)           Choice of Law. This Agreement
shall be governed by and construed in accordance with the domestic substantive
laws of the State of Delaware without giving effect to any choice or conflict
of laws provision or rule that would cause the application of the domestic
substantive laws of any other jurisdiction.

(b)           Consent to Jurisdiction. Each
of the parties agrees that all actions, suits or proceedings arising out of,
based upon or relating to this Agreement or the subject matter hereof will be
brought and maintained exclusively in the federal and state courts of the State
of Delaware. Each of the parties hereto by execution hereof (i) hereby
irrevocably submits to the jurisdiction of the federal and state courts in the
State of Delaware for the purpose of any action, suit or proceeding arising out
of or based upon this Agreement or the subject matter hereof and (ii) hereby
waives to the extent not prohibited by applicable law, and agrees not to
assert, by way of motion, as a defense or otherwise, in any such action, suit
or proceeding, any claim that it is not subject personally to the jurisdiction
of the above-named courts, that it is immune from extraterritorial injunctive
relief or other injunctive relief, that its property is exempt or immune from
attachment or execution, that any such action, suit or proceeding may not be
brought or maintained in one of the above-named courts, that any such action,
suit or proceeding brought or maintained in one of the above-named courts
should be dismissed on grounds of forum non conveniens,
should be transferred to any court other than one of the above-named courts,
should be stayed by virtue of the pendency of any other action, suit or
proceeding in any court other than one of the above-named courts, or that this
Agreement or the subject matter hereof may not be enforced in or by any of the
above-named courts. Notwithstanding the foregoing, to the extent that any party
hereto is or becomes a party in any litigation in connection with which it may
assert indemnification rights set forth in this Agreement, the court in which
such litigation is being heard will be deemed to be included in clause (i).
Each of the parties hereto hereby consents to service of process in any such
suit, action or proceeding in any manner permitted by the laws of the State of
Delaware, agrees that service of process by registered or certified mail,
return receipt requested, at the address specified in or pursuant to Section 10
is reasonably calculated to give actual notice and waives and agrees not to
assert by way of motion, as a defense or otherwise, in any such action, suit or
proceeding any claim that service of process made in accordance with Section 10
does not constitute good and sufficient service of process. The provisions of
this Section 8 will not restrict the ability of any party to enforce in
any court any judgment obtained in a federal or state court of the State of
Delaware.

(c)           Waiver
of Jury Trial. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT
CANNOT BE WAIVED, EACH OF THE PARTIES HERETO HEREBY WAIVES, AND COVENANTS THAT
IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT, OR OTHERWISE), ANY RIGHT
TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, CAUSE OF
ACTION, ACTION, SUIT OR PROCEEDING ARISING OUT OF, BASED UPON OR RELATING TO
THIS AGREEMENT OR THE SUBJECT MATTER HEREOF, IN EACH CASE WHETHER NOW EXISTING
OR HEREAFTER ARISING AND WHETHER IN CONTRACT OR TORT OR OTHERWISE. EACH OF THE
PARTIES HERETO ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY EACH OTHER PARTY THAT
THE PROVISIONS OF THIS SECTION 8(C) CONSTITUTE A MATERIAL INDUCEMENT
UPON WHICH SUCH PARTY IS RELYING AND WILL RELY IN ENTERING INTO THIS AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED HEREBY. ANY OF THE PARTIES HERETO MAY FILE
AN ORIGINAL 

 6
 

 

COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT
AS WRITTEN EVIDENCE OF THE CONSENT OF EACH OF THE PARTIES HERETO TO THE WAIVER
OF ITS RIGHT TO TRIAL BY JURY.

9.             Entire Agreement. This Agreement
contains the entire understanding of the parties with respect to the subject
matter hereof and supersedes any prior communication or agreement with respect
thereto.

10.           Notice. All notices, demands, and
communications required or permitted under this Agreement will be in writing
and will be effective if served upon such other party and such other party’s
copied persons as specified below to the address set forth for it below (or to
such other address as such party will have specified by notice to each other
party) if (i) delivered personally, (ii) sent and received by
facsimile or (iii) sent by certified or registered mail or by Federal
Express, DHL, UPS or any other comparably reputable overnight courier service,
postage prepaid, to the appropriate address as follows:

If
to the Company, to it at:

Cellu Paper Holdings, Inc.

3440 Francis Road

Suite C

Alpharetta, Georgia 30004

Attention:  Russell C. Taylor

Fax No:  (678) 393-2657

Tel. No:  (678) 393-2148

If
to Parent or Merger Sub, to it at:

c/o Weston Presidio V,
L.P.

Pier 1, Bay 2

San Francisco, CA  94111

Attention: R. Sean Honey and Therese Mrozek

Fax No:  (415) 398-0990

Tel. No:  (415) 398-0770

If
to Sponsor, to it at:

Weston Presidio V, L.P.

Pier 1, Bay 2

San Francisco, CA  94111

Attention: R. Sean Honey and Therese Mrozek

Fax No:  (415) 398-0990

Tel. No:  (415) 398-0770

with
a copy to:

Ropes & Gray LLP

 7
 

 

One International Place

Boston, Massachusetts 02110

Attention: David C. Chapin, Esq. and Shari Wolkon, Esq.

Fax No:  (617) 951-7050

Tel. No:  (617) 951-7371

Tel. No.:  (617) 951-7861

Unless otherwise
specified herein, such notices or other communications will be deemed
effective, (a) on the date received, if personally delivered or sent by
facsimile during normal business hours, (b) on the business day after
being received if sent by facsimile other than during normal business hours, (c) one
business day after being sent by Federal Express, DHL or UPS or other
comparably reputable delivery service and (d) five business days after
being sent by registered or certified mail. Each of the parties hereto shall be
entitled to specify a different address by giving notice as aforesaid to each
of the other parties hereto.

11.           Severability.
If in any judicial or arbitral proceedings a court or arbitrator refuses to
enforce any provision of this Agreement, then such unenforceable provision will
be deemed eliminated from this Agreement for the purpose of such proceedings to
the extent necessary to permit the remaining provisions to be enforced. To the
full extent, however, that the provisions of any applicable law may be waived,
they are hereby waived to the end that this Agreement be deemed to be valid and
binding agreement enforceable in accordance with its terms, and in the event
that any provision hereof is found to be invalid or unenforceable, such
provision will be construed by limiting it so as to be valid and enforceable to
the maximum extent consistent with and possible under applicable law.

12.          Counterparts. This Agreement may
be executed in any number of counterparts and by each of the parties hereto in
separate counterparts, each of which when so executed will be deemed to be an
original and all of which together will constitute one and the same agreement.

[The remainder of this page is intentionally
left blank. Signatures follow.]

 

 8
 

 

IN WITNESS WHEREOF, each of the parties has
caused this Agreement to be executed on its behalf as an instrument under seal
as of the date first above written by its officer or representative thereunto
duly authorized.

	
  THE COMPANIES:

  	
   

  	
  CELLU PARENT CORPORATION

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
  /s/ R. Sean Honey

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
  R. Sean Honey

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
  President

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  CELLU ACQUISITION CORPORATION

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
  /s/ R. Sean Honey

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
  R. Sean Honey

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
  President

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SPONSOR:

  	
   

  	
  WESTON PRESIDIO SERVICE COMPANY, LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
  Therese A. Mrozek

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
  Therese A. Mrozek

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
  Chief Operating Officer

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACKNOWLEDGED AND
  AGREED:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  CELLU TISSUE
  HOLDINGS, INC.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Dianne M.
  Scheu

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
  Dianne M. Scheu

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
  Chief Financial Officer

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 9

 

Schedule 1 to

Management Agreement

Wire Transfer Instructions for Sponsor

	
  Bank:

  	
   

  	
  Silicon Valley Bank

  
	
   

  	
   

  	
   

  
	
  ABA #:

  	
   

  	
  121-140-399

  
	
   

  	
   

  	
   

  
	
  For:

  	
   

  	
  Weston Presidio Service Company LLC

  
	
   

  	
   

  	
   

  
	
  Acct #:

  	
   

  	
  33004-35132

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00105-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00105-of-00352.parquet"}]]