Document:

stockop.htm

Duckwall-ALCO Stores, Inc.

INCENTIVE STOCK OPTION AGREEMENT

THIS INCENTIVE STOCK OPTION AGREEMENT (this “Agreement”), is made and entered into this 20th day of September, 2010 (the "Granting Date"), by and between Duckwall-ALCO Stores, Inc., a Kansas corporation (the "Company"), and Wayne S. Peterson (the "Optionee").

WITNESSETH:

WHEREAS, on May 22, 2003, the Company adopted an Incentive Stock Option Plan (the "Plan") pursuant to which the Company may grant from time to time, on or prior to

May 22, 2013, options to purchase shares of common stock of the Company (the "Common Stock"), to "key employees" of the Company or of any of its subsidiary corporations, such options to be granted to such of the persons who are eligible to receive options under the Plan in such amounts and under such form of agreement as shall be determined by the Compensation Committee pursuant to the Plan;

WHEREAS, the Plan has been subsequently amended and any references to the Plan under this Agreement incorporates all amendments and modifications to the Plan;

WHEREAS, the Compensation Committee has determined that the Optionee is a key employee of the Company or of one of its subsidiary corporations within the meaning of the Plan and that the Optionee shall be granted an option to purchase shares of Common Stock on the terms and conditions herein set forth;

NOW, THEREFORE, in consideration of the mutual promises and covenants herein contained and other good and valuable consideration paid by the Optionee to the Company, the parties hereto do hereby agree as follows:

 

1. Incorporation of Plan.  All provisions of this Agreement and the rights of the Optionee hereunder are subject in all respects to the provisions of the Plan and the powers of the Compensation Committee and Board of Directors of the Company therein provided. Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts the Option (as hereinafter defined) subject to all of the terms and provisions of the Plan.  Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board of Directors and Compensation Committee of the Company upon any questions arising under the Plan or this Agreement.

 

2. Grant of Option.  Pursuant to the authorization of the Compensation Committee, and subject to the terms, conditions and provisions contained in the Plan and this Agreement, the Company hereby grants to the Optionee as a matter of separate inducement and agreement in connection with his or her employment, but not in lieu of any salary or other compensation for his or her services, the right and option (the "Option") to purchase from the Company, at the times and on the terms and conditions hereinafter set forth, all or part of an aggregate of 25,000 shares of Common Stock at the purchase price of $12.69 per share.  Exercises of this Option may be honored by issuing authorized and unissued shares of Common Stock or, at the election of the Company, by transferring shares of Common Stock which may at the time be held by the Company as treasury shares.

 

3. Terms of Option.  The Option granted hereunder shall be exercisable from time to time by the Optionee by the giving of written notice of exercise to the Company in advance of an exercise date hereinafter set forth, specifying the number of shares to be purchased, and by payment of the purchase price therefore by either (i) cash or certified or cashier's bank check to the order of the Company, or (ii) shares of stock of the Company having a fair market value equal to the purchase price on the exercise date, subject, however, to the following restrictions:

 

(a) The Option shall be exercisable within a five (5) year period beginning on the Granting Date and only in the following maximum amounts:  (i) none until the expiration of one (1) year from Granting Date  (the waiting period); (ii) 25% of all shares after one (1) year from Granting Date; (iii) 50% of all shares after two (2) years from Granting Date; (iv) 75% of all shares after three (3) years from Granting Date; (v) 100% of all shares after four (4) years from Granting Date.  This Option shall expire five (5) years after the Granting Date.  To the extent that the Optionee does not purchase part or all of the shares of Common Stock to which he is entitled, this Option shall expire as to such unpurchased shares.

 

 

(b) Notwithstanding the provisions of subparagraph (a) of paragraph 3 of this Agreement, in the event the Company shall not be the surviving corporation in any merger, consolidation, or reorganization, or in the event of the acquisition by another corporation of all or substantially all of the assets of the Company and if such surviving, continuing, successor or purchasing corporation does not agree to assume or replace the Option granted hereunder in accordance with paragraph 7 of this Agreement, or in the event of the liquidation or dissolution of the Company, the Option granted hereunder shall become immediately exercisable to the extent of all of the aggregate number of shares subject to this Option for a period commencing 30 days immediately prior to and ending on the day immediately prior to such merger, consolidation, reorganization or acquisition of all or substantially all of the assets of the Company, or the liquidation or dissolution of the Company.

 

 

(c) Notwithstanding the provisions of subparagraph (a) of paragraph 3 of this Agreement, in the event of a Change of Control of the Company, the Option granted hereunder shall become immediately exercisable to the extent of all of the aggregate number of shares subject to this Option.  In the event of a Change of Control, the Company shall notify the Optionee as soon as practicable of the Optionee's rights hereunder.  For purposes of this subparagraph (c), a "Change of Control" shall have the meaning set forth in Section 8(a) of the Plan.

  

  

  

 

 

(d) The Option shall be exercisable in the manner set forth above, during the lifetime of the Optionee only by him or her and may not be exercisable by Optionee unless at the time of exercise he or she is a full-time employee of the Company or of one of its subsidiary corporations and shall have been continuously so employed since the Granting Date, or, if the Optionee's employment with the Company or any of its subsidiary corporations shall have terminated the Option shall be exercisable only if exercised prior to the expiration of thirty (30) days after the date of such termination or prior to five (5) years after the Granting Date, whichever shall first occur, and (except as otherwise provided by subparagraph (b) and subparagraph (c) of this paragraph 3) only to the extent that the Optionee was entitled to exercise the Option prior to the date of such termination.

 

 

(e) The Option shall be exercisable after the death of the Optionee only if the Optionee shall at the time of his or her death have been an employee of the Company and shall have been continuously employed since the Granting Date, and then (i) only by or on behalf of such person or persons to whom the Optionee's rights under the Option shall have been passed by the Optionee's will or by the laws of descent and distribution, (ii) (except as otherwise provided by subparagraph (b) and subparagraph (c) of this paragraph 3) only to the extent that the Optionee was entitled to exercise said Option prior to the date of his or her death, and (iii) only if said Option is exercised prior to the expiration of twelve (12) months after the date of the Optionee's death or prior to five (5) years after the Granting Date, whichever shall first occur.

 

 

(f) In the event the job classification and/or duties of the Optionee shall be changed and such change shall, in the opinion of the Compensation Committee, reflect a lower job classification and/or a reduction in responsibility or duties of the Optionee, the Company shall have the right, exercisable by written notice to the Optionee, within ninety (90) days after such notice, to terminate this Option as to any and all unpurchased shares.

 

 

4. No Special Employment Rights.  Nothing contained in the Plan or in any option granted under the Plan shall confer upon the Optionee any right with respect to the continuation of his or her employment by the Company (or any subsidiary) or interfere in any way with the right of the Company (or any subsidiary), subject to the terms of any separate employment agreement to the contrary, at any time to terminate such employment or to increase or decrease the compensation of the Optionee from the rate in existence at the time of the grant of an option.  Whether an authorized leave of absence, or absence in military or government service, shall constitute termination of employment shall be determined by the Board of Directors at the time.

 

5. Nonassignability.  Except as otherwise herein provided, the Option herein granted and the rights and privileges conferred hereby shall not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment, or similar process.  Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of the Option herein granted, or of any right or privilege conferred hereby, or upon the levy of any attachment or similar process upon the rights and privileges conferred hereby, contrary to the provisions hereof, this Option and the rights and privileges conferred hereby shall immediately become null and void.

 

6. Adjustments for Stock Dividends, Splits, etc.  In the event that, prior to the delivery to the Optionee by the Company of all the shares of the Common Stock in respect of which this Option is hereby granted, the Company shall have effected any stock dividend, stock split, recapitalization, combination or reclassification of shares or other similar transaction, then to the extent necessary to prevent dilution or enlargement of the Optionee's rights hereunder:

 

(a) in the event that a new increase shall have been effected in the number of outstanding shares of Common Stock, the number of shares remaining subject to this Option shall be proportionately increased, and the cash consideration payable per share shall be proportionately reduced, and

 

 

(b) in the event that a new reduction shall have been effected in the number of outstanding shares of Common Stock, the number of shares remaining subject to this Option shall be proportionately reduced, and the cash consideration payable per share shall be proportionately increased.

 

 

7. Adjustments for Mergers, Reorganizations, etc.  Subject to paragraph 3(b) of this Agreement, if the Company shall become a party to any corporate merger, consolidation, major acquisition of property for stock, separation, reorganization or liquidation, the Company shall have power to make arrangements which shall be binding upon the Optionee for the substitution of a new Option for this Option, or for the assumption of this Option, provided that such arrangements shall meet the requirements of Section 424(a) of the Internal Revenue Code of 1986, as amended (the "Code"), or such similar provisions of the Code as may then be in effect.

 

8. Rights of Optionee.  The Optionee shall not be, nor shall he have any of the rights or privileges of, a stockholder of the Company in respect of any of the shares issuable upon the exercise of this Option unless and until certificates representing such shares shall have been issued and delivered; except that the Company shall supply the Optionee with all financial information and other reports which the Company furnished its stockholders during the Option period.

  

  

  

 

9. Compliance with Other Laws and Regulations.  The Option and the obligation of the Company to sell and deliver Common Stock under the Option, shall be subject to all applicable federal and state laws, rules, and regulations, and to such approvals by any government or regulatory agency as may be required.  The Company shall not be required to issue or deliver any certificates for Common Stock under the Option prior to the completion of any registration or qualification of such shares under any federal or state law, or any rule or regulation of any governmental body which the Company shall, in its sole discretion, determine to be necessary or advisable.

 

10. Taxation.

 

(a) This Option is intended to be an incentive stock option as defined in Section 422 of the Code. The Optionee acknowledges that if Optionee determines to exercise its Option in a cashless net exercise as provided in Section 16 of the Plan, then  Optionee’s stock options may be determined to be nonqualified stock options, instead of incentive stock options, by the Internal Revenue Service and this may result in negative tax consequences.

 

 

(b)  Optionee acknowledges that to the extent the Option exceeds the $100,000 limitation described in Section 422(d) of the Code, the Option shall be treated as a non-qualified stock option, instead of an incentive stock option.

 

 

(c) Optionee acknowledges that the Company has advised that Optionee consult a tax advisor before exercising the Option under this Agreement.

 

 

11. Waiver.  Any term or condition of this Agreement may be waived in writing at any time by the party entitled to enforce the same; provided, however, that no delay or failure on the part of any party in enforcing any term or condition of this Agreement, or in exercising any right hereunder, will constitute a waiver by such party of its right to enforce fully the same or any other term or condition at any time thereafter.

 

12. Notice.  Any notice required to be given under the terms of this Agreement shall be addressed to the Company in care of its secretary at its offices at 401 Cottage Street, Abilene, Kansas 67410-0129, and any notice to be given to the Optionee shall be addressed to him or her at the address given beneath the Optionee’s signature hereto.  Either party hereto may from time to time change the address to which notices are to be sent to such party by giving written notice of such change to the other party.  Any notice hereunder shall be deemed to have been duly given if and when addressed as aforesaid, registered and deposited, postage and registry fee prepaid, in a post office regularly maintained by the United States Government.

 

13. Binding Effect.  This Agreement shall bind, and, except as specifically provided herein, shall inure to the benefit of the respective heirs, legal representatives, successors and assigns of the parties hereto.

 

14. Governing Law.  This Agreement and the rights of all persons claiming hereunder shall be construed and determined in accordance with the laws of the State of Kansas.

 

15. Entire Agreement; Amendment.  This Agreement contains the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior representations, understandings, or agreements by or between the parties.  This Agreement shall not be modified or amended except by a written instrument duly executed by each of the parties hereto.

 

16. Counterparts.  This Agreement may be executed in multiple counterparts, and each such counterpart shall be deemed to be an original, but all such counterparts together shall constitute one and the same instrument.  The signatures of all of the parties need not appear on any single counterpart, and delivery of an executed counterpart signature page by facsimile is as effective as executing and delivering this Agreement in the presence of the other parties to this Agreement.  This Agreement is effective upon delivery of one executed counterpart from each party to the other parties.  In proving this Agreement, a party must produce or account only for the executed counterpart of the party to be charged.

  

  

  

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its officers thereunto duly authorized and its corporate seal to be hereunto affixed, and the Optionee has hereunto set his or her hand as of the day and year first above written.

 

	  	
COMPANY

	  	
 

Duckwall-ALCO Stores, Inc.

	
(CORPORATE SEAL)

	
 

By: ________________________

Printed Name:  Richard E. Wilson

	  	
Title:  Chief Executive Officer

	  	  
	
ATTEST:

	  
	
_______________________

	  
	  	
OTIONEE

	  	
 

By: __________________________________

	  	
Printed Name: Wayne S. Peterson

Address: 401 Cottage Street

	  	
Abilene, KS 67410

 

	  	
SS NO.: XXX-XX-XXXX

 

CWDOCS 663198v2Exhibit 4.1 (W0261882).DOC

Exhibit 4.1

EXECUTION COPY

WAUSAU PAPER CORP.

$35,000,000

Series C Senior Notes due August 31, 2011

         

AMENDMENT NO. 5 TO NOTE PURCHASE AGREEMENT

         

Dated as of September 17, 2010

AMENDMENT NO. 5

TO

NOTE PURCHASE AGREEMENT

THIS AMENDMENT NO. 5 TO NOTE PURCHASE AGREEMENT, dated as of September 17, 2010 (the “Amendment”), is made by and among Wausau Paper Corp. (formerly known as Wausau-Mosinee Paper Corporation (the “Company”)) and the holders of the Notes who execute the signature pages hereto (the “Holders”).

RECITALS:

A.

The Company is a party to the several Note Purchase Agreements, each dated as of August 31, 1999, between it and each of the purchasers of Notes issued pursuant thereto (collectively, and in each case as amended by that certain Amendment No. 1 dated as of June 28, 2005, that certain Amendment No. 2 dated as of December 21, 2006, that certain Amendment No. 3 dated as of October 19, 2007 and that certain Amendment No. 4 dated as of March 27 2009, the “Note Purchase Agreement”).

B.

The Company has notified the Holders that it entered into a Credit Agreement, dated as of June 23, 2010, with Bank of America, N.A., the other lenders party thereto and Banc of America Securities LLC and that Section 7.01(c) thereof (the “Additional Net Worth Covenant”) constitutes an Additional Covenant (as defined in the Note Purchase Agreement).

C.

Pursuant to Section 9.8 of the Note Purchase Agreement, the Additional Net Worth Covenant is incorporated automatically into the Note Purchase Agreement and, in addition, the Company is obligated upon request to deliver an amendment to the Note Purchase Agreement to evidence further the inclusion of the Additional Net Worth Covenant in the Note Purchase Agreement.  

D.

Notwithstanding the terms of Section 9.8 of the Note Purchase Agreement, the Company is asking the Holders to waive incorporation of the Additional Net Worth Covenant and the right to require amendment of the Note Purchase Agreement to evidence further the inclusion of the Additional Net Worth Covenant in the Note Purchase Agreement.

E.

The Company further desires to amend the Note Purchase Agreement to modify its representations concerning compliance with ERISA and to reflect certain statutory changes in the laws applicable to ERISA Plans.

F.

In light of the foregoing, the Company and each of the Holders desire to modify the Note Purchase Agreement as set forth herein.

AGREEMENT:

In consideration of the terms and conditions contained herein, and other good and valuable consideration the receipt and sufficiency are hereby acknowledged, the parties hereto agree as follows:

SECTION 1.

Definitions.  All capitalized terms used but not otherwise defined herein shall have the meaning given such terms in the Note Purchase Agreement. 

SECTION 2.

Amendments.  Subject to the terms and conditions of this Amendment, Section 5.12 of the Note Purchase Agreement is hereby amended and restated as follows:

“5.12

Compliance with ERISA.

The Company and each ERISA Affiliate have operated and administered each Plan in compliance with all applicable laws except for such instances of noncompliance as have not resulted in and could not reasonably be expected to result in a Material Adverse Effect.  Neither the Company nor any ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans (as defined in section 3 of ERISA), and no event, transaction or condition has occurred or exists that would reasonably be expected to result in the incurrence of any such liability by the Company or any ERISA Affiliate, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions or to section 430 or 436 of the Code, other than such liabilities or Liens as would not be individually or in the aggregate Material.  The Company, on behalf of Wausau Paper Mills, LLC, is in discussions concerning the PBGC's assertion of liability under ERISA on the part of Wausau Paper Mills, LLC to two Plans sponsored by Wausau Paper Mills, LLC.  The PBGC has asserted that as a result of certain cessations of manufacturing operations at the Company's New Hampshire facility on December 31, 2007 and the Company's Maine facility on May 31, 2009, Wausau Paper Mills, LLC became liable for certain obligations to the Plans relating to those facilities under ERISA Section 4062(e).  The liability with respect to the New Hampshire facility Plan under ERISA Section 4062(e) was determined by the PBGC to be $900,000, and the liability with respect to the Maine facility Plan under ERISA Section 4062(e) was determined by the PBGC to be $5,500,000.  These liabilities are anticipated to be satisfied through the use of credit balances and/or cash contributions over a three year period.  While a final agreement with the PBGC has not yet been reached, the Company represents and warrants that these liabilities would not individually or in the aggregate be Material.

The funded percentage of each of the Plans (other than Multiemployer Plans) determined as of the end of such Plan’s most recently ended plan year on the basis of the actuarial assumptions specified for funding purposes in such Plan’s most recent actuarial valuation report, equals or exceeds 80%.  The funded percentage shall be determined by dividing the aggregate current value of the assets of such Plan allocable to such Plan’s benefit liabilities by the present value of the aggregate benefit liabilities under such Plan.  The term “benefit liabilities” has the meaning specified in section 4001 of ERISA and the terms “current value” and “present value” have the meaning specified in section 3 of ERISA.

2

The Company and its ERISA Affiliates have not incurred withdrawal liabilities (and are not subject to contingent withdrawal liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer Plans that individually or in the aggregate are Material.

The expected postretirement benefit obligations (determined as of the last day of the Company’s most recently ended fiscal year in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 715, without regard to liabilities attributable to continuation coverage mandated by section 4980B of the Code) of the Company and its Subsidiaries as reflected on the financial statements provided pursuant to Section 7.1(b) (1) have been determined according to GAAP, (2) present fairly the nature and extent of such obligations, in all material respects and (3) are not Material.

The execution and delivery of this Agreement and the issuance and sale of the Notes hereunder will not involve any transaction that is subject to the prohibitions of section 406 of ERISA or in connection with which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code.  The representation by the Company in the first sentence of this Section 5.12(e) is made in reliance upon and subject to the accuracy of your representation in Section 6.2 as to the sources of the funds to be used to pay the purchase price of the Notes to be purchased by you.”

SECTION 3.

Representations and Warranties.  

The Company hereby represents and warrants to the Holders as of the date hereof that:  (a) it is duly organized, validly existing and in active status under the laws of its jurisdiction of organization; (b) the execution, delivery and performance by the Company of this Amendment are within its powers, have been duly authorized by all necessary action, and do not violate, result in a breach of or constitute (alone or with due notice or lapse of time or both) a default under (i) its articles of incorporation or bylaws, (ii) any applicable law, (iii) any order of any court or any rule, regulation or order of any other agency or government binding upon the Company, or (iv) any provision of any instrument or agreement to which the Company is a party or by which its properties or assets are or may be bound; (c) no consent, license, permit, approval or authorization of, or registration, filing or declaration with any Governmental Authority or other Person is required in connection with the execution, delivery or performance of this Amendment by the Company or the validity or enforceability of this Amendment against the Company; (d) this Amendment has been duly executed and delivered by the Company; (e) each of this Amendment and the Note Purchase Agreement (after giving effect hereto) constitutes the legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally or by general principles of equity; (f) each of the Company’s Subsidiaries is a party to the Guaranty Agreement, and each such Subsidiary has duly executed and delivered to the Holders a Reaffirmation Agreement in the form of Exhibit A attached hereto; and (g) the representations and warranties made by the Company in the Note Purchase Agreement are true and complete as if made on the date hereof, except for such representations and warranties limited by their terms to a specific date in which case, such representations and warranties are true and complete as of such specific date.

3

SECTION 4.

Waivers.

(a)

Notwithstanding the failure by the Company to report, pursuant to Section 7.2 of the Note Purchase Agreement, the information required in order to establish whether the Company was in compliance with the net worth covenant set forth in Section 10.3 for the period ended June 30, 2010 (the “June 30 Net Worth Test”), the Holders hereby waive the Default (and any Event of Default) as a result of such failure provided that the Company was in fact in compliance with the June 30, 2010 Net Worth Test as shown in the calculations set forth in Annex I attached hereto.

(b)

Notwithstanding the terms of Section 9.8 of the Note Purchase Agreement, the Holders hereby waive the requirement thereunder that (i) the Additional Net Worth Covenant be deemed incorporated by reference into the Note Purchase Agreement and (ii) the Company execute and deliver an amendment to the Note Purchase Agreement to include the Additional Net Worth Covenant.

SECTION 5.

Miscellaneous. 

(a)

Except as specifically amended hereby, the terms of the Note Purchase Agreement, the Notes and all other agreements, instruments and documents delivered in connection therewith (collectively, the “Note Documents”) shall remain in full force and effect and hereby are ratified and confirmed in all respects.  The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, be deemed to be an amendment, modification or waiver of any provision of the Note Purchase Agreement or any other Note Document or any right, power or remedy of the Holders in connection therewith whether arising before or after the date hereof.  This Amendment shall not preclude the future exercise of any right, remedy, power or privilege available to the Holders whether under the Note Purchase Agreement or any other Note Documents, at law or otherwise.

(b)

Each reference in the Note Purchase Agreement to “this Agreement,” “hereunder,” “hereof,” “herein” or words of similar import shall mean and be a reference to the Note Purchase Agreement as amended by this Amendment, and each reference herein or in any other Note Document or any other document or instrument to the Note Purchase Agreement shall mean and be a reference to the Note Purchase Agreement as amended and modified by this Amendment.

(c)

This Amendment may be executed in any number of counterparts (including by facsimile or other electronic transmission), by the different parties hereto on the same or separate counterparts, each of which shall be deemed to be an original instrument but all of which together shall constitute one and the same agreement.  Each party agrees that it will be bound by its own facsimile or other electronic transmission signature and that it accepts the facsimile or other electronic transmission signature of each other party provided that the Company shall furnish original signature pages upon request to the Holders.  The descriptive headings of the various sections of this Amendment are inserted for convenience of reference only and shall not be deemed to affect the meaning or construction of any of the provisions hereof or thereof.  

4

(d)

This Amendment, the Note Purchase Agreement and the other Note Documents constitute the final, entire agreement and understanding between the parties with respect to the subject matter hereof and thereof and may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements between the parties, and shall be binding upon and inure to the benefit of the successors and assigns of the parties hereto and thereto.  There are no oral agreements between the parties with respect to the subject matter hereof and thereof. 

(e)

If any provision of this Amendment is adjudicated to be invalid under applicable laws or regulations, such provision shall be inapplicable to the extent of such invalidity without affecting the validity or enforceability of the remainder of this Amendment which shall be given effect so far as possible.  

(f)

THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE CHOICE OF LAW PROVISIONS SET FORTH IN SECTION 22.6 OF THE NOTE PURCHASE AGREEMENT AND SHALL BE SUBJECT TO THE NOTICE PROVISIONS OF SECTION 18 0F THE NOTE PURCHASE AGREEMENT.  

(g)

The Company may not assign, delegate or transfer this Amendment or any of its rights or obligations hereunder and any delegation, transfer or assignment in violation hereof shall be null and void.  No rights are intended to be created under this Amendment for the benefit of any Person other then the parties hereto. This Amendment shall be binding upon each of the Company and the Holders and their respective successors and permitted assigns.  

(h)

All representations and warranties made in this Amendment shall survive the execution and delivery of this Amendment and no investigation by any of the Holders shall affect such representations or warranties or the right of any of the Holders to rely upon them.

[Remainder of Page Intentionally Left Blank]

5

IN WITNESS WHEREOF, each party hereto has caused this Amendment to be duly executed and delivered as of the day and year first above written. 

WAUSAU PAPER CORP.

By:  

Name:

Scott P. Doescher

Title: 

Executive Vice President, Finance

6

THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY 

By:  

Name: 

Title: 

[Signature Page to Amendment No. 5 to Note Purchase Agreement]

THRIVENT FINANCIAL FOR LUTHERANS

By: 

Name: 

Title: 

[Signature Page to Amendment No. 5 to Note Purchase Agreement]

THE LINCOLN NATIONAL LIFE INSURANCE COMPANY, 

successor by merger to JEFFERSON PILOT FINANCIAL INSURANCE COMPANY, 

a Nebraska corporation

By:  

Delaware Investment Advisers, a Series of Delaware Business Management Trust, Attorney-in-Fact

By: 

Name: 

Title: 

[Signature Page to Amendment No. 5 to Note Purchase Agreement]

EXHIBIT A

FORM OF REAFFIRMATION AGREEMENT

See Attached.

REAFFIRMATION AGREEMENT

THIS REAFFIRMATION AGREEMENT (“Reaffirmation”) is made as of September 17, 2010 by each of the undersigned entities (the “Guarantors”) in favor of each “Holder” (as defined in the Guaranty referenced below).

RECITALS:

A.

Each of the Guarantors is a wholly owned, direct or indirect subsidiary of Wausau Paper Corp., a Wisconsin corporation (the “Company”).

B.

The Company is a party to the several Note Purchase Agreements, each dated as of August 31, 1999, among it and each of the Holders, as amended (collectively, the “Note Purchase Agreement”).

C.

The Guarantors have guarantied the obligations of the Company under the Note Purchase Agreement pursuant to that certain Guaranty, dated as of August 31, 1999, that certain Guaranty, dated as of December 21, 2006, or that certain Guaranty, dated as of October 19, 2007, in each case made by each Guarantor in favor of the Holders (each as amended, supplemented or otherwise modified, being collectively, the “Guaranty”).

D.

The Guarantors desire that the Holders enter into that certain Amendment No. 5 to Note Purchase Agreement, dated as of the date hereof, among the Company and the Holders that are a party thereto (the “Amendment”).

E.

As a condition to the effectiveness of the Amendment, the Holders have required, among other things, that the Guarantors execute and deliver this Reaffirmation.

AGREEMENT:

NOW, THEREFORE, in consideration of the above premises, to induce the Holders to enter into the Amendment and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each of the Guarantors hereby agrees as follows:

1.

No consent by any Guarantor to the Amendment is required in order for the Guaranty to remain in full force and effect and to be enforceable against each Guarantor in accordance with its terms.  Without limiting the foregoing, each of the Guarantors hereby acknowledges its consent to the terms of the Amendment and ratifies and reaffirms all of its obligations and liabilities arising under or otherwise relating to the Guaranty.

2.

The Guaranty is, and shall remain after giving effect to the Amendment, in full force and effect, enforceable in accordance with its terms.

3.

Upon the effectiveness of the Amendment, all references in the Guaranty to the Note Purchase Agreement shall be deemed references to the Note Purchase Agreement as modified by the Amendment.

4.

The execution, delivery and effectiveness of the Amendment shall not diminish, or operate as a waiver of, any right, power or remedy of each Holder under the Guaranty or any other agreement or document relating thereto.

5.

This Reaffirmation shall be governed by, construed and interpreted in accordance with the laws of the State of New York applicable to contracts executed and to be performed in that state.

6.

The execution hereof by each Guarantor shall constitute a contract by such Guarantor in favor of each Holder.

7.

This Reaffirmation may be executed in any number of counterparts (including by facsimile or other electronic transmission), by the different parties hereto on the same or separate counterparts, each of which shall be deemed to be an original instrument but all of which together shall constitute one and the same agreement.  Each party agrees that it will be bound by its own facsimile or other electronic transmission signature and that it accepts the facsimile or other electronic transmission signature of each other party provided that the each party agrees to furnish original signature pages upon request to the Holders.

8.

Notice of acceptance hereof is hereby waived by each of the Guarantors.

[Remainder of Page Intentionally Left Blank]

IN WITNESS WHEREOF, this Reaffirmation has been duly executed and delivered as of the date first above written.

GUARANTORS:

THE SORG PAPER COMPANY

THE MIDDLETOWN HYDRAULIC COMPANY

By:_______________________

Name:

Scott P. Doescher

Title: 

Executive Vice President, Finance

WAUSAU PAPER TOWEL & TISSUE, LLC

WAUSAU PAPER MILLS, LLC

WAUSAU TIMBERLAND COMPANY, LLC

By:_______________________

Name:

Scott P. Doescher

Title:

Executive Vice President, Finance/Manager

ANNEX I

See attached.

September 15, 2010 

Dear Colleagues:

Pursuant to Section 7.2(a) of the Senior Notes Agreement dated August 31, 1999, I am enclosing detailed calculations demonstrating the company’s compliance (for the fiscal quarter ended June 30, 2010) with the requirements of Sections 10.3 through 10.5 of the Senior Notes, as amended.  Please note that the Consolidated Net Worth calculation is revised (from our earlier compliance certificate dated August 9, 2010) to reflect the covenant in effect under the Note Purchase Agreement.  The certificate dated August 9, 2010, referenced a proposed Consolidated Net Worth calculation not previously approved by the Note Purchasers.

Please contact me if you have questions regarding these calculations. 

Very truly yours,

SCOTT P. DOESCHER

Scott P. Doescher

Executive Vice President, Finance Secretary and Treasurer

Enclosures

cc:  Robin DeChamps, Deloitte & Touche LLP

100 Paper Place, Mosinee, WI  54455

tel  715 693 4470  fax  715 692 2082

www.wausaupaper.com

WAUSAU PAPER CORP.

Financial Covenant Calculation Worksheet

SENIOR NOTES DATED AUGUST 31, 1999

(REVISED)

				
	($ in thousands)

	 
	 
	 

	 
	 
	6/30/10

	 

	Section 10.3 - Consolidated Net Worth

	 
	 
	 

	Shareholders’ Equity at Statement Date

	 
	237,064

	 

	add:  Accumulated other comprehensive loss (income) 

	62,103

	 

	Consolidated Net Worth for purposes of Section 10.3 

	299,167

	 

	Stated Consolidated Net Worth

	 
	200,000

	 

	add:  25% of Cumulative Consolidated Net Income beginning quarter ending 12-31-07

	8,661

	 

	100% of Cumulative Proceeds of all Equity Issuances beginning quarter ending 12-31-07

	229

	 

	Minimum Consolidated Net Worth Permitted:

	208,890

	 

	 
	Compliance

	YES

	 

	Section 10.4(a) - Consolidated Funded Indebtedness to Consolidated Total Capitalization 

	 
	 

	Consolidated Total Capitalization:

	 
	 
	 

	Consolidated Funded Indebtedness

	 
	124,535

	 

	Consolidated Net Worth 

	 
	237,064

	 

	Consolidated Total Capitalization 

	 
	361,599

	 

	Total Funded Indebtedness/Capitalization Ratio

	34.44%

	 

	 
	 
	 
	 

	Maximum Total Funded Indebtedness/Capitalization Ratio permitted:

	55.00%

	 

	 
	Compliance

	YES

	 

	Section 10.4(b) - Consolidated Interest Coverage Ratio

	 
	 

	A.  Consolidated EBITDDA for four consecutive fiscal quarters ending on statement date 

(Subject Period"):

	 
	 

	 
	 
	 

	1.  Consolidated Net Income for Subject Period:

	32,315

	 

	2.  Consolidated Interest Expense for Subject Period:

	6,544

	 

	3.  All federal and state income tax expense for Subject Period:

	23,733

	 

	4.  Depreciation expense for Subject Period:

	38,728

	 

	5.  Depletion expenses for Subject Period:

	54

	 

	6.  Amortization expenses for Subject Period: 

	17,505

	 

	7.  Consolidated EBITDDA for Subject Period

	118,879

	 

	(Sum of Line A.1 through Line A.6):

	 
	 

	B.  Consolidated Interest Charges for Subject Period:

	6,544

	 

	 
	 
	 

	C.  Consolidated Interest Coverage Ratio (Line A.7 / Line B): 

	18.17 

	to 1

	Minimum Consolidated Interest Coverage Ratio permitted:

	3.00 

	to 1

	 
	Compliance

	YES

	 

	Section 10.5 - Limitation on Priority Debt

	 
	 
	 

	Priority Debt

	 
	0

	 

	 
	 
	 
	 

	Maximum Priority Debt (10% of Consolidated Net Worth) permitted:

	23,706

	 

	 
	Compliance

	YES

	 

September 15, 2010

		
	Delaware Investments-

	Thrivent Financial for Lutherans

	Private Placements

	Attn:  Investment Acctg/Trade

	Attn:  Edward J. Brennan, Vice President

	625-4th Ave. South, 10th Floor

	2005 Market Street – 41st Floor

	Minneapolis, MN  55415

	Fixed Income-mailcode 41-104

	 

	Philadelphia, PA  19103

	 

	 
	 

	 
	 

	The Northwestern Mutual Life Ins. Co. 

	 

	Attn:  Investment Operations

	 

	720 East Wisconsin Avenue

	 

	Milwaukee, WI  53202

	 

100 Paper Place, Mosinee, WI  54455

tel  715 693 4470  fax  715 692 2082

www.wausaupaper.com

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