Exhibit 10.2

PW EAGLE, INC.

Retention Bonus Plan

1. OBJECTIVE

The objective of this Retention Bonus Plan is to provide incentive to eligible
management and key employees to remain with the Company and to contribute fully
to the Company’s business achievement goals and success as the Strategic
Committee of the Company’s Board of Directors continues to evaluate and explore
strategic alternatives for the Company, including return of capital to
shareholders, a potential sale of the Company, acquisitions, product
diversification and other actions designed to maximize shareholder value.

2. PARTICIPATION

Those members of management or key employees, in each case as specified by the
Compensation Committee of the Company’s Board of Directors, (collectively
“Covered Employees”) will participate in this Plan. A Covered Employee will
receive the retention bonus noted below if, and only if, both of the following
conditions are met: (A) the Covered Employee remains employed by the Company, or
a subsidiary of the Company, and is so employed by either the Company or a
subsidiary of the Company as of the effective date of a “Change in Control” (as
defined below) and (B) the effective date of such Change in Control is after the
effective date of this Plan and on or prior to December 31, 2007.

3. RETENTION BONUS

The retention bonus, to which a Covered Employee meeting the conditions set
forth in Paragraph 2 above is entitled, shall equal the amount of the potential
target bonus assigned to such Covered Employee under the Company’s 2006
Performance Bonus Plan, whether or not such target bonus is achieved. The
retention bonus is in addition to, and not in substitution of, any bonus earned
by the Covered Employee under the Company’s 2006 Performance Bonus Plan or under
any other bonus arrangement.

4. PAYMENT

Payment of the retention bonus shall be in cash and shall be paid as of the
effective date of the Change in Control, and the Company will deduct therefrom
any taxes and withholdings required by law to be withheld.

It is the intention of the Company that the provisions of this Plan comply with
Section 409A of the Internal Revenue Code of 1986, as amended from time to time,
and the regulations promulgated thereunder (the “Code”), if applicable, and all
provisions of this Plan shall be construed and interpreted in a manner
consistent with Section 409A of the Code. To the extent necessary to avoid
imposition of any additional tax or interest penalties under Section 409A (such
tax and interest penalties, a “Section 409A Tax”) for a particular Covered
Employee, notwithstanding the timing of payment provided above for the retention
bonus, the timing of

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such payment to such Covered Employee shall be subject to a six-month delay in a
manner consistent with Section 409A(a)(2)(B)(i) of the Code, provided that
(a) such Covered Employee shall be credited with interest in respect of such
payment during such six-month period at the prime rate in effect from time to
time at Citibank, N.A., or any successor thereto and (b) if such Covered
Employee dies during such six-month period, any such delayed payment shall not
be further delayed, and shall be immediately payable to such Covered Employee’s
devisee, legatee or other designee or, should there be no such designee, to such
Covered Employee’s estate. From and after the effective date of this Plan,
(i) the Company shall administer and operate this Plan in compliance with
Section 409A of the Code and any rules, regulations or other guidance
promulgated thereunder as in effect from time to time and (ii) in the event that
the Company determines that any provision of this Plan does not comply with
Section 409A of the Code or any such rules, regulations or guidance and that a
Covered Employee may become subject to a Section 409A Tax, the Company shall in
good faith amend or modify such provision with respect to such Covered Employee
to avoid the application of such Section 409A Tax, provided that such amendment
or modification shall not reduce the economic value to such Covered Employee of
the retention bonus.

5. DEFINITIONS

For purposes of this Plan, the following terms shall have the meanings set forth
below.

 

  (a) “Change in Control” means:

(i) the consummation of (A) a merger, consolidation, statutory share exchange or
similar form of corporate transaction involving the Company (each of the events
referred to in this clause (A) being hereinafter referred to as a
“Reorganization”) or (B) a sale or other disposition of all or substantially all
the assets of the Company (a “Sale”), unless, immediately following such
Reorganization or Sale, (1) all or substantially all the individuals and
entities who were the “beneficial owners” (as such term is defined in Rule 13d-3
under the Exchange Act (or a successor rule thereto)) of shares of the Company’s
common stock or other securities eligible to vote for the election of the Board
outstanding immediately prior to the consummation of such Reorganization or Sale
(such securities, the “Company Voting Securities”) beneficially own, directly or
indirectly, more than 50% of the combined voting power of the then outstanding
voting securities of the corporation or other entity resulting from such
Reorganization or Sale (including a corporation or other entity that, as a
result of such transaction, owns the Company or all or substantially all the
Company’s assets either directly or through one or more subsidiaries) (the
“Continuing Entity”) in substantially the same proportions as their ownership,
immediately prior to the consummation of such Reorganization or Sale, of the
outstanding Company Voting Securities (excluding any outstanding voting
securities of the Continuing Entity that such beneficial owners hold immediately
following the consummation of the Reorganization or Sale as a result of their
ownership prior to such consummation of voting securities of any corporation or
other entity involved in or forming part of such Reorganization or Sale other
than the Company or a Subsidiary), (2) no Person (defined below) (excluding any

 

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employee benefit plan (or related trust) sponsored or maintained by the
Continuing Entity or any corporation or other entity controlled by the
Continuing Entity) beneficially owns, directly or indirectly, 50% or more of the
combined voting power of the then outstanding voting securities of the
Continuing Entity and (3) at least a majority of the members of the board of
directors or other governing body of the Continuing Entity were Incumbent
Directors (defined below) at the time of the execution of the definitive
agreement providing for such Reorganization or Sale or, in the absence of such
an agreement, at the time at which approval of the Board was obtained for such
Reorganization or Sale;

(ii) the shareholders of the Company approve a plan of complete liquidation or
dissolution of the Company; or

(iii) any Person, corporation or other entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act) becomes the beneficial owner,
directly or indirectly, of securities of the Company representing 50% or more of
the combined voting power of the Company Voting Securities; provided, however,
that for purposes of this subparagraph (a)(iii), the following acquisitions
shall not constitute a Change in Control: (A) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
subsidiary of the Company, (B) any acquisition by an underwriter temporarily
holding such Company Voting Securities pursuant to an offering of such
securities or (C) any acquisition pursuant to a Reorganization or Sale that does
not constitute a Change in Control for purposes of subparagraph (a)(i).

(b) The “effective date” of a Change in Control means the date on which a Change
in Control occurs (if any).

(c) “Incumbent Directors” means individuals who, as of the effective date of
this Plan, were members of the Company’s Board of Directors; provided, however,
that any individual becoming a director subsequent to the effective date of this
Plan whose appointment or election, or nomination for election, by the Company’s
shareholders was approved by a vote of at least a majority of the Incumbent
Directors shall be considered as though such individual were an Incumbent
Director, but excluding, for purposes of this proviso, any such individual whose
assumption of office after the effective date of this Plan occurs as a result of
an actual or threatened proxy contest with respect to election or removal of
directors or other actual or threatened solicitation of proxies or consents by
or on behalf of a “person” (as such term is used in Section 13(d) of the
Exchange Act) (each, a “Person”) other than the Board.

(d) “Exchange Act” means the Securities Exchange Act of 1934, as amended from
time to time, or any successor statute thereto.

As authorized by the Board of Directors and its Compensation Committee

Effective: November 15, 2006

 

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