Exhibit (10)(b)

 

POTLATCH CORPORATION

 

SEVERANCE PROGRAM FOR

 

EXECUTIVE EMPLOYEES

 

As Amended and Restated as of May 24, 2005

 

SECTION 1. ADOPTION AND PURPOSE OF PROGRAM.

 

The Potlatch Corporation Severance Program for Executive Employees (the
“Program”) was adopted effective September 30, 1978, by Potlatch Corporation, a
Delaware corporation (the “Company”), to provide a program of severance payments
to certain employees of the Company and its designated subsidiaries. The Program
was last amended and restated effective as of May 24, 2005, to read as set forth
herein. The Program is an employee welfare benefit plan within the meaning of
section 3(1) of the Employee Retirement Income Security Act of 1974 (“ERISA”)
and section 2510.3-1 of the regulations issued thereunder. The plan
administrator of the Program for purposes of ERISA is the Company.

 

SECTION 2. ELIGIBILITY AND DETERMINATION OF VESTING SERVICE.

 

All Principal Officers and appointed vice presidents of the Company and of any
subsidiary of the Company that is designated to participate in the Program by
the Executive Compensation and Personnel Policies Committee of the Board of
Directors of the Company and such other employees of the Company or any such
subsidiary who are designated by such Committee to participate in the Program
shall be eligible to participate in the Program. The Company and such designated
subsidiaries are referred to collectively in the Program as the “Participating
Companies.” For purposes of the Program, “Principal Officers” shall include the
chief executive officer, president, secretary, treasurer and controller and any
elected vice-

 

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president of a Participating Company. Those Principal Officers and other
employees who participate in the program are referred to herein as “Eligible
Employees.” As a condition to participation in the Program, each Eligible
Employee shall agree in writing to become bound by its terms, including, without
limitation, the provisions of Section 10.

 

For purposes of the Program, an Eligible Employee’s Years of Vesting Service
shall be determined under the provisions of the Potlatch Corporation Salaried
Employees’ Retirement Plan as in effect from time to time (the “Retirement
Plan”).

 

SECTION 3. SEVERANCE BENEFITS.

 

(a) Basic Severance Benefits. Upon the occurrence of any of the events specified
in Section 4(a), an Eligible Employee shall receive (in lieu of any other
severance benefit payable under any other plan or program now or hereafter
maintained by a Participating Company) Basic Severance Benefits under the
Program as follows:

 

(i) A cash benefit equal to three (3) weeks of the Eligible Employee’s Base
Compensation for each full Year of Vesting Service completed by such Eligible
Employee;

 

(ii) If at the end of the number of weeks following termination of the Eligible
Employee’s employment equal to three (3) times the number of full Years of
Vesting Service completed by the Eligible Employee he or she has not obtained a
position with another employer (despite reasonable, diligent and good faith
efforts to do so) at a salary comparable to the Eligible Employee’s Base
Compensation, a cash benefit equal to an additional week of Base Compensation
for each full Year of Vesting Service completed by the Eligible Employee;
provided, however, that such benefit shall not be payable if the Eligible
Employee is not living on the last day of the period described herein;

 

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(iii) In the event that a Participating Company terminates the employment of an
Eligible Employee and does not give him or her one month’s advance notice, one
month of the Eligible Employee’s Base Compensation in lieu of notice;

 

(iv) The Eligible Employee’s unused and accrued vacation pay, if any, determined
as of the date when the Eligible Employee’s employment is terminated under the
terms of the Participating Company’s basic vacation policy as in effect when the
applicable event specified in Section 4(a) occurs (which, in the case of
termination of employment pursuant to Section 4(a)(iv), shall be the date of the
material change rather than the date the Eligible Employee resigns);

 

(v) Eligibility for an Award under the Company’s Management Performance Award
Plan for the Award Year in which his or her employment terminates, determined
under all the terms and conditions of such plan; and

 

(vi) Continued coverage as an employee during a period of weeks equal to three
(3) (four (4), in the case of an Eligible Employee eligible for the benefit
described in (ii) above) times the number of full Years of Vesting Service
completed by the Eligible Employee, under the following employee benefit plans
of the Company:

 

(A) Medical coverage in the amount, if any, that the Eligible Employee had in
effect on the day preceding the date of his or her termination of employment;

 

(B) Dental coverage in the amount, if any, that the Eligible Employee had in
effect on the day preceding the date of his or her termination of employment;

 

(C) Basic life insurance coverage in the amount, if any, that the Eligible
Employee had in effect on the day preceding the date of his or her termination
of employment; and

 

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(D) Accidental death and dismemberment coverage (not including travel accident
coverage) in the amount, if any, that the Eligible Employee had in effect on the
day preceding the date of his or her termination of employment, except that
continuation of any employee-paid coverage shall be at the Eligible Employee’s
expense at standard group rates.

 

Notwithstanding any of the foregoing provisions of this Section 3(a)(vi):

 

(I) Any such continued coverage shall terminate when the Eligible Employee
becomes covered by the life insurance, medical, dental or accidental death and
dismemberment plan of another employer.

 

(II) In the event that after an Eligible Employee’s termination of employment
with a Participating Company he or she is otherwise entitled to continued
coverage under the Company’s basic life insurance, medical, dental and
accidental death and dismemberment plans pursuant to any employee benefit plan
or program of the Company (other than this Program), the total benefits paid for
by the Participating Companies during the period described above shall not
exceed the benefits to which the Eligible Employee is entitled under this
Section 3(a)(vi).

 

(III) For purposes of this Section 3(a)(vi), the Company’s basic life insurance
plan shall not include any group universal life insurance or travel accident
insurance coverage provided through or by the Company to or on behalf of its
employees or any accidental death and dismemberment insurance coverage provided
by the Company to family members of its employees.

 

(IV) During the period of such continued coverage, the Eligible Employee shall
not be eligible to participate in the Company’s disability income plan or as an
employee

 

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in the Retirement Plan, the Salaried Employees’ Savings Plan, any qualified or
nonqualified stock option or phantom stock plan of the Company or any employee
benefit plan or program now or hereafter maintained by the Company or a
Participating Company other than those plans listed in the first sentence of
this Section 3(a)(vi).

 

Notwithstanding the foregoing provisions of this subsection (a), the sum of the
amounts payable under (i), (ii) and (iii) above shall be not less than four (4)
months of the Eligible Employee’s Base Compensation nor greater than one (1)
year of the Eligible Employee’s Base Compensation and the period of continued
coverage described in (vi) above shall be not less than four (4) months nor more
than one (1) year from the termination of the Eligible Employee’s employment.
The Executive Compensation and Personnel Policies Committee of the Board of
Directors of the Company may, in its discretion, increase the benefit payable to
any Eligible Employee without regard to the foregoing limitation.

 

(b) Change of Control Benefits. Upon the occurrence of any of the events
specified in Section 4(b), an Eligible Employee shall receive (in lieu of any
severance benefit payable under Section 3(a) or any other severance benefit
payable under any other plan or program now or hereafter maintained by a
Participating Company) Change of Control Benefits under the Program as follows:

 

(i) Within ten (10) business days following the effective date an Eligible
Employee terminates, a lump sum cash benefit equal to the Eligible Employees’
annual Base Compensation plus his or her annual Base Compensation multiplied by
his or her standard bonus percentage (as determined pursuant to the Management
Performance Award Plan), determined as of the date of the Change of Control or
the effective date the

 

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Eligible Employee terminates, whichever produces the larger amount, multiplied
by the appropriate factor from the following table:

 

Eligible Employee

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   Pay Multiple
Factor

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Chief Executive Officer

   3.0

Chief Operating Officer

   3.0

Other Eligible Employees

   2.5

 

Notwithstanding the foregoing, if the Eligible Employee’s employment terminates
on or after the date thirty (30) months prior to the Eligible Employee’s “normal
retirement date,” as determined under the Retirement Plan, the applicable factor
shall be a fraction, the numerator of which is the number of full months between
the date the Eligible Employee’s employment terminates and such “normal
retirement date” and the denominator of which is twelve (12). An Eligible
Employee described in the preceding sentence shall be entitled to an additional
benefit equal to the difference between the benefit payable to the Eligible
Employee, if any, under the Retirement Plan and the Retirement Plan Supplemental
Benefit provisions of the Salaried Employees’ Supplemental Benefit Plan (the
“Supplemental Plan”), and such benefits that would have been payable, if any,
under such Plans if the Eligible Employee had remained an Eligible Employee and
continued to earn his or her Base Compensation until such “normal retirement
date;” provided, however, that the present value (calculated using the assumed
discount rate applied in projecting the Company’s pension benefit obligations
for financial reporting purposes and the UP-84 mortality table) (the “Present
Value”) of such additional benefit shall not exceed the difference between the
lump sum benefit

 

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determined under the preceding sentence and the lump sum benefit determined
using the otherwise applicable factor from the table above. Such additional
benefit shall be paid at the same time and in the same form as any benefit
payable to the Eligible Employee under the Supplemental Plan or, if no benefit
is payable to the Eligible Employee under the Supplemental Plan, the Present
Value of such additional benefit shall be paid in a lump sum at the same time as
the Eligible Employee’s Change of Control Benefits are paid.

 

(ii) In the event that a Participating Company terminates the employment of an
Eligible Employee and does not give him or her one month’s advance notice, one
month of the Eligible Employee’s Base Compensation (determined as of the date of
the Change of Control or the date the Eligible Employee’s employment terminates,
whichever produces the larger amount) in lieu of notice;

 

(iii) A lump sum cash benefit equal to the Eligible Employee’s unused and
accrued vacation pay, if any, under the terms of the Participating Company’s
basic vacation policy. For this purpose, (I) an Eligible Employee’s Base
Compensation and the terms of the basic vacation policy shall be determined as
of the date when the Eligible Employee’s employment is terminated or as of the
date of the Change of Control, whichever produces the larger amount and (II)
accrued vacation pay shall be paid notwithstanding any minimum service
requirement of the Participating Company’s basic vacation policy;

 

(iv) Eligibility for an Award under the Company’s Management Performance Award
Plan for the Award Year in which his or her employment terminates determined
under all the terms and conditions of such Plan;

 

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(v) Continued coverage as an employee during the number of years equal to the
applicable factor determined under (b)(i) above, subject to all of the
conditions and limitations described in Section 3(a)(vi)(I) through (IV) above
(determined without regard to the last paragraph of Section 3 (a)) under the
following employee benefit plans of the Company;

 

(A) Medical coverage in the amount, if any, that the Eligible Employee had in
effect on the day preceding the date of his or her termination of employment;

 

(B) Dental coverage in the amount, if any, that the Eligible Employee had in
effect on the day preceding the date of his or her termination of employment;

 

(C) Basic life insurance coverage in the amount, if any, that the Eligible
Employee had in effect on the day preceding the date of his or her termination
of employment;

 

(D) Accidental death and dismemberment coverage (not including travel accident
coverage) in the amount, if any, that the Eligible Employee had in effect on the
day preceding the date of his or her termination of employment, except that
continuation of any employee-paid coverage shall be at the Eligible Employee’s
expense at standard group rates; and

 

(E) Temporary, long-term and permanent disability income coverage in the amount,
if any, that the Eligible Employee had in effect on the day preceding the date
of his or her termination of employment;

 

(vi) In the case of an Eligible Employee who has less than five (5) Years of
Vesting Service on the date his or her employment terminates, a lump sum cash
benefit equal to (A) the value of that portion of the Eligible Employee’s
Company Stock Account

 

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in the Salaried Employees’ Savings Plan attributable to Company Contributions
under such Plan made on the Eligible Employee’s behalf in a Plan Year which
ended less than 24 months prior to the date the Eligible Employee’s employment
with the Participating Companies terminates, plus (B) the unvested portion, if
any, of the Eligible Employee’s Savings Plan Supplemental Benefit account under
the Supplemental Plan. The value of those portions of the Eligible Employee’s
Company Stock Account and the Savings Plan Supplemental Benefit account referred
to in the preceding sentence shall be determined as of the date the Eligible
Employee’s employment with the Participating Companies terminates; and

 

(vii) A lump sum cash benefit equal to the Present Value of the Eligible
Employee’s Normal Retirement Benefit and Retirement Plan Supplemental Benefit
determined under the Retirement Plan and the Supplemental Plan, respectively, if
the Eligible Employee was not entitled to a Vested Benefit under the Retirement
Plan as of the date the Eligible Employee’s employment with the Participating
Companies terminates.

 

(c) Payment of Excise Taxes. If any payment or benefit to or for the benefit of
the Eligible Employee in connection with a Change of Control is deemed an
“excess parachute payment” as defined in Section 280G of the Internal Revenue
Code of 1986 (the “Code”) subject to the excise tax imposed by Section 4999 of
the Code, the Company shall pay to the Eligible Employee an additional amount
such that the total amount of all such payments and benefits (including payments
made pursuant to this Section 3(c)) to the Eligible Employee shall equal the
total amount of all such payments and benefits to which the Eligible Employee
would have been entitled (but for this Section 3(c)) net of all applicable
federal, state and local

 

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taxes except the excise tax. For purposes of this Section 3(c), the Eligible
Employee shall be deemed to pay federal, state and local taxes at the highest
marginal rate of taxation for the applicable calendar year. The amount of the
payment to the Eligible Employee shall be estimated by a third-party service
provider selected by the Company as of the date of the event specified in
Section 4(a) or, if earlier, as of the date of the Change of Control as
determined pursuant to Section 4(b). Within thirty (30) business days following
the effective date an Eligible Employee terminates, the estimated amount due the
Eligible Employee pursuant to this Section 3(c) shall be paid to the Eligible
Employee. In the event that the amount of the estimated payment is less than the
amount actually due to the Eligible Employee under this Section 3(c), the amount
of any such shortfall shall be paid to the Eligible Employee within ten (10)
business days after the existence of the shortfall is discovered.

 

The Eligible Employee shall not be required to mitigate the amount of any
payments provided under Section 3(b) and 3(c), nor shall any payment or benefit
provided for in Section 3(b) and 3(c) be offset by any compensation earned by
the Eligible Employee as the result of employment by another employer or by
retirement benefits.

 

(d) Definition of “Base Compensation”. For purposes of the Program, “Base
Compensation” shall mean the Eligible Employee’s base rate of pay as in effect
at the time the Eligible Employee’s employment is terminated, or, if greater,
the rate in effect at the time the material change described in Section 4(a)(iv)
occurs or the time a Change of Control described in Section 4(b) occurs, if
applicable. An Eligible Employee’s base rate of pay shall be determined without
reduction for (i) any Deferred Contributions made by the Eligible Employee
pursuant to the Potlatch Corporation Salaried Employees’ Savings Plan or (ii)
any contributions made by the Eligible Employee pursuant to the Potlatch
Corporation Custom Benefits Plan.

 

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SECTION 4. CONDITIONS FOR PAYMENT OF SEVERANCE BENEFITS.

 

(a) Payment Of Basic Severance Benefits. Subject to the provisions of Section
4(c), an Eligible Employee will be eligible for the benefits specified in
Section 3(a) upon the occurrence of any of the following events (except that an
Eligible Employee who has satisfied the conditions of Section 4(b) will be
eligible for the benefits specified in Section 3(b) rather than the benefits
specified in Section 3(a)):

 

(i) Termination of the Eligible Employee’s employment by a Participating Company
or by the Eligible Employee at the request of the Participating Company for any
reason other than misconduct, subject to the limitations of Section 4(c)(ii). As
used herein “misconduct” means that the Eligible Employee has engaged in unfair
competition with a Participating Company or a subsidiary thereof, induced any
customer of a Participating Company or subsidiary to breach any contract with a
Participating Company or subsidiary, made any unauthorized disclosure of any of
the secrets or confidential information of a Participating Company or
subsidiary, committed an act of embezzlement, fraud or theft with respect to the
property of a Participating Company or subsidiary, or engaged in conduct which
is not in good faith and which directly results in material loss, damage or
injury to the business, reputation or employees of a Participating Company or
subsidiary; or

 

(ii) Termination of the Eligible Employee’s employer’s status as a Participating
Company due to the sale to a third party or a spin-off of a designated
subsidiary, subject to the limitations of Section 4(c)(ii); or

 

(iii) The Participating Company requires the Eligible Employee to relocate his
or her principal place of work and the new principal place of work is fifty (50)
or more

 

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miles further from the Eligible Employee’s primary residence than was his or her
former principal place of work, and the Eligible Employee elects to resign
rather than to relocate or

 

(iv) The Eligible Employee resigns from employment with a Participating Company
within twenty-four (24) months following (A) a significant diminution of the
Eligible Employee’s assigned job, as reflected in the Participating Company’s
official position description, duties, responsibilities or privileges or (B) a
any reduction in the Eligible Employee’s base salary, standard bonus opportunity
or long term incentive opportunity or a fifteen percent or greater reduction in
the Eligible Employee’s aggregate benefits or perquisites as compared to those
of all other employees similarly situated, unless in each case the reduction is
applicable to all salaried employees or all other employees similarly situated;
provided, however, that this Section 4(a)(iv) shall apply to the resignation of
an Eligible Employee only if the Eligible Employee or the Participating Company
has notified the other party in writing within three (3) months following the
occurrence of any such change that the party giving notice considers such change
to be a material change encompassed by this Section 4(a)(iv). If the party
receiving such notice does not agree that the change in question is a material
change encompassed by this Section 4(a)(iv), it shall give written notice
thereof to the party first giving notice hereunder within thirty (30) days after
receiving notice and the matter shall be immediately referred to the Review
Panel as provided in Section 9; provided, however, that, within thirty (30) days
after receiving written notice that the other party does not agree that the
change in question is covered by this Section 4(a)(iv), the Eligible Employee
may request that the matter be submitted directly to arbitration as provided in

 

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Section 10. If necessary, the twenty-four (24) month period specified above
shall be extended to a date not later than thirty (30) days following (i) the
announcement of the decision of the Review Panel or, if the matter is referred
to arbitration within thirty (30) days following the announcement of the Review
Panel’s decision, the announcement of the award of the arbitrator, or (ii) if
the matter is referred directly to arbitration, the announcement of the award of
the arbitrator. The Participating Company or the Eligible Employee may each give
the notice described in this Section 4(a)(iv) only once while this Program is in
effect. If one party has given notice and the twenty-four (24) month period
specified above has commenced running, the other party may not give notice
hereunder with respect to a change occurring during such twenty-four (24) month
period. If an Eligible Employee gives notice pursuant to this Section 4(a)(iv)
and the Company thereafter in good faith makes an adjustment in the Eligible
Employee’s compensation, benefits, assigned job or duties, responsibilities,
privileges or perquisites, the Eligible Employee and the Company may mutually
agree in writing that the notice shall be null and void.

 

Notwithstanding the foregoing, no benefits shall be available under the Program
(i) if the Eligible Employee’s employment with a Participating Company
terminates because he or she is eligible for or receiving long-term or permanent
disability benefits under the Company’s disability income plan as in effect on
the date of onset of disability or (ii) if the Eligible Employee satisfies all
of the following conditions:

 

(I) His or her employment with a Participating Company terminates on or after
his or her “normal retirement date,” as determined under the Retirement Plan;

 

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(II) For the two-year period immediately before retirement, he or she qualified
as an Eligible Employee; and

 

(III) He or she is entitled to benefits under the Retirement Plan, Salaried
Employees’ Savings Plan and Supplemental Plan which, when converted to a
straight life annuity (and excluding any portion of the benefit under the
Salaried Employees’ Savings Plan which represents contributions by the Eligible
Employee), equals, in the aggregate, at least $44,000.

 

(b) Payment Of Change Of Control Benefits. An Eligible Employee will be eligible
for the benefits specified in Section 3(b) if, within three (3) years following
a Change of Control, the Eligible Employee’s employment terminates under the
conditions described in Section 4(a)(i), (ii) or (iii) or a material change
described in Section 4(a)(iv) occurs and the Eligible Employee thereafter
resigns under the conditions described in Section 4(a)(iv); provided, that the
Eligible Employee was employed by a Participating Company on the date preceding
the Change of Control. For purposes of the Program, “Change of Control” shall
mean:

 

(i) Upon consummation of a reorganization, merger or consolidation involving the
Corporation (a “Business Combination”), in each case, unless, following such
Business Combination, (A) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the then outstanding
shares of Common Stock (the “Outstanding Common Stock”) and the then outstanding
voting securities of the Corporation entitled to vote generally in the election
of directors (the “Outstanding Voting Securities”) immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities

 

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entitled to vote generally in the election of directors of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Corporation either
directly or through one or more subsidiaries), (B) no Person (as defined in
Section 4(b)(iii) below) (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) sponsored or
maintained by the Corporation or such other corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then outstanding voting securities of such corporation except to the extent that
such ownership is based on the beneficial ownership, directly or indirectly, of
Outstanding Common Stock or Outstanding Voting Securities immediately prior to
the Business Combination and (C) at least a majority of the members of the board
of directors of the corporation resulting from such Business Combination were
members of the Board at the time of the execution of the initial agreement, or
of the action of the Board, providing for such Business Combination; or

 

(ii) On the date that individuals who, as of December 2, 1999 constitute the
Board (the “Incumbent Board”) cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to December 2, 1999 whose election, or nomination for
election by the Corporation’s stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual

 

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whose initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors, an actual
or threatened solicitation of proxies or consents or any other actual or
threatened action by, or on behalf of any Person other than the Board; or

 

(iii) Upon the acquisition after December 2, 1999 by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (A) the then Outstanding Common Stock or
(B) the combined voting power of the Outstanding Voting Securities; provided,
however, that the following acquisitions shall not be deemed to be covered by
this Section 4(b)(iii): (x) any acquisition of Outstanding Common Stock or
Outstanding Voting Securities by the Corporation, (y) any acquisition of
Outstanding Common Stock or Outstanding Voting Securities by any employee
benefit plan (or related trust) sponsored or maintained by the Corporation or
(z) any acquisition of Outstanding Common Stock or Outstanding Voting Securities
by any corporation pursuant to a transaction which complies with clauses (A),
(B) and (C) of Section 3(b)(i); or

 

(iv) Upon the consummation of the sale of all or substantially all of the assets
of the Corporation or approval by the stockholders of the Corporation of a
complete liquidation or dissolution of the Corporation.

 

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(c) Limitations On Eligibility For Benefits.

 

(i) If an Eligible Employee is assigned from one to another Participating
Company, his or her employment shall not be considered to be terminated under
the provisions of the Program.

 

(ii) The provisions of Section 4(a)(i) and 4(a)(ii) to the contrary
notwithstanding, no benefit will be payable hereunder due to termination of an
Eligible Employee’s employment because of the sale to a third party or spin-off
of a division (or other operating assets) of a Participating Company or to
termination of the Eligible Employee’s employer’s status as a Participating
Company upon the sale to a third party or spin-off of a designated subsidiary,
if (A) (I) the Eligible Employee is employed by the purchaser of such division,
assets, or subsidiary or such other spun-off entity or (II) such purchaser or
spun-off entity is contractually obligated to offer the Eligible Employee the
same or a better job and (B) such purchaser of spun-off entity is contractually
obligated to maintain a plan which in all material respects is equivalent to the
Program, providing for continuing coverage of the Eligible Employee for three
(3) years following the sale or spin-off of such division, assets or subsidiary.

 

SECTION 5. FORM OF BENEFIT.

 

The benefits described in Sections 3(a)(i), (ii) and (iii) shall be paid in a
lump sum or in monthly installments over a period not to exceed twelve (12)
months from the date employment is terminated pursuant to Section 4, as
determined by the Company. The benefit described in Section 3(a)(iv) shall be
paid in a lump sum. The benefits described in Sections 3(b)(i), (ii), (iii),
(vi) and (vii) shall be paid in a lump sum.

 

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SECTION 6. EFFECT OF DEATH OF EMPLOYEE.

 

Should an Eligible Employee die after employment terminates but while
participating in the Program and prior to the payment of the entire benefit due
hereunder, the balance of the benefit payable under the Program (other than any
benefit described in Section 3(a)(ii) if the Eligible Employee was not living on
the last day of the period described therein or the proceeds of any life
insurance or accidental death insurance, which shall be paid to the beneficiary
determined pursuant to the terms of the applicable insurance policy) shall be
paid in a lump sum to the estate of the Eligible Employee. Continued medical and
dental coverage as provided in Section 3(a)(vi) and Section 3(b)(v), as
applicable, shall be available to the Eligible Employee’s surviving spouse only
if and to the extent that such coverage would have been available to such
surviving spouse if the Eligible Employee had died as an active salaried
employee of a Participating Company. Such coverage shall be determined under the
terms of the applicable plan as in effect on the earlier of (i) the date the
Eligible Employee’s employment terminated or (ii) the date of the Change of
Control or the material change described in Section 4(a)(iv), if applicable.

 

SECTION 7. AMENDMENT AND TERMINATION.

 

The Board of Directors of the Company reserves the right to amend or terminate
the Program at any time and to increase or decrease the amount of any benefit
provided under the Program; provided, however, that any individual who has
qualified as an Eligible Employee may become entitled to any Change of Control
Benefit under Section 3(b), the Program cannot be terminated or amended to
reduce any benefit provided under Section 3(b) or make any condition pertaining
to qualification for the Change of Control Benefit under Section 3(b) materially
more restrictive. Once an individual has qualified as an Eligible Employee, the
Program may not be

 

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amended to cause such individual to cease to qualify as an Eligible Employee for
purposes of determining that individual’s eligibility for the Change of Control
Benefit under Section 3(b). Notwithstanding any other provision of the Program,
following a Change of Control this Section 7 may not be amended for a period of
three (3) years.

 

SECTION 8. CLAIMS PROCEDURE.

 

(a) Claims. All applications for benefits and all inquiries concerning claims
under the program shall be submitted to the Company addressed as follows:
“Potlatch Corporation, Plan Administrator under the Potlatch Corporation
Severance Program for Executive Employees, 601 West Riverside Avenue, Suite
1100, Spokane, Washington 99201.”

 

(b) Denial Of Claims. In the event that any application for benefits under the
Program is denied in whole or in part, the Company shall notify the applicant in
writing of such denial and shall advise the applicant of the right to a review
thereof. Such written notice shall set forth, in a manner calculated to be
understood by the applicant, specific reasons for such denial, specific
references to the provisions of the Program on which such denial is based, a
description of any information or material necessary for the applicant to
perfect his or her application, an explanation of why such material is necessary
and an explanation of the Program’s review procedure and the time limits
applicable to such procedures, including a statement of the applicant’s right to
bring a civil action under section 502(a) of ERISA following a denial on review
of the claim, as described in Section 9. Such written notice shall be given to
the applicant within ninety (90) days after the Company receives the
application, unless special circumstances require an extension of time up to an
additional ninety (90) days for processing the application. If such an extension
of time for processing is required, written notice of the extension shall be
furnished to the applicant prior to the termination of the initial ninety (90)
day period. This

 

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notice of extension shall indicate the special circumstances requiring the
extension of time and the date by which the Company expects to render its
decision on the application for benefits.

 

SECTION 9. REVIEW PROCEDURE.

 

(a) Appointment Of Review Panel. The Company shall appoint a Review Panel which
shall consist of three (3) or more individuals who may (but need not) be
employees of the Company; provided, however, that at all times following a
Change of Control the Review Panel shall consist of at least three current (as
of the effective date of the Change of Control) or former Company officers and
directors. The Review Panel shall be the named fiduciary which shall have
authority to act with respect to appeals from denials of benefits under the
Program.

 

(b) Right To Appeal. Any person whose application for benefits is denied (or is
deemed denied) in whole or in part (or such person’s authorized representative)
may appeal from the denial by submitting to the Review Panel a written request
for review of the application within sixty (60) days after receiving written
notice from the Company of the denial. The Company shall give the applicant (or
the applicant’s representative) an opportunity to review pertinent documents in
preparing such request for review.

 

(c) Form Of Request For Review. The request for review must be in writing and
shall be addressed as follows: “Review Panel under the Potlatch Corporation
Severance Program for Executive Employees, 601 West Riverside Avenue, Suite
1100, Spokane, Washington 99201.” The request for review shall set forth all of
the grounds upon which it is based, all facts in support thereof, and any other
matters which the applicant deems pertinent. The Review Panel may require the
applicant to submit such additional facts, documents or other material as the
Review Panel may deem necessary or appropriate in making its review.

 

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(d) Time For Review Panel Action. The Review Panel shall act upon each request
for review within sixty (60) days after receipt thereof unless special
circumstances require an extension of time of up to an additional sixty (60)
days for processing the request for review. If such an extension of time for
review is required, written notice of the extension shall be furnished to the
applicant prior to the end of the initial sixty (60) day period.

 

(e) Review Panel Decision. Within the time prescribed in Section 9(d), the
Review Panel shall give written notice of its decision to the applicant and to
the Company. In the event the Review Panel confirms the denial of the
application for benefits in whole or in part, such notice shall set forth, in a
manner calculated to be understood by the applicant, the specific reasons for
such denial, specific references to the provisions of the Program on which the
decision was based, a statement that the applicant is entitled to receive, upon
request and free of charge, reasonable access to, and copies of, all documents,
records and other information relevant to his or her claim, and a statement of
the applicant’s right to bring a civil action under section 502(a) of ERISA. In
the event that the Review Panel determines that the application for benefits
should not have been denied in whole or in part, the Company shall take
appropriate remedial action as soon as reasonably practicable after receiving
notice of the Review Panel’s decision.

 

(f) Section 4(a)(iv) Dispute. In the event that a dispute involving the
application or interpretation of Section 4(a)(iv) is referred to the Review
Panel as provided therein, the Review Panel shall treat such dispute as an
appeal from the denial of a claim for benefits under this Program that is
subject to all of the terms and conditions of this Section 9.

 

(g) Rules And Procedures. The Review Panel shall establish such rules and
procedures, consistent with the Program and with ERISA, as it may deem necessary
or

 

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appropriate in carrying out its responsibilities under this Section 9. The
Review Panel may require an applicant who wishes to submit additional
information in connection with an appeal from the denial of benefits in whole or
in part to do so at the applicant’s own expense.

 

(h) Exhaustion of Remedies. No legal action for benefits under the Program may
be brought until the claimant (i) has submitted a written application for
benefits in accordance with the procedures described in Section 8, (ii) has been
notified by the Company that the application is denied, (iii) has filed a
written request for review of the application in accordance with the appeal
procedures described in Section 9, and (iv) has been notified that the Review
Panel has denied the appeal. Notwithstanding the foregoing, if the Company or
the Review Panel does not respond to an Eligible Employee’s claim or appeal
within the relevant time limits specified in Sections 8 and 9, the Eligible
Employee may bring legal action for benefits under the Program pursuant to
section 502(a) of ERISA.

 

SECTION 10. RESOLUTION OF DISPUTES INVOLVING SECTION 4.

 

(a) Arbitration Of Section 4 Dispute. Any dispute, controversy or question
arising under Section 4 which is not resolved by the decision of the Review
Panel (or which the Eligible Employee requests be submitted directly to
arbitration as provided herein) shall be referred for decision by an arbitrator
selected by the parties. The proceeding shall be governed by the Rules of the
American Arbitration Association then in effect or such rules last in effect (in
the event such Association is no longer in existence). If the parties are unable
to agree upon such an Arbitrator within thirty (30) days after either party has
given the other party written notice of its desire to submit the dispute,
controversy or question for decision as aforesaid, then either party may apply
to the American Arbitration Association for the appointment of an arbitrator or,
if such Association is not then in existence or does not desire to act in the
matter, either party

 

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may apply to the Presiding Judge of the Superior Court of the City and County of
Spokane, State of Washington, for the appointment of an arbitrator to hear the
parties and settle the dispute, controversy or question, and such Judge is
authorized to make such appointment pursuant to the Program. The arbitration
shall take place at the location mutually agreed to by the parties or, if the
parties are unable to agree upon the location, at the location designated by the
Arbitrator. The compensation and expenses of the Arbitrator shall be borne by
the Company, unless the Arbitrator determines that an Eligible Employee acted
willfully and maliciously in connection with his or her claim for benefits under
the Program, in which case the Arbitrator shall direct the Eligible Employee to
pay all or a portion of the compensation and expenses of the Arbitrator.

 

(b) Arbitration Exclusive Remedy. Arbitration shall be the exclusive remedy for
the settlement of disputes involving the application or interpretation of
Section 4. The decision of the Arbitrator shall be final, conclusive and binding
on all interested persons and no action at law or in equity involving the
application or interpretation of Section 4 shall be instituted other than to
enforce the award of the Arbitrator.

 

SECTION 11. BASIS OF PAYMENTS TO AND FROM PROGRAM.

 

All benefits under the Program shall be paid by the Company. The Program shall
be unfunded and benefits hereunder shall be paid only from the general assets of
the Company. Nothing contained in the Program shall be deemed to create a trust
of any kind for the benefit of Eligible Employees, or create any fiduciary
relationship between the Company and the Eligible Employees with respect to any
assets of the Company. The Company is under no obligation to fund the benefits
provided herein prior to payment, although it may do so if it chooses. Any
assets which the Company chooses to use for advance funding shall not cause the
Program to be a funded plan within the meaning of ERISA.

 

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SECTION 12. NO EMPLOYMENT RIGHTS.

 

Nothing in the Program shall be deemed to give any individual the right to
remain in the employ of a Participating Company or a subsidiary or to limit in
any way the right of a Participating Company or a subsidiary to terminate an
individual’s employment, which right is hereby reserved.

 

SECTION 13. NON-ALIENATION OF BENEFITS.

 

No benefit payable under the Program shall be subject to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any
attempt to do so shall be void.

 

SECTION 14. SUCCESSORS AND ASSIGNS.

 

The Program shall be binding on the Company, its successors and assigns, and any
parent corporation of the Company’s successors or assigns. Notwithstanding that
the Program may be binding upon a successor or assign by operation of law, the
Company shall require any successor or assign to expressly assume and agree to
be bound by the Program in the same manner and to the same extent that the
Company would be if no succession or assignment had taken place.

 

SECTION 15. NOTICES.

 

All notices pertaining to the Program shall be in writing and shall be deemed
given if delivered by hand or mailed with postage prepaid and addressed, in the
case of the Company to the address set forth in Section 8(a), attention of its
Secretary, and the case of the Eligible Employee to his or her last known
address as reflected in the records of the Company.

 

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