Exhibit 10.3

EMPLOYEE MATTERS AGREEMENT

by and between

POTLATCH CORPORATION

and

CLEARWATER PAPER CORPORATION

Dated as of December 15, 2008

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TABLE OF CONTENTS

 

          Page ARTICLE I DEFINITIONS    2

1.1

   Action    2

1.2

   Affiliate    2

1.3

   Agreement    2

1.4

   Administrative Service Organization Contracts or ASO Contracts    2

1.5

   Assignment Agreement    2

1.6

   Clearwater    2

1.7

   Clearwater Common Stock    2

1.8

   Clearwater Employee    3

1.9

   Clearwater Group    3

1.10

   Clearwater Ratio    3

1.11

   Clearwater Stock Value    3

1.12

   Clearwater Terminated Employee    3

1.13

   COBRA    3

1.14

   Code    3

1.15

   Contract    3

1.16

   Director Deferred Compensation Plan    4

1.17

   Disability Plans    4

1.18

   Distribution    4

1.19

   Distribution Date    4

1.20

   DOL    4

1.21

   ERISA    4

1.22

   Executive Severance Plan    4

1.23

   Facilities    4

1.24

   Flexible Benefits Plan    5

1.25

   FMLA    5

1.26

   Fringe Benefits    5

1.27

   Frozen Supplemental Plan    5

1.28

   Governmental Entity    5

1.29

   Group Insurance Policies    5

1.30

   HCFA    5

1.31

   Health and Welfare Plans    5

1.32

   Health Plans    6

1.33

   Incentive Pay Plan.    6

1.34

   IRS    6

1.35

   Labor Agreements    6

1.36

   Law    6

1.37

   Leave of Absence Programs    6

1.38

   Liability or Liabilities    6

1.39

   Management Deferred Compensation Plan    6

1.40

   Material Feature    6

1.41

   Option    7

 

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1.42

     Other Post-Retirement Benefits (OPEB) Program    7

1.43

     Outsource    7

1.44

     Participating Company    7

1.45

     Party or Parties    7

1.46

     PBGC    7

1.47

     Pension Plans    7

1.48

     Performance Shares    7

1.49

     Person    8

1.50

     Plan    8

1.51

     Potlatch    8

1.52

     Potlatch Common Stock    8

1.53

     Potlatch Employee    8

1.54

     Potlatch Group    8

1.55

     Potlatch Post-Distribution Stock Value    8

1.56

     Potlatch Pre-Distribution Stock Value    8

1.57

     Potlatch Ratio    8

1.58

     Potlatch Terminated Employee    9

1.59

     Premium Plan    9

1.60

     Pulp-Based Business    9

1.61

     QDRO    9

1.62

     QMCSO    9

1.63

     Record Date    9

1.64

     Restricted Stock Units    9

1.65

     RetainCo    9

1.66

     Retained Business    10

1.67

     Retirement Plans    10

1.68

     Salaried Severance Plan    10

1.69

     Savings Plans    10

1.70

     SEC    10

1.71

     Separation    10

1.72

     Separation Agreement    10

1.73

     Stock Incentive Plan    10

1.74

     Subsidiary    10

1.75

     Supplemental Benefit Plan    11

1.76

     Time Off Policies    11

1.77

     Transfer Amount    11

1.78

     Transfer Date    11

1.79

     Transition Services Agreement    11

1.80

     Unemployment Insurance Program    11

1.81

     Valuation Date    11

1.82

     Wood Products Mills    11 ARTICLE II GENERAL PRINCIPLES    13

2.1

     Assumption of Liabilities    13

2.2

     Establishment of Plans    13

2.3

     Parties Under Certain Obligations to Maintain Plans    14

2.4

     Participation in Other Party’s Plans.    14

 

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2.5

   Terms of Participation.    15 ARTICLE III DEFINED BENEFIT PENSION PLANS    17

3.1

   Establishment of Potlatch Pension Plans and Master Trust.    17

3.2

   Assumption of Liabilities and Transfer of Trust Assets.    17

3.3

   No Distributions to Potlatch Employees    18 ARTICLE IV DEFINED CONTRIBUTION
PLANS    19

4.1

   Establishment of Potlatch Savings Plans and Master Trust.    19 ARTICLE V
NON-QUALIFIED AND SUPPLEMENTAL PLANS    21

5.1

   Supplemental Benefit Plans.    21

5.2

   Deferred Compensation Plans.    21 ARTICLE VI EQUITY AND OTHER MANAGEMENT
COMPENSATION    23

6.1

   Incentive Pay Plans    23

6.2

   Clearwater Stock Incentive Plan    23

6.3

   Potlatch Options    23

6.4

   Potlatch Restricted Stock Units    24

6.5

   Potlatch Performance Shares    24

6.6

   Severance Plans    25

6.7

   Deferred Payment Contracts and Severance Contracts    25 ARTICLE VII HEALTH
AND WELFARE PLANS    26

7.1

   Establishment of Potlatch Health and Welfare Plans.    26

7.2

   Insured Health and Welfare Benefits    26

7.3

   Self-Insured Health and Welfare Benefits    26

7.4

   Disability Plans    27

7.5

   Outsourcing of Claims    27

7.6

   Post-Distribution Transitional Arrangements.    27

7.7

   Vendor Arrangements    28

7.8

   Business Travel Accident Insurance    28

7.9

   Flexible Benefits Plans    28

7.10

   COBRA    28

7.11

   Other Post-Retirement Benefits (OPEB) Programs    29 ARTICLE VIII FRINGE AND
OTHER BENEFITS    30

8.1

   Employee Assistance Program    30

8.2

   Educational Assistance Program.    30

8.3

   Other Benefits    30 ARTICLE IX TRANSITION ADMINISTRATIVE PROVISIONS    31

9.1

   Transition Services Agreement    31

9.2

   Payment of Liabilities, Plan Expenses and Related Matters    31

9.3

   Sharing of Participant Information    31

9.4

   Reporting and Disclosure Communications to Participants    31

9.5

   Audits Regarding Vendor Contracts    32

 

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9.6

   Beneficiary Designations    32

9.7

   Requests for IRS, PBGC and DOL Opinions    32

9.8

   Fiduciary Matters    32

9.9

   Consent of Third Parties    32

9.10

   Tax Cooperation    32 ARTICLE X EMPLOYMENT-RELATED MATTERS    34

10.1

   Terms of Employment    34

10.2

   Non-Solicitation of Employees    34

10.3

   Confidentiality and Proprietary Information    34

10.4

   Time Off Policies    34

10.5

   Payroll Systems.    35

10.6

   Personnel and Pay Records    35

10.7

   Unemployment Insurance Program.    35

10.8

   Non-Termination of Employment    36

10.9

   Leave of Absence Programs and FMLA.    36

10.10

   Employment Litigation    36

10.11

   Workers’ Compensation    37 ARTICLE XI LABOR AGREEMENTS    38 ARTICLE XII
GENERAL PROVISIONS    39

12.1

   Relationship of Parties    39

12.2

   Incorporation of Separation Agreement Provisions    39

12.3

   Conflict    39

12.4

   Entire Agreement    39

12.5

   Choice of Law and Forum    39

12.6

   Amendment    39

12.7

   Waiver    39

12.8

   Partial Invalidity    40

12.9

   Execution in Counterparts    40

12.10

   Successors and Assigns    40

12.11

   No Third Party Beneficiaries    40

12.12

   Notices    40

12.13

   Performance    41

12.14

   Force Majeure    41

12.15

   No Public Announcement    41

12.16

   Termination    41

 

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SCHEDULE 1.31 HEALTH AND WELFARE BENEFITS PLANS

   I

SCHEDULE 3.2(C)(I) ACTUARIAL ASSUMPTIONS FOR DEFINED BENEFIT PLAN TERMINATION
BASIS DETERMINATIONS

   III

SCHEDULE 6.7 DEFERRED PAYMENT CONTRACTS AND SEVERANCE CONTRACTS

   IV

SCHEDULE 7.7(B) GROUP INSURANCE POLICIES

   VI

SCHEDULE 8.3 FRINGE BENEFITS

   VIII

 

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EMPLOYEE MATTERS AGREEMENT

This EMPLOYEE MATTERS AGREEMENT (this “Agreement”) is made as of December 15,
2008, by and between Potlatch Corporation, a Delaware corporation, and
Clearwater Paper Corporation, a Delaware corporation (formerly named Potlatch
Forest Products Corporation) (each a “Party” and together, the “Parties”).
Capitalized terms used herein (other than the formal names of Plans (as defined
below) and related trusts) and not otherwise defined, shall have the respective
meanings assigned to them in Article I hereof.

RECITALS

WHEREAS, Potlatch and Clearwater have entered into a Separation and Distribution
Agreement, dated as of the date hereof (the “Separation Agreement”), in order
to, among other things, separate the Retained Business from the Pulp-Based
Business (the “Separation”); and

WHEREAS, in furtherance of the Separation, Potlatch and Clearwater have agreed
to enter into this Agreement to allocate between them assets, liabilities and
responsibilities with respect to certain employee compensation, benefit Plans,
and certain employment matters.

NOW, THEREFORE, in consideration of the mutual promises contained herein, the
Parties hereto agree as follows:

 

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ARTICLE I

DEFINITIONS

Wherever used in this Agreement, the following terms shall have the meanings
indicated below, unless a different meaning is plainly required by the context.
The singular shall include the plural, unless the context indicates otherwise.
Headings of sections are used for convenience of reference only, and in case of
conflict, the text of this Agreement, rather than such headings, shall control.

1.1 Action. “Action” means any action, claim, demand, suit, arbitration,
inquiry, subpoena, discovery request, proceeding or investigation by or before
any Governmental Entity or any arbitration tribunal, domestic or foreign.

1.2 Affiliate. “Affiliate” means, as defined in the Separation Agreement, with
respect to any Person, any other Person that directly or indirectly controls, is
controlled by or is under common control with such Person. For the purpose of
this definition, the term “control” means the power to direct the management of
an entity, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the term “controlled” has the meaning
correlative to the foregoing. After the Distribution, Potlatch and Clearwater
shall not be deemed to be under common control for purposes hereof due solely to
the fact that Potlatch and Clearwater may have common stockholders.

1.3 Agreement. “Agreement” means this Employee Matters Agreement, including all
the Addendums, Schedules and Exhibits hereto, and all amendments made hereto
from time to time.

1.4 Administrative Service Organization Contracts or ASO Contracts.
“Administrative Service Organization Contracts” or “ASO Contracts” is defined in
Section 7.7(a) and the Schedule 7.7(a).

1.5 Assignment Agreement. “Assignment Agreement” means the Transfer and
Assumption Agreement, effective as of the date immediately prior to the
Distribution Date, by and among Potlatch, RetainCo, and Clearwater.

1.6 Clearwater. “Clearwater” means Clearwater Paper Corporation, a Delaware
corporation, formerly named Potlatch Forest Products Corporation. In all such
instances in which Clearwater is referred to in this Agreement, it shall also be
deemed to include a reference to each member of the Clearwater Group, unless the
context specifically requires otherwise; Clearwater shall be solely responsible
to Potlatch for ensuring that each member of the Clearwater Group complies with
the applicable terms of this Agreement.

1.7 Clearwater Common Stock. “Clearwater Common Stock” means, as defined in the
Separation Agreement, Clearwater common stock, par value $0.0001 per share.

 

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1.8 Clearwater Employee. “Clearwater Employee” means an individual who is:
(a) either actively employed primarily in connection with, or on leave of
absence from, the Pulp-Based Business immediately prior to the Distribution
Date; (b) a Clearwater Terminated Employee; (c) an employee or a member of a
group of employees designated as Clearwater Employees (as of the specified
date(s)) by Potlatch and Clearwater by mutual written agreement; or (d) an
alternate payee under a QDRO, alternate recipient under a QMCSO, beneficiary,
covered dependent, or qualified beneficiary (as such term is defined under
COBRA), in each case, of an employee or former employee described in any of
Sections 1.8(a) through (c) with respect to that employee’s or former employee’s
benefit under the applicable Plan(s) (unless specified otherwise in this
Agreement, such an alternate payee, alternate recipient, beneficiary, covered
dependent, or qualified beneficiary shall not otherwise be considered a
Clearwater Employee with respect to any benefits he or she accrues or accrued
under any applicable Plan(s), unless he or she is a Clearwater Employee by
virtue of any of Sections 1.8(a) through (c)).

1.9 Clearwater Group. “Clearwater Group” means, as defined in the Separation
Agreement, Clearwater, its Subsidiaries and Affiliates (other than RetainCo),
and any Subsidiaries or Affiliates of Clearwater formed or acquired after the
Distribution Date.

1.10 Clearwater Ratio. “Clearwater Ratio” means the ratio determined by dividing
the Clearwater Stock Value by the Potlatch Pre-Distribution Stock Value.

1.11 Clearwater Stock Value. “Clearwater Stock Value” means the average
per-share trading price of Clearwater Common Stock as quoted on the New York
Stock Exchange (“NYSE”) during the first four (4) hours of “regular way” trading
in Clearwater Common Stock after the Distribution.

1.12 Clearwater Terminated Employee. “Clearwater Terminated Employee” means an
individual who was employed primarily in connection with the Pulp-Based Business
or a discontinued business specified or described on Schedule 2B or Schedule 19
to the Assignment Agreement and who terminated employment from the Pulp-Based
Business or such discontinued business on or before the Distribution Date;
provided, however, that to the extent a former employee has not been, or cannot
be, allocated in accordance with such Schedule, then such former employee shall
be deemed a Potlatch Terminated Employee. Notwithstanding the foregoing,
“Clearwater Terminated Employee” shall not, unless otherwise expressly provided
to the contrary in this Agreement, include an individual who is a Potlatch
Employee on the Distribution Date.

1.13 COBRA. “COBRA” means the continuation coverage requirements for “group
health plans” under Title X of the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended from time to time, and as codified in Code Section 4980B
and ERISA Sections 601 through 608.

1.14 Code. “Code” means, as defined in the Separation Agreement, the Internal
Revenue Code of 1986, as amended.

1.15 Contract. “Contract” means, as defined in the Separation Agreement, any
agreement, license, contract, obligation, indenture, instrument, lease, promise,
arrangement,

 

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release, warranty, commitment or undertaking (whether written or oral and
whether express or implied).

1.16 Director Deferred Compensation Plan. “Director Deferred Compensation Plan,”
when immediately preceded by “Potlatch,” means the Potlatch Corporation Deferred
Compensation Plan for Directors II. When immediately preceded by “Clearwater,”
“Director Deferred Compensation Plan” means the deferred compensation plan to be
established by Clearwater pursuant to Sections 2.2 and 5.2 that corresponds to
the Potlatch Corporation Deferred Compensation Plan for Directors II.

1.17 Disability Plans. “Disability Plans,” when immediately preceded by
“Clearwater,” means the Clearwater short-term and long-term disability plans
(including, where an employee works in a state that offers a statutory state
disability plan, any alternative voluntary state disability plan provided by
Clearwater). When immediately preceded by “Potlatch,” “Disability Plans” means
the short-term and long-term disability plans to be established or provided by
Potlatch pursuant to Section 2.2 and Article VII that correspond to the
Clearwater Disability Plans.

1.18 Distribution. “Distribution” means, as defined in the Separation Agreement,
the distribution on a pro rata basis to the holders of Potlatch’s Common Stock,
without any consideration being paid by such holders, all of the outstanding
shares of Clearwater Common Stock then owned by Potlatch.

1.19 Distribution Date. “Distribution Date” means, as defined in the Separation
Agreement, the date determined by the Board of Directors of Potlatch as the date
on which the Clearwater Common Stock is payable to holders of Potlatch Common
Stock as of the Record Date.

1.20 DOL. “DOL” means the United States Department of Labor.

1.21 ERISA. “ERISA” means the Employee Retirement Income Security Act of 1974,
as amended from time to time.

1.22 Executive Severance Plan. “Executive Severance Plan,” when immediately
preceded by “Clearwater,” means the Potlatch Forest Products Corporation
Severance Program for Executive Employees, an ERISA severance program, to be
retained by Clearwater. When immediately preceded by “Potlatch,” “Executive
Severance Plan” means the severance program for eligible executives to be
established by Potlatch pursuant to Sections 2.2 and 6.6(a).

1.23 Facilities. “Facilities” means, as defined in the Separation Agreement,
each of the following mills and facilities:

(a)(i) sawmill, (ii) pulp and paperboard mill and (iii) tissue mill and tissue
converting facility at Lewiston, Idaho;

(b) pulp and paperboard mill at Cypress Bend, Arkansas;

 

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(c) tissue mill and converting facility in North Las Vegas, Nevada; and

(d) tissue converting facility in Elwood, Illinois.

1.24 Flexible Benefits Plan. “Flexible Benefits Plan,” when immediately preceded
by “Clearwater,” means the Clearwater Plan established pursuant to Code
Section 125 for eligible employees to make pre-tax contributions to flexible
spending accounts. When immediately preceded by “Potlatch,” “Flexible Benefits
Plan” means the Plan to be established by Potlatch for eligible employees to
make pre-tax contributions to flexible spending accounts pursuant to Section 2.2
and Article VII that corresponds to the respective Clearwater Flexible Benefits
Plan.

1.25 FMLA. “FMLA” means the Family and Medical Leave Act of 1993, as amended
from time to time.

1.26 Fringe Benefits. “Fringe Benefits,” when immediately preceded by
“Clearwater,” means the Clearwater employee assistance program, the educational
assistance program and other fringe benefits, plans, programs and arrangements
sponsored and maintained by Clearwater (as set forth in Article VIII and
Schedule 8.3). When immediately preceded by “Potlatch,” “Fringe Benefits” means
the fringe benefits, plans, programs and arrangements to be established by
Potlatch pursuant to Section 2.2 and Article VIII that correspond to the
respective Clearwater Fringe Benefits.

1.27 Frozen Supplemental Plan. “Frozen Supplemental Plan” is defined in
Section 5.1(a).

1.28 Governmental Entity. “Governmental Entity” means, as defined in the
Separation Agreement, any nation or government, any state, municipality or other
political subdivision thereof and any entity, body, agency, commission,
department, board, bureau or court, whether domestic, foreign or multinational,
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government; and any official thereof.

1.29 Group Insurance Policies. “Group Insurance Policies” is defined in
Section 7.7(b) and Schedule 7.7(b).

1.30 HCFA. “HCFA” means the United States Health Care Financing Administration.

1.31 Health and Welfare Plans. “Health and Welfare Plans,” when immediately
preceded by “Clearwater,” means the Clearwater Health Plans, the Clearwater
Flexible Benefit Plans, the Clearwater Premium Plan, the Clearwater Disability
Plans and the other health and welfare plans listed on Schedule 1.31 established
and maintained by Clearwater for the benefit of employees and retirees of the
Clearwater Group, and such other welfare plans or programs as may apply to such
employees and retirees as of the Distribution Date. When immediately preceded by
“Potlatch,” “Health and Welfare Plans” means the Potlatch Health Plans, the
Potlatch Flexible Benefit Plans, the Potlatch Premium Plan, the Potlatch
Disability Plans and the other health and welfare Plans to be established by
Potlatch pursuant to Section 2.2 and Article VII that correspond to the
respective Clearwater Health and Welfare Plans.

 

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1.32 Health Plans. “Health Plans,” when immediately preceded by “Clearwater,”
means the Plans designated as Health Plans on Schedule 1.31, and any similar or
successor Plans. When immediately preceded by “Potlatch,” “Health Plans” means
the Plans providing health coverage and benefits to be established by Potlatch
pursuant to Section 2.2 and Article VII that correspond to the respective
Clearwater Health Plans.

1.33 Incentive Pay Plan. “Incentive Pay Plan,” when immediately preceded by
“Potlatch,” means either the Potlatch Corporation Management Performance Award
Plan II or the Potlatch Corporation Annual Incentive Plan, whichever is in
effect as of the Distribution Date. When immediately preceded by “Clearwater,”
“Incentive Pay Plan” means the incentive pay plan to be established by
Clearwater pursuant to Sections 2.2 and 6.1 that corresponds to the Potlatch
Incentive Pay Plan.

1.34 IRS. “IRS” means, as defined in the Separation Agreement, the Internal
Revenue Service and any successor agency.

1.35 Labor Agreements. “Labor Agreements” means the collective bargaining
agreements set forth on Schedule 1.35.

1.36 Law. “Law” means, as defined in the Separation Agreement, any United States
or non-United States federal, national, supranational, state, provincial, local
or similar statute, law, ordinance, regulation, rule, code, order, consent
decree, requirement or rule of law (including common law and in equity).

1.37 Leave of Absence Programs. “Leave of Absence Programs,” when immediately
preceded by “Clearwater,” means the personal, medical, military and FMLA leave
offered from time to time under the personnel policies and practices of
Clearwater. When immediately preceded by “Potlatch,” “Leave of Absence Programs”
means the leave of absence programs to be established by Potlatch pursuant to
Sections 2.2 and 10.9 that correspond to the respective Clearwater Leave of
Absence Programs.

1.38 Liability or Liabilities. “Liability” or “Liabilities” means, as defined in
the Separation Agreement, any and all debts, liabilities and obligations,
absolute or contingent, matured or unmatured, liquidated or unliquidated,
accrued or unaccrued, known or unknown, whenever arising, including all costs
and expenses relating thereto, and including those debts, liabilities and
obligations arising under any Law, Action or threatened Action, or any award of
any arbitrator of any kind, and those arising under any Contract.

1.39 Management Deferred Compensation Plan. “Management Deferred Compensation
Plan,” when immediately preceded by “Potlatch,” means the Potlatch Corporation
Management Deferred Compensation Plan. When immediately preceded by
“Clearwater,” “Management Deferred Compensation Plan” means the deferred
compensation plan to be established by Clearwater pursuant to Sections 2.2 and
5.2 that corresponds to the Potlatch Corporation Management Deferred
Compensation Plan.

1.40 Material Feature. “Material Feature” means any feature of a Plan that would
reasonably be expected to be of material importance to the sponsoring employer
or the participants (or their dependents or beneficiaries) (in the aggregate) of
that Plan, which could

 

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include, depending on the type and purpose of the particular Plan, the class or
classes of employees eligible to participate in such Plan, the nature, type,
form, source, and level of benefits provided under such Plan and the amount or
level of contributions, if any, required to be made by participants (or their
dependents or beneficiaries) to such Plan.

1.41 Option. “Option,” when immediately preceded by “Potlatch,” means an option
to purchase Potlatch Common Stock pursuant to a Stock Incentive Plan. When
immediately preceded by “Clearwater,” “Option” means an option to purchase
Clearwater Common Stock pursuant to a Stock Incentive Plan.

1.42 Other Post-Retirement Benefits (OPEB) Program. “Other Post-Retirement
Benefits (OPEB) Program,” when immediately preceded by “Clearwater,” means the
health and life insurance programs that permit certain retirees and former
employees of the Clearwater Group, and their eligible spouses and dependents to
continue to receive coverage and benefits under certain Clearwater Health and
Welfare Plans for a designated period of time. When immediately preceded by
“Potlatch,” “Other Post-Retirement Benefits (OPEB) Programs” means such
continuation programs to be established by Potlatch pursuant to Sections 2.2 and
7.11 that correspond to the Clearwater Other Post-Retirement Benefits (OPEB)
Programs.

1.43 Outsource. “Outsource” is defined in Section 7.5.

1.44 Participating Company. “Participating Company” means any Person (other than
an individual) whose employees participate in a Plan, other than the Plan
sponsor.

1.45 Party or Parties. “Party” or “Parties” has the meaning set forth in the
first paragraph of this Agreement.

1.46 PBGC. “PBGC” means the Pension Benefit Guaranty Corporation.

1.47 Pension Plans. “Pension Plans,” when immediately preceded by “Clearwater,”
means the Potlatch Forest Products Corporation Salaried Employees’ Retirement
Plan (the “Salaried Pension Plan”), the Potlatch Forest Products Corporation
Retirement Plan for Hourly Non-Represented Employees of the Idaho Operations of
the Wood Products Division (the “Hourly Non-Represented Pension Plan”), and the
Potlatch Forest Products Corporation Hourly Employees’ Retirement Plan (the
“Hourly Represented Pension Plan”). When immediately preceded by “Potlatch,”
“Pension Plans” means the defined benefit plans to be established pursuant to
Section 2.2 and Article III.

1.48 Performance Shares. “Performance Shares” means, when preceded by
“Potlatch,” awards denominated in shares of Potlatch Common Stock pursuant to
which the holder can earn, in whole or in part, the right to receive a specified
number of shares of Potlatch Common Stock based upon attainment of performance
objectives, pursuant to a Potlatch Stock Incentive Plan. When preceded by
“Clearwater,” “Performance Shares” means awards denominated in shares of
Clearwater Common Stock pursuant to which the holder can earn, in whole or in
part, the right to receive a specified number of shares of Clearwater Common
Stock based upon attainment of performance objectives, pursuant to a Clearwater
Stock Incentive Plan.

 

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1.49 Person. “Person” means, as defined in the Separation Agreement, any
individual, corporation, partnership, joint venture, limited liability company,
association, joint-stock company, trust, unincorporated organization or
Governmental Entity.

1.50 Plan. “Plan” means any plan, policy, program, payroll practice,
arrangement, contract, trust, insurance policy, or any agreement or funding
vehicle providing compensation or benefits to employees, former employees or
directors of Potlatch or Clearwater.

1.51 Potlatch. “Potlatch” means Potlatch Corporation, a Delaware corporation. In
all such instances in which Potlatch is referred to in this Agreement, it shall
also be deemed to include a reference to each member of the Potlatch Group,
unless the context specifically requires otherwise; Potlatch shall be solely
responsible to Clearwater for ensuring that each member of the Potlatch Group
complies with the applicable terms of this Agreement.

1.52 Potlatch Common Stock. “Potlatch Common Stock” means, as defined in the
Separation Agreement, Potlatch common stock, par value $1.00 per share.

1.53 Potlatch Employee. “Potlatch Employee” means an individual who is:
(a) either actively employed primarily in connection with, or on leave of
absence from, the Retained Business immediately prior to the Distribution Date;
(b) a Potlatch Terminated Employee; (c) an employee or a member of a group of
employees designated as Potlatch Employees (as of the specified date(s)) by
Potlatch and Clearwater by mutual written agreement; or (d) an alternate payee
under a QDRO, alternate recipient under a QMCSO, beneficiary, covered dependent,
or qualified beneficiary (as such term is defined under COBRA), in each case, of
an employee or former employee described in any of Sections 1.53(a) through
(c) with respect to that employee’s or former employee’s benefit under the
applicable Plan(s) (unless specified otherwise in this Agreement, such an
alternate payee, alternate recipient, beneficiary, covered dependent, or
qualified beneficiary shall not otherwise be considered a Potlatch Employee with
respect to any benefits he or she accrues or accrued under any applicable
Plan(s), unless he or she is a Potlatch Employee by virtue of any of Sections
1.53(a) through (c)).

1.54 Potlatch Group. “Potlatch Group” means, as defined in the Separation
Agreement, Potlatch, its Subsidiaries and Affiliates (including RetainCo and
those Subsidiaries and Affiliates formed or acquired after the date hereof),
other than members of the Clearwater Group.

1.55 Potlatch Post-Distribution Stock Value. “Potlatch Post-Distribution Stock
Value” means the average per-share trading price of Potlatch Common Stock as
quoted on the New York Stock Exchange during the first four (4) hours of
“ex-dividend” trading in Potlatch Common Stock after the Distribution.

1.56 Potlatch Pre-Distribution Stock Value. “Potlatch Pre-Distribution Stock
Value” means the closing per-share price of Potlatch Common Stock as quoted on
the New York Stock Exchange for trading in Potlatch Common Stock on the last
trading day preceding the trading day on which Potlatch Common Stock first
trades on an “ex-dividend” basis.

1.57 Potlatch Ratio. “Potlatch Ratio” means the ratio determined by dividing the
Potlatch Post-Distribution Stock Value by the Potlatch Pre-Distribution Stock
Value.

 

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1.58 Potlatch Terminated Employee. “Potlatch Terminated Employee” means an
individual who was employed primarily in connection with the Retained Business
or a discontinued business specified or described on Schedule 17 to the
Assignment Agreement and who terminated employment from the Retained Business or
such discontinued business on or prior to the Distribution Date. In addition, a
“Potlatch Terminated Employee” shall include a former employee who might
otherwise be deemed a Clearwater Terminated Employee, but who has not been, or
cannot be, allocated as such pursuant to Section 1.12. Notwithstanding the
foregoing, “Potlatch Terminated Employee” shall not, unless otherwise expressly
provided to the contrary in this Agreement, include an individual who is a
Clearwater Employee on the Distribution Date.

1.59 Premium Plan. “Premium Plan,” when immediately preceded by “Clearwater”
means the Clearwater Plan established pursuant to Code Section 125 for eligible
employees to pay for their coverage under the Health and Disability Plans with
pre-tax contributions. When immediately preceded by Potlatch, “Premium Plans”
means the Plan to be established by Potlatch pursuant to Code Section 125 for
eligible employees to pay for their coverage under the Health and Disability
Plans with pre-tax contributions.

1.60 Pulp-Based Business. “Pulp-Based Business” means, as defined in the
Separation Agreement, Clearwater’s consumer tissue products business,
Clearwater’s pulp and paperboard business and the portion of Clearwater’s wood
products business operated at Clearwater’s lumber mill in Lewiston, Idaho, which
such businesses are generally comprised of Clearwater’s ownership and operation
of the Facilities and the sale of products manufactured at the Facilities.

1.61 QDRO. “QDRO” means a domestic relations order which qualifies under Code
Section 414(p) and ERISA Section 206(d) and which creates or recognizes an
alternate payee’s right to, or assigns to an alternate payee, all or a portion
of the benefits payable to a participant under any of the Retirement Plans.

1.62 QMCSO. “QMCSO” means a medical child support order which qualifies under
ERISA Section 609(a) and which creates or recognizes the existence of an
alternate recipient’s right to, or assigns to an alternate recipient the right
to, receive benefits for which a participant or beneficiary is eligible under
any of the Health Plans.

1.63 Record Date. “Record Date” shall have the meaning assigned to it in
Section 6.5(a).

1.64 Restricted Stock Units. “Restricted Stock Units,” when immediately preceded
by “Potlatch,” means awards denominated in shares of Potlatch Common Stock
pursuant to which the holder has the right to receive a specified number of
shares of Potlatch Common Stock over a specified period of time, pursuant to a
Potlatch Stock Incentive Plan. When immediately preceded by “Clearwater,”
“Restricted Stock Units” means rights to receive shares of Clearwater Common
Stock that are subject to transfer restrictions or to employment or performance
vesting conditions, pursuant to a Clearwater Stock Incentive Plan.

1.65 RetainCo. “RetainCo” means, as defined in the Separation Agreement,
Potlatch Land & Lumber, LLC, a Delaware limited liability company.

 

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1.66 Retained Business. “Retained Business” means, as defined in the Separation
Agreement, all of the current businesses and operations of Potlatch and its
Affiliates other than the Pulp-Based Business, and includes: (a) the real estate
business, which acquires and sells timberland and other real property, sells
conservation easements and undertakes certain land development activities,
(b) the harvest and log sale business, which harvests standing timber and
purchases and sells logs, (c) the wood products business, which is generally
comprised of Clearwater’s ownership and operation of the Wood Products Mills and
the sale of wood products manufactured at the Wood Products Mills (for the
avoidance of doubt, the Retained Business does not include the portion of
Clearwater’s wood products business operated at Clearwater’s lumber mill in
Lewiston, Idaho), and (d) the timberland management business that manages
Potlatch timberlands.

1.67 Retirement Plans. “Retirement Plans,” when immediately preceded by
“Clearwater,” means the Clearwater Pension Plans and the Clearwater Savings
Plans. When immediately preceded by “Potlatch,” “Retirement Plans” means the
Potlatch Pension Plans and Potlatch Savings Plans.

1.68 Salaried Severance Plan. “Salaried Severance Plan,” when immediately
preceded by “Clearwater,” means the Potlatch Forest Products Corporation
Salaried Severance Benefit Plan, an ERISA severance program, to be retained by
Clearwater. When immediately preceded by “Potlatch,” “Salaried Severance Plan”
means the severance program to be established by Potlatch pursuant to
Section 6.6(b).

1.69 Savings Plans. “Savings Plans,” when immediately preceded by “Clearwater,”
means the Potlatch Forest Products Corporation Savings Plan for Hourly Employees
and the Potlatch Forest Products Corporation Salaried Employees’ Savings Plan.
When immediately preceded by “Potlatch,” “Savings Plans” means the defined
contribution Plans to be established by Potlatch pursuant to Section 2.2 and
Article IV.

1.70 SEC. “SEC” means, as defined in the Separation Agreement, means the United
States Securities and Exchange Commission.

1.71 Separation. “Separation” means, as defined in the Separation Agreement, the
separation of the Retained Business from the Pulp-Based Business.

1.72 Separation Agreement. “Separation Agreement” shall have the meaning set
forth in the recitals.

1.73 Stock Incentive Plan. “Stock Incentive Plan,” when immediately preceded by
“Potlatch,” means any plan, program or arrangement pursuant to which directors,
employees and other service providers hold Potlatch Options, Potlatch Restricted
Stock Units, Potlatch Performance Shares or other Potlatch equity incentives.
When immediately preceded by “Clearwater,” “Stock Incentive Plan” means the
Plans to be established by Clearwater pursuant to Sections 2.2 and 6.2.

1.74 Subsidiary. “Subsidiary” means, as defined in the Separation Agreement,
when used with reference to any Person, any corporation, limited liability
company, partnership or other organization of which at least a majority of the
securities or interests having by the terms

 

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thereof ordinary voting power to elect at least a majority of the board of
directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by such Person; provided, however, that no Person that is not directly or
indirectly wholly owned by any other Person shall be a Subsidiary of such other
Person unless such other Person controls, or has the right, power or ability to
control, that Person. After the Distribution, Potlatch and Clearwater shall not
be deemed to be under common control for purposes hereof due solely to the fact
that Potlatch and Clearwater may have common stockholders.

1.75 Supplemental Benefit Plan. “Supplemental Benefit Plan,” when immediately
preceded by “Clearwater,” means the Potlatch Forest Products Corporation
Salaried Employees’ Supplemental Benefit Plan II. When immediately preceded by
“Potlatch,” “Supplemental Benefit Plan” means the non-qualified supplemental
excess benefit retirement plan to be established by Potlatch pursuant to
Sections 2.2 and 5.1 that corresponds to the Clearwater Supplemental Benefit
Plan.

1.76 Time Off Policies. “Time Off Policies,” when immediately preceded by
“Clearwater,” means the Clearwater vacation, holidays and other time off
policies. When immediately preceded by “Potlatch,” “Time Off Policies” means the
vacation, holidays and other time off policies to be established by Potlatch
pursuant to Sections 2.2 and 10.4 that correspond to the Clearwater Time Off
Policies.

1.77 Transfer Amount. “Transfer Amount” shall have the meaning assigned to it in
Section 3.2(c)(ii).

1.78 Transfer Date. “Transfer Date” shall have the meaning assigned to it in
Section 3.2(c)(ii).

1.79 Transition Services Agreement. “Transition Services Agreement” means, as
defined in the Separation Agreement, the Transition Services Agreement, dated
the date hereof, between RetainCo and Clearwater.

1.80 Unemployment Insurance Program. “Unemployment Insurance Program,” when
immediately preceded by “Clearwater,” means the group unemployment insurance
policies purchased by Clearwater from time to time. When immediately preceded by
“Potlatch,” “Unemployment Insurance Program” means any group unemployment
insurance policies to be established by Potlatch pursuant to Section 10.7.

1.81 Valuation Date. “Valuation Date” shall have the meaning assigned to it in
Section 3.2(c)(ii).

1.82 Wood Products Mills. “Wood Products Mills” means, as defined in the
Separation Agreement, each of the following mills and facilities:

(a) sawmill in Prescott, Arkansas (which was permanently closed in May 2008);

(b) sawmill in Warren, Arkansas;

 

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(c)(i) sawmill, (ii) dry kilns and (iii) plywood mill in St. Maries, Idaho;

(d) sawmill in Bemidji, Minnesota;

(e) sawmill in Gwinn, Michigan; and

(f) particleboard mill in Post Falls, Idaho.

 

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ARTICLE II

GENERAL PRINCIPLES

2.1 Assumption of Liabilities.

(a) Clearwater Employees. Except as specified otherwise in this Agreement, or as
mutually agreed upon in writing by Clearwater and Potlatch from time to time,
Clearwater hereby retains, or, as applicable, assumes and agrees to pay,
perform, fulfill and discharge, in accordance with their respective terms, all
of the following: (i) all Liabilities to or relating to Clearwater Employees, in
each case relating to, arising out of or resulting from employment prior to the
Distribution Date (including Liabilities to or relating to Clearwater Employees
arising under, relating to or resulting from Potlatch Plans or Clearwater Plans
and including Liabilities to or relating to Clearwater Employees under or
relating to workers compensation Laws or claims); (ii) all Liabilities to or
relating to Clearwater Employees, to the extent relating to, arising out of, or
resulting from employment with the Clearwater Group on and after the
Distribution Date (including Liabilities to or relating to Clearwater Employees
arising under, relating to or resulting from Clearwater Plans); and (iii) all
other Liabilities relating to, arising out of, or resulting from obligations,
liabilities and responsibilities expressly assumed or retained by the Clearwater
Group, or a Clearwater Plan, pursuant to this Agreement.

(b) Potlatch Employees. Except as specified otherwise in this Agreement, or as
mutually agreed upon in writing by Clearwater and Potlatch from time to time,
Potlatch hereby retains, or, as applicable, assumes and agrees to pay, perform,
fulfill and discharge, in accordance with their respective terms, all of the
following: (i) all Liabilities to or relating to Potlatch Employees, in each
case relating to, arising out of or resulting from employment prior to the
Distribution Date (including Liabilities to or relating to Potlatch Employees
arising under, relating to or resulting from Potlatch Plans or Clearwater Plans
and including Liabilities to or relating to Potlatch Employees, under or
relating to workers compensation Laws or claims); (ii) all Liabilities to or
relating to Potlatch Employees, to the extent relating to, arising out of, or
resulting from employment with the Potlatch Group on and after the Distribution
Date (including Liabilities to or relating to Potlatch Employees arising under
or relating to Potlatch Plans); and (iii) all other Liabilities relating to,
arising out of, or resulting from obligations, liabilities and responsibilities
expressly assumed or retained by the Potlatch Group, or a Potlatch Plan,
pursuant to this Agreement.

2.2 Establishment of Plans. Effective as of the Distribution Date or such later
date(s) as Potlatch and Clearwater may mutually agree in writing:

(a) Potlatch shall adopt the Potlatch Pension Plans as provided in Article III;

(b) Potlatch shall adopt the Potlatch Savings Plans as provided in Article IV;

 

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(c) Potlatch shall adopt the Potlatch Supplemental Benefit Plan, and Clearwater
shall adopt the Clearwater Management Deferred Compensation Plan and the
Clearwater Director Deferred Compensation Plan, as provided in Article V;

(d) Clearwater shall adopt the Clearwater Incentive Pay Plan and the Clearwater
Stock Incentive Plan, and Potlatch shall adopt the Potlatch Salaried Severance
Plan and the Potlatch Executive Severance Plan, as provided in Article VI;

(e) Potlatch shall adopt the Potlatch Health and Welfare Plans and the Potlatch
Other Post-Retirement Benefits (OPEB) Program, as provided in Article VII;

(f) the Parties shall establish the Fringe Benefit and other Plans as provided
in Article VIII; and

(g) Potlatch shall establish the Potlatch Time Off Policies and the Potlatch
Leave of Absence Programs, as provided in Article X.

2.3 Parties Under Certain Obligations to Maintain Plans. Clearwater and Potlatch
agree that they each will continue to maintain and sponsor their respective
Plans on the terms and conditions in effect immediately prior to the
Distribution Date, as modified by this Agreement, for at least twelve
(12) months from the Distribution Date; provided, however, that: (a) any such
Plan can be amended or otherwise altered with regard to any individual who is
not a current employee of a Party as of the Distribution Date; (b) any such Plan
can be amended to ensure compliance with applicable law, or to maintain its
tax-favored, tax-qualified or tax-exempt status; and (c) any such Plan can be
amended, modified, merged, terminated, or otherwise altered to ensure compliance
with a Labor Agreement. Except as specified in this Section 2.3 or a Labor
Agreement, nothing in this Agreement shall otherwise preclude Potlatch or
Clearwater, at any time after twelve (12) months from the Distribution Date,
from amending, merging, modifying, terminating, eliminating, reducing, or
otherwise altering in any respect any of their respective Plans, any benefit
under any of their respective Plans or any trust, insurance policy or funding
vehicle related to any of their respective Plans.

2.4 Participation in Other Party’s Plans.

(a) General Obligations as Plan Sponsor. To the extent that, after the
Distribution Date, Clearwater is a Participating Company in any Potlatch Plan or
Potlatch is a Participating Company in any Clearwater Plan, Potlatch and
Clearwater (as applicable) shall continue to administer, or cause to be
administered, in accordance with their terms and applicable Law, their
respective Plans, and shall have the sole and absolute discretion and authority
to interpret their respective Plans, as set forth therein. Notwithstanding the
foregoing, neither Party shall, without first consulting with the other Party,
amend any Material Feature of a Plan in which the other Party is a Participating
Company, except to the extent such amendment would not affect any benefits of
the other Party’s employees under such Plan or as may be necessary or
appropriate to comply with applicable law or a Labor Agreement.

(b) General Obligations as Participating Company. To the extent that, after the
Distribution Date, Clearwater is a Participating Company in any Potlatch Plan or
Potlatch is a Participating Company in any Clearwater Plan, Clearwater or
Potlatch (as applicable) shall

 

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perform with respect to its participation in the other Party’s Plan, the duties
of a Participating Company as set forth in each such Plan or any procedures
adopted pursuant thereto, including (without limitation): (i) assisting in the
administration of claims, to the extent requested by the claims administrator of
the applicable Plan; (ii) cooperating fully with Plan auditors, benefit
personnel and benefit vendors; (iii) preserving the confidentiality of all
financial arrangements the Plan sponsor has or may have with any vendors, claims
administrators, trustees or any other entity or individual with whom the Plan
sponsor has entered into an agreement relating to the Plan; and (iv) preserving
the confidentiality of participant information (including, without limitation,
health information in relation to FMLA leaves) to the extent not specified
otherwise in this Agreement.

2.5 Terms of Participation.

(a) Non-Duplication of Benefits. As of the Distribution Date or such later date
that applies to the particular Plan established thereafter, (i) the Potlatch
Plans shall be, with respect to Potlatch Employees, in all respects the
successors in interest to, and shall not provide benefits that duplicate
benefits provided by, the corresponding Clearwater Plans, and (ii) the
Clearwater Plans shall be, with respect to Clearwater Employees, in all respects
the successors in interest to, and shall not provide benefits that duplicate
benefits provided by, the corresponding Potlatch Plans. Potlatch and Clearwater
shall agree on methods and procedures, including amending their respective Plan
documents, to prevent Potlatch Employees and Clearwater Employees from receiving
duplicate benefits from the Potlatch Plans and the Clearwater Plans.

(b) Service Credit. Except as specified otherwise in this Agreement, to the
extent that Potlatch and Clearwater establish new Plans to replace and succeed
the existing Plans maintained by the other Party prior to the Distribution Date,
they shall cause their respective Plans to recognize all service, all
compensation and all other benefit-affecting determinations that, as of the
Distribution Date, were recognized under the corresponding Plan maintained by
the other Party, except to the extent that duplication of benefits would result.
Notwithstanding the foregoing: (i) Potlatch and Clearwater shall recognize
service with either Potlatch or Clearwater that was recognized as of the
Distribution Date, except to the extent provided in Section 2.5(a) above, and
(ii) Potlatch and Clearwater shall each recognize and grant service credit to
any employee who is employed by the Potlatch Group or the Clearwater Group,
terminated from such employment and then hired by the other Party as an employee
at any time during the twelve (12) month period following the Distribution Date;
provided, however, no service credit shall be required for any such period that
he/she is not employed by either the Potlatch Group or the Clearwater Group. The
service crediting provisions shall be subject to any respective applicable
“service bridging,” “break in service,” “vesting service,” “employment date,” or
“eligibility date” rules under the Clearwater Plans and the Potlatch Plans.

(c) Assumption of Liabilities. The provisions of this Agreement for the transfer
of assets from certain Clearwater Plans to the appropriate Potlatch Plans are
based upon the understanding of the Parties that the appropriate Potlatch Plan
will assume all Liabilities to or relating to Potlatch Employees under the
corresponding Clearwater Plan, as provided for herein. If any such Liabilities
are not effectively assumed by the appropriate Potlatch Plan, then the amount of
transferred assets shall be recomputed accordingly, taking into account the
retention of such Liabilities by such Clearwater Plan, and assets shall be
transferred from the appropriate Potlatch Plan to the appropriate Clearwater
Plan so as to place the appropriate

 

15

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Potlatch Plan in the position it would have been in, had the initial asset
transfer been made in accordance with such recomputed amount of assets.

 

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ARTICLE III

DEFINED BENEFIT PENSION PLANS

3.1 Establishment of Potlatch Pension Plans and Master Trust.

(a) Pension Plans. Effective as of January 1, 2009, Potlatch shall establish, or
cause to be established, the Potlatch Salaried Pension Plan and the Potlatch
Hourly Represented Pension Plan, which shall be substantially identical in all
Material Features to the corresponding Clearwater Pension Plans as in effect on
December 31, 2008. The sponsorship of the existing Clearwater Hourly
Non-Represented Pension Plan shall be transferred from Clearwater to Potlatch as
of January 1, 2009, and, as of the Distribution Date, Potlatch shall assume all
liabilities relating to such Plan.

(b) Master Trust. Effective as of January 1, 2009, Potlatch shall establish, or
cause to be established, a new master trust which is intended to be exempt from
taxation under Code Section 501(a), to hold the assets of the Potlatch Pension
Plans.

3.2 Assumption of Liabilities and Transfer of Trust Assets.

(a) Assumption of Liabilities. Subject to the completion of each of the asset
allocations and transfers described in Section 3.2(b) and (c), effective as of
January 1, 2009, (i) all accrued benefits of the Potlatch Employees under each
of the Clearwater Pension Plans shall be transferred to the corresponding
Potlatch Pension Plan, and (ii) each such Potlatch Pension Plan shall assume and
be solely responsible for all Liabilities for or relating to the accrued
benefits of the Potlatch Employees under the corresponding Clearwater Pension
Plan.

(b) Hourly Non-Represented Pension Plan. In conjunction with the assumption by
Potlatch of the sponsorship of the Clearwater Hourly Non-Represented Pension
Plan, all of the assets of the Clearwater Hourly Non-Represented Pension Plan
shall be transferred from the existing trust established under such Plan to the
master trust established by Potlatch pursuant to Section 3.1(b).

(c) Salaried Pension Plan and Hourly Represented Pension Plan.

(i) As soon as reasonably practicable after the Distribution Date, the Parties
shall engage an enrolled actuary to determine for each of the Clearwater
Salaried Pension Plan and the Clearwater Hourly Represented Pension Plan, the
total accrued benefit Liabilities as of the Distribution Date for all
participants in such Plans, calculated on a plan termination basis in accordance
with Title IV of ERISA. The particular actuarial assumptions that will be used
to value the benefit Liabilities described in the preceding sentence shall be
set forth in Schedule 3.2(c)(i) hereto. The enrolled actuary shall allocate such
accrued Liabilities to the priority categories described in ERISA Section 4044
and shall determine, for each such priority category, the amount of accrued
Liabilities attributable to Potlatch Employees and the amount of accrued
Liabilities attributable to Clearwater Employees.

 

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(ii) As soon as reasonably practicable after the determinations described in
Section 3.2(c)(i), the Parties shall designate a date for valuing the assets of
each of the Clearwater Salaried Pension Plan and the Clearwater Hourly
Represented Pension Plan (the “Valuation Date”), and a date as soon as
practicable after the Valuation Date on which there shall occur the initial
transfer of assets from each such Clearwater Pension Plan to the corresponding
Potlatch Pension Plan (the “Transfer Date”). The fair market value of the assets
of each such Clearwater Pension Plan as of the Valuation Date (excluding the
effect of any contributions made to such Clearwater Pension Plan after the
Distribution Date and any distributions made by the Clearwater Pension Plan to
Potlatch Employees after the Distribution Date) shall be allocated to the
priority categories of accrued Liabilities determined under Section 3.2(c)(i),
in the order specified under ERISA Section 4044, until all such assets have been
fully allocated. On the Transfer Date, the amount of assets allocated to the
accrued Liabilities attributable to Potlatch Employees in each of the priority
categories (the “Transfer Amount”) shall be transferred from the trust
established under the Clearwater Pension Plans to the trust established under
the Potlatch Pension Plans, and Potlatch shall cause the trust established under
its Plans to accept such transfer. The Parties agree and acknowledge that a
second Transfer Date will likely be necessary to reconcile any erroneous
transfers and provide for an interest adjustment. Such additional Transfer Date,
if necessary, shall occur as soon as administratively feasible following the
Transfer Date but in no event later than December 31, 2009.

(iii) Notwithstanding the foregoing, in no event shall the Transfer Amount be
less than the minimum amount required to satisfy the requirements of Code
Section 414(l) and the regulations thereunder.

(iv) Each of the Parties shall bear an equal portion of the cost of the enrolled
actuary’s determinations under this Section 3.2(c).

3.3 No Distributions to Potlatch Employees. The Clearwater and Potlatch Pension
Plans shall provide that no distribution of retirement benefits shall be made to
any Potlatch Employee on account of the Potlatch Group ceasing to be an
Affiliate of the Clearwater Group as of the Distribution Date.

 

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ARTICLE IV

DEFINED CONTRIBUTION PLANS

4.1 Establishment of Potlatch Savings Plans and Master Trust.

(a) Savings Plans. Effective as of the Distribution Date or such other date as
Potlatch and Clearwater may mutually agree in writing, Potlatch shall establish,
or cause to be established, the Potlatch Savings Plans, which shall be
substantially identical in all Material Features to the corresponding Clearwater
Savings Plans as in effect on the Distribution Date.

(b) Master Trust. Effective as of the Distribution Date or such other date as
the Parties agree to in Section 4.1(a), Potlatch shall establish, or cause to be
established, a new master trust, which is intended to be exempt from taxation
under Code Section 501(a), to hold the assets of the Potlatch Savings Plans.

(c) Assumption of Liabilities and Transfer of Assets. Effective as of the
Distribution Date: (i) each Potlatch Savings Plan shall assume and be solely
responsible for all Liabilities for or relating to Potlatch Employees under the
corresponding Clearwater Savings Plan, subject to the completion of the asset
transfers; and (ii) Clearwater shall cause the accounts of the Potlatch
Employees under each Clearwater Savings Plan that are held by its related trust
as of the Distribution Date to be transferred to the corresponding Potlatch
Savings Plan and related trust, and Potlatch shall cause such transferred
accounts to be accepted by each such Potlatch Plan and related trust. As soon as
reasonably practicable after the Distribution Date, Potlatch shall use its
commercially reasonable efforts to enter into agreements satisfactory to
Potlatch to accomplish such assumption and transfer, the maintenance of the
necessary participant records, the appointment of an initial trustee under the
Potlatch Savings Plans, and the engagement of an initial record keeper under the
Potlatch Savings Plans. Clearwater and Potlatch each agree to use their
commercially reasonable efforts to effectuate this Section 4.1.

(d) Stock Fund Considerations. As a result of the Distribution and the transfers
of liabilities and assets described in Section 4.1(c), each Clearwater Savings
Plan and each Potlatch Savings Plan shall include investment funds comprised of
Potlatch Common Stock and Clearwater Common Stock. Clearwater and Potlatch shall
assume sole responsibility for ensuring that their respective company stock
funds, and underlying employer securities held in each such fund, are maintained
in compliance with all requirements of the SEC including, without limitation,
filing Forms S-8 and 11-K, and the prospectus requirements for such funds.
Notwithstanding Section 2.3 or any other provision in this Agreement, on and
after the Distribution Date, nothing shall preclude either Clearwater or
Potlatch from imposing restrictions through their respective Savings Plans on
future investments in securities issued by the other Party, or from
discontinuing any investment fund holding securities issued by the other Party.

(e) No Distribution to Potlatch Employees. The Potlatch and Clearwater Savings
Plans shall provide that no distribution of account balances shall be made to
any

 

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Potlatch Employee on account of the Potlatch Group ceasing to be an Affiliate of
the Clearwater Group as of the Distribution Date.

 

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ARTICLE V

NON-QUALIFIED AND SUPPLEMENTAL PLANS

5.1 Supplemental Benefit Plans.

(a) Establishment of Potlatch Supplemental Benefit Plan. Effective as of the
Distribution Date, Potlatch shall establish the Potlatch Supplemental Benefit
Plan that shall be substantially identical in all Material Features to the
Clearwater Supplemental Benefit Plan. Potlatch shall continue to sponsor the
Potlatch Corporation Salaried Employees’ Supplemental Benefit Plan, which was
frozen as of December 31, 2004 (the “Frozen Supplemental Plan”).

(b) Assumption of Liabilities by Potlatch Supplemental Benefit Plan. Effective
as of the Distribution Date, all accrued benefits of Potlatch Employees under
the Clearwater Supplemental Benefit Plan shall be transferred to the Potlatch
Supplemental Benefit Plan. The Potlatch Supplemental Benefit Plan shall assume
and be solely responsible for all Liabilities for or relating to the accrued
benefits of the Potlatch Employees under the Clearwater Supplemental Benefit
Plan as of the Distribution Date.

(c) Assumption of Liabilities by Clearwater Supplemental Benefit Plan. Effective
as of the Distribution Date, all accrued benefits of Clearwater Employees under
the Frozen Supplemental Plan shall be transferred to the Clearwater Supplemental
Benefit Plan. The Clearwater Supplemental Benefit Plan shall assume and be
solely responsible for all Liabilities for or relating to the accrued benefits
of the Clearwater Employees under the Frozen Supplemental Plan as of the
Distribution Date.

5.2 Deferred Compensation Plans.

(a) Establishment of Clearwater Deferred Compensation Plans. Effective as of the
Distribution Date, Clearwater shall establish the Clearwater Management Deferred
Compensation Plan and the Clearwater Director Deferred Compensation Plan, which
shall be substantially identical in all Material Features to the Potlatch
Management Deferred Compensation Plan and the Potlatch Director Deferred
Compensation Plan, respectively.

(b) Assumption of Liabilities by Clearwater Management Deferred Compensation
Plan. Effective as of the Distribution Date, all deferred compensation benefits
of Clearwater Employees under the Potlatch Management Deferred Compensation Plan
shall be transferred to the Clearwater Management Deferred Compensation Plan.
The Clearwater Management Deferred Compensation Plan shall assume and be solely
responsible for all Liabilities for or relating to the deferred compensation
benefits of the Clearwater Employees under the Potlatch Management Deferred
Compensation Plan as of the Distribution Date.

(c) Clearwater Assumption of Other Management Deferred Compensation Liabilities.
Effective as of the Distribution Date, all deferred compensation benefits of
Clearwater Employees under the Potlatch Corporation Management Performance Award
Plan and the Potlatch Corporation Management Performance Award Plan II shall be
transferred to the

 

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Clearwater Management Deferred Compensation Plan or to an alternative plan or
plans established by Clearwater. Such Clearwater Plan or Plans shall assume and
be solely responsible for all Liabilities for or relating to the deferred
compensation benefits of the Clearwater Employees under such Potlatch Plans.

(d) Director Deferred Compensation Liabilities. Potlatch shall retain all
Liabilities to current and former directors of Potlatch under the Potlatch
Director Deferred Compensation Plan and any predecessor deferred compensation
Plans for Potlatch directors. Clearwater shall establish the Clearwater Director
Deferred Compensation Plan to provide benefits for directors of Clearwater
comparable to those provided under the Potlatch Director Deferred Compensation
Plan.

(e) Treatment of Stock Units. With respect to the deferred compensation benefits
under the Potlatch Plans described in this Section 5.2 that have been deemed
invested in “stock units” (units denominated in shares of Potlatch Common Stock)
prior to the Distribution Date, the following provisions shall apply:

(i) Potlatch shall cause the number of stock units allocated to each deferred
compensation account to be adjusted as of the Distribution Date. The adjusted
number of units shall equal the number of units allocated to the account
immediately prior to the Distribution Date divided by the Potlatch Ratio,
rounded to three (3) decimal places.

(ii) For account balances that will be assumed by the Clearwater Plans,
Clearwater shall assume the obligation to treat such accounts as deemed invested
in Potlatch stock units, as adjusted by Potlatch pursuant to Section 5.2(e)(i).
Notwithstanding the foregoing, Clearwater shall be permitted to give Clearwater
Employees and Clearwater directors an election to have their Potlatch stock
units converted into Clearwater stock units (units denominated in shares of
Clearwater Common Stock) as of the Distribution Date, in lieu of the adjustment
described in Section 5.2(e)(i). For Clearwater Employees and directors who make
such an election, the number of Clearwater stock units allocated to each such
account as a result of such conversion shall equal the total number of Potlatch
stock units allocated to the account immediately prior to the Distribution Date
divided by the Clearwater Ratio, rounded to three (3) decimal places.

(f) No Distributions to Potlatch or Clearwater Employees. Potlatch and
Clearwater agree that the Separation and Distribution shall not be viewed as a
separation from service or other termination of employment entitling Potlatch
Employees or Clearwater Employees or other participants in the Plans described
in this Article V to distributions of their deferred compensation benefits.
Potlatch and Clearwater shall cause their respective deferred compensation Plans
to be amended (if necessary) and to be administered in a manner consistent with
this understanding.

 

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ARTICLE VI

EQUITY AND OTHER MANAGEMENT COMPENSATION

6.1 Incentive Pay Plans. Clearwater Employees shall cease participating in the
Potlatch Incentive Pay Plan as of the Distribution Date. Clearwater shall
establish the Clearwater Incentive Pay Plan to provide annual incentive bonuses
for periods beginning on or after the Distribution Date. The Clearwater
Incentive Pay Plan may, but is not required to, contain the same Material
Features as the Potlatch Incentive Pay Plan. Notwithstanding the foregoing, if
the Distribution Date occurs in 2008 or in 2009 prior to the date when 2008
bonuses would be payable under the Potlatch Incentive Pay Plan, Clearwater shall
assume the obligation to pay 2008 bonuses to the Clearwater Employees (such
bonuses to be determined as if the Clearwater Employees had continued to
participate in the Potlatch Incentive Pay Plan for all of 2008), and Potlatch
shall have no responsibility for the payment of 2008 bonuses to the Clearwater
Employees.

6.2 Clearwater Stock Incentive Plan. Clearwater shall establish the Clearwater
Stock Incentive Plan to provide equity incentives to Clearwater Employees after
the Distribution Date. The Clearwater Stock Incentive Plan may, but is not
required to, contain the same Material Features as the Potlatch Stock Incentive
Plan.

6.3 Potlatch Options.

(a) Adjustment of Potlatch Options. As of the Distribution Date, each
outstanding Potlatch Option held by Potlatch Employees and Clearwater Employees
shall be, in connection with the Distribution, adjusted by Potlatch. Each such
Potlatch Option shall continue to have, and be subject to, the same terms and
conditions set forth in the Potlatch Stock Incentive Plans and as provided in
the respective option agreements governing such Potlatch Option as of the
Distribution Date, except that (i) such Potlatch Option shall be exercisable for
that number of whole shares of Potlatch Common Stock equal to the number of
shares of Potlatch Common Stock that were issuable upon exercise of such
Potlatch Option as of the Distribution Date divided by the Potlatch Ratio,
rounded up to the nearest whole share, and (ii) the per share exercise price for
the shares of Potlatch Common Stock issuable upon exercise of such Potlatch
Option shall be equal to the exercise price per share at which such Potlatch
Option was exercisable as of the Distribution Date multiplied by the Potlatch
Ratio, rounded to four (4) decimal places.

(b) Potlatch Options Held by Clearwater Employees. In addition to the adjustment
described in Section 6.3(a), Potlatch shall amend the Options held by Clearwater
Employees to provide that the Separation and Distribution shall not give rise to
a forfeiture of the Options held by the Clearwater Employees after ninety
(90) days from the Distribution Date, so that they can exercise the Options in
accordance with their terms, subject to continued employment with Clearwater.
Upon the request of Potlatch in connection with the exercise of an Option held
by a Clearwater Employee and in order to determine whether such Option is being

 

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validly exercised by the Clearwater Employee, Clearwater shall confirm to
Potlatch such Clearwater Employee’s current employment status with Clearwater.

6.4 Potlatch Restricted Stock Units.

(a) Adjustment of Potlatch Restricted Stock Units. As of the Distribution Date,
each outstanding Potlatch Restricted Stock Unit held by Potlatch Employees,
whether vested or unvested, shall be, in connection with the Distribution,
adjusted by Potlatch. Each such Potlatch Restricted Stock Unit shall continue to
have, and be subject to, the same terms and conditions set forth in the Potlatch
Stock Plans and as provided in the respective award agreements governing such
Potlatch Restricted Stock Unit as of the Distribution Date, except that the
number of shares of Potlatch Common Stock for which such Potlatch Restricted
Stock Unit can be settled shall be equal to the number of shares of Potlatch
Common Stock that were issuable upon settlement of such Potlatch Restricted
Stock Unit as of the Distribution Date divided by the Potlatch Ratio, rounded to
three (3) decimal places.

(b) Potlatch Restricted Stock Units Held by Clearwater Employees. Potlatch
Restricted Stock Units held by Clearwater Employees shall be forfeited as of the
Distribution Date in accordance with the terms of the applicable award
agreements. Clearwater shall be responsible for issuing cash incentives or
equity incentives based on Clearwater Common Stock, which may include Clearwater
Restricted Stock Units, to provide a substitute of comparable value for such
terminated Potlatch Restricted Stock Units.

6.5 Potlatch Performance Shares.

(a) Adjustment of Potlatch Performance Shares for the 2006-2008 Performance
Period. Prior to the record date for the Distribution (the “Record Date”), each
outstanding Potlatch Performance Share award held by a Potlatch Employee or
Clearwater Employee for the 2006-2008 performance period shall be settled by
Potlatch. Each such Potlatch Performance Share award shall continue to have, and
be subject to, the same terms and conditions set forth in the Potlatch Stock
Incentive Plans and as provided in the respective award agreements governing
such Potlatch Performance Shares, except that the determination of the extent to
which the performance goals for the 2006-2008 period shall have been attained
shall be made as of the last day of the calendar quarter preceding the Record
Date.

(b) Adjustment of Potlatch Performance Shares for the 2007-2009 and 2008-2010
Performance Periods. As of the Distribution Date, each outstanding Potlatch
Performance Share award held by Potlatch Employees for the 2007-2009 and
2008-2010 performance periods, whether vested or unvested, shall be, in
connection with the Distribution, adjusted by Potlatch. Each such Potlatch
Performance Share award shall continue to have, and be subject to, the same
terms and conditions set forth in the Potlatch Stock Incentive Plans and as
provided in the respective award agreements governing such Potlatch Performance
Shares as of the Distribution Date, except that (i) the number of shares of
Potlatch Common Stock for which such Potlatch Performance Share award can be
settled shall be equal to the number of shares of Potlatch Common Stock that
were issuable upon settlement of such Potlatch Performance Share award as of the
Distribution Date divided by the Potlatch Ratio, rounded to three (3) decimal
places, and

 

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(ii) the Distribution shall be treated as a dividend for purposes of measuring
attainment of the total shareholder return performance objectives.

(c) Potlatch Performance Shares Held by Clearwater Employees. Potlatch
Performance Share Awards for the 2006-2008 performance periods that are held by
Clearwater Employees shall be settled and paid in the manner described in
Section 6.5(a). Potlatch Performance Share awards for the 2007-2009 and
2008-2010 performance periods held by Clearwater Employees shall be forfeited as
of the Distribution Date in accordance with the terms of the applicable award
agreements. Clearwater shall be responsible for issuing cash incentives or
equity incentives based on Clearwater Common Stock, which may include Clearwater
Performance Share awards, to provide a substitute of comparable value for such
terminated Potlatch Performance Share awards.

6.6 Severance Plans.

(a) Executive Severance Plan. Effective as of the Distribution Date, Potlatch
shall establish the Potlatch Executive Severance Plan that shall be
substantially identical in all Material Features to the Clearwater Executive
Severance Plan.

(b) Salaried Severance Plan. Effective as of the Distribution Date, Potlatch
shall establish the Potlatch Salaried Severance Plan that shall be substantially
identical in all Material Features to the Clearwater Salaried Severance Plan.

(c) No Separation from Service. The Parties agree that the Separation and
Distribution shall not be considered a separation from service or termination of
employment entitling Potlatch Employees or Clearwater Employees to be eligible
to participate in or to receive payment of severance benefits under the
Executive Severance Plans or Salaried Severance Plans. Potlatch and Clearwater
shall cause their respective Executive Severance Plans and Salaried Severance
Plans to be amended (if necessary) and to be administered in a manner consistent
with this understanding.

6.7 Deferred Payment Contracts and Severance Contracts. All Liabilities with
respect to, and all responsibilities for administering, the deferred payment
contracts and severance contracts for the individuals listed on Schedule 6.7
shall be allocated between the Parties as set forth on Schedule 6.7.

 

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ARTICLE VII

HEALTH AND WELFARE PLANS

7.1 Establishment of Potlatch Health and Welfare Plans.

(a) New Plans. Effective as of January 1, 2009, Potlatch shall establish, or
cause to be established, the Potlatch Health and Welfare Plans which shall be
substantially identical in all Material Features to the corresponding Clearwater
Health and Welfare Plans as in effect on the Distribution Date. Potlatch shall
cause the Potlatch Health and Welfare Plans to be responsible for all claims
incurred by Potlatch Employees on and after January 1, 2009 (subject to the
terms of such Plans).

(b) Existing Arrangement. Clearwater, as sponsor of the existing Health and
Welfare Plans through December 31, 2008, agrees not to make any modification,
amendment or other change to any Health and Welfare Plan without Potlatch’s
consent through December 31, 2008.

7.2 Insured Health and Welfare Benefits. Effective as of the Distribution Date
and through December 31, 2008, Potlatch shall be liable to Clearwater for
premiums owed for coverage for Potlatch Employees under the Clearwater Health
and Welfare Plans (other than the Disability Plan).

7.3 Self-Insured Health and Welfare Benefits.

(a) Administration of Claims of Potlatch Employees. Clearwater shall cause the
Clearwater Health and Welfare Plans, other than Disability Plans, to administer
all claims incurred by Potlatch Employees and Clearwater Employees under such
Plans prior to January 1, 2009, including claims incurred but not yet reported
prior to January 1, 2009. The Clearwater Health and Welfare Plans, other than
Disability Plans, shall be responsible for claims incurred (including claims
incurred but not yet reported) prior to January 1, 2009. Potlatch shall be
liable to Clearwater for any such claims incurred by Potlatch Employees from the
Distribution Date through December 31, 2008. Thereafter, the Potlatch Health and
Welfare Plans, other than Disability Plans, shall be responsible for and assume
Liability for claims incurred on or after January 1, 2009. For this purpose, a
claim shall be deemed to be incurred:

(i) when an individual obtains professional services, equipment or prescription
drugs covered by a medical, prescription drug, dental or vision benefit plan;

(ii) upon death in the case of a life insurance plan; and

(iii) as of the date of the accident or injury in the case of an accidental
death and dismemberment or business travel accident plan.

(b) Clearwater Health Plans. Notwithstanding the foregoing, the Clearwater
Health Plans shall be responsible for but not liable for the cost of all
professional services,

 

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equipment and prescription drugs provided during a hospital stay or similar
confinement of a Potlatch Employee that begins prior to January 1, 2009, and
ends after January 1, 2009 (subject to the terms and conditions of the
Clearwater Health Plans). Potlatch shall be liable to Clearwater for any and all
such costs incurred by Potlatch Employees from the Distribution Date through the
end of such stay or confinement. Thereafter, the Potlatch Health Plans shall be
responsible and assume related Liability for the cost of all professional
services, equipment and prescription drugs provided during a hospital stay or
similar confinement of a Potlatch Employee that begins on or after January 1,
2009 (subject to the terms and conditions of the Potlatch Health Plans).

7.4 Disability Plans. Effective as of the Distribution Date and through
December 31, 2008, the Disability Plans will be administered by Clearwater as
set forth in the Transition Services Agreement. Effective as of the Distribution
Date, Potlatch shall assume responsibility and accompanying Liability for any
Potlatch Employee who is absent from work on account of a short term disability.
Furthermore, effective as of the Distribution Date and through December 31,
2008, Potlatch shall be liable to Clearwater for premiums owed for long-term
disability coverage for Potlatch Employees under the Clearwater Disability
Plans. Effective as of January 1, 2009, the Potlatch Disability Plans
(short-term and long-term) shall assume responsibility and accompanying
Liability for Potlatch Employees.

7.5 Outsourcing of Claims. Potlatch and Clearwater shall have the right to
engage a third party administrator, vendor, or insurance company to administer
(“Outsource”) claims incurred under their respective Health and Welfare Plans,
including claims incurred before January 1, 2009. Each Party may determine the
manner and extent of such Outsourcing, including the selection of one or more
third party administrators, vendors, or insurance companies and the ability to
transfer the Liability for such claims to one or more independent insurance
companies.

7.6 Post-Distribution Transitional Arrangements.

(a) Transition Period. Both Clearwater and Potlatch will participate in the
Clearwater Health and Welfare Plans through December 31, 2008. Accordingly,
Potlatch shall reimburse Clearwater for any and all direct and indirect expenses
and costs for claims incurred through December 31, 2008, by Potlatch Employees.

(b) Continuance of Elections, Co-Payments and Maximum Benefits.

(i) As of January 1, 2009, Potlatch shall cause the Potlatch Health and Welfare
Plans to recognize and maintain all coverage and contribution elections made by
Potlatch Employees under the Clearwater Health and Welfare Plans and apply such
elections under the Potlatch Health and Welfare Plans for the remainder of the
period or periods for which such elections are by their terms applicable. The
direct transfer or other movement of employment between Potlatch and Clearwater
at any time upon or before January 1, 2009, shall neither constitute nor be
treated as a “status change” or termination of employment under the Potlatch
Health and Welfare Plans or the Clearwater Health and Welfare Plans.

 

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(ii) On and after January 1, 2009, Potlatch shall cause the Potlatch Health
Plans to recognize and give credit for all benefits paid to Potlatch Employees
under the Clearwater Health Plans for purposes of determining when such persons
have reached their lifetime maximum benefits under the Potlatch Health Plans.

(c) HCFA Administration. As of the Distribution Date, Potlatch shall assume all
Liabilities relating to, arising out of or resulting from claims verified by
Potlatch or Clearwater under the HCFA data match reports that relate to Potlatch
Employees.

7.7 Vendor Arrangements. The Parties shall use their commercially reasonable
efforts to enable Potlatch to procure, effective as of January 1, 2009:
(a) third party ASO Contracts with the Material Features of the ASO Contracts
entered into by Clearwater, as set forth in Schedule 7.7(a) (the “ASO
Contracts”); and (b) Group Insurance Policies, with the Material Features of the
Group Insurance Policies entered into by Clearwater, as set forth in Schedule
7.7(b) (the “Group Insurance Policies”). In each case, Potlatch shall, as of
January 1, 2009, be responsible for establishing, adopting and implementing such
contracts, agreements and arrangements for the Potlatch Health and Welfare
Plans, and Clearwater shall be responsible for maintaining such contracts,
agreements and arrangements for the Clearwater Health and Welfare Plans.

7.8 Business Travel Accident Insurance. Potlatch shall procure a business travel
accident insurance policy with the Material Features of the Clearwater business
travel accident policy, effective as of the Distribution Date.

7.9 Flexible Benefits Plans. Through December 31, 2008, Potlatch and designated
members of the Potlatch Group shall remain Participating Companies in the
Clearwater Flexible Benefits Plan. The existing elections for Potlatch Employees
shall remain in effect through December 31, 2008. Potlatch shall reimburse
Clearwater for any and all direct and indirect expenses and costs attributable
to Potlatch Employees through December 31, 2008. Effective as of January 1,
2009, Potlatch shall establish, or caused to be established, the Potlatch
Flexible Benefits Plan and shall be solely responsible for implementing and
maintaining the Potlatch Flexible Benefits Plan. The Potlatch Flexible Benefits
Plan shall be Liable for any and all outstanding claims incurred and made by
Potlatch Employees attributable to their 2008 elections after December 31, 2008,
in accordance with the terms of the Potlatch Flexible Benefits Plan.
Accordingly, Clearwater and Potlatch shall each take all actions necessary to
cause a spin-off of the portion of the Clearwater Flexible Benefits Plan
covering Potlatch Employees to the Potlatch Flexible Benefits Plan for the
outstanding recordkeeping account balances after December 31, 2008, in
accordance with Revenue Ruling 2002-32 and subsequent guidance thereunder. Such
actions shall include, but not be limited to, a transfer by or on behalf of
Clearwater to Potlatch of the amount equal to participant contributions to the
Clearwater Flexible Benefits Plan from January 1, 2008 through the Distribution
Date, less the participant reimbursements for such period.

7.10 COBRA. Clearwater shall be responsible through December 31, 2008, for
compliance with the health care continuation coverage requirements of COBRA and
the Clearwater Health and Welfare Plans with respect to Potlatch Employees and
qualified beneficiaries (as such term is defined under COBRA). On or about
December 31, 2008,

 

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Clearwater shall provide Potlatch, through hard copy, electronic format or such
other mechanism as is appropriate under the circumstances, with a list of all
qualified beneficiaries (as such term is defined under COBRA) that relate to the
Potlatch Group and the relevant information pertaining to their coverage
elections and remaining COBRA time periods. Effective as of January 1, 2009,
Potlatch shall be solely responsible for compliance with the health care
continuation coverage requirements of COBRA and the Potlatch Health and Welfare
Plans for Potlatch Employees and their qualified beneficiaries (as such term is
defined under COBRA).

7.11 Other Post-Retirement Benefits (OPEB) Programs.

(a) Administration. As soon as reasonably practicable after December 31, 2008,
Clearwater shall provide to Potlatch, through hard copy, electronic format or
such other mechanism as is appropriate under the circumstances, a list detailing
all Potlatch Employees who are, to the knowledge of Clearwater, eligible to
participate in the Clearwater Other Post-Retirement Benefits Program as of
January 1, 2009, and the type of coverage and level of coverage for which they
are eligible, as applicable. Effective as of January 1, 2009, Clearwater shall
be solely responsible for the administration of the Clearwater Other
Post-Retirement Benefits (OPEB) Program for Clearwater Employees, and Potlatch
shall be solely responsible for the administration of the Potlatch Other
Post-Retirement Benefits (OPEB) Program for the Potlatch Employees.

(b) Assumption of Liabilities. Effective as of January 1, 2009, (i) the Potlatch
Other Post-Retirement Benefits (OPEB) Program shall assume and be solely
responsible for any and all Liabilities for or relating to Potlatch Employees
under the corresponding Clearwater Other Post-Retirement Benefits (OPEB)
Program, and (ii) the Clearwater Other Post-Retirement Benefits (OPEB) Program
shall assume and be solely responsible for any and all Liabilities for or
relating to Clearwater Employees under the Clearwater Other Post-Retirement
Benefits (OPEB) Program.

(c) Transition Period. Potlatch shall reimburse Clearwater for any and all
direct and indirect expenses and costs attributable to the Potlatch Employees’
coverage under the Clearwater Other Post-Retirement Benefits (OPEB) Program from
the Distribution Date through December 31, 2008 (or such other date as the
Parties may mutually agree upon in writing).

 

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ARTICLE VIII

FRINGE AND OTHER BENEFITS

8.1 Employee Assistance Program. The Parties shall use their commercially
reasonable efforts to procure, effective as of the Distribution Date or such
other date as Potlatch and Clearwater may mutually agree in writing, contracts
and arrangements with Clearwater’s vendors to establish an employee assistance
program for Potlatch Employees that contains the Material Features of the
existing contracts and arrangements of Clearwater’s employee assistance program.
Potlatch shall cease to be a Participating Company in the Clearwater employee
assistance program coincident with Potlatch’s establishment of the Potlatch
employee assistance program.

8.2 Educational Assistance Program.

(a) Establishment of Educational Assistance Program. Effective as of the
Distribution Date or such other date as Clearwater and Potlatch may mutually
agree in writing, each Party shall provide an educational assistance program to
its respective Employees that have the Material Features of the Clearwater
educational assistance program. Potlatch shall cease to be a Participating
Company in the Clearwater educational assistance program coincident with
Potlatch’s establishment of the Potlatch educational assistance program.

(b) Reimbursement of Expenses. As of the Distribution Date, any and all
outstanding approved reimbursements under the Clearwater educational assistance
program for Potlatch Employees shall be made by Potlatch. Potlatch and
Clearwater each agree to be responsible for providing benefits to their
respective Employees who are enrolled in a class or other program as of the
Distribution Date for which approval has been granted under the Clearwater
educational assistance program on or before the Distribution Date.

8.3 Other Benefits. To the extent that Potlatch or Clearwater maintains,
sponsors or provides other fringe benefits including, without limitation, the
benefits specified in Schedule 8.3 to its employees, then each Party shall, to
the extent permitted by law, continue to make such benefits available to
Clearwater Employees and Potlatch Employees, respectively, on substantially
similar terms and conditions as are currently offered through the Distribution
Date or such other date upon which Clearwater and Potlatch mutually agree in
writing. Each Party shall reimburse the other Party for any and all direct and
indirect costs and expenses arising out of or relating to or resulting from
making any such fringe benefits available to the other Party’s employees.
Clearwater and Potlatch agree to make commercially reasonable efforts to
mutually agree in writing, whether, when, and on what terms any member of the
Clearwater Group and Potlatch Group shall maintain, sponsor or offer fringe
benefits.

 

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ARTICLE IX

TRANSITION ADMINISTRATIVE PROVISIONS

9.1 Transition Services Agreement. On the date hereof, Potlatch and Clearwater
have entered into the Transition Services Agreement covering the provision of
various interim services, including financial, accounting, legal, and other
services between the Parties.

9.2 Payment of Liabilities, Plan Expenses and Related Matters. For the period
from the Distribution Date until such date as each Party maintains its own
Plan(s), the following provisions shall be in effect:

(a) Shared Costs. Each Party shall pay its share, as mutually determined by
Clearwater in good faith, of any contributions made to any trust maintained in
connection with a Clearwater Plan while the Parties both participate in that
Clearwater Plan.

(b) Contributions to Trusts. With respect to Plans to which Potlatch Employees
make contributions, Clearwater shall use reasonable procedures to determine
Potlatch’s Liabilities associated with such Plans, taking into account such
contributions, settlements, refunds and similar payments.

(c) Administrative Expenses Not Chargeable to a Trust. Plan administration
expenses shall be allocated in the manner described in Article IX of the
Separation Agreement to the extent not (i) charged pursuant to the Transition
Services Agreement or another provision of this Agreement, (ii) otherwise
mutually agreed to in writing by Potlatch and Clearwater, or (iii) chargeable to
a trust established in connection with a Clearwater Plan or a Potlatch Plan.

9.3 Sharing of Participant Information. In addition to the responsibilities and
obligations of Potlatch and Clearwater specified in Article XII of the
Separation Agreement, Potlatch and Clearwater shall share, or cause to be
shared, all participant information that is necessary or appropriate for the
efficient and accurate administration of each of the Potlatch Plans and the
Clearwater Plans during the respective periods applicable to such Plans as
Clearwater and Potlatch may mutually agree in writing. Potlatch and Clearwater
and their respective authorized agents shall, subject to applicable laws of
confidentiality and data protection, duplicate all files no matter in what
format relating to the subjects of this Agreement and that are in the custody of
the other Party or its agents, to the extent necessary or appropriate for such
administration.

9.4 Reporting and Disclosure Communications to Participants. While Potlatch is a
Participating Company in the Clearwater Plans or Clearwater is a Participating
Company in the Potlatch Plans, each Party shall take, or cause to be taken, all
actions necessary or appropriate to facilitate the distribution of all
Plan-related communications and materials to its respective Employees,
participants and beneficiaries, including (without limitation) summary plan
descriptions and related summaries of material modification(s), summary annual
reports, investment information, prospectuses, notices and enrollment materials.
The Parties shall assist

 

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each other in complying with all reporting and disclosure requirements of ERISA
for their respective Plans, including the preparation of Form Series 5500 annual
reports, where applicable.

9.5 Audits Regarding Vendor Contracts. From the period beginning as of the
Distribution Date and ending eight (8) years thereafter, or such earlier date as
Potlatch and Clearwater may mutually agree in writing, Potlatch and Clearwater
and their duly authorized representatives shall have the right to conduct joint
audits with respect to any vendor contracts that relate to both the Potlatch
Plans and the Clearwater Plans. The scope of such audits shall encompass the
review of all correspondence, account records, claim forms, canceled drafts
(unless retained by the bank), provider bills, medical records submitted with
claims, billing corrections, vendor’s internal corrections of previous errors
and any other documents or instruments relating to the services performed by the
vendor under the applicable vendor contracts. Potlatch and Clearwater shall
agree on the performance standards, audit methodology, auditing policy and
quality measures, reporting requirements, and the manner in which costs incurred
in connection with such audits will be allocated between the Parties.

9.6 Beneficiary Designations. Subject to Section 9.9, all beneficiary
designations made by Potlatch Employees under Clearwater Plans, and all
beneficiary designations made by Clearwater Employees under Potlatch Plans,
shall be transferred to and be in full force and effect under the corresponding
Plans established by the other Party until such beneficiary designations are
replaced or revoked by the Potlatch Employee or Clearwater Employee who made the
beneficiary designation.

9.7 Requests for IRS, PBGC and DOL Opinions. Potlatch and Clearwater shall make
such applications to regulatory agencies, including the PBGC, IRS and DOL, as
may be reasonable under the circumstances. Clearwater and Potlatch shall
cooperate fully with one another on any issue relating to the transactions
contemplated by this Agreement for which Potlatch or Clearwater elects to seek a
determination letter or private letter ruling from the IRS or an advisory
opinion from the DOL.

9.8 Fiduciary Matters. Potlatch and Clearwater each acknowledge that actions
contemplated to be taken pursuant to this Agreement may be subject to fiduciary
duties or standards of conduct under ERISA or other applicable law, and no Party
shall be deemed to be in violation of this Agreement if such Party fails to
comply with any provisions hereof based upon such Party’s good faith
determination that to do so would violate such a fiduciary duty or standard.

9.9 Consent of Third Parties. If any provision of this Agreement is dependent on
the consent of any third party (such as a vendor) and such consent is withheld,
Potlatch and Clearwater shall use commercially reasonable efforts to implement
the applicable provisions of this Agreement. If any provision of this Agreement
cannot be implemented due to the failure of such third party to consent,
Potlatch and Clearwater shall negotiate in good faith to implement the provision
in a mutually satisfactory manner.

9.10 Tax Cooperation. In connection with the interpretation and administration
of this Agreement, Potlatch and Clearwater shall take into account the
agreements and policies

 

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established pursuant to the Separation Agreement and the parties’ intent to
qualify the Distribution as a tax-free reorganization under Code Sections
368(a)(1)(D) and 355.

 

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ARTICLE X

EMPLOYMENT-RELATED MATTERS

10.1 Terms of Employment. All basic terms and conditions of employment for
Potlatch Employees and Clearwater Employees, in each case, who are not subject
to a Labor Agreement including, without limitation, their pay and benefits in
the aggregate, shall remain substantially the same as the terms and conditions
that were in place immediately prior to the Distribution Date for twelve
(12) months from the Distribution Date, unless otherwise mutually agreed in
writing by the Parties. Notwithstanding the foregoing or any other provision of
the Separation Agreement or this Agreement, the employees of the Potlatch Group
or the Clearwater Group, in each case, who are not subject to a Labor Agreement
or an employment agreement that specifically provides otherwise shall remain
at-will employees and the Potlatch Group and the Clearwater Group may terminate
their respective employees at any time for any reason.

10.2 Non-Solicitation of Employees. Potlatch and Clearwater each agree not to
directly solicit or recruit the other Party’s employees for a period of two
(2) years following the Distribution Date, if such solicitation or recruitment
would be disruptive or damaging or would interfere with the operation or
business of the other Party. Notwithstanding the foregoing, this prohibition on
solicitation does not apply to actions taken by a Party either: (a) as a result
of an employee’s affirmative response to a general recruitment effort carried
out through a public solicitation or general solicitation, or (b) as a result of
an employee’s initiative.

10.3 Confidentiality and Proprietary Information. No provision of the Separation
Agreement or this Agreement shall be deemed to release any Potlatch Employee or
Clearwater Employee for any violation of any non-competition guideline or any
agreement or policy pertaining to confidential or proprietary information of any
member of the Potlatch Group or Clearwater Group, or otherwise relieve any such
individual of his or her obligations under such non-competition guideline,
agreement, or policy.

10.4 Time Off Policies. Effective as of the Distribution Date, Potlatch shall
establish the Potlatch Time Off Policies that are identical in all Material
Features to the Clearwater Time Off Policies. Effective as soon as reasonably
practicable after the Distribution Date (or such other date as Potlatch and
Clearwater may mutually agree in writing), (a) Clearwater shall transfer to
Potlatch all data and information relating to the Clearwater Time Off Policies;
and (b) Potlatch shall assume all Liabilities attributable to Potlatch Employees
under the Clearwater Time Off Policies. In the event that a Potlatch Employee or
Clearwater Employee transfers his or her employment to the other Party before
the Distribution Date, such transfer of employment shall not result in a payout
or constitute a termination event for purposes of the Time Off Policies, and no
duplication of benefits shall occur as a result of any such transfer of
employment between Potlatch and Clearwater. Furthermore, the Liability
attributable to any Clearwater Employee or Potlatch Employee who transfers
employment between Potlatch and Clearwater prior to the Distribution Date shall
be assumed by the employer subsequent to the transfer.

 

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10.5 Payroll Systems.

(a) Clearwater Payroll System. Effective on and after the Distribution Date, and
subject to the Transition Services Agreement, Clearwater shall perform payroll
services for Potlatch.

(b) Income Reporting, Withholding. Commencing with service periods beginning
after the division of the payroll services, Clearwater shall perform or be
responsible for performing the income reporting and withholding function under
its own employer identification number for Clearwater Employees and its other
service providers, and Potlatch shall perform or be responsible for performing
the income reporting and withholding function for Potlatch Employees and its
other service providers.

(c) Delivery of, and Access to, Documents and Other Information. Potlatch and
Clearwater each shall make reasonably available to the other Party all forms,
documents or information, no matter in what format stored, relating to
compensation or payments made to any employee or service provider to extent
reasonably necessary to facilitate an individual’s transfer to, or service or
employment by, the other Party. Such information may include, but is not limited
to, information concerning employee payroll deductions, payroll adjustments,
records of time worked, tax records (e.g., Forms W-2, W-4, 940 and 941), and
information concerning garnishment of wages or other payments.

(d) Consistency of Payroll Taxes and Contributions. Potlatch and Clearwater
shall individually and collectively use commercially reasonable efforts to avoid
unnecessarily duplicative federal, state or local payroll taxes, insurance or
workers’ compensation contributions, or unemployment contributions arising on or
after the Distribution Date. Potlatch and Clearwater shall take consistent
reporting and withholding positions with respect to any such taxes or
contributions.

10.6 Personnel and Pay Records. Subject to Section 12.1 of the Separation
Agreement, for such period as Potlatch and Clearwater may mutually agree in
writing, Potlatch and Clearwater shall make reasonably available to the other
Party (including the ability to duplicate) to the extent necessary to facilitate
a transfer of employment or service to the other Party, subject to applicable
laws on confidentiality and data protection, all current and historic forms,
documents or information, no matter in what format stored, relating to
pre-Distribution Date personnel, medical records, and payroll information. Such
forms, documents or information may include, but is not limited to:
(a) information regarding an Employee’s ranking or promotions; (b) the existence
and nature of garnishment orders or other judicial or administrative actions or
orders affecting an employee’s or service provider’s compensation; and
(c) performance evaluations.

10.7 Unemployment Insurance Program.

(a) Coverage Through Distribution Date. All current Potlatch Employees and all
current Clearwater Employees will be covered under the Clearwater Unemployment
Insurance Program through the Distribution Date. Clearwater shall cooperate with
the

 

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unemployment insurance vendor(s) by providing information in its possession that
is necessary for the development of the Potlatch Unemployment Insurance Program.

(b) Coverage Post-Distribution Date. Before the Distribution Date, the Parties
shall use their commercially reasonable efforts to enable Potlatch to procure an
agreement with its unemployment insurance vendor(s) with the Material Features
of the Clearwater Unemployment Insurance Program. After the Distribution Date,
Potlatch and Clearwater will maintain their respective Unemployment Insurance
Programs for their respective employees.

(c) Tax Experience Rating. Unless otherwise directed by Potlatch, the Parties
shall use their commercially reasonable efforts to enable Potlatch as well as
all members of the Potlatch Group, to retain the existing experience rating on
or after the Distribution Date.

10.8 Non-Termination of Employment. Neither the Distribution or Separation, nor
the termination of the Participating Company status of Potlatch, Clearwater or
any member of the Potlatch Group or Clearwater Group shall cause any employee to
be deemed to have incurred a termination of employment; and no transfer of
employment between Potlatch and Clearwater before the Distribution Date shall be
deemed a termination of employment for any purpose hereunder.

10.9 Leave of Absence Programs and FMLA.

(a) Allocation of Responsibilities After Distribution Date. Subject to
Section 12.1 of the Separation Agreement, effective as of the Distribution Date:
(i) each Party shall adopt (or continue to maintain) Leave of Absence Programs
which are substantially identical in all Material Features to the existing Leave
of Absence Programs as in effect on the Distribution Date; (ii) each Party shall
honor all terms and conditions of leaves of absence which have been granted to
any Clearwater or Potlatch Employee under an existing Leave of Absence Program
or FMLA before the Distribution Date, including such leaves that are to commence
after the Distribution Date; (iii) each Party shall be solely responsible for
administering leaves of absence and complying with FMLA with respect to its
hourly Employees; and (iv) each Party shall recognize all periods of service of
the other Party’s employees to the extent such service is recognized under the
existing Leave of Absence Programs and FMLA; provided, however, that no
duplication of benefits shall, to the extent permitted by law, be required by
the foregoing.

(b) Disclosure. Subject to Section 12.1 of the Separation Agreement, at such
date as mutually agreed in writing by the Parties, Clearwater shall provide to
Potlatch copies of all records pertaining to the Clearwater Leave of Absence
Programs and FMLA with respect to all Potlatch Employees to the extent such
records have not been previously provided.

10.10 Employment Litigation. Subject to the Separation Agreement, Potlatch shall
have the sole responsibility for all employment-related claims regarding
Potlatch Employees, and Clearwater shall have the sole responsibility for all
employment-related claims regarding Clearwater Employees, that exist, or come
into existence, on or after the Distribution Date arising out of or relating to
or resulting from their employment in the Retained Business or Pulp-Based
Business, respectively.

 

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10.11 Workers’ Compensation. The ownership and administration of workers
compensation insurance shall be governed by Article VIII of the Separation
Agreement.

 

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ARTICLE XI

LABOR AGREEMENTS

The Parties agree that the Labor Agreements and the Liabilities thereunder
shall, in each case, as applicable, be retained by, or, as applicable, assumed
by, and assigned to, Clearwater.

 

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ARTICLE XII

GENERAL PROVISIONS

12.1 Relationship of Parties. Nothing in this Agreement shall be deemed or
construed by the Parties or any third party as creating the relationship of
principal and agent, partnership or joint venture between the Parties, the
understanding and agreement being that no provision contained herein, and no act
of the Parties, shall be deemed to create any relationship between the Parties
other than the relationship set forth herein.

12.2 Incorporation of Separation Agreement Provisions. The following provisions
of the Separation Agreement are hereby incorporated herein by reference, and
unless otherwise expressly specified herein, such provisions shall apply as if
fully set forth herein (references in this Section to an “Article” shall mean
Articles of the Separation Agreement, and, except as expressly set forth below,
references in the material incorporated herein by reference shall be references
to the Separation Agreement): Article IX (Expenses); Article X
(Indemnification); Article XI (Dispute Resolution); and Article XII (Access to
Information and Services).

12.3 Conflict. In the event of any conflict between the provisions of this
Agreement and the Separation Agreement, any other Agreement between the Parties,
or any Plan, then the provisions of this Agreement shall control.

12.4 Entire Agreement. This Agreement, the Separation Agreement, the Transition
Services Agreement, and the documents delivered pursuant hereto and thereto,
constitute the entire agreement between the Parties with respect to the subject
matter contained herein or therein, and supersede all prior agreements,
negotiations, discussions, understandings, writings and commitments between the
Parties with respect to such subject matter.

12.5 Choice of Law and Forum. This Agreement shall be governed by and construed
and enforced in accordance with the substantive laws of the State of Delaware
and the federal laws of the United States of America applicable therein, as
though all acts and omissions related hereto occurred in Delaware.

12.6 Amendment. This Agreement shall not be amended, modified or supplemented
except by a written instrument signed by an authorized representative of each of
the Parties.

12.7 Waiver. Any term or provision of this Agreement may be waived, or the time
for its performance may be extended, by the Party or Parties entitled to the
benefit thereof. Any such waiver shall be validly and sufficiently given for the
purposes of this Agreement if, as to any Party, it is in writing signed by an
authorized representative of such Party. The failure of any Party to enforce at
any time any provision of this Agreement shall not be construed to be a waiver
of such provision, or in any way to affect the validity of this Agreement or any
part hereof or the right of any Party thereafter to enforce each and every such
provision. No waiver of any breach of this Agreement shall be held to constitute
a waiver of any other or subsequent breach.

 

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12.8 Partial Invalidity. Wherever possible, each provision hereof shall be
interpreted in such a manner as to be effective and valid under applicable Law,
but in case any one or more of the provisions contained herein shall, for any
reason, be held to be invalid, illegal or unenforceable in any respect, such
provision or provisions shall be ineffective to the extent, but only to the
extent, of such invalidity, illegality or unenforceability without invalidating
the remainder of such provision or provisions or any other provisions hereof,
unless such a construction would be unreasonable.

12.9 Execution in Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original instrument, but all of
which shall be considered one and the same agreement, and shall become binding
when one or more counterparts have been signed by and delivered to each of the
Parties.

12.10 Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the Parties hereto and thereto, respectively, and their
successors and permitted assigns; provided, however, that the rights and
obligations of either Party under this Agreement shall not be assignable by such
Party without the prior written consent of the other Party. The successors and
permitted assigns hereunder shall include, without limitation, any permitted
assignee as well as the successors in interest to such permitted assignee
(whether by merger, liquidation (including successive mergers or liquidations)
or otherwise).

12.11 No Third Party Beneficiaries. The provisions of this Agreement are solely
for the benefit of the Parties and their respective Affiliates, successors and
permitted assigns and shall not confer upon any third Person any remedy, claim,
liability, reimbursement or other right in excess of those existing without
reference to this Agreement. No provision in this Agreement shall be construed
to create any right, or accelerate entitlement, to any compensation or benefit
whatsoever on the part of any Potlatch Employee, Clearwater Employee or other
future, present or former employee of Potlatch or Clearwater under any Potlatch
Plan or Clearwater Plan or otherwise. Furthermore, no provision in this
Agreement is intended to, or shall, modify or amend any Potlatch Plan or
Clearwater Plan. The foregoing shall not prevent the Parties entitled to enforce
this Agreement from enforcing any provision in this Agreement, but no other
Person shall be entitled to enforce any provision in this Agreement on the
grounds that it is an amendment to any Potlatch Plan or Clearwater Plan, unless
the provision is explicitly designated as such in this Agreement, and the Person
is otherwise entitled to enforce the terms of such Potlatch Plan or Clearwater
Plan. If a party who is not entitled to enforce this Agreement brings a lawsuit
or other action to enforce any provision in this Agreement as an amendment to
any Potlatch Plan or Clearwater Plan and such provision is construed by a
Governmental Entity to constitute an amendment of such Plan despite not being
explicitly designated as such in this Agreement, that provision shall
retroactively lapse, thereby precluding it from having an amendatory effect.

12.12 Notices. All notices, requests, claims, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed given or
delivered (a) when delivered personally, (b) if transmitted by facsimile when
confirmation of transmission is received, (c) if sent by registered or certified
mail, postage prepaid, return receipt requested, on the third business day after
mailing, or (d) if sent by private courier when received; and shall be addressed
as follows:

 

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If to Potlatch, to:

Potlatch Corporation

601 W. First Avenue, Suite 1600

Spokane, WA 99201

Facsimile: (509) 835-1561

Attention: General Counsel

If to Clearwater, to:

Clearwater Paper Corporation

601 West Riverside Avenue, Suite 1100

Spokane, WA 99201

Facsimile: (509) 342-2570

Attention: General Counsel

or to such other address as such Party may indicate by a notice delivered to the
other Party.

12.13 Performance. Each Party shall cause to be performed, and hereby guarantees
the performance of, all actions, agreements and obligations set forth herein to
be performed by any Subsidiary or Affiliate of such Party.

12.14 Force Majeure. No Party shall be deemed in default of this Agreement to
the extent that any delay or failure in the performance of its obligations under
this Agreement results from any cause beyond its reasonable control and without
its fault or negligence, including, without limitation, acts of God, acts of
civil or military authority, embargoes, epidemics, war, riots, labor strikes,
work stoppages as a result of labor unrest, insurrections, fires, explosions,
earthquakes, floods, unusually severe weather conditions, or unavailability of
parts, or, in the case of computer systems, any failure in electrical or air
conditioning equipment. In the event of any such excused delay, the time for
performance shall be extended for a period equal to the time lost by reason of
the delay.

12.15 No Public Announcement. Neither Potlatch nor Clearwater shall, without the
approval of the other, make any press release or other public announcement
concerning the actions (or inactions) contemplated by this Agreement, except as
and to the extent that any such Party shall be so obligated by Law or the rules
of any stock exchange or quotation system, in which case the other Party shall
be advised and the Parties shall use commercially reasonable efforts to cause a
mutually agreeable release or announcement to be issued; provided, however,
that; the foregoing shall not preclude communications or disclosures necessary:
(a) to implement the provisions of this Agreement; (b) to comply with the
accounting and SEC disclosure obligations or the rules of any stock exchange;
(c) to comply with a Labor Agreement and any requisite effects bargaining; or
(d) to promote a smooth transition for the employees, including FAQs and other
employee communications.

12.16 Termination. Notwithstanding any provisions hereof, this Agreement may be
terminated and the Distribution abandoned at any time prior to the Distribution
Date by and in the sole discretion of the Board of Directors of Potlatch without
the prior approval of any Person.

 

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In the event of such termination, this Agreement shall forthwith become void and
no Party shall have any liability to any Person by reason of this Agreement.

[signature page follows]

 

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IN WITNESS WHEREOF, each Party has caused this Agreement to be executed by its
authorized representative as of the date first above written.

 

POTLATCH CORPORATION, a Delaware corporation By:  

/s/    Michael J. Covey

Name:   Michael J. Covey

CLEARWATER PAPER CORPORATION,

a Delaware corporation

By:  

/s/    Gordon L. Jones

Name:   Gordon L. Jones

 

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