8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 15, 2008

CLEARWATER PAPER CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	001-34146	20-3594554
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

601 West Riverside Ave., Suite 1100

Spokane, WA 99201

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (509) 344-5900

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement.

On December 16, 2008, Potlatch Corporation (“Potlatch”) completed the spin-off (the “Spin-off”) of Clearwater Paper Corporation, formerly known as Potlatch Forest Products Corporation (the “Company”), to Potlatch stockholders. Prior to the Spin-off, the Company was a wholly owned subsidiary of Potlatch. On December 15, 2008, the Company entered into each of the following agreements in connection with the Spin-off (collectively, the “Spin-off Agreements”):

1. Separation and Distribution Agreement, between the Company and Potlatch;

2. Retained Obligation Agreement, between the Company and Potlatch;

3. Transition Services Agreement, between the Company and Potlatch Land & Lumber, LLC, a wholly owned subsidiary of Potlatch (“PLL”);

4. Employee Matters Agreement, between the Company and Potlatch; and

5. Tax Sharing Agreement, among the Company, Potlatch, PLL and Potlatch Forest Holdings, Inc., a wholly owned subsidiary of Potlatch (“Holdings”).

A summary of the material terms of each of the Spin-off Agreements can be found in the section entitled “Our Relationship with Potlatch Corporation after the Distribution” in the Company’s Information Statement, filed as Exhibit 99.2 to the Company’s Current Report on Form 8-K filed on December 3, 2008 (the “Information Statement”), and is incorporated herein by reference. The summary in the Information Statement does not purport to be complete. The summary in the Information Statement is subject to, and is qualified in its entirety by, the complete text of each of the Spin-off Agreements, copies of which are attached as Exhibit 2.1, Exhibit 10.1, Exhibit 10.2, Exhibit 10.3 and Exhibit 10.4, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.

Item 2.01 Completion of Acquisition or Disposition of Assets.

Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference. In connection with the Spin-off, on December 15, 2008, the Company transferred its real estate sales and development business, its harvest and log sales business and its wood products operations, other than the lumber products operations located in Lewiston, Idaho, to PLL, all pursuant to the Separation and Distribution Agreement. Immediately following such transfer of assets, the Company transferred all outstanding equity interests in PLL to Potlatch. A description of the foregoing transfers can be found in the section of the Information Statement entitled “The Spin-off – Transactions Prior to the Spin-off,” and such description is incorporated herein by reference.

Item 2.03. Creation of a Direct Financial Obligation.

Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference. On December 15, 2008 and in connection with the Spin-off, the Company drew $50 million in cash under the Loan and Security Agreement, dated as of November 26, 2008, by and among the Company and Bank of America, N.A., as administrative agent, and the lenders party thereto (the “Credit Agreement”), and caused that amount to be transferred to PLL. In addition, on December 15,

2008, the Company entered into the Retained Obligation Agreement pursuant to which the Company retained the obligation to pay $100 million principal amount of credit sensitive debentures previously issued by Holdings, which will become due and payable in full on December 1, 2009. A description of the Credit Agreement under which the $50 million was drawn can be found in the section of the Information Statement entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” and such description is incorporated herein by reference. A summary of the material terms of the Retained Obligation Agreement can be found in the section of the Information Statement entitled “Our Relationship with Potlatch Corporation after the Distribution – Retained Obligation Agreement,” and such description is incorporated herein by reference. The summaries of the Credit Agreement and the Retained Obligation Agreement contained in the Information Statement incorporated herein do not purport to be complete. The summaries are subject to, and are qualified in their entirety by, the complete text of the Credit Agreement and the Retained Obligation Agreement, copies of which are attached as Exhibit 10.1 to the Current Report on Form 8-K filed on December 3, 2008 and as Exhibit 10.1 to this Current Report on Form 8-K, respectively, and incorporated herein by reference.

Item 5.01 Change in Control of the Registrant.

Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference. Prior to the completion of the Spin-off, Potlatch was the sole and controlling stockholder of the Company. On December 16, 2008, Potlatch distributed all of the outstanding shares of common stock of the Company (and the associated “Rights” referred to in Item 5.03 of this Current Report on Form 8-K) to Potlatch stockholders. The section of the Information Statement entitled “Our Relationship with Potlatch Corporation after the Distribution,” which summarizes the material terms of the Spin-off Agreements, is incorporated herein by reference. The summary of the material terms of the Spin-off Agreements is subject to, and is qualified in its entirety by, the complete text of each of the Spin-off Agreements, copies of which are attached as Exhibit 2.1, Exhibit 10.1, Exhibit 10.2, Exhibit 10.3 and Exhibit 10.4, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(b) Effective December 16, 2008 and in connection with the appointment of the officers and directors of the Company described below, Michael J. Covey resigned from his position as the President and Chief Executive Officer of the Company and as a member of the Board of Directors of the Company, and Eric J. Cremers resigned from his position as Vice President, Finance and Chief Financial Officer of the Company.

(c) Effective December 16, 2008 and in connection with the Spin-off, (i) Gordon L. Jones was appointed as the Company’s President, Chief Executive Officer and a member of the Company’s Board of Directors, (ii) Linda K. Massman was appointed as the Company’s Vice President, Finance and Chief Financial Officer, and (iii) Douglas D. Spedden was appointed as the Company’s Controller and Treasurer. Douglas D. Spedden, 48, previously served as the Treasurer of Potlatch from March 2004 until December 15, 2008, and served as the Assistant Treasurer of Potlatch from December 2000 until March 2004. The sections of the Information Statement entitled “Management,” “Compensation Discussion and Analysis,” “Certain Relationships and Related Party Transactions” and “Description of Capital Stock - Limitation of Liability and Indemnification Matters” are incorporated herein by reference.

(d) Effective December 16, 2008 and in connection with the Spin-off, Gordon L. Jones, Jack A. Hockema and William D. Larsson were appointed as members of the Board of Directors of the Company. In addition, effective December 16, 2008, William D. Larsson was appointed as a member of the Audit Committee of the Board of Directors of the Company and Jack A. Hockema was appointed as a member of the Compensation Committee of the Board of Directors of the Company and as a member of the Nominating and Corporate Governance Committee of the Board of Directors of the Company. The sections of the Information Statement entitled “Management,” “Certain Relationships and Related Party Transactions” and “Description of Capital Stock - Limitation of Liability and Indemnification Matters” are incorporated herein by reference.

The following table shows the composition of the Board of Directors of the Company, the composition of the committees of the Board of Directors of the Company, and the director classifications, all as of December 16, 2008:

Name of Director	Audit Committee	Compensation Committee	Nominating and Governance Committee	Director Class(1)
Gordon L. Jones				Class I
Boh. A. Dickey(2)(3)	•		•	Class I
Jack A. Hockema		•	•	Class III
William D. Larsson	•			Class II
Michael T. Riordan(4)		•	•	Class II
William T. Weyerhaeuser(5)	•	•		Class III

(1) The initial term of Class I directors expires at the 2009 annual stockholders’ meeting, the initial term of Class II directors expires at the 2010 annual stockholders’ meeting, and the initial term of Class III directors expires at the 2011 annual stockholders’ meeting.

(2) Chair of the Board of Directors.

(3) Chair of the Audit Committee.

(4) Chair of the Nominating and Corporate Governance Committee.

(5) Chair of the Compensation Committee.

Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

Effective December 16, 2008, the Company amended and restated its certificate of incorporation (the “Restated Charter”). The section of the Information Statement entitled “Description of Capital Stock,” which includes a description of the provisions of the Restated Charter, is incorporated herein by reference. The Restated Charter includes, as Exhibit A attached thereto, the classification and designation of the Series A Participating Preferred Stock of the Company (the “Series A Preferred Stock”). The Current Report on Form 8-K filed by the Company on December 4, 2008, which contains a description of the rights and preferences of the Series A Preferred Stock and the “Rights” associated therewith, is incorporated herein by reference.

Effective December 16, 2008, the Company’s Board of Directors approved an amendment and restatement of the Company’s by-laws (the “Amended and Restated Bylaws”). The section of the Information Statement entitled “Description of Capital Stock,” which includes a description of the provisions of the Amended and Restated Bylaws, is incorporated herein by reference.

The foregoing descriptions of the Restated Charter and the Amended and Restated Bylaws are qualified in their entirety by reference to the full text of the Restated Charter and the Amended and Restated Bylaws, copies of which are attached as Exhibits 3.1 and 3.2 hereto, respectively, and are incorporated herein by reference.

Item 8.01. Other Events.

On December 1, 2008, the Company issued a press release announcing the completion of the Spin-off. The foregoing summary is qualified in its entirety by reference to the press release, a copy of which is furnished as Exhibit 99.1 hereto, and is incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits.

(b) Pro forma financial information.

Item 1.01 of this Current Report on Form 8-K is incorporated by reference. The pro forma financial information required to be filed under Item 9.01 of this Current Report on Form 8-K is included in the Information Statement.

(d) Exhibits.

2.1	Separation and Distribution Agreement, dated December 15, 2008, between Potlatch Corporation and Clearwater Paper Corporation.
3.1	Restated Certificate of Incorporation of Clearwater Paper Corporation, effective as of December 16, 2008, as filed with the Secretary of State of the State of Delaware.
3.2	Amended and Restated Bylaws of Clearwater Paper Corporation, effective as of December 16, 2008.
10.1	Retained Obligation Agreement, dated December 15, 2008, between Potlatch Corporation and Clearwater Paper Corporation.
10.2	Transition Services Agreement, dated December 15, 2008, between Potlatch Land & Lumber, LLC and Clearwater Paper Corporation.
10.3	Employee Matters Agreement, dated December 15, 2008, between Potlatch Corporation and Clearwater Paper Corporation.
10.4	Tax Sharing Agreement, dated December 15, 2008, among Potlatch Corporation, Potlatch Forest Holdings, Inc., Potlatch Land & Lumber, LLC and Clearwater Paper Corporation.
99.1	Clearwater Paper Corporation Press Release, dated December 16, 2008.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: December 18, 2008

CLEARWATER PAPER CORPORATION
By:	/s/ Michael S. Gadd
	Michael S. Gadd, Corporate Secretary

EXHIBIT INDEX

Exhibit	Description of Exhibit
2.1	Separation and Distribution Agreement, dated December 15, 2008, between Potlatch Corporation and Clearwater Paper Corporation.
3.1	Restated Certificate of Incorporation of Clearwater Paper Corporation, effective as of December 16, 2008, as filed with the Secretary of State of the State of Delaware.
3.2	Amended and Restated Bylaws of Clearwater Paper Corporation, effective as of December 16, 2008.
10.1	Retained Obligation Agreement, dated December 15, 2008, between Potlatch Corporation and Clearwater Paper Corporation.
10.2	Transition Services Agreement, dated December 15, 2008, between Potlatch Land & Lumber, LLC and Clearwater Paper Corporation.
10.3	Employee Matters Agreement, dated December 15, 2008, between Potlatch Corporation and Clearwater Paper Corporation.
10.4	Tax Sharing Agreement, dated December 15, 2008, among Potlatch Corporation, Potlatch Forest Holdings, Inc., Potlatch Land & Lumber, LLC and Clearwater Paper Corporation.
99.1	Clearwater Paper Corporation Press Release, dated December 16, 2008.

EX-2.1

Exhibit 2.1

SEPARATION AND DISTRIBUTION AGREEMENT

by and between

POTLATCH CORPORATION

and

CLEARWATER PAPER CORPORATION

Dated as of December 15, 2008

Table of Contents

		Page
ARTICLE I DEFINITIONS		2
Section 1.1	Definitions	2
Section 1.2	Interpretation	10
ARTICLE II		11
THE SEPARATION		11
Section 2.1	General	11
Section 2.2	Transfer of Assets.	11
Section 2.3	Assumption of Liabilities; Retention of Specified Liabilities	11
Section 2.4	Separation and Distribution Transactions	12
Section 2.5	Existing Intercompany Agreements	13
Section 2.6	Shared Contracts Liability	13
Section 2.7	Employee Matters Agreement and Tax Sharing Agreement	13
Section 2.8	Credit Sensitive Debentures	13
ARTICLE III		13
THE DISTRIBUTION		13
Section 3.1	Issuance and Delivery of Clearwater Common Stock	13
Section 3.2	Distribution of Clearwater Common Stock	14
Section 3.3	Treatment of Fractional Shares	14
Section 3.4	Potlatch Board Action	14
ARTICLE IV CONVEYANCE INSTRUMENTS		14
Section 4.1	Delivery of Instruments of Conveyance	14
Section 4.2	Delivery of Other Agreements	15
ARTICLE V NO REPRESENTATIONS AND WARRANTIES		15
Section 5.1	No Potlatch Group Representations or Warranties	15
Section 5.2	No Clearwater Representations or Warranties	15
ARTICLE VI COVENANTS		16
Section 6.1	Material Governmental Approvals	16
Section 6.2	Non-Assignable Contracts	16
Section 6.3	Further Assurances	17
Section 6.4	Collection of Accounts Receivable	18
Section 6.5	Registration and Listing	18
Section 6.6	No Non-competition	19
Section 6.7	Use of Potlatch Name	19
Section 6.8	Exempt Facilities	20
ARTICLE VII CONDITIONS TO THE DISTRIBUTION		21
Section 7.1	Approval by Potlatch Board of Directors	21
Section 7.2	Receipt of IRS Private Letter Ruling and Opinion	21
Section 7.3	Compliance with State and Foreign Securities and “Blue Sky” Laws	21
Section 7.4	SEC Filings and Approvals	22
Section 7.5	Effectiveness of Registration Statement; No Stop Order	22

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Section 7.6	Dissemination of Information to Potlatch Stockholders	22
Section 7.7	Approval of NYSE Listing Application	22
Section 7.8	Ancillary Agreements	22
Section 7.9	Director and Officer Appointments and Resignations	22
Section 7.10	Consents	22
Section 7.11	No Actions	22
Section 7.12	Consummation of Pre-Distribution Transactions	23
Section 7.13	No Other Events	23
Section 7.14	Satisfaction of Conditions	23
ARTICLE VIII INSURANCE MATTERS		23
Section 8.1	Insurance Prior to the Distribution Date	23
Section 8.2	Ownership of Existing Policies and Programs	23
Section 8.3	Maintenance of Insurance for Clearwater	24
Section 8.4	Acquisition and Maintenance of Post-Distribution Insurance by Clearwater	24
Section 8.5	Property Damage and Business Interruption Insurance Claims Administration for Pre-Distribution Losses	24
Section 8.6	Liability and Workers Compensation Insurance Claims Administration for Pre-Distribution Occurrences	24
Section 8.7	Non-Waiver of Rights to Coverage; Subrogation	25
Section 8.8	Scope of Affected Policies of Insurance	25
ARTICLE IX EXPENSES		25
Section 9.1	Allocation of Expenses	25
ARTICLE X INDEMNIFICATION		26
Section 10.1	Release of Pre-Distribution Claims.	26
Section 10.2	Indemnification by Clearwater	27
Section 10.3	Indemnification by Potlatch	28
Section 10.4	Applicability of and Limitation on Indemnification	28
Section 10.5	Adjustment of Indemnifiable Losses	28
Section 10.6	Procedures for Indemnification of Third Party Claims	29
Section 10.7	Procedures for Indemnification of Direct Claims	31
Section 10.8	Contribution	31
Section 10.9	Remedies Cumulative	32
Section 10.10	Survival	32
ARTICLE XI DISPUTE RESOLUTION		32
Section 11.1	Escalation and Mediation.	32
Section 11.2	Continuity of Service and Performance	32
Section 11.3	Choice of Forum	33
Section 11.4	Ability to Pursue Other Legal Remedies	33
ARTICLE XII ACCESS TO INFORMATION AND SERVICES		33
Section 12.1	Agreement for Exchange of Information	33
Section 12.2	Ownership of Information	33
Section 12.3	Compensation for Providing Information	33
Section 12.4	Retention of Records	34

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Section 12.5	Limitation of Liability	34
Section 12.6	Production of Witnesses	34
Section 12.7	Confidentiality	34
Section 12.8	Privileged Matters	35
ARTICLE XIII MISCELLANEOUS		36
Section 13.1	Entire Agreement	36
Section 13.2	Choice of Law	36
Section 13.3	Amendment	36
Section 13.4	Waiver	36
Section 13.5	Partial Invalidity	36
Section 13.6	Execution in Counterparts	37
Section 13.7	Successors and Assigns	37
Section 13.8	Third Party Beneficiaries	37
Section 13.9	Notices	37
Section 13.10	Performance	38
Section 13.11	Force Majeure	38
Section 13.12	No Public Announcement	38
Section 13.13	Termination	38

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SEPARATION AND DISTRIBUTION AGREEMENT

THIS SEPARATION AND DISTRIBUTION AGREEMENT (this “Agreement”) is made as of December 15, 2008, by and between Potlatch Corporation, a Delaware corporation (“Potlatch”), and Clearwater Paper Corporation, a Delaware corporation (formerly named Potlatch Forest Products Corporation) (“Clearwater”) (each a “Party” and together, the “Parties”). Capitalized terms used in this Agreement are defined or otherwise referenced in Section 1.1.

RECITALS

WHEREAS, in order to elect to be taxed as a real estate investment trust effective January 1, 2006, the predecessor corporation to Potlatch contributed manufacturing assets, certain real property, and other assets to Clearwater on December 30, 2005 (the “REIT Conversion Contribution”), and, as a result of the REIT Conversion Contribution, Clearwater holds assets and liabilities that comprise the Retained Business (as defined below) and the Pulp-Based Business (as defined below);

WHEREAS, in connection with the REIT Conversion Contribution, Clearwater assumed, and agreed to duly and punctually make all payments of principal (and premium, if any) and interest on, approximately $335 million of Potlatch’s predecessor’s indebtedness to third parties (the “Drop-Down Indebtedness”), and also assumed certain other contractual and contingent liabilities of Potlatch’s predecessor (such assumptions, collectively, the “REIT Conversion Assumption”);

WHEREAS, Potlatch desires to separate the Retained Business from the Pulp-Based Business (the “Separation”), such that, after the Separation, Potlatch will indirectly own and conduct the Retained Business and Clearwater will directly own and conduct the Pulp-Based Business;

WHEREAS, following the Separation, the Board of Directors of Potlatch has determined that it is appropriate, desirable and in the best interests of Potlatch and its stockholders to distribute on a pro rata basis to the holders of Potlatch’s common stock, par value $1.00 per share (“Potlatch Common Stock”), without any consideration being paid by the holders of such Potlatch Common Stock, all of the outstanding shares of Clearwater common stock, par value $0.001 per share (“Clearwater Common Stock”), then owned by Potlatch (the “Distribution”);

WHEREAS, for federal income tax purposes, the Separation is intended to qualify for tax-free treatment under Section 368(a)(1)(D) and Section 355 of the Internal Revenue Code of 1986, as amended (the “Code”) and the Distribution is intended to qualify for tax-free treatment under Section 355 of the Code; and

WHEREAS, it is appropriate and desirable to set forth the principal transactions required to effect the Separation and the Distribution and certain other agreements that will govern the relationship of the Potlatch Group and the Clearwater Group following the Distribution.

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

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ARTICLE I

DEFINITIONS

Section 1.1 Definitions. As used in this Agreement, the following terms shall have the meanings set forth in this Section 1.1.

“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.

“Affiliate” means, 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.

“Agent” means Mellon Investor Services LLC, the distribution agent appointed by Potlatch to distribute shares of Clearwater Common Stock pursuant to the Distribution.

“Agreement” has the meaning set forth in the first paragraph hereof.

“Ancillary Agreements” means all of the written Contracts (other than this Agreement) entered into in connection with the transactions contemplated hereby, including the Conveyance Instruments, the Employee Matters Agreement, the Greenhouse Agreement, the Marketing Agreement, the Lease and Option Agreement, the Retained Obligation Agreement, the Supply Agreements, the Tax Sharing Agreement and the Transition Services Agreement.

“Assets” means assets, properties, claims and rights (including goodwill), wherever located, of every kind, character and description, whether real, personal or mixed, tangible or intangible, in each case whether or not recorded or reflected or required to be recorded or reflected on the records or financial statements of any Person, including the following:

(i) real property, and all buildings, fixtures and other improvements located thereon, and interests therein and rights and interests appurtenant thereto;

(ii) personal property and interests therein, whether owned, leased, licensed, subleased or sublicensed, including machinery, equipment, tools, tooling, furniture, office equipment, communications equipment, computers, servers, workstations, data communications lines, and other information technology equipment, vehicles, containers, storage tanks, spare and replacement parts, fuel and other tangible property;

(iii) raw materials, work-in-process, finished goods, supplies and other inventories;

(iv) rights under Contracts;

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(v) the capital stock, membership interests, partnership interests or other equity interests in any Person;

(vi) prepaid expenses, including ad valorem taxes, leases and rentals;

(vii) accounts, notes and other receivables;

(viii) rights, claims, credits, causes of Action or rights of set-off against third parties;

(ix) Intellectual Property Rights;

(x) licenses, permits or other governmental authorizations issued by any Governmental Entity;

(xi) books, records, files and papers, whether in hard copy or computer format, or business processes, whether recorded or not, including facility blueprints and plant layouts, process sheets, preventive maintenance schedules, environmental information, sales and promotional literature, engineering information, manuals and data, sales and purchase correspondence, lists of present and former suppliers, lists of present and former customers, legal files and papers, personnel and employment records, and other financial, accounting and operational data, records and information;

(xii) cash and cash equivalents on hand and in banks; and

(xiii) refunds with respect to Taxes, whether recorded or not.

“Assume” means accept, assume, perform, discharge and fulfill in accordance with the terms of the item assumed; and the terms “Assumed” and “Assumption” shall have their correlative meanings.

“Bonds” has the meaning set forth in Section 6.8(a).

“Clearwater” has the meaning set forth in the first paragraph of this Agreement.

“Clearwater Common Stock” has the meaning set forth in the recitals.

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

“Clearwater Indemnified Parties” has the meaning set forth in Section 10.3.

“Code” has the meaning set forth in the recitals.

“Consents” means any consents, waivers or approvals from any Person, other than a Governmental Entity.

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“Contract” means any agreement, license, contract, obligation, indenture, instrument, lease, promise, arrangement, release, warranty, commitment or undertaking (whether written or oral and whether express or implied).

“Conveyance Instruments” has the meaning set forth in Section 4.1.

“Credit Facility” means a $125 million secured bank credit facility to be entered into by Clearwater.

“Credit Sensitive Debentures” means the 9-1/8% Credit Sensitive Debentures due 2009 issued by Potlatch on December 4, 1989, under that certain Indenture dated as of April 1, 1986 between Potlatch and Bankers Trust of California, National Association.

“Distribution” has the meaning set forth in the recitals.

“Distribution Date” means 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.

“Distribution Ratio” means, for each holder of record of Potlatch Common Stock as of the close of business on the Record Date, one share of Clearwater Common Stock for every 3.5 shares of Potlatch Common Stock outstanding and held of record by such holder at such time.

“Drop-Down Indebtedness” has the meaning set forth in the recitals and includes the Liabilities, if any, specifically described in, or listed or described in the schedules attached to, and referred to as “Drop-Down Indebtedness” in, the Conveyance Instruments.

“Employee Matters Agreement” means the Employee Matters Agreement, dated the date hereof, between Potlatch and Clearwater.

“Escalation Notice” has the meaning set forth in Section 11.1(a).

“Exchange Act” has the meaning set forth in Section 6.5(a).

“Exempt Facilities” has the meaning set forth in Section 6.8(a).

“Expenses” means any and all reasonable expenses incurred in connection with investigating, defending or asserting any Action incident to any matter indemnified against hereunder (including court filing fees, court costs, arbitration fees or costs, witness fees, and reasonable fees and disbursements of legal counsel, investigators, expert witnesses, consultants, accountants and other professionals).

“Facilities” means 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.

“Governmental Approvals” means any notices or reports to be submitted to, or other filings to be made with, or any consents, registrations, approvals, permits or authorizations to be obtained from, any Governmental Entity.

“Governmental Entity” means 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.

“Greenhouse Agreement” means the Greenhouse Services Agreement, dated the date hereof, between Holdings and Clearwater.

“Groups” means the Potlatch Group or the Clearwater Group, as applicable.

“Holdings” means Potlatch Forest Holdings, Inc., a Delaware corporation and a direct, wholly owned subsidiary of Potlatch.

“Indemnified Party” has the meaning set forth in Section 10.5(a).

“Indemnifying Party” has the meaning set forth in Section 10.5(a).

“Indemnity Payment” has the meaning set forth in Section 10.5(a).

“Information” has the meaning set forth in Section 12.1(a).

“Information Statement” has the meaning set forth in Section 6.5(a).

“Insurance Charges” has the meaning set forth in Section 8.6(c).

“Intellectual Property Rights” means all (i) inventions, whether or not patentable; (ii) patents and patent applications; (iii) trademarks, service marks, trade dress, logos, Internet domain names and trade names, whether or not registered, and all goodwill associated therewith; (iv) rights of publicity and other rights to use the names and likeness of individuals; (v) copyrights and related rights, whether or not registered; (vi) computer software, data, databases, files, and documentation and other materials related thereto; (vii) trade secrets, know-how and confidential, technical and business information, including product design and proprietary technology, processes and formulae; (viii) all rights to sue or recover and retain damages and costs and attorneys’ fees for past, present and future infringement or misappropriation of any of the foregoing; and (ix) any other similar type of proprietary intellectual property right.

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“Intercompany Agreements” means any Contract between Potlatch or one of its Subsidiaries and Clearwater or one of its Subsidiaries entered into prior to the Distribution, excluding this Agreement and the Ancillary Agreements.

“Intercreditor Agreement” means the Intercreditor Agreement among Potlatch, Clearwater and the senior lenders under the Credit Facility.

“IRS” means the Internal Revenue Service and any successor agency.

“Knowing Violation of Law” means (i) in any context other than a criminal action, an intentional act or omission by a Person who is aware that the conduct is in violation of Law, and (ii) in the context of a criminal action, an intentional act or omission by a Person that violates a criminal Law unless that Person had no reasonable cause to believe that the conduct was a violation of criminal Law.

“Law” means 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).

“Lease and Option Agreement” means the Lease and Option Agreement, dated the date hereof, between Holdings and Clearwater.

“Liability” means 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.

“Losses” means any and all losses, costs, Liabilities, settlement payments, awards, judgments, fines, penalties, damages, fees, expenses, deficiencies, claims or other charges, absolute or contingent, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown (including, without limitation, the costs and expenses of any and all Actions, threatened Actions, demands, assessments, judgments, settlements and compromises relating thereto and attorneys’ fees and any and all expenses whatsoever reasonably incurred in investigating, preparing or defending against any such Actions or threatened Actions).

“Marketing Agreement” means the Lumber Sales and Marketing Agreement, dated the date hereof, between RetainCo and Clearwater.

“NYSE” means the New York Stock Exchange, Inc.

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

“Person” means any individual, corporation, partnership, joint venture, limited liability company, association, joint-stock company, trust, unincorporated organization or Governmental Entity.

“Potlatch” has the meaning set forth in the first paragraph on this Agreement.

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“Potlatch Administered Claims” has the meaning set forth in Section 8.6(a).

“Potlatch Common Stock” has the meaning set forth in the recitals.

“Potlatch Group” means 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.

“Potlatch Indemnified Parties” has the meaning set forth in Section 10.2.

“Potlatch Name” means the business name, brand name, trade name, trademark, service mark and domain name “Potlatch,” any business name, brand name, trade name, trademark, service mark or domain name that includes the word “Potlatch,” and any and all other derivatives thereof and the Potlatch logo.

“Potlatch Policies” has the meaning set forth in Section 8.2.

“Prime Rate” means the rate that Bank of America (or any successor thereto or other major money center commercial bank agreed to by the Parties) announces from time to time as its prime lending rate, as in effect from time to time.

“Privilege” has the meaning set forth in Section 12.8(a).

“Privileged Information” has the meaning set forth in Section 12.8(a).

“Pulp-Based Business” means 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.

“Pulp-Based Business Assets” means the Assets primarily used in or held for use in the Pulp-Based Business (excluding, for the avoidance of doubt, the Clearwater Common Stock), including the Pulp-Based Business Assets specifically described in, or listed or described in the schedules attached to, the Conveyance Instruments.

“Pulp-Based Business Liabilities” means (a) the Liabilities primarily arising from or primarily related to the Pulp-Based Business and the Pulp-Based Business Assets, other than any such Liabilities that are Specified Potlatch Liabilities, (b) the Liabilities, if any, specifically described in, or listed or described in the schedules attached to, and referred to as “Pulp-Based Business Liabilities” in, the Conveyance Instruments and (c) the Retained Obligation.

“Record Date” means the date determined by the Board of Directors of Potlatch as the record date for the Distribution.

“Registration Statement” has the meaning set forth in Section 6.5(a).

“REIT Conversion Assumption” has the meaning set forth in the recitals.

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“REIT Conversion Contribution” has the meaning set forth in the recitals.

“Related Person” means, with respect to a Party, any Person who at any time prior to the Distribution Date was a director, officer, agent or employee of such Party (in each case, in their respective capacities as such), together with such Person’s heirs, executors, administrators, successors and assigns.

“RetainCo” means Potlatch Land & Lumber, LLC, a Delaware limited liability company.

“Retained Business” means all of the current businesses and operations of Potlatch and its Affiliates other than the Pulp-Based Business, and includes (i) the real estate business, which acquires and sells timberland and other real property, sells conservation easements and undertakes certain land development activities, (ii) the harvest and log sale business, which harvests standing timber and purchases and sells logs, and (iii) 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).

“Retained Business Assets” means all Assets of Clearwater other than the Pulp-Based Business Assets, including the Retained Business Assets specifically described in, or listed or described in the schedules attached to, the Conveyance Instruments.

“Retained Business Liabilities” means (a) all Liabilities of Clearwater (including the Drop-Down Indebtedness) other than the Pulp-Based Business Liabilities, and (b) the Liabilities, if any, specifically described in, or listed or described in the schedules attached to, and referred to as “Retained Business Liabilities” in, the Conveyance Instruments.

“Retained Obligation” means the Liability of Clearwater under the documents governing the REIT Conversion Assumption for payment of principal and interest on the Credit Sensitive Debentures (as set forth in the Retained Obligation Agreement).

“Retained Obligation Agreement” means the Retained Obligation Agreement, dated the date hereof, between Potlatch and Clearwater.

“SEC” means the U.S. Securities and Exchange Commission.

“Separation” has the meaning set forth in the recitals.

“Shared Contract” means a Contract with a third Person that directly benefits both the Potlatch Group and the Clearwater Group, as the same may be more specifically described in, or listed or described in schedules attached to, the Conveyance Instruments.

“Specified Potlatch Liabilities” means the Liabilities, if any, specifically described in, or listed or described in the schedules attached to, and referred to as “Specified Potlatch Liabilities” in, the Conveyance Instruments.

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“Subscriber Agreement” means the Amended Subscriber Agreement among Potlatch and the other parties thereto (including Clearwater after the Distribution Date), as the same may be amended from time to time, relating to the domestic reciprocal workers compensation insurer known as the Idaho Workers Compensation Exchange.

“Subsidiary” means, 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 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.

“Supply Agreements” means the Hog Fuel Supply Agreement, the Lewiston Shavings Sales Agreement, the Log Supply Agreement, and the St. Maries Residuals Sales Agreement, each dated the date hereof, between RetainCo and Clearwater.

“Tax” shall have the meaning set forth in the Tax Sharing Agreement.

“Tax Sharing Agreement” means the Tax Sharing Agreement, dated the date hereof, among Potlatch, Holdings, RetainCo and Clearwater.

“Third Party Claim” has the meaning set forth in Section 10.6(a).

“Transfer” means transfer, contribute, assign, distribute, and convey, or cause to be transferred, contributed, assigned, distributed, and conveyed.

“Transition Services Agreement” means the Transition Services Agreement, dated the date hereof, between RetainCo and Clearwater.

“Wood Products Mills” means each of the following mills and facilities:

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

(b) sawmill in Warren, Arkansas;

(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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Section 1.2 Interpretation.

(a) In this Agreement, unless the context clearly indicates otherwise:

(i) words used in the singular include the plural and words used in the plural include the singular;

(ii) reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement;

(iii) reference to any gender includes the other gender;

(iv) the word “including” means “including, but not limited to”;

(v) reference to any Article or Section means such Article or Section of this Agreement, as the case may be, and references in any section or definition to any clause means such clause of such section or definition;

(vi) the words “herein,” “hereunder,” “hereof,” “hereto” and words of similar import shall be deemed references to this Agreement as a whole and not to any particular section or other provision hereof;

(vii) reference to any Contract means such Contract as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and by this Agreement;

(viii) reference to any Law means such Law as amended, modified, codified or reenacted, in whole or in part, and in effect at the time of determining compliance or applicability;

(ix) accounting terms used herein shall have the meanings historically ascribed to them by Potlatch and its Subsidiaries based upon Potlatch’s internal financial policies and procedures in effect prior to the date of this Agreement;

(x) the titles to Articles and headings of Sections contained in this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of or to affect the meaning or interpretation of this Agreement;

(xi) any portion of this Agreement obligating a Party to take any action or refrain from taking any action, as the case may be, shall mean that such Party shall also be obligated to cause its relevant Subsidiaries to take such action or refrain from taking such action, as the case may be; and

(xii) unless otherwise specified in this Agreement, all references to dollar amounts herein shall be in respect of lawful currency of the United States.

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(b) This Agreement was negotiated by the Parties, and any rule of construction or interpretation otherwise requiring this Agreement to be construed or interpreted against either Party shall not apply to any construction or interpretation hereof.

ARTICLE II

THE SEPARATION

Section 2.1 General. Subject to the terms and conditions of this Agreement, the Parties shall use, and shall cause members of their respective Groups to use, their respective commercially reasonable efforts to consummate the transactions contemplated hereby, a portion of which have already been implemented prior to the date hereof. It is the intent of the Parties that Potlatch and Clearwater and the members of their respective Groups, shall take such actions, to the extent necessary, such that prior to the Distribution: (i) the Retained Business Assets will be owned or held by members of the Potlatch Group, the Retained Business will be conducted by members of the Potlatch Group and all of the Retained Business Liabilities will be Assumed directly or indirectly by (or retained by) a member of the Potlatch Group and (ii) the Pulp-Based Business Assets will be owned or held by members of the Clearwater Group, the Pulp-Based Business will be conducted by members of the Clearwater Group and all of the Pulp-Based Business Liabilities will be Assumed directly or indirectly by (or retained by) members of the Clearwater Group.

Section 2.2 Transfer of Assets.

(a) Prior to the Distribution and to the extent not already completed or owned by RetainCo, pursuant to the Conveyance Instruments, Clearwater shall Transfer to RetainCo, all of Clearwater’s right, title and interest in and to the Retained Business Assets.

(b) Prior to the Distribution and to the extent not already completed or owned by Clearwater as a result of the REIT Conversion Contribution or otherwise, pursuant to the Conveyance Instruments, Potlatch shall Transfer to Clearwater all of Potlatch’s (or any member of the Potlatch Group’s) right, title and interest in and to the Pulp-Based Business Assets.

(c) The Parties shall cooperate and use their commercially reasonable efforts to obtain any required Consents or Governmental Approvals, and provide any required notices, to Transfer any Assets as contemplated by this Agreement.

Section 2.3 Assumption of Liabilities; Retention of Specified Liabilities. Except as otherwise specifically set forth in any Ancillary Agreement,

(a) (i) Clearwater shall, to the extent not already Assumed in connection with the REIT Conversion Assumption, Assume, pursuant to the Conveyance Instruments (or, as applicable, retain), the Pulp-Based Business Liabilities and (ii) RetainCo shall Assume, pursuant to the Conveyance Instruments, the Retained Business Liabilities; and

(b) the applicable member of the Potlatch Group shall retain the Specified Potlatch Liabilities (it being understood and agreed that, pursuant to Section 10.2(c), the Clearwater Group will indemnify the Potlatch Group with respect to the Specified Potlatch Liabilities);

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in each case of subsection (a) and (b) above, regardless of (w) when or where the same arose or arise, (x) whether the facts upon which they are based occurred prior to or on the Distribution, (y) where or against whom the same are asserted or determined or (z) whether arising from or alleged to arise from negligence, gross negligence, recklessness, violation of Law, willful misconduct, bad faith, fraud or misrepresentation by any member of the Potlatch Group or the Clearwater Group, as the case may be, or any of their respective Related Persons.

Section 2.4 Separation and Distribution Transactions. In order to effectuate the Transfers and Assumptions pursuant to Section 2.2 and Section 2.3, each Party agrees to take, or cause members of its respective Group to take, prior to the Distribution and subject to the terms of this Agreement, all actions necessary to effectuate the Separation and Distribution, including the following actions (some of which have already been taken prior to the date hereof):

(a) Clearwater shall form RetainCo as a first-tier Subsidiary.

(b) Clearwater shall enter into the Credit Facility and Potlatch and Clearwater shall enter into the Intercreditor Agreement.

(c) Clearwater will file (and Potlatch will consent to and approve the filing of) an amendment to Clearwater’s certificate of incorporation to increase the number of authorized shares of Clearwater Common Stock.

(d) Holdings shall transfer to Potlatch all of Holdings’ right, title and interest in and to the capital stock of Clearwater.

(e) Clearwater and the applicable member of the Potlatch Group shall enter into each of the Ancillary Agreements.

(f) Clearwater will effect a stock dividend to Potlatch such that, after giving effect to such dividend, Potlatch will hold that number of shares of Clearwater Common Stock as are to be distributed in the Distribution

(g) Clearwater shall effect the Transfer to RetainCo of the Retained Assets, and Clearwater shall effect the Assumption of Pulp-Based Business Liabilities, set forth in Section 2.2(a) and Section 2.3(a)(i), respectively.

(h) Potlatch shall effect the Transfer to Clearwater of the Pulp-Based Business Assets (to the extent not already owned by Clearwater), and RetainCo shall effect the Assumption of the Retained Business Liabilities, set forth in Section 2.2(b) and Section 2.3(a)(ii), respectively.

(i) Clearwater will draw $50 million on the Credit Facility and transfer (or cause to be transferred) such amount to RetainCo.

(j) Clearwater shall transfer to Potlatch all of Clearwater’s right, title and interest in and to the equity interests in RetainCo.

(k) Potlatch shall transfer to Holdings all of Potlatch’s right, title and interest in and to the equity interests in RetainCo.

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Section 2.5 Existing Intercompany Agreements. Except as otherwise expressly provided in this Agreement or the Ancillary Agreements, and except for all receivables accrued in the ordinary course of business of the Potlatch Group and the Clearwater Group, as between the Potlatch Group and the Clearwater Group, all Intercompany Agreements in effect immediately prior to the Distribution shall be terminated, amended or assigned such that the Clearwater Group shall no longer be a party thereto from and after the Distribution.

Section 2.6 Shared Contracts Liability.

(a) With respect to Liabilities pursuant to, arising under or relating to any Shared Contract, such Liabilities shall be allocated between the Potlatch Group and the Clearwater Group as follows:

(i) first, if a Liability is incurred exclusively in respect of a benefit received by one Party, the Party receiving such benefit shall be responsible for such Liability; and

(ii) second, if a Liability cannot be so allocated under clause (i), such Liability shall be allocated between the Parties based on the relative proportions of total benefit received (over the term of the Shared Contract, measured as of the date of the allocation) under the relevant Shared Contract. Notwithstanding the foregoing, each Party shall be responsible for any and all Liabilities arising out of or resulting from its breach of the relevant Shared Contract.

(b) If any member of the Potlatch Group, on the one hand, or any member of the Clearwater Group, on the other hand, receives any benefit or payment under any Shared Contract that was intended for the other Group, the Group receiving such benefit or payment will use commercially reasonable efforts to deliver, transfer or otherwise afford such benefit or payment to the other Group.

Section 2.7 Employee Matters Agreement and Tax Sharing Agreement. This Agreement shall not apply to or affect any of the matters covered by the Tax Sharing Agreement or the Employee Matters Agreement, including with respect to the allocation and assumption of Liabilities, and the Tax Sharing Agreement or the Employee Matters Agreement shall control as to all matters set forth therein over any contrary terms set forth in this Agreement.

Section 2.8 Credit Sensitive Debentures. Potlatch and Clearwater are entering into the Retained Obligation Agreement so as to confirm and set forth, among other things, their rights and obligations with respect to the Credit Sensitive Debentures. This Agreement shall not apply to or affect any of the matters covered by the Retained Obligation Agreement, and the Retained Obligation Agreement shall control as to all matters set forth therein over any contrary terms set forth in this Agreement.

ARTICLE III

THE DISTRIBUTION

Section 3.1 Issuance and Delivery of Clearwater Common Stock. Clearwater shall issue to Potlatch the number of shares of Clearwater Common Stock required so that the total

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number of shares of Clearwater Common Stock held by Potlatch after the subsequent distribution of shares of Clearwater Common Stock by Holdings to Potlatch and immediately prior to the Distribution is equal to the total number of shares of Clearwater Common Stock distributable pursuant to Section 3.2. Potlatch shall deliver to the Agent one or more stock certificates representing all shares of Clearwater Common Stock then issued and outstanding, together with one or more stock power(s) endorsed in blank and, with respect to any uncertificated shares to be distributed pursuant to Section 3.2, shall take such steps as are necessary to permit such shares to be distributed in the manner described in Section 3.2. In its capacity as Clearwater’s transfer agent, the Agent will distribute such shares in the manner described in Section 3.2.

Section 3.2 Distribution of Clearwater Common Stock. Potlatch shall instruct the Agent to distribute, based on the Distribution Ratio, the Clearwater Common Stock to each holder of record of Potlatch Common Stock at the close of business on the Record Date. Each distributed share of Clearwater Common Stock shall be validly issued, fully paid and nonassessable and free of preemptive rights. The shares of Clearwater Common Stock distributed shall be distributed as uncertificated shares registered in book-entry form through the direct registration system. Except as required by applicable Law, no certificates therefor shall be distributed. The Agent shall deliver an account statement to each holder of shares of Clearwater Common Stock reflecting such holder’s ownership interest in shares of Clearwater Common Stock.

Section 3.3 Treatment of Fractional Shares. No fractional shares of Clearwater Common Stock shall be issued in the Distribution. In lieu of receiving fractional shares, each holder of Potlatch Common Stock who would otherwise be entitled to receive a fractional share of Clearwater Common Stock pursuant to the Distribution will receive cash for such fractional share. Potlatch and Clearwater shall instruct the Agent to determine the number of whole shares of Clearwater Common Stock and fractional shares of Clearwater Common Stock allocable to each holder of record of Potlatch Common Stock as of the close of business on the Record Date, to aggregate all such fractional shares into whole shares and sell the whole shares obtained thereby in the open market at the then prevailing prices on behalf of holders who would otherwise be entitled to receive fractional share interests, and to distribute to each such holder such holder’s ratable share of the total proceeds of such sale after making appropriate deductions of any amounts required for U.S. federal tax withholding purposes and after deducting any taxes attributable to the sale of such fractional share interests.

Section 3.4 Potlatch Board Action. The Board of Directors of Potlatch shall, in its discretion, establish the Record Date and the Distribution Date and all appropriate procedures in connection with the Distribution. The Board of Directors of Potlatch also shall have the right to adjust the Distribution Ratio at any time prior to the Distribution. The consummation of the transactions provided for in this Article III shall only be effected after the Distribution has been declared by Potlatch’s Board of Directors.

ARTICLE IV

CONVEYANCE INSTRUMENTS

Section 4.1 Delivery of Instruments of Conveyance. In order to effect the transactions contemplated by Article II, the Parties shall execute and deliver, or cause to be executed and

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delivered, prior to or as of the Distribution, such Contracts, deeds, bills of sale, instruments of assumption, instruments of assignment, stock powers, certificates of title and other instruments of assignment, transfer, assumption and conveyance (collectively, the “Conveyance Instruments”) as the Parties shall reasonably deem necessary or appropriate to effect such transactions.

Section 4.2 Delivery of Other Agreements. Prior to or as of the Distribution, the Parties shall execute and deliver, or shall cause to be executed and delivered, each of the Ancillary Agreements.

ARTICLE V

NO REPRESENTATIONS AND WARRANTIES

Section 5.1 No Potlatch Group Representations or Warranties. Except as expressly set forth herein or in any Ancillary Agreement, the Potlatch Group does not represent or warrant in any way (i) as to the value or freedom from encumbrance of, or any other matter concerning, any of the Pulp-Based Business, the Pulp-Based Business Assets, the Pulp-Based Business Liabilities or the Specified Potlatch Liabilities or (ii) as to the legal sufficiency to convey title to any of the Pulp-Based Business Assets on the execution, delivery and filing of the Conveyance Instruments. ALL SUCH TRANSFERRED ASSETS ARE BEING TRANSFERRED ON AN “AS IS, WHERE IS” BASIS WITHOUT ANY REPRESENTATION OR WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, MARKETABILITY, TITLE, VALUE, FREEDOM FROM ENCUMBRANCE OR ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, and the Clearwater Group shall bear the economic and legal risks that any conveyances of such Assets shall prove to be insufficient or that the Clearwater Group’s title to any such Assets shall be other than good and marketable and free of encumbrances. Except as expressly set forth in this Agreement or in any Ancillary Agreement, the Potlatch Group does not represent or warrant that the obtaining of the Consents or Governmental Approvals, the execution and delivery of any mandatory agreements or the making of the filings and applications contemplated by this Agreement shall satisfy the provisions of all applicable agreements or the requirements of all applicable Laws or judgments and the Clearwater Group shall bear the economic and legal risk that any necessary Consents or Governmental Approvals are not obtained or that any requirements of Law or judgments are not complied with. The Clearwater Group waives compliance with any applicable bulk sales Law or any similar Law in any applicable jurisdiction in respect of the transactions contemplated by this Agreement.

Section 5.2 No Clearwater Representations or Warranties. Except as expressly set forth herein or in any Ancillary Agreement, the Clearwater Group does not represent or warrant in any way (i) as to the value or freedom from encumbrance of, or any other matter concerning, any of the Retained Business, the Retained Business Assets or the Retained Business Liabilities, or (ii) as to the legal sufficiency to convey title to any of the Retained Business Assets on the execution, delivery and filing of the Conveyance Instruments. ALL SUCH TRANSFERRED ASSETS ARE BEING TRANSFERRED ON AN “AS IS, WHERE IS” BASIS WITHOUT ANY REPRESENTATION OR WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, MARKETABILITY, TITLE, VALUE, FREEDOM FROM ENCUMBRANCE OR ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS OR

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IMPLIED, and the Potlatch Group shall bear the economic and legal risks that any conveyances of such Assets shall prove to be insufficient or that the Potlatch Group’s title to any such Assets shall be other than good and marketable and free of encumbrances. Except as expressly set forth in this Agreement or in any Ancillary Agreement, the Clearwater Group does not represent or warrant that the obtaining of the Consents or Governmental Approvals, the execution and delivery of any mandatory agreements or the making of the filings and applications contemplated by this Agreement shall satisfy the provisions of all applicable agreements or the requirements of all applicable Laws or judgments and the Potlatch Group shall bear the economic and legal risk that any necessary Consents or Governmental Approvals are not obtained or that any requirements of Law or judgments are not complied with. The Potlatch Group waives compliance with any applicable bulk sales Law or any similar Law in any applicable jurisdiction in respect of the transactions contemplated by this Agreement.

ARTICLE VI

COVENANTS

Section 6.1 Material Governmental Approvals. The Parties will use commercially reasonable efforts to obtain any material Governmental Approvals required by the transactions contemplated by this Agreement.

Section 6.2 Non-Assignable Contracts.

(a) If and to the extent that any member of the Potlatch Group is unable to obtain any Consent necessary for the Transfer of any Contract or other rights relating to the Pulp-Based Business that would otherwise be Transferred to a member of the Clearwater Group as contemplated by this Agreement or any other agreement or document contemplated hereby, (i) such member of the Potlatch Group shall continue to be bound thereby and the purported Transfer to such member of the Clearwater Group shall automatically be deemed deferred until such time as all legal impediments are removed and all necessary Consents have been obtained, and (ii) unless not permitted by the terms thereof or by Law, the Clearwater Group shall pay, perform and discharge fully all of the obligations of the Potlatch Group thereunder from and after the Distribution, or such earlier time as such Transfer would otherwise have taken place, and indemnify the Potlatch Group for all Losses arising out of such performance by such member of the Clearwater Group. The Potlatch Group shall, without further consideration therefor, pay and remit to the applicable member of the Clearwater Group promptly all monies, rights and other considerations received in respect of such performance. The Potlatch Group shall exercise or exploit their rights and options under all such Contracts and other rights, agreements and documents referred to in this Section 6.2(a) only as reasonably directed by Clearwater and at Clearwater’s expense. If and when any such Consent shall be obtained or such Contract or other right shall otherwise become Transferable or be able to be novated, the Potlatch Group shall promptly Transfer and novate (to the extent permissible) all of their rights and obligations thereunder to the applicable member of the Clearwater Group without payment of further consideration, and the Clearwater Group shall, without the payment of any further consideration therefor, Assume such rights and obligations. To the extent that the Transfer of any Contract or other right (or the proceeds thereof) pursuant to this Section 6.2(a) is prohibited by Law or the terms thereof, this Section 6.2(a) shall operate to create a subcontract with the applicable member of the Clearwater Group to perform each relevant Contract or other right at a

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subcontract price equal to the monies, rights and other considerations received by the Potlatch Group with respect to the performance by such member of the Clearwater Group.

(b) If and to the extent that any member of the Clearwater Group is unable to obtain any Consent necessary for the Transfer of any Contract or other rights relating to the Retained Business that would otherwise be Transferred to such member of the Potlatch Group as contemplated by this Agreement or any other agreement or document contemplated hereby, (i) such member of the Clearwater Group shall continue to be bound thereby and the purported Transfer to such member of the Potlatch Group shall automatically be deemed deferred until such time as all legal impediments are removed and all necessary Consents have been obtained, and (ii) unless not permitted by the terms thereof or by Law, the Potlatch Group shall pay, perform and discharge fully all of the obligations of the Clearwater Group thereunder from and after the Distribution, or such earlier time as such Transfer would otherwise have taken place, and indemnify the Clearwater Group for all Losses arising out of such performance by such member of the Potlatch Group. The Clearwater Group shall, without further consideration therefor, pay and remit to the applicable member of the Potlatch Group promptly all monies, rights and other considerations received in respect of such performance. The Clearwater Group shall exercise or exploit their rights and options under all such Contracts and other rights, agreements and documents referred to in this Section 6.2(b) only as reasonably directed by Potlatch and at Potlatch’s expense. If and when any such Consent shall be obtained or such Contract or other right shall otherwise become Transferable or be able to be novated, the Clearwater Group shall promptly Transfer and novate (to the extent permissible) all of their rights and obligations thereunder to the applicable member of the Potlatch Group without payment of further consideration, and the Potlatch Group shall, without the payment of any further consideration therefor, Assume such rights and obligations. To the extent that the Transfer of any Contract or other right (or the proceeds thereof) pursuant to this Section 6.2(b) is prohibited by Law or the terms thereof, this Section 6.2(b) shall operate to create a subcontract with the applicable member of the Potlatch Group to perform each relevant Contract or other right at a subcontract price equal to the monies, rights and other considerations received by the Clearwater Group with respect to the performance by such member of the Potlatch Group.

Section 6.3 Further Assurances.

(a) In addition to the actions specifically provided for elsewhere in this Agreement, each of the Parties shall use commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things reasonably necessary, proper or advisable under applicable Laws and Contracts to consummate and make effective the Separation and the Distribution and the other transactions contemplated hereby. Without limiting the generality of the foregoing, each Party shall cooperate with the other Party to execute, deliver and make, or use commercially reasonable efforts to cause to be executed, delivered and made, all instruments (including the Conveyance Instruments), Consents and Governmental Approvals under any permit, license, Contract or Law, and to take all such other actions as such Party may reasonably be requested to take by the other Party from time to time, consistent with the terms of this Agreement, in order to confirm the title of the Clearwater Group and the Potlatch Group to all of the Pulp-Based Business Assets or the Retained Business Assets, respectively, to put the applicable member of the Clearwater Group or the Potlatch Group in actual possession and operating control thereof and to permit the applicable member of the

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Clearwater Group or the Potlatch Group to exercise all rights with respect thereto and to effectuate the provisions and purposes of this Agreement and the other agreements and documents contemplated hereby or thereby.

(b) If, as a result of mistake or oversight, any Pulp-Based Business Asset or Retained Business Asset is not transferred to the applicable member of the Clearwater Group or the Potlatch Group, respectively, or any Pulp-Based Business Asset or Retained Business Asset is Transferred to (or retained by) any member of the Potlatch Group or the Clearwater Group, respectively, Potlatch and Clearwater shall negotiate in good faith after the Distribution to determine the terms and conditions upon which such Asset shall be made available to a member of the Potlatch Group or to a member of the Clearwater Group, as the case may be. Unless expressly provided to the contrary in this Agreement or any Ancillary Agreement, if, as a result of mistake or oversight, any Pulp-Based Business Liability is Assumed or retained by any member of the Potlatch Group, or any Retained Business Liability is Assumed or retained by any member of the Clearwater Group, Potlatch and Clearwater shall negotiate in good faith after the Distribution to determine whether such Liability should be Assumed by a member of the Potlatch Group or a member of the Clearwater Group, as the case may be, and the terms and conditions upon which any such Liability shall be Assumed.

Section 6.4 Collection of Accounts Receivable.

(a) Following the Distribution and subject to Section 6.2, the Potlatch Group shall be entitled to control all collection actions related to the Retained Business Assets and the Clearwater Group shall be entitled to control all collection actions related to the Pulp-Based Business Assets, in each case including the determination of what actions are necessary or appropriate and when and how to take any such action.

(b) If, after the Distribution, any member of the Clearwater Group shall receive any remittance from any account debtors with respect to the accounts receivable that constitute Retained Business Assets or other amounts due any member of the Potlatch Group in respect of services rendered by any member of the Potlatch Group after the Distribution, or any member of the Potlatch Group shall receive any remittance from any account debtors with respect to the accounts receivable that constitute Pulp-Based Business Assets or other amounts due any member of the Clearwater Group in respect of services rendered by any member of the Clearwater Group after the Distribution, such Party shall receive and deposit such remittance and promptly pay the same to the other Party.

Section 6.5 Registration and Listing. Prior to the Distribution:

(a) Potlatch and Clearwater shall cooperate with respect to the preparation of the registration statement on Form 10, including such amendments or supplements thereto as may be necessary (together, the “Registration Statement”), to effect the registration of the Clearwater Common Stock under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Registration Statement shall include an information statement to be sent by Potlatch to its stockholders in connection with the Distribution (the “Information Statement”). Potlatch and Clearwater shall use commercially reasonable efforts to cause the Registration Statement to become and remain effective under the Exchange Act as soon as reasonably

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practicable. As soon as reasonably practicable after the Registration Statement becomes effective, Potlatch shall mail the Information Statement to the holders of Potlatch Common Stock.

(b) The Parties shall use commercially reasonable efforts to take all such action as may be necessary or appropriate under state and foreign securities and “blue sky” laws in connection with the transactions contemplated by this Agreement.

(c) Potlatch and Clearwater shall prepare, and Clearwater shall file and seek to make effective, an application for the listing of the Clearwater Common Stock on the New York Stock Exchange, subject to official notice of issuance. Potlatch shall give NYSE notice of the Record Date in compliance with Rule 10b-17 of the Securities Exchange Act of 1934, as amended.

(d) The Parties shall cooperate in preparing, filing with the SEC and causing to become effective any registration statements or amendments thereto that are necessary or appropriate in order to effect the transactions contemplated hereby.

Section 6.6 No Non-competition. After the Distribution, either Party may, except as otherwise provided in the Ancillary Agreements, (i) engage in the same or similar activities or lines of business as the other Party or (ii) do business, or refrain from doing business, with any potential or actual supplier or customer of the other Party.

Section 6.7 Use of Potlatch Name.

(a) Potlatch hereby grants to Clearwater a limited, nonexclusive, worldwide, fully paid-up license during the period beginning on the Distribution Date and ending six months thereafter, without any right to transfer or sublicense, to use the Potlatch Name anywhere in the world for informational purposes only, otherwise than as a mark, solely to refer to and identify the Pulp-Based Business as “formerly known as Potlatch” or “formerly known as Potlatch Forest Products Corporation.” These phrases shall be used only as subscripts to the Clearwater name. The subscripts shall be in plain block or typed letters no greater than one third the size of the Clearwater name or mark. Without limitation, Clearwater shall not use the Potlatch logo in the subscripts. Prior to use of the subscripts, Clearwater shall submit representative specimens thereof to Potlatch for prior written approval, not to be unreasonably withheld.

(b) In addition to the license granted in Section 6.7(a), Potlatch hereby grants to Clearwater a limited, nonexclusive, worldwide, fully paid-up license during the period beginning on the Distribution Date and ending 90 days thereafter, without any right to transfer or sublicense, to use the name Potlatch Forest Products Corporation in communications and agreements with parties who, as of the Distribution Date, are customers of Clearwater. During said 90 day period, Clearwater shall take all reasonable steps to ensure that those customers update their systems to properly reference Clearwater as “Clearwater Paper Corporation.” Without limitation, Clearwater shall not use the Potlatch logo in connection with the use of the Potlatch Forest Products Corporation name.

(c) Notwithstanding the licenses granted above in Section 6.7(a) and Section 6.7(b), Potlatch reserves the right of simultaneous uses of the Potlatch Name anywhere in the

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world by Potlatch and its Affiliates, for any purpose. Clearwater’s rights with respect to use of the Potlatch Name are limited to those expressly granted in this Section 6.7 or in any Ancillary Agreement, and Clearwater may not use any other trademarks or names of Potlatch or its Affiliates without prior written approval of Potlatch. Except as expressly authorized under Section 6.7(b), Clearwater shall not use the Potlatch Name in any manner that indicates, suggests or implies that Clearwater is then affiliated in any manner with Potlatch or any of its Affiliates, that the Pulp-Based Business is then a business or operation of Potlatch or any of its Affiliates or that the products or services of the Pulp-Based Business are then a product or service of Potlatch or any of its Affiliates. During the permitted periods of use under Section 6.7(a) and Section 6.7(b), Clearwater agrees to maintain the current level of quality of the products, goods and services for which the Potlatch Name is now used. Clearwater recognizes and agrees that all permitted uses of the Potlatch Name by Clearwater, and all resultant goodwill associated with the Potlatch Name, will at all times inure solely to the benefit of Potlatch. Clearwater will not register or use any trademark that is confusingly similar to the Potlatch Name. Clearwater will make no use of the Potlatch Name as or in any domain name, trading names or company names, or parts thereof, of Clearwater, except as specifically permitted hereby or in any Ancillary Agreement. Clearwater may not and will not institute or prosecute any Action with respect to the Potlatch Name.

(d) No later than six months after the Distribution Date, Clearwater shall remove (or, if necessary, on an interim basis cover up) any and all exterior and interior signs and identifiers on the Pulp-Based Business that refer or pertain to any member of the Potlatch Group or the Retained Business. After said six-month period, (i) the Clearwater Group shall not use or display the Potlatch Name, or any variations thereof, or other service marks, trademarks, any trade names, domain names, logos or identifiers using any of such names or otherwise owned by or licensed to any member of the Potlatch Group except as expressly permitted in any Ancillary Agreement, and (ii) the Potlatch Group shall not use or display the name “Clearwater Paper” or any variations thereof, or other service marks, trademarks, trade names, domain names, logos or identifiers using any of such names or otherwise owned by or licensed to any member of the Clearwater Group that have not been assigned or licensed to a member of the Potlatch Group, without the prior written consent of the other Party; provided, however, that notwithstanding the foregoing, (i) nothing contained in this Agreement shall prevent either Party from using the other’s name in any fair use, otherwise than as a mark, or in public filings with Governmental Entities, materials intended for distribution to either Party’s stockholders or any other communication in any medium that describes the relationship between the Parties, including materials distributed to employees relating to the matters covered by the Employee Matters Agreement and (ii) Clearwater may, without modification, use inventory, product literature and sales literature in existence as of the Distribution Date until the earlier of the exhaustion of such materials or the date that is six months after the Distribution Date.

Section 6.8 Exempt Facilities.

(a) With respect to those facilities of Potlatch or Clearwater (the “Exempt Facilities”) that were financed or refinanced through the issuance of bonds (the “Bonds”), the interest on which is excluded from gross income of the holder under section 103(a) of the Code or any predecessor provisions, Clearwater hereby represents, certifies and covenants that there

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will be no action, or failure to act, by Clearwater that would adversely effect the exclusion from gross income of interest on the Bonds for U.S. federal income Tax purposes.

(b) Without limiting Section 6.8(a), Clearwater certifies, represents, and covenants that so long as any Bonds remain outstanding:

(i) the Exempt Facilities will continue to be used for the collection, storage, treatment, utilization, processing, or final disposal of material of a type that, on the date of issuance of the Bonds financing the Exempt Facilities, was useless, unused, unwanted or discarded solid material which had no market value at the place where it was located;

(ii) at least 65%, by weight or volume, of the materials utilized or processed at the Exempt Facilities will be of a type which on the date of issuance of the Bonds financing the Exempt Facilities was useless, unused, unwanted, or discarded solid material which had no market or other value at the place where it is located; and

(iii) Clearwater will maintain adequate records documenting its compliance with this Section 6.8 and will annually provide to Potlatch a written certification of its continued compliance.

ARTICLE VII

CONDITIONS TO THE DISTRIBUTION

The obligation of Potlatch to effect the Distribution is subject to the satisfaction or the waiver by Potlatch of each of the following conditions:

Section 7.1 Approval by Potlatch Board of Directors. This Agreement and the transactions contemplated hereby, including the declaration of the Distribution, shall have been duly approved by the Board of Directors of Potlatch.

Section 7.2 Receipt of IRS Private Letter Ruling and Opinion. Potlatch shall have received a ruling from the IRS which shall not have been rescinded, substantially to the effect that the Separation will qualify as a tax-free reorganization and distribution for federal income tax purposes under Section 368(a)(1)(D) and Section 355 of the Code and the Distribution will qualify as a tax-free distribution for federal income tax purposes under Section 355 of the Code, and that no income, gain or loss will be recognized by Potlatch, Clearwater or their respective stockholders (other than with respect to cash received in lieu of fractional shares) upon the Separation or the Distribution. In addition, Potlatch shall have received an opinion of its tax counsel that the Distribution was motivated by a valid business purpose and the Distribution does not constitute a “device” for the distribution of Potlatch’s or Clearwater’s earnings and profits for U.S. federal income tax purposes.

Section 7.3 Compliance with State and Foreign Securities and “Blue Sky” Laws. The Parties shall have taken all such action as may be necessary or appropriate under state and foreign securities and “blue sky” Laws in connection with the Distribution.

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Section 7.4 SEC Filings and Approvals. The Parties shall have prepared and Clearwater shall, to the extent required under applicable Law, have filed with the SEC any such documentation that Potlatch reasonably determines are necessary or desirable to effectuate the Distribution, and each Party shall have obtained all necessary approvals from the SEC.

Section 7.5 Effectiveness of Registration Statement; No Stop Order. The Registration Statement shall have been declared effective by the SEC, and no stop order suspending the effectiveness of the Registration Statement shall have been initiated or, to the knowledge of either of the Parties, threatened by the SEC.

Section 7.6 Dissemination of Information to Potlatch Stockholders. Prior to the Distribution, the Parties shall have prepared and mailed to the holders of Potlatch Common Stock the Information Statement and such other information concerning Clearwater, its business, operations and management, the Distribution and such other matters as Potlatch shall reasonably determine and as may be required by Law.

Section 7.7 Approval of NYSE Listing Application. The Clearwater Common Stock to be distributed in the Distribution shall have been approved for listing on the New York Stock Exchange, subject to official notice of issuance.

Section 7.8 Ancillary Agreements. Each of the Ancillary Agreements shall have been executed and delivered, and each of such agreements shall be in full force and effect.

Section 7.9 Director and Officer Appointments and Resignations. Each of the individuals named in the Information Statement as a director or officer of Clearwater, or as an individual to become a director or officer of Clearwater after the Distribution, shall have been appointed to his or her applicable position with Clearwater, with the effective time of such appointment, as applicable, to take effect at the time described in the Information Statement. Each individual that will become (or remain) an employee of Clearwater or an employee of a member of the Potlatch Group, in each case after the Distribution, shall have resigned or been removed as an officer and as a member of all boards of directors or similar governing bodies of the Potlatch Group and the Clearwater Group, respectively.

Section 7.10 Consents.

(a) All material Governmental Approvals required to permit the consummation of the Distribution shall have been obtained without any conditions being imposed that would have a material adverse effect on Potlatch or Clearwater.

(b) Potlatch shall have obtained all Consents that shall be required in connection with the Separation or the Distribution, except those for which the failure to obtain such Consents would not, in the reasonable opinion of Potlatch, individually or in the aggregate, have a material adverse effect on Potlatch, Clearwater or the consummation of the Separation or Distribution.

Section 7.11 No Actions. No Action shall have been instituted or threatened by or before any Governmental Entity or before any arbitrator to restrain, enjoin or otherwise prevent the Separation or the Distribution or the other transactions contemplated by this Agreement, and

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no order, injunction, judgment, ruling or decree issued by any court of competent jurisdiction shall be in effect restraining the Separation, the Distribution or such other transactions.

Section 7.12 Consummation of Pre-Distribution Transactions. The transactions contemplated by Article II shall have been consummated.

Section 7.13 No Other Events. No other events or developments shall have occurred that, in the judgment of the Potlatch Board of Directors, would result in the Distribution having a material adverse effect on Potlatch or its stockholders.

Section 7.14 Satisfaction of Conditions. The satisfaction of the foregoing conditions are for the sole benefit of Potlatch and shall not give rise to or create any duty on the part of Potlatch or the Board of Directors of Potlatch to waive or not waive any such condition, to effect the Separation or the Distribution or in any way limit Potlatch’s right to terminate this Agreement pursuant to Section 13.13.

ARTICLE VIII

INSURANCE MATTERS

Section 8.1 Insurance Prior to the Distribution Date. Except as may otherwise be expressly provided in this Article VIII, the Potlatch Group shall not have any Liability whatsoever to the Clearwater Group in connection with the insurance policies and practices of Potlatch in effect at any time prior to the Distribution Date, including in connection with the level or scope of any such insurance, the creditworthiness of any insurance carrier, the terms and conditions of any policy and the adequacy or timeliness of any notice to any insurance carrier with respect to any claim or potential claim or otherwise.

Section 8.2 Ownership of Existing Policies and Programs. Potlatch or one or more members of the Potlatch Group shall continue to own all property damage and business interruption, and liability insurance policies and programs, including, without limitation, primary and excess general liability, executive liability, automobile, workers’ compensation, property damage and business interruption, crime and surety insurance policies, in effect on or before the Distribution Date (collectively, the “Potlatch Policies” and individually, a “Potlatch Policy”); provided, however, that for purposes of this Article VIII, the Subscriber Agreement shall not be deemed to be a “Potlatch Policy.” Subject to the provisions of this Agreement, the Potlatch Group shall retain all of their respective rights, benefits and privileges, if any, under the Potlatch Policies. Nothing contained herein shall be construed to be an attempted Transfer of or a change to any part of the ownership of the Potlatch Policies. With respect to any claim under the Potlatch Policies relating to the Pulp-Based Business or the Pulp-Based Business Assets, Potlatch shall have sole responsibility for claims administration and financial administration of such policies and such administration shall be governed solely by the terms of Section 8.5 and Section 8.6. Except as expressly set forth in Section 8.5 and Section 8.6, no member of the Potlatch Group shall have any responsibility for or obligation to any member of the Clearwater Group under the Potlatch Policies relating to property damage and business interruption or liability or workers compensation matters for any period, whether prior to, on or after the Distribution Date.

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Section 8.3 Maintenance of Insurance for Clearwater. Until the Distribution, Potlatch will maintain in full force and effect its existing insurance to the extent that it applies to the Pulp-Based Business or the Pulp-Based Business Assets.

Section 8.4 Acquisition and Maintenance of Post-Distribution Insurance by Clearwater. Commencing on and as of the Distribution, Clearwater shall be responsible for establishing and maintaining separate property damage and business interruption and liability insurance policies and programs (including primary and excess general liability, executive liability, automobile, workers’ compensation, unemployment, property damage and business interruption, crime, surety and other insurance) for activities and claims involving any member of the Clearwater Group. Each member of the Clearwater Group, as appropriate, shall be responsible for all administrative and financial matters relating to insurance policies established and maintained by the members of the Clearwater Group for claims involving any member of the Clearwater Group.

Section 8.5 Property Damage and Business Interruption Insurance Claims Administration for Pre-Distribution Losses. For property damage and business interruption losses related to the Pulp-Based Business Assets or the Pulp-Based Business occurring prior to the Distribution Date, Potlatch shall have the sole right, responsibility and authority to submit and process claims. Any amounts received by Potlatch with respect to any such unresolved claims that are settled subsequent to the Distribution Date shall be paid, net of any deductibles, self-insured retentions, reserves or any combination thereof (for which Clearwater shall be liable), to Clearwater within five business days of receipt thereof by Potlatch.

Section 8.6 Liability and Workers Compensation Insurance Claims Administration for Pre-Distribution Occurrences.

(a) Except as otherwise set forth herein, the Potlatch Group shall have the sole right, responsibility and authority for the administration of all insurance claims, including, but not limited to, comprehensive general liability, directors’ and officers’ liability, employer’s liability and workers’ compensation claims involving pre-Distribution occurrences related to the Pulp-Based Business (collectively, the “Potlatch Administered Claims”).

(b) Upon notification by a member of the Clearwater Group of a Potlatch Administered Claim related to the Pulp-Based Business under one or more of the Potlatch Policies, Potlatch shall cooperate with Clearwater in asserting and pursuing coverage and payment for such claim by the appropriate insurance carrier(s). In asserting and pursuing such coverage and payment, and subject to Section 10.6, Potlatch shall have sole power and authority to make binding decisions, determinations, commitments and stipulations on its own behalf and on behalf of the Clearwater Group. Any amounts received by Potlatch with respect to any Administered Claim related to the Pulp-Based Business that are settled subsequent to the Distribution Date shall be paid, net of any deductibles, self-insured retentions, reserves or any combination thereof (for which Clearwater shall be liable), to Clearwater within five business days of receipt thereof by Potlatch.

(c) Consistent with past practices and subject to Section 8.6(a), following the Distribution the Clearwater Group shall assume responsibility for, and shall pay to the

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appropriate insurance carriers, the Potlatch Group or otherwise, any premiums, retrospectively-rated premiums, defense costs, indemnity payments or uninsured costs arising from any liability or workers compensation losses which are uninsured because of coverage terms or conditions of the policies covering such losses, or other charges (including, but not limited to, deductibles, self-insured retentions, reserves and the like) (collectively, “Insurance Charges”) whenever occurring, which shall become due and payable under the terms and conditions of any applicable Potlatch Policy in respect of any Losses or Actions attributable to pre-Distribution occurrences related to the Pulp-Based Business, whenever becoming known, which Insurance Charges are known or become known prior to, on or after the Distribution Date. To the extent that the terms of any applicable Potlatch Policy provide that any member of the Potlatch Group shall have an obligation to pay or guarantee the payment of any such Insurance Charges, Potlatch shall be entitled to demand that Clearwater make such payment directly to the Person or entity entitled thereto. In connection with any such demand, Potlatch shall submit to Clearwater a copy of any invoice or listing of claims received by Potlatch pertaining to such Insurance Charges together with appropriate supporting documentation. In the event that Clearwater fails to pay any such Insurance Charges when due and payable, whether at the request of the Person entitled to payment or upon demand by Potlatch, the Potlatch Group may (but shall not be required to) pay such insurance charges for and on behalf of the Clearwater Group and, thereafter, Clearwater shall promptly reimburse Potlatch for such payment.

Section 8.7 Non-Waiver of Rights to Coverage; Subrogation. An insurance carrier that would otherwise be obligated to pay any claim shall not be relieved of the responsibility with respect thereto, or, solely by virtue of the provisions of this Agreement, have any subrogation rights with respect thereto. To the fullest extent permitted by law, each of the parties hereto hereby contractually waives any and all rights of insurer subrogation under all pertinent policies with respect to the matters covered by this Agreement, and shall exercise commercially reasonable efforts to ensure such waiver of subrogation with respect to each of their respective insurers and all such pertinent policies. No insurance carrier or any third party shall be entitled to a benefit (i.e., a benefit they would not be entitled to receive had no Distribution occurred or in the absence of the provisions of this Agreement) by virtue of the provisions hereof. For the avoidance of doubt, no provision of this Agreement is intended or shall be construed in any way to prejudice or limit insurance coverage under any applicable policy of insurance or reinsurance.

Section 8.8 Scope of Affected Policies of Insurance. The provisions of this Article VIII relate solely to matters involving property damage and business interruption, and liability insurance policies and programs, including, without limitation, primary and excess general liability, executive liability, automobile, workers’ compensation, property damage and business interruption, crime and surety insurance policies, and shall not be construed to affect any obligation of or impose any obligation on the Parties with respect to any life, health and accident, dental or medical or any other insurance policies applicable to any of the officers, directors, employees or other representatives of the Parties or their Affiliates.

ARTICLE IX

EXPENSES

Section 9.1 Allocation of Expenses. Except as otherwise provided in this Agreement or any other agreement contemplated hereby, (a) all fees, expenses and other costs relating to the

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Separation or the Distribution that are incurred prior to the Distribution Date shall be allocated in accordance with the Parties’ allocation methodology prior to the date hereof, and (b) all fees, expenses and other costs relating to the Separation or the Distribution that are incurred after the Distribution Date shall be paid by the Party incurring such expenses. Without limiting the foregoing and for the sake of clarity, the Parties expect that all fees, expenses and other costs associated with the Credit Facility that are incurred prior to the Distribution Date shall be subject to Section 9.1(a).

ARTICLE X

INDEMNIFICATION

Section 10.1 Release of Pre-Distribution Claims.

(a) Except as provided in Section 10.1(b) and except for any matter for which any Person is entitled to indemnification or contribution pursuant to this Article X, effective as of the Distribution Date, each Party does hereby, on behalf of itself and, to the extent of its power and authority, its Subsidiaries, Affiliates and Related Persons, release and forever discharge the other Party, its Subsidiaries, Affiliates and Related Persons, from any and all Liabilities whatsoever, whether at Law or in equity (including any right of contribution), whether arising under any Contract, by operation of Law or otherwise, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed on or before the Distribution Date, including in connection with the transactions and all other activities to implement the Distribution.

(b) Nothing contained in Section 10.1(a) shall impair any right of any Person identified in Section 10.1(a) to enforce this Agreement, any Ancillary Agreement or any Shared Contract, in each case in accordance with its terms. Nothing contained in Section 10.1(a) shall release any Party from indemnifying any Related Person of another Party, its Subsidiaries or Affiliates, who was a Related Person of the first Party, its Subsidiaries or Affiliates on or prior to the Distribution Date and entitled to such indemnification pursuant to obligations existing prior to the Distribution Date. Nothing contained in Section 10.1(a) shall release or discharge any rights or claims that either Party, its Subsidiaries, Affiliates or its Related Person may have against any Related Person of the other Party as a result of any Knowing Violation of Law or fraud by such Related Person. Nothing contained in Section 10.1(a) shall release any Person from:

(i) any Liability that is Assumed, retained or allocated to a Party, its Subsidiaries or Affiliates in accordance with this Agreement or any Ancillary Agreement;

(ii) any Liability for the sale, lease or receipt of goods, property or services purchased, obtained or used in the ordinary course of business by a member of one Group or its Related Persons from a member of the other Group or its Related Persons prior to the Distribution Date;

(iii) any Liability the release of which would result in the release of any Person other than a Person released pursuant to Section 10.1(a); provided, however, that

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each Party agrees not to bring suit against the other Party or any Subsidiary, Affiliate or Related Person of such other Party with respect to any such Liability; or

(iv) any Liability that any Indemnified Party may have with respect to indemnification or contribution pursuant to this Agreement for claims brought against the Parties or their respective Subsidiaries or Affiliates by third Persons, which Liability shall be governed by the provisions of this Article X and, if applicable, the appropriate provisions of the Ancillary Agreements.

(c) Neither Party shall make, nor permit any of its Subsidiaries or Affiliates to make, any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or indemnification, against the other Party, or any other Person released pursuant to Section 10.1(a), with respect to any Liability released pursuant to Section 10.1(a).

(d) If any Subsidiary, Affiliate or Related Person of a Party initiates an Action with respect to claims released by Section 10.1(a), the Party with which such Person is associated shall indemnify the other Party against Expenses or Losses suffered or incurred in connection with such Action in accordance with the provisions set forth in this Article X.

(e) It is the intent of each of the Parties by virtue of the provisions of this Section 10.1 to provide for a full and complete release and discharge of all Liabilities existing or arising from all acts and events occurring or failing to occur or alleged to have occurred or to have failed to occur and all conditions existing or alleged to have existed on or before the Distribution Date, between the Parties (including any Intercompany Agreements), except as expressly set forth in Section 10.1(b). At any time, at the reasonable request of either Party, the other Party shall execute and deliver releases reflecting the provisions hereof in such form as the requesting Party may reasonably request.

Section 10.2 Indemnification by Clearwater. Except as provided in Section 10.5 and except as expressly provided in any Conveyance Instrument or the Employee Matters Agreement, from and after the Distribution, Clearwater shall, and shall cause each of the other members of the Clearwater Group to, indemnify, defend and hold harmless the members of the Potlatch Group, each of their Related Persons and their respective successors and assigns (collectively, the “Potlatch Indemnified Parties”), from and against any and all Expenses or Losses incurred or suffered by one or more of the Potlatch Indemnified Parties, in connection with, relating to, arising out of or due to, directly or indirectly, any of the following items (in each case, regardless of when or where the loss, claim, accident, occurrence, event or happening giving rise to the Expense or Loss took place, or whether any such loss, claim, accident, occurrence, event or happening is known or unknown, or reported or unreported):

(a) the operation of the Pulp-Based Business and Pulp-Based Business Assets;

(b) the Pulp-Based Business Liabilities;

(c) the Specified Potlatch Liabilities;

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(d) the breach by any member of the Clearwater Group of any covenant or agreement set forth in this Agreement, any Conveyance Instrument or the Employee Matters Agreement;

(e) any claim that the information relating to Clearwater included in the Registration Statement or the Information Statement is or was false or misleading with respect to any material fact or omits or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

Section 10.3 Indemnification by Potlatch. Except as provided in Section 10.5 and except as expressly provided in any Conveyance Instrument or the Employee Matters Agreement, from and after the Distribution, Potlatch shall, and shall cause each of the other members of the Potlatch Group to, indemnify, defend and hold harmless the members of the Clearwater Group, each of their Related Persons and their respective successors and assigns (collectively, the “Clearwater Indemnified Parties”), from and against any and all Expenses or Losses incurred or suffered by one or more of the Clearwater Indemnified Parties in connection with, relating to, arising out of or due to, directly or indirectly, any of the following items (in each case, regardless of when or where the loss, claim, accident, occurrence, event or happening giving rise to the Expense or Loss took place, or whether any such loss, claim, accident, occurrence, event or happening is known or unknown, or reported or unreported):

(a) the operation of the Retained Business and Retained Business Assets;

(b) the Retained Business Liabilities;

(c) the breach by any member of the Potlatch Group of any covenant or agreement set forth in this Agreement, any Conveyance Instrument or the Employee Matters Agreement;

(d) any claim that the information, other than information relating to Clearwater, included in the Registration Statement or the Information Statement is or was false or misleading with respect to any material fact or omits or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

Section 10.4 Applicability of and Limitation on Indemnification. EXCEPT AS EXPRESSLY PROVIDED HEREIN, THE INDEMNITY OBLIGATION UNDER THIS ARTICLE X SHALL APPLY NOTWITHSTANDING ANY INVESTIGATION MADE BY OR ON BEHALF OF ANY INDEMNIFIED PARTY AND SHALL APPLY WITHOUT REGARD TO WHETHER THE LOSS, LIABILITY, CLAIM, DAMAGE, COST OR EXPENSE FOR WHICH INDEMNITY IS CLAIMED HEREUNDER IS BASED ON STRICT LIABILITY, ABSOLUTE LIABILITY, ANY OTHER THEORY OF LIABILITY OR ARISES AS AN OBLIGATION FOR CONTRIBUTION.

Section 10.5 Adjustment of Indemnifiable Losses.

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(a) The amount that any Party or any of the members of such Party’s Group (an “Indemnifying Party”) is required to pay to any Person entitled to indemnification hereunder (an “Indemnified Party”) shall be reduced by any insurance proceeds and other amounts actually recovered by or on behalf of such Indemnified Party in reduction of the related Expense or Loss. If an Indemnified Party receives a payment (an “Indemnity Payment”) required by this Agreement from an Indemnifying Party in respect of any Expense or Loss and subsequently actually receives insurance proceeds or other amounts in respect of such Expense or Loss, then such Indemnified Party shall pay to the Indemnifying Party a sum equal to the lesser of (1) the amount of such insurance proceeds or other amounts actually received or (2) the amount of Indemnity Payments actually received previously.

(b) An insurer who would otherwise be obligated to pay any claim shall not be relieved of the responsibility with respect thereto, or, solely by virtue of the indemnification provisions hereof, have any subrogation rights with respect thereto, it being expressly understood and agreed that no insurer or any other third party shall be entitled to a “windfall” (i.e., a benefit he or she would not be entitled to receive in the absence of the indemnification provisions) by virtue of the indemnification provisions hereof.

(c) Indemnity Payments (i) shall not be increased to take into account any tax costs incurred by the Indemnified Party arising from any Indemnity Payments from the Indemnifying Party and (ii) shall not be reduced to take into account any tax benefit received by the Indemnified Party arising from the incurrence or payment of any Indemnity Payment.

Section 10.6 Procedures for Indemnification of Third Party Claims.

(a) If any third Person shall make any claim or commence any Action (collectively, a “Third Party Claim”) against any one or more of the Indemnified Parties with respect to which an Indemnified Party intends to make any claim for indemnification against any member of the Clearwater Group under Section 10.2 or against any member of the Potlatch Group under Section 10.3, such Indemnified Party shall promptly give written notice to the Indemnifying Party describing such Third Party Claim in reasonable detail. Notwithstanding the foregoing, the failure of any Indemnified Party to provide notice in accordance with this Section 10.6(a) shall not relieve the related Indemnifying Party of its obligations under this Article X, except to the extent (and only to the extent) that such Indemnifying Party is actually prejudiced by such failure to provide notice.

(b) Subject to the following provisions of this Section 10.6(b), the Indemnifying Party shall have 30 days after receipt of the notice referred to in Section 10.6(a) to notify the Indemnified Party in writing that it elects to conduct and control the defense of such Third Party Claim, provided that such written notice must contain an express obligation and acknowledgement by the Indemnifying Party that the Indemnified Party will be indemnified and held harmless hereunder with respect to the full amount of all Expenses or Losses the Indemnified Party may suffer arising out of or relating to such Third Party Claim. If the Indemnifying Party does not give the foregoing notice or if the Third Party Claim involves or relates to matters that are described in subsection (i) of the proviso to the immediately following sentence, the Indemnified Party shall have the right to defend, contest, settle or compromise such Third Party Claim in the exercise of its exclusive discretion, subject to the provisions of

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Section 10.6(c) and Section 10.6(f), and the Indemnifying Party shall, upon request from the Indemnified Party and to the extent required under this Article X, promptly pay to such Indemnified Party in accordance with the other terms of this Section 10.6(b) the amount of any Expense or Loss resulting from the Indemnified Party’s liability to the third Person claimant. If the Indemnifying Party gives the foregoing notice, the Indemnifying Party shall have the right to undertake, conduct and control, through counsel reasonably acceptable to the Indemnified Party, and at the Indemnifying Party’s sole expense, the conduct and settlement of such Third Party Claim, and the Indemnified Party shall cooperate with the Indemnifying Party in connection therewith; provided, however, that (i) in no event, without the Indemnified Party’s prior written consent (not to be unreasonably withheld or delayed in the event the Indemnifying Party has insurance coverage applicable to such Third Party Claim), will the Indemnifying Party have the right to undertake, conduct and control such Third Party Claim (or the settlement thereof) if such Third Party Claim (A) involves any Action by any Governmental Entity or (B) relates to any environmental Law; and (ii) the Indemnifying Party shall permit the Indemnified Party and counsel chosen by the Indemnified Party and reasonably acceptable to the Indemnifying Party to monitor such conduct or settlement and shall provide the Indemnified Party and such counsel with such information regarding such Third Party Claim as either of them may reasonably request (which request may be general or specific), but the fees and expenses of such counsel chosen by the Indemnified Party shall be borne by the Indemnified Party unless (A) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such counsel or (B) the named parties to any such Third Party Claim include the Indemnified Party and the Indemnifying Party and in the reasonable opinion of counsel to the Indemnified Party representation of both parties by the same counsel would be inappropriate due to actual or likely conflicts of interest between them, in either of which cases the reasonable fees and disbursements of counsel for such Indemnified Party shall be paid by the Indemnifying Party. Subject to the following sentence, in no event shall the Indemnifying Party settle or compromise any Third Party Claim or consent to the entry of any judgment with respect to a Third Party Claim without the prior written consent of the Indemnified Party, such consent not to be unreasonably withheld or delayed; provided, however, that the Indemnified Party shall not be deemed to have unreasonably withheld consent to any settlement or comprise if such settlement or compromise would (w) result in any lien, encumbrance or other adverse charge to thereafter attach to any asset of any Indemnified Party, (x) result in any injunction against any Indemnified Party, (y) result in or include any acknowledgement, stipulation or statement of a violation of Law by any Indemnified Party, or (z) not include as an unconditional term thereof the giving by the claimant or the plaintiff to the Indemnified Party a complete release from all Liability in respect of such claim. Notwithstanding the foregoing sentence, the Indemnifying Party may settle or compromise a Third Party Claim without the prior written consent of the Indemnified Party if such settlement or compromise (i) involves solely a cash settlement payment that is satisfied and paid entirely by the Indemnifying Party and (ii) includes as an unconditional term thereof the giving by the claimant or the plaintiff to the Indemnified Party a complete release from all Liability in respect of such Third Party Claim.

(c) If the Indemnifying Party shall not have undertaken the conduct and control of the defense of any Third Party Claim as provided above, the Indemnifying Party shall nevertheless be entitled through counsel chosen by the Indemnifying Party and reasonably acceptable to the Indemnified Party to monitor the conduct or settlement of such claim by the Indemnified Party, and the Indemnified Party shall provide the Indemnifying Party and such

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counsel with such information regarding such Third Party Claim as either of them may reasonably request (which request may be general or specific), but all costs and expenses incurred in connection with such monitoring shall be borne by the Indemnifying Party.

(d) So long as the Indemnifying Party is contesting any such Third Party Claim in its reasonable good faith judgment, the Indemnified Party shall not pay or settle any such Third Party Claim. Notwithstanding the foregoing, the Indemnified Party shall have the right to pay or settle any such Third Party Claim; provided, however, that in such event the Indemnified Party shall waive any right to indemnity therefor by the Indemnifying Party, and no amount in respect thereof shall be claimed as an Expense or a Loss under this Article X.

(e) If the Indemnified Party determines in its reasonable good faith judgment that the Indemnifying Party is not defending such Third Party Claim in good faith, the Indemnified Party shall have the right to undertake control of the defense of such Third Party Claim upon five days’ written notice to the Indemnifying Party and thereafter to defend, contest, settle or compromise such Third Party Claim in the exercise of its exclusive discretion, subject to Section 10.6(f).

(f) If the Indemnified Party shall have undertaken the conduct and control of the defense of any Third Party Claim as provided above, the Indemnified Party may make settlement (including payment in full) of such Third Party Claim; provided, however, if the Indemnified Party makes such settlement without the written consent of the Indemnifying Party, such settlement shall not be dispositive of whether such Third Party Claim (or any part thereof) is subject to indemnification under this Article X or the extent of the Expense or Loss indemnifiable under this Article X arising from such Third Party Claim (or part thereof).

Section 10.7 Procedures for Indemnification of Direct Claims. Any claim for indemnification by an Indemnified Party against the Indemnifying Party that does not result from a Third Party Claim shall be asserted by written notice from the Indemnified Party to the Indemnifying Party. Such Indemnifying Party shall have a period of 45 days after the receipt of such notice within which to respond thereto. If such Indemnifying Party does not respond within such 45-day period, such Indemnifying Party shall be deemed to have accepted responsibility to provide the indemnity claimed and shall have no further right to contest the validity of such claim. If such Indemnifying Party does respond within such 45-day period and rejects such claim in whole or in part, such Indemnified Party shall be free to pursue resolution as provided in Article XI.

Section 10.8 Contribution. If the indemnification provided for in this Article X is unavailable to an Indemnified Party in respect of any Expense or Loss arising out of or related to information contained in the Registration Statement or the Information Statement, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Expense or Loss in such proportion as is appropriate to reflect the relative fault of the Clearwater Indemnified Parties, on the one hand, or the Potlatch Indemnified Parties, on the other hand, in connection with the statements or omissions that resulted in such Expense or Loss. The relative fault of any Clearwater Indemnified Party, on the one hand, and of any Potlatch Indemnified Party, on the other hand, shall be determined by reference to, among other things, whether the untrue or

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alleged untrue statement of a material fact or the omission or alleged omission of a material fact relates to Clearwater, on the one hand, or does not relate to Clearwater, on the other hand.

Section 10.9 Remedies Cumulative. The remedies provided in this Article X shall be cumulative and, subject to the provisions of Article XI, shall not preclude assertion by an Indemnified Party of any other rights or the seeking of any and all other remedies against any Indemnifying Party.

Section 10.10 Survival. All covenants and agreements of the Parties contained in this Agreement relating to indemnification shall survive the Distribution Date indefinitely, unless a specific survival or other applicable period is expressly set forth herein.

ARTICLE XI

DISPUTE RESOLUTION

Section 11.1 Escalation and Mediation.

(a) The Parties agree to use commercially reasonable efforts to resolve expeditiously any dispute, controversy or claim between them with respect to any matter covered hereby that may arise from time to time on a mutually acceptable negotiated basis. In furtherance of the foregoing, any Party involved in such a dispute, controversy or claim may deliver a notice (an “Escalation Notice”) demanding an in-person meeting involving representatives of the Parties at a senior level of management of the Parties (or if the Parties agree, of the appropriate business unit or division within such entity). A copy of any such Escalation Notice shall be given to the General Counsel, or like officer or official, of each Party involved in the dispute, controversy or claim (which copy shall state that it is an Escalation Notice pursuant to this Agreement). Any agenda, location or procedures for such discussions or negotiations between the Parties may be established by the Parties from time to time; provided, however, that the Parties shall use commercially reasonable efforts to meet within 30 days of the Escalation Notice.

(b) The Parties may agree to retain a mediator, acceptable to both Parties, to aid the Parties in their discussions and negotiations by informally providing advice to the Parties. Any opinion expressed by the mediator shall be strictly advisory and shall not be binding on the Parties, nor shall any opinion expressed by the mediator be admissible in any action or proceeding. The mediator shall be selected by the Party that did not deliver the applicable Escalation Notice from the list of individuals to be supplied to the Parties by JAMS/Endispute, the American Arbitration Association or such entity mutually agreeable to the Parties. Costs of the mediator shall be borne equally by the Parties involved in the matter, and each Party shall otherwise be responsible for its own expenses.

Section 11.2 Continuity of Service and Performance. Unless otherwise agreed in writing, the Parties will continue to provide service and honor all other commitments under this Agreement and each Ancillary Agreement during the course of dispute resolution pursuant to the provisions of this Article XI with respect to all matters not subject to such dispute, controversy or claim.

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Section 11.3 Choice of Forum. Any mediation hereunder shall take place in Spokane, Washington, unless otherwise agreed in writing by the Parties.

Section 11.4 Ability to Pursue Other Legal Remedies. For the avoidance of doubt, nothing in this Article XI shall prevent any Party from pursuing any and all remedies available to it in connection with a dispute relating to this Agreement or any of the Ancillary Agreements.

ARTICLE XII

ACCESS TO INFORMATION AND SERVICES

Section 12.1 Agreement for Exchange of Information.

(a) At all times from and after the Distribution Date, as soon as reasonably practicable after written request: (i) the Potlatch Group shall at Clearwater’s expense afford to Clearwater, its Subsidiaries and their authorized accountants, counsel and other designated representatives reasonable access during normal business hours to, and provide copies of, all records, books, contracts, instruments, data, documents and other information (collectively, “Information”) in the possession or under the control of the Potlatch Group following the Distribution Date that relates to the Clearwater Group or the Pulp-Based Business; and (ii) the Clearwater Group shall at Potlatch’s expense afford to Potlatch, its Subsidiaries and their authorized accountants, counsel and other designated representatives reasonable access during normal business hours to, and provide copies of, all Information in the possession or under the control of the Clearwater Group following the Distribution Date that relates to the Potlatch Group or the Retained Business; provided, however, that in the event that either Party determines that any such provision of or access to Information could be commercially detrimental, violate any Law or Contract or waive any attorney-client privilege, the Parties shall take all reasonable measures to permit the compliance with such obligations in a manner that avoids any such harm or consequence.

(b) Either Party may request Information under Section 12.1(a) (i) to comply with reporting, disclosure, filing or other requirements imposed on the requesting party (including under applicable securities or tax Laws) by a Governmental Entity having jurisdiction over the requesting party, (ii) for use in any other judicial, regulatory, administrative, tax or other proceeding or in order to satisfy audit, accounting, claims defense, regulatory filings, litigation, tax or other similar requirements, (iii) for use in compensation, benefit or welfare plan administration or other bona fide business purposes or (iv) to comply with its obligations under this Agreement or any Ancillary Agreement.

Section 12.2 Ownership of Information. Any Information owned by one Party that is provided to a requesting Party pursuant to Section 12.1 shall be deemed to remain the property of the providing Party. Unless specifically set forth herein, nothing contained in this Agreement shall be construed to grant or confer rights of license or otherwise in any such Information.

Section 12.3 Compensation for Providing Information. The Party requesting Information agrees to reimburse the providing Party for the reasonable costs, if any, of creating, gathering and copying such Information, to the extent that such costs are incurred for the benefit of the requesting Party.

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Section 12.4 Retention of Records. To facilitate the possible exchange of Information pursuant to this Article XII after the Distribution Date, the Parties agree to use commercially reasonable efforts to retain all Information in their respective possession or control on the Distribution Date in accordance with their respective document retention policies as in effect on the Distribution Date. No Party will destroy, or permit any of its Subsidiaries or Affiliates to destroy, any Information that the other Party may have the right to obtain pursuant to this Agreement except in accordance with the first Party’s document retention policy as in effect on the Distribution Date. If either Party proposes to amend its document retention policy in a manner that relates to the Information or the retention thereof (including the period for retention of any Information), such Party shall notify the other Party in writing of such proposed amendment prior to its adoption and take such actions as the other Party may reasonably request with respect to the Information subject to such amendment.

Section 12.5 Limitation of Liability. No Party shall have any liability to the other Party (i) if any Information exchanged or provided pursuant to this Agreement that is an estimate or forecast, or that is based on an estimate or forecast, is found to be inaccurate, in the absence of gross negligence or willful misconduct by the Party providing such Information, or (ii) if any Information is destroyed after commercially reasonable efforts to comply with the provisions of Section 12.4.

Section 12.6 Production of Witnesses. At all times from and after the Distribution Date, each Party shall use commercially reasonable efforts to make available to the other Party (without cost (other than reimbursement of actual out-of-pocket expenses) to, and upon prior written request of, the other Party) its directors, officers, employees and agents as witnesses to the extent that the same may reasonably be required by the other Party in connection with any Action in which the requesting Party may from time to time be involved with respect to the Pulp-Based Business, the Retained Business or any transactions contemplated hereby.

Section 12.7 Confidentiality.

(a) From and after the Distribution Date, each of the Potlatch Group and the Clearwater Group shall hold, and shall cause their respective directors, officers, employees, agents, consultants, advisors and other representatives to hold, in strict confidence, with at least the same degree of care that applies to the Potlatch Group’s confidential and proprietary information pursuant to policies in effect as of the Distribution Date or such other procedures as may reasonably be adopted by the applicable Party after the Distribution Date, all non-public information concerning or belonging to the other Party or any of its Subsidiaries or Affiliates obtained by it prior to the Distribution Date, accessed by it pursuant to Section 12.1, or furnished to it by the other Party or any of its Subsidiaries or Affiliates pursuant to this Agreement, any Conveyance Instrument or the Employee Matters Agreement, and shall not release or disclose such information to any other Person, except their representatives, who shall be bound by the provisions of this Section 12.7; provided, however, that the Potlatch Group and the Clearwater Group and their respective directors, officers, employees, agents, consultants, advisors and other representatives may disclose such information if, and only to the extent that, (i) a disclosure of such information is compelled by judicial or administrative process or, in the opinion of such Party’s counsel, by other requirements of Law (in which case the disclosing Party will provide, to the extent practicable under the circumstances, advance written notice to the other Party of its

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intent to make such disclosure), or (ii) such Party can show that such information (A) is published or is or otherwise becomes available to the general public as part of the public domain without breach of this Agreement; (B) has been furnished or made known to the recipient without any obligation to keep it confidential by a third party under circumstances which are not known to the recipient to involve a breach of the third party’s obligations to a Party hereto; or (C) was developed independently of information furnished to the recipient under this Agreement.

(b) Each Party acknowledges that the other Party would not have an adequate remedy at Law for the breach by the acknowledging Party of any one or more of the covenants contained in this Section 12.7 and agrees that, in the event of such breach, the other Party may, in addition to the other remedies that may be available to it, apply to a court for an injunction to prevent breaches of this Section 12.7 and to enforce specifically the terms and provisions of this Section 12.7. Notwithstanding any other section hereof, the provisions of this Section 12.7 shall survive the Distribution Date indefinitely.

Section 12.8 Privileged Matters.

(a) Each of the Potlatch Group and the Clearwater Group agrees to maintain, preserve and assert all privileges, including, without limitation, privileges arising under or relating to the attorney-client relationship (which shall include the attorney-client and work product privileges), not heretofore waived, that relate to the Pulp-Based Business, the Pulp-Based Business Liabilities, the Retained Business or the Retained Business Liabilities for any period prior to the Distribution Date (“Privilege”). Each Party agrees that it shall not waive any Privilege that could be asserted under applicable Law without the prior written consent of the other Party. The rights and obligations created by this Section 12.8 shall apply to all information relating to the Pulp-Based Business, the Pulp-Based Business Liabilities, the Retained Business or the Retained Business Liabilities as to which, but for the Distribution, either Party would have been entitled to assert or did assert the protection of a Privilege (“Privileged Information”), including (i) any and all information generated prior to the Distribution Date but which, after the Distribution, is in the possession of either Party; and (ii) all information generated, received or arising after the Distribution Date that refers to or relates to Privileged Information generated, received or arising prior to the Distribution Date.

(b) Upon receipt by either Party of any subpoena, discovery or other request that may call for the production or disclosure of Privileged Information or if either Party obtains knowledge that any current or former employee of a member of the Potlatch Group or the Clearwater Group has received any subpoena, discovery or other request that may call for the production or disclosure of Privileged Information, such Party shall notify promptly the other Party of the existence of the request and shall provide the other Party a reasonable opportunity to review the information and to assert any rights it may have under this Section 12.8 or otherwise to prevent the production or disclosure of Privileged Information. Each Party agrees that it will not produce or disclose any information that may be covered by a Privilege under this Section 12.8 unless (i) the other Party has provided its written consent to such production or disclosure (which consent shall not be unreasonably withheld), or (ii) a court of competent jurisdiction has entered a final, nonappealable order finding that the information is not entitled to protection under any applicable Privilege. Any costs associated with asserting any Privilege shall be borne by the Party requesting that such Privilege be asserted.

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(c) Each Party’s transfer of books and records and other information to the other Party, and each Party’s agreement to permit the other Party to possess Privileged Information existing or generated prior to the Distribution Date, are made in reliance on each Party’s agreement, as set forth in Section 12.7 and Section 12.8, to maintain the confidentiality of Privileged Information and to assert and maintain all applicable Privileges. The access to information being granted pursuant to Section 12.1, the agreement to provide witnesses and individuals pursuant to Section 12.6 and the transfer of Privileged Information pursuant to this Agreement shall not be deemed a waiver of any Privilege that has been or may be asserted under this Section 12.8 or otherwise. Nothing in this Agreement shall operate to reduce, minimize or condition the rights granted to each Party in, or the obligations imposed upon each Party by, this Section 12.8.

ARTICLE XIII

MISCELLANEOUS

Section 13.1 Entire Agreement. This Agreement, the Ancillary Agreements, 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.

Section 13.2 Choice of Law. 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.

Section 13.3 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.

Section 13.4 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.

Section 13.5 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.

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Section 13.6 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.

Section 13.7 Successors and Assigns. This Agreement and each Ancillary 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 and each Ancillary 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).

Section 13.8 Third Party Beneficiaries. Except to the extent otherwise provided in Article X or in any Ancillary Agreement, the provisions of this Agreement and each Ancillary 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 or any Ancillary Agreement.

Section 13.9 Notices. All notices, requests, claims, demands and other communications required or permitted hereunder shall be in writing and shall be deemed given or delivered (i) when delivered personally, (ii) if transmitted by facsimile when confirmation of transmission is received, (iii) if sent by registered or certified mail, postage prepaid, return receipt requested, on the third business day after mailing or (iv) if sent by private courier when received; and shall be addressed as follows:

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 W. 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.

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Section 13.10 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.

Section 13.11 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, insurrections, fires, explosions, earthquakes, floods, unusually severe weather conditions, labor strikes or work stoppages as a result of labor unrest, 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.

Section 13.12 No Public Announcement. Neither Potlatch nor Clearwater shall, without the approval of the other, make any press release or other public announcement concerning the transactions 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 to implement the provisions of this Agreement or any Ancillary Agreement or to comply with the accounting and SEC disclosure obligations or the rules of any stock exchange.

Section 13.13 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. 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

SEPARATION AND DISTRIBUTION AGREEMENT – SIGNATURE PAGE

EX-3.1

Exhibit 3.1

RESTATED CERTIFICATE OF INCORPORATION

OF

CLEARWATER PAPER CORPORATION

Clearwater Paper Corporation, a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows:

FIRST: The name of the corporation is Clearwater Paper Corporation.

SECOND: The original Certificate of Incorporation of the corporation was filed with the Secretary of State of the State of Delaware on October 7, 2005 and the original name of the corporation was Potlatch Forest Products Corporation.

THIRD: An amendment to the Certificate of Incorporation of the Corporation was filed on December 2, 2008, changing the name of the Corporation to Clearwater Paper Corporation.

FOURTH: Pursuant to Sections 242 and 245 of the General Corporation Law of the State of Delaware, this Restated Certificate of Incorporation restates, integrates and further amends the provisions of the Certificate of Incorporation of the corporation.

FIFTH: The Certificate of Incorporation of the corporation shall be amended and restated to read in full as follows:

ARTICLE I

The name of the corporation is Clearwater Paper Corporation.

ARTICLE II

The address of the registered office of the corporation in the State of Delaware is c/o The Corporation Trust Company, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company.

ARTICLE III

The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware (the “DGCL”).

ARTICLE IV

A. Classes of Stock. The total number of shares of all classes of classes of capital stock that the corporation shall have authority to issue is 105,000,000, of which 100,000,000 shares, par value $0.0001 per share, shall be common stock (“Common Stock”) and 5,000,000 shares, par value $0.0001 per share, shall be preferred stock (“Preferred Stock”). The number of authorized shares of Common Stock or Preferred Stock may be increased or decreased

(but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the then outstanding shares of Common Stock, without a vote of the holders of Preferred Stock, or of any series thereof, unless a vote of any such Preferred Stock holders is required pursuant to the provisions established by the Board of Directors of the corporation (the “Board of Directors”) in the resolution or resolutions providing for the issue of such Preferred Stock, and if such holders of such Preferred Stock are so entitled to vote thereon, then, except as may otherwise be set forth in this Restated Certificate of Incorporation, the only stockholder approval required shall be the affirmative vote of a majority of the combined voting power of Common Stock and Preferred Stock so entitled to vote.

B. Preferred Stock. Preferred Stock may be issued from time to time in one or more series, as determined by the Board of Directors. The Board of Directors is expressly authorized to provide for the issue, in one or more series, of all or any of the remaining shares of Preferred Stock and, in the resolution or resolutions providing for such issue, to establish for each such series the number of its shares, the voting powers, full or limited, of the shares of such series, or that such shares shall have no voting powers, and the designations, preferences and relative, participating, optional or other special rights of the shares of such series, and the qualifications, limitations or restrictions thereof. The Board of Directors is also expressly authorized (unless forbidden in the resolution or resolutions providing for such issue) to increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of any series subsequent to the issuance of shares of that series. In case the number of shares of any such series shall be so decreased, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series.

C. Series A Participating Preferred Stock. 250,000 shares of the authorized and unissued Preferred Stock of the corporation are hereby designated “Series A Participating Preferred Stock” with the rights, preferences, powers, privileges and restrictions, qualifications and limitations as provided on Exhibit A attached hereto.

D. Common Stock.

1. Relative Rights of Preferred Stock and Common Stock. All preferences, voting powers, relative, participating, optional or other special rights and privileges, and qualifications, limitations, or restrictions of Common Stock are expressly made subject and subordinate to those that may be fixed with respect to any shares of Preferred Stock.

2. Voting Rights. Except as otherwise required by law or this Restated Certificate of Incorporation, each holder of Common Stock shall have one vote in respect of each share of stock held by such holder of record on the books of the corporation for the election of directors and on all matters submitted to a vote of stockholders of the corporation.

3. Dividends. Subject to the preferential rights of the Preferred Stock, the holders of shares of Common Stock shall be entitled to receive, when and if declared by the Board of Directors, out of the assets of the corporation which are by law available therefor, dividends payable either in cash, in property or in shares of capital stock.

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4. Dissolution, Liquidation or Winding Up. In the event of any dissolution, liquidation or winding up of the affairs of the corporation, after distribution in full of the preferential amounts, if any, to be distributed to the holders of shares of the Preferred Stock, holders of Common Stock shall be entitled, unless otherwise provided by law or this Restated Certificate of Incorporation, to receive all of the remaining assets of the corporation of whatever kind available for distribution to stockholders ratably in proportion to the number of shares of Common Stock held by them respectively.

ARTICLE V

In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware:

A. The Board of Directors is expressly authorized to adopt, amend or repeal the bylaws of the corporation, provided, however, that the bylaws may only be amended in accordance with the provisions thereof.

B. Elections of directors need not be by written ballot unless the bylaws of the corporation shall so provide.

C. The books of the corporation may be kept at such place within or without the State of Delaware as the bylaws of the corporation may provide or as may be designated from time to time by the Board of Directors.

ARTICLE VI

A. Number of Directors. The business and affairs of the corporation shall be managed by a Board of Directors consisting of not less than five nor more than eleven persons. The exact number of directors of the corporation within the minimum and maximum number specified in the preceding sentence shall be determined from time to time by resolution adopted by the affirmative vote of a majority of the entire Board of Directors at any regular or special meeting of the Board.

B. Classes of Directors. The Board of Directors, other than those directors elected by the holders of any series of Preferred Stock as provided for or fixed pursuant to the provisions of Article IV of this Restated Certificate of Incorporation, shall be divided into three classes, designated Class I, Class II and Class III, as nearly equal in number as possible, and the term of office of directors of one class shall expire at each annual meeting of stockholders, and in all cases as to each director until his or her successor shall be elected and shall qualify or until his or her earlier resignation, removal from office, death or incapacity. Additional directorships resulting from an increase in number of directors shall be apportioned among the classes as equally as possible. The initial term of office of directors of Class I shall expire at the annual meeting of stockholders in 2009, the initial term of office of directors of Class II shall expire at the annual meeting of stockholders in 2010, and the initial term of office of directors of Class III shall expire at the annual meeting of stockholders in 2011. At each annual meeting of

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stockholders the number of directors equal to the number of directors of the class whose term expires at the time of such meeting (or, if less, the number of directors properly nominated and qualified for election) shall be elected to hold office until the third succeeding annual meeting of stockholders after such directors’ election.

C. Vacancies. Except as otherwise provided for or fixed pursuant to the provisions of Article IV of this Restated Certificate of Incorporation relating to the rights of the holders of any series of Preferred Stock to elect additional directors, and subject to the provisions hereof, newly created directorships resulting from any increase in the authorized number of directors or any vacancies on the Board of Directors resulting from death, resignation or removal, shall be filled only by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors, or by a sole remaining director. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of directors in which the new directorship was created or in which the vacancy occurred, and until such director’s successor shall have been duly elected and qualified or until his or her earlier death, resignation or removal from office. Subject to the provisions of this Restated Certificate of Incorporation, no decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. Any director or the entire Board of Directors may be removed only for cause.

ARTICLE VII

Any action required or permitted to be taken by the stockholders of the corporation must be taken at a duly called annual or special meeting of the stockholders of the corporation, and the power of stockholders to consent in writing, without a meeting, to the taking of any action is specifically denied. Subject to the rights of the holders of any series of Preferred Stock, special meetings of the stockholders of the corporation may be called only by the Secretary of the corporation (a) at the written request of the Chair of the Board of the corporation or the Vice Chair of the Board of the corporation, (b) pursuant to a resolution adopted by the affirmative vote of a majority of the Board of Directors or (c) at the request in writing of stockholders owning shares which have a majority of the voting power of the capital stock issued and outstanding and entitled to vote.

ARTICLE VIII

A. Limitation on Liability. To the fullest extent permitted by the DGCL, as the same exists or as may hereafter be amended, a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director.

B. Indemnification. Each person who is or was a director or officer of the corporation and each director or officer of the corporation who is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, employee benefit plan or other enterprise (including the heirs, executors, administrators or estate of such person), shall be indemnified and advanced expenses by the corporation, in accordance with the bylaws of the corporation, to the fullest extent

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authorized by the DGCL, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than said law permitted the corporation to provide prior to such amendment) or any other applicable laws as presently or hereinafter in effect. The right to indemnification and advancement of expenses hereunder shall not be exclusive of any other right that any person may have or hereafter acquire under any statute, provision of the Restated Certificate of Incorporation, bylaw, agreement, vote of stockholders or disinterested directors or otherwise.

C. Insurance. The corporation may, to the fullest extent permitted by law, purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation or another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against any expense, liability or loss incurred by such person in any such capacity or arising out of such person’s status as such, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the DGCL.

D. Repeal and Modification. Any repeal or modification of the foregoing provisions of this Article VIII shall not adversely affect any right or protection existing hereunder immediately prior to such repeal or modification.

ARTICLE IX

Notwithstanding any other provision of this Restated Certificate of Incorporation, the affirmative vote of the holders of at least 66 ²/3% of the voting power of all of the then outstanding shares of the stock of the corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend in any respect or repeal this Article IX, or Articles VI, VII and VIII.

* * *

SIXTH: This Restated Certificate of Incorporation was duly adopted by the Board of Directors of the corporation.

SEVENTH: This Restated Certificate of Incorporation was duly adopted by the sole stockholder of the corporation in accordance with the provisions of Sections 242 and 245 of the General Corporation Law of the State of Delaware. Written consent of the sole stockholder of the corporation has been given with respect to this Restated Certificate of Incorporation in accordance with Section 228 of the General Corporation Law of the State of Delaware.

EIGHTH: Pursuant to Section 103(d) of the General Corporation Law of the State of Delaware, this Restated Certificate of Incorporation shall become effective at 12:01 a.m. (Eastern) on December 16, 2008.

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IN WITNESS WHEREOF, the corporation has caused this certificate to be signed by its President and Chief Executive Officer and attested by its Secretary this 12^th day of December, 2008.

CLEARWATER PAPER CORPORATION
By	/s/    Michael J. Covey
	Michael J. Covey,
	Chief Executive Officer and President

Attest:
By	/s/    Michael S. Gadd
	Michael S. Gadd, Secretary

Exhibit A

Series A Participating Preferred Stock

A. Dividends and Distributions.

1. Subject to the prior and superior rights of the holders of any shares of any series of Preferred Stock ranking prior and superior to the shares of Series A Participating Preferred Stock with respect to dividends, the holders of shares of Series A Participating Preferred Stock in preference to the holders of shares of Common Stock of the corporation and any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each such date being referred to herein as a “Quarterly Dividend Payment Date”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Participating Preferred Stock in an amount per share (rounded to the nearest cent) equal to the greater of (a) $25.00 or, (b) subject to the provision for adjustment hereinafter set forth, 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock, since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Participating Preferred Stock. In the event the corporation shall at any time after the close of business on December 4, 2008 (the “Rights Declaration Date”) (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the outstanding Common Stock into a smaller number of shares, by reclassification or otherwise, then in each such case the amount to which holders of shares of Series A Participating Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

2. The corporation shall declare a dividend or distribution on the Series A Participating Preferred Stock as provided in Section A.1 of this Exhibit A immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $25.00 per share on the Series A Participating Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.

3. Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Participating Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A Participating Preferred Stock unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which

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case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Participating Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Participating Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 30 days prior to the date fixed for the payment thereof.

B. Voting Rights. The holders of shares of Series A Participating Preferred Stock shall have the following voting rights:

1. Subject to the provision for adjustment hereinafter set forth, each share of Series A Participating Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters submitted to a vote of the stockholders of the corporation. In the event the corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock into a greater number of shares or (iii) combine the outstanding Common Stock into a smaller number of shares, by reclassification or otherwise, then in each such case the number of votes per share to which holders of shares of Series A Participating Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock outstanding immediately prior to such event.

2. Except as otherwise provided herein, in the Certificate of Incorporation or by law, the holders of shares of Series A Participating Preferred Stock and the holders of shares of Common Stock and any other capital stock of the corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the corporation.

3. (a) If at any time dividends on any Series A Participating Preferred Stock shall be in arrears in an amount equal to six quarterly dividends thereon, the holders of the Series A Participating Preferred Stock, voting as a separate series from all other series of Preferred Stock and classes of capital stock, shall be entitled to elect two members of the Board of Directors in addition to any directors elected by any other series, class or classes of securities and the authorized number of directors will automatically be increased by two. Promptly thereafter, the Board of Directors of this corporation shall, as soon as may be practicable, call a special meeting of holders of Series A Participating Preferred Stock for the purpose of electing such members of the Board of Directors. Said special meeting shall in any event be held within 45 days of the occurrence of such arrearage.

(b) During any period when the holders of Series A Participating Preferred Stock, voting as a separate series, shall be entitled and shall have exercised their right to elect

8

two directors, then and during such time as such right continues (a) the then authorized number of directors shall remain increased by two, and the holders of Series A Participating Preferred Stock, voting as a separate series, shall remain entitled to elect the additional directors so provided for, and (b) each such additional director shall not be a member of any existing class of the Board of Directors, but shall serve until the next annual meeting of stockholders for the election of directors, or until his or her successor shall be elected and shall qualify, or until his or her right to hold such office terminates pursuant to the provisions of this Section B.3.

(c) A director elected pursuant to the terms hereof may be removed with or without cause by the holders of Series A Participating Preferred Stock entitled to vote in an election of such director.

(d) If, during any interval between annual meetings of stockholders for the election of directors and while the holders of Series A Participating Preferred Stock shall be entitled to elect two directors, there are fewer than two such directors in office by reason of resignation, death or removal, then, promptly thereafter, the Board of Directors shall call a special meeting of the holders of Series A Participating Preferred Stock for the purpose of filling such vacancy(ies) and such vacancy(ies) shall be filled at such special meeting. Such special meeting shall in any event be held within 45 days of the occurrence of any such vacancy(ies).

(e) At such time as the arrearage is fully cured, and all dividends accumulated and unpaid on any shares of Series A Participating Preferred Stock outstanding are paid, and, in addition thereto, at least one regular dividend has been paid subsequent to curing such arrearage, the term of office of any director elected pursuant to this Section B.3., or his or her successor, shall automatically terminate, and the authorized number of directors shall automatically decrease by two, and the rights of the holders of the shares of the Series A Participating Preferred Stock to vote as provided in this Section B.3. shall cease, subject to renewal from time to time upon the same terms and conditions.

4. Except as set forth herein or as otherwise provided by law, holders of Series A Participating Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock and any other capital stock of the corporation having general voting rights as set forth herein) for taking any corporate action.

C. Certain Restrictions.

1. Whenever quarterly dividends or other dividends or distributions payable on the Series A Participating Preferred Stock as provided in Section B of this Exhibit A are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Participating Preferred Stock outstanding shall have been paid in full, the corporation shall not:

(a) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Participating Preferred Stock;

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(b) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Participating Preferred Stock except dividends paid ratably on the Series A Participating Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;

(c) redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Participating Preferred Stock provided that the corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Participating Preferred Stock; or

(d) purchase or otherwise acquire for consideration any shares of Series A Participating Preferred Stock or any shares of stock ranking on a parity with the Series A Participating Preferred Stock except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.

2. The corporation shall not permit any subsidiary of the corporation to purchase or otherwise acquire for consideration any shares of stock of the corporation unless the corporation could, under Section C.1. of this Exhibit A, purchase or otherwise acquire such shares at such time and in such manner.

D. Reacquired Shares. Any shares of Series A Participating Preferred Stock purchased or otherwise acquired by the corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein.

E. Liquidation, Dissolution or Winding Up.

1. Upon any liquidation (voluntary or otherwise), dissolution or winding up of the corporation, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Participating Preferred Stock unless, prior thereto, the holders of shares of Series A Participating Preferred Stock shall have received per share, the greater of $1,000.00 or 1,000 times the payment made per share of Common Stock, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the “Series A Liquidation Preference”). Following the payment of the full amount of the Series A Liquidation Preference, no additional distributions shall be made to the holders of shares of Series A Participating Preferred Stock unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the “Common Adjustment”) equal to the quotient obtained by dividing (i) the Series A Liquidation Preference by (ii) 1,000 (as appropriately adjusted as set

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forth in Section E.3. of this Exhibit A to reflect such events as stock splits, stock dividends and recapitalization with respect to the Common Stock) (such number in clause (ii), the “Adjustment Number”). Following the payment of the full amount of the Series A Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Series A Participating Preferred Stock and Common Stock, respectively, holders of Series A Participating Preferred Stock and holders of shares of Common Stock shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to 1 with respect to such Preferred Stock and Common Stock, on a per share basis, respectively.

2. In the event there are not sufficient assets available to permit payment in full of the Series A Liquidation Preference and the liquidation preferences of all other series of Preferred Stock, if any, which rank on a parity with the Series A Participating Preferred Stock, then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences. In the event, following payment in full of all liquidation preferences of all shares senior to Common Stock (including the Series A Participating Preferred Stock), there are not sufficient assets available to permit payment in full of the Common Adjustment, then the remaining assets shall be distributed ratably to the holders of Common Stock.

3. In the event the corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, by reclassification or otherwise, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

F. Consolidation, Merger, etc. In case the corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash or any other property, then in any such case the shares of Series A Participating Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 1,000 times the aggregate amount of stock, securities, cash and any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Participating Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that are outstanding immediately prior to such event.

G. Redemption. The shares of Series A Participating Preferred Stock shall not be redeemable.

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H. Ranking. The Series A Participating Preferred Stock shall rank junior to all other series of the corporation’s Preferred Stock as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise.

I. Amendment. This Certificate of Incorporation and the Bylaws of the corporation shall not be further amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Participating Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least 66 ²/3% of the outstanding shares of Series A Participating Preferred Stock voting separately as a class.

J. Fractional Shares. Series A Participating Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder’s fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Participating Preferred Stock.

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EX-3.2

Exhibit 3.2

AMENDED AND RESTATED

B Y L A W S

OF

CLEARWATER PAPER CORPORATION

(a Delaware corporation)

TABLE OF CONTENTS

			Page
ARTICLE 1 Offices			1
	1.1	Registered Office	1
	1.2	Other Offices	1
ARTICLE 2 Meeting of Stockholders			1
	2.1	Place of Meeting	1
	2.2	Annual Meeting	1
	2.3	Special Meetings	4
	2.4	Notice of Meetings	5
	2.5	List of Stockholders	5
	2.6	Organization and Conduct of Business	5
	2.7	Quorum	6
	2.8	Adjournments	6
	2.9	Voting Rights	6
	2.10	Action at Meetings	6
	2.11	Record Date for Stockholder Notice and Voting	7
	2.12	Proxies	7
	2.13	Inspectors of Election	8
	2.14	No Action Without a Meeting	8
ARTICLE 3 Directors			8
	3.1	Election, Tenure and Qualifications	8
	3.2	Enlargement and Vacancies	11
	3.3	Resignation and Removal	11
	3.4	Powers	11
	3.5	Chair of the Board; Vice Chair of the Board	11
	3.6	Place of Meetings	12
	3.7	Annual Meetings	12
	3.8	Regular Meetings	12
	3.9	Special Meetings	12
	3.10	Quorum, Action at Meeting, Adjournments	12
	3.11	Action Without Meeting	12
	3.12	Telephone Meetings	13
	3.13	Committees	13
	3.14	Fees and Compensation of Directors	13
ARTICLE 4 Officers			14
	4.1	Officers Designated	14
	4.2	Election	14
	4.3	Tenure	14
	4.4	Chief Executive Officer	14

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TABLE OF CONTENTS

(continued)

			Page
	4.5	President	14
	4.6	Chief Financial Officer	15
	4.7	Vice President	15
	4.8	Secretary	15
	4.9	Assistant Secretary	16
	4.10	Treasurer and Assistant Treasurers	16
	4.11	Delegation of Authority	16
ARTICLE 5 Notices			16
	5.1	Delivery	16
	5.2	Waiver of Notice	16
ARTICLE 6 Indemnification and Insurance			17
	6.1	Indemnification	17
	6.2	Advance Payment	18
	6.3	Non-Exclusivity and Survival of Rights; Amendments	18
	6.4	Insurance	18
	6.5	Severability	18
	6.6	Reliance	19
	6.7	Indemnification of Other Persons	19
ARTICLE 7 Capital Stock			19
	7.1	Uncertificated Shares	19
	7.2	Transfer of Stock	19
	7.3	Registered Stockholders	20
	7.4	Lost, Stolen or Destroyed Certificates	20
ARTICLE 8 General Provisions			20
	8.1	Dividends	20
	8.2	Checks	20
	8.3	Corporate Seal	20
	8.4	Execution of Corporate Contracts and Instruments	20
	8.5	Representation of Shares of Other Corporations	21
ARTICLE 9 Amendments			21

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AMENDED AND RESTATED

B Y L A W S

OF

CLEARWATER PAPER CORPORATION

(a Delaware corporation)

ARTICLE 1

Offices

1.1 Registered Office. The registered office of the corporation shall be set forth in the certificate of incorporation of the corporation (the “Certificate of Incorporation”).

1.2 Other Offices. The corporation may also have offices at such other places, either within or without the State of Delaware, as the board of directors of the corporation (the “Board”) may from time to time designate or the business of the corporation may require.

ARTICLE 2

Meeting of Stockholders

2.1 Place of Meeting. Meetings of stockholders may be held at such place, either within or without the State of Delaware, as may be designated by or in the manner provided in these bylaws, or, if not so designated, at the principal executive offices of the corporation. In lieu of holding a meeting of stockholders at a designated place, the Board, in its sole discretion, may determine that any meeting of stockholders may be held solely by means of remote communication.

2.2 Annual Meeting. Annual meetings of stockholders shall be held each year at such date and time as shall be designated from time to time by the Board and stated in the notice of the meeting. At each such annual meeting, the stockholders shall elect the number of directors equal to the number of directors of the class whose term expires at such meeting (or, if fewer, the number of directors properly nominated and qualified for election) to hold office until the third succeeding annual meeting of stockholders after their election. The stockholders shall also transact such other business as may properly be brought before the meeting.

To be properly brought before the annual meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board, (b) otherwise properly brought before the meeting by or at the direction of the Board, or (c) otherwise properly brought before the meeting by a stockholder who is a stockholder of record of the corporation at the time of giving of the notice provided for in this Section and at the time of the annual meeting, who is entitled to vote at the meeting, and who complies with the notice procedures set forth in this Section. The requirements of this Section shall apply to any

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business to be brought before an annual meeting by a stockholder, other than (i) the nomination of a person for election as a director, which must be made in compliance with, and shall be exclusively governed by, Section 3.1 of these bylaws, and (ii) matters properly brought under Rule 14a-8 (or any successor rule or regulation) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”) and included in the corporation’s notice of meeting.

For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice to the Secretary of the corporation in proper written form of the stockholder’s intent to propose such business and the business proposed must be otherwise proper to be brought before the meeting. To be timely, the stockholder’s notice must be delivered by a nationally recognized courier service or mailed by first class United States mail, postage or delivery charges prepaid, and received at the principal executive offices of the corporation addressed to the attention of the Secretary of the corporation not more than 120 days nor less than 90 days prior to the first anniversary date of the preceding year’s annual meeting of stockholders; provided, however, that in the event that no annual meeting was held in the preceding year or the annual meeting is called for a date that is more than 30 days before or more than 60 days after the first anniversary date of the preceding year’s annual meeting of stockholders, notice by the stockholder to be timely must be so received by the Secretary of the corporation not later than the close of business on the later of (x) the 90th day prior to the date of such scheduled annual meeting and (y) the 10th day following the earlier to occur of the day on which notice of the date of the scheduled annual meeting was mailed or the day on which public announcement (as defined below) of the date of such scheduled annual meeting was first made. In no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period (or extend any time period) for the giving of the stockholder’s notice as described above.

A stockholder’s notice to the Secretary shall set forth the following as to each matter the stockholder proposes to bring before the annual meeting: (i) a brief description of the business desired to be brought before the annual meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration and, in the event that such business includes a proposal to amend these bylaws, the language of the proposed amendment), and the reasons for conducting such business at the annual meeting; (ii) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the business is being proposed, (A) the name and address, as they appear on the corporation’s books, of the stockholder, the name and address of the beneficial owner, if any, and the name and address of any person who is an associated person (as defined below) of the stockholder or the beneficial owner, (B) the class, series and number of shares of the corporation that are held of record by the stockholder, the beneficial owner, if any, and any person who is an associated person of the stockholder or the beneficial owner as of the date of the notice, and a representation that the stockholder will provide the corporation in writing the information required by this clause (B) updated as of the record date for the meeting promptly following the later of the record date or the date on which public announcement of the record date was first made, (C) any material interest in such business of the stockholder, the beneficial owner, if any, and any person who is an associated person of the stockholder or the beneficial owner, (D) a representation as to whether the stockholder or the beneficial owner, if any, intends, or is or intends to be part of a group that intends, to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the corporation’s outstanding shares that, together with shares owned by the stockholder or the beneficial owner

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and any such group, would be required to approve or adopt such business and/or otherwise to solicit proxies from stockholders in support of such business, and (E) any other information that would be required to be provided by the stockholder, the beneficial owner, if any, and any person who is an associated person of the stockholder or the beneficial owner pursuant to the Section 14 of the Exchange Act and the rules and regulations promulgated thereunder assuming that the stockholder or the beneficial owner were to request that the corporation include such business in the corporation’s proxy statement as a stockholder proposal; (iii) as to the stockholder giving the notice or, if the notice is given on behalf of a beneficial owner on whose behalf the business is being proposed, as to the beneficial owner, (A) the class, series and number of shares of the corporation that are owned beneficially by the stockholder or beneficial owner and any associated person thereof as of the date of the notice, (B) any derivative or short positions held or beneficially held by the stockholder or beneficial owner and any associated person thereof and whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of, or any other agreement, arrangement or understanding (including any profit interests, options, and borrowed or loaned shares) has been made, the effect or intent of which is to mitigate loss to, manage the risk or benefit of share price changes for, or increase or decrease the voting power of, the stockholder or beneficial owner or any associated person thereof with respect to the corporation’s securities, (C) a representation that the stockholder will provide the corporation in writing the information required by the preceding clauses (A) and (B) updated as of the record date for the meeting promptly following the later of the record date or the date on which public announcement of the record date was first made, and (D) a description of any agreement, arrangement or understanding with respect to such business between or among the stockholder or beneficial owner and any associated person thereof, and any others (including their names) acting in concert with any of the foregoing (including any agreement that would be required to be disclosed pursuant to Item 5 or Item 6 of Schedule 13D under the Exchange Act, regardless of whether the requirement to file a Schedule 13D is applicable to the stockholder or beneficial owner), and a representation that the stockholder or beneficial owner will provide the corporation in writing the information required by this clause (D) updated as of the record date for the meeting promptly following the later of the record date or the date on which public announcement of the record date was first made; and (iv) a representation that the stockholder (or a qualified representative of the stockholder) intends to appear in person or by proxy at the meeting to propose such business.

Notwithstanding anything in these bylaws to the contrary, (a) no business shall be conducted at the annual meeting except in accordance with the procedures set forth in this Section; provided, however, that nothing in this Section shall be deemed to preclude discussion by any stockholder of any business properly brought before the annual meeting; and (b) unless otherwise required by law, if a stockholder intending to propose business at an annual meeting pursuant to the preceding paragraph does not provide the updated information required under clauses (ii) and (iii) of the preceding paragraph to the corporation promptly following the later of the record date or the date on which public announcement of the record date was first made, or the stockholder (or a qualified representative of the stockholder) does not appear at the meeting to present the proposed business, such business shall not be transacted, notwithstanding that proxies in respect of such business may have been received by the corporation. For purposes of this Section, to be considered a qualified representative of the stockholder, a person must be a duly authorized officer, manager or partner of such stockholder or authorized by a writing executed by such stockholder (or a reliable reproduction or electronic transmission of the

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writing) delivered to the corporation prior to the proposing of the business at the meeting by the stockholder stating that the person is authorized to act for the stockholder as proxy at the meeting of stockholders. Notwithstanding the foregoing provisions of this Section, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section; provided, however, that any references in this Section to the Exchange Act or the rules and regulations thereunder are not intended to and shall not limit the requirements applicable to proposals as to any business to be considered pursuant to the preceding paragraph. The requirements set forth in the preceding paragraph of this Section are intended to provide the corporation with notice of a stockholder’s intention to bring business before an annual meeting and related information and shall in no event be construed as imposing upon any stockholder the requirement to seek approval from the corporation as a condition precedent to bringing any such business before an annual meeting. Nothing in this Section shall be deemed to affect any rights (i) of stockholders to request inclusion of proposals in the corporation’s proxy statement pursuant to Rule 14a-8 (or any successor rule or regulation) promulgated under the Exchange Act or (ii) of the holders of any class or series of stock having a preference over the common stock as to dividends or upon liquidation, to make nominations of persons for election to the Board if and to the extent provided for under law, the Certificate of Incorporation, or these bylaws.

The Chair of the Board (or such other person presiding at the meeting in accordance with these bylaws) shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section, and if he or she should so determine, he or she shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.

For purposes of these bylaws, (1) “public announcement” shall mean disclosure (A) in a press release issued through Business Wire or PR Newswire or reported by the Dow Jones News Service, Associated Press or a comparable national news service or (B) in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act, (2) “associated person” of a person shall mean any person controlling, controlled by or under common control with, directly or indirectly, or acting in concert with, such person, and (3) “group” shall have the meaning ascribed to such term under Section 13(d)(3) of the Exchange Act.

2.3 Special Meetings. Special meetings of the stockholders may be called for any purpose or purposes, unless otherwise prescribed by statute or by the Certificate of Incorporation, by the Secretary only (a) at the written request of the Chair of the Board or the Vice Chair of the Board, (b) pursuant to a resolution adopted by the affirmative vote of a majority of the Board or (c) at the request in writing of stockholders owning shares which have a majority of the voting power of the capital stock issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. Business transacted at any special meeting shall be limited to matters relating to the purpose or purposes stated in the notice of meeting.

A request to the Secretary by stockholders for a special meeting shall be signed by each stockholder, or a duly authorized agent of such stockholder, requesting the special meeting and shall set forth the same information required to be provided by a stockholder proposing to bring a

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matter before an annual meeting pursuant to Section 2.2 of these bylaws. A special meeting requested by stockholders shall be held at such date, time and place within or without the state of Delaware as may be fixed by the Board; provided, however, that the date of any such special meeting shall be not more than ninety (90) days after the request to call the special meeting is received by the Secretary. A stockholder may revoke a request for a special meeting at any time by written revocation delivered to the Secretary, and if, following such revocation, there are un-revoked requests from stockholders holding in the aggregate less than the requisite number of shares entitling the stockholders to request the calling of a special meeting, the Board, in its discretion, may cancel the special meeting. Business to be transacted at a special meeting requested by stockholders shall be limited to the matters in the special meeting request; provided, however, that nothing herein shall prohibit the Board from submitting matters to the stockholders at any special meeting requested by stockholders.

2.4 Notice of Meetings. Except as otherwise provided by law, written notice of each meeting of stockholders, annual or special, stating the place, if any, date and time of the meeting, the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and, in the case of a special meeting, the purpose or purposes for which such special meeting is called, shall be given to each stockholder entitled to vote at such meeting not less than 10 nor more than 60 days before the date of the meeting.

2.5 List of Stockholders. The officer in charge of the stock ledger of the corporation or the transfer agent shall prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, for a period of at least ten days prior to the meeting, (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the principal place of business of the corporation. If the meeting is to be held at a place, then the list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to gain access to such list shall be provided with the notice of the meeting.

2.6 Organization and Conduct of Business. The Chair of the Board or, in his or her absence, the Chief Executive Officer or President of the corporation or, in their absence, such person as the Board may have designated or, in the absence of such a person, such person as may be chosen by the holders of a majority of the shares entitled to vote who are present, in person or by proxy, shall call to order any meeting of the stockholders and act as chair of the meeting. In the absence of the Secretary of the corporation, the secretary of the meeting shall be such person as the chair of the meeting appoints.

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The chair of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussion as seems to him or her in order.

2.7 Quorum. Except where otherwise provided by law or the Certificate of Incorporation or these bylaws, the holders of a majority of the stock issued and outstanding and entitled to vote, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of the stockholders.

2.8 Adjournments. Any meeting of stockholders may be adjourned from time to time to any other time and to any other place at which a meeting of stockholders may be held under these bylaws, which time and place shall be announced at the meeting. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the original meeting. When a meeting is adjourned to another place, date or time, notice need not be given of the adjourned meeting if the place, date and time thereof are announced at the meeting at which the adjournment is taken; provided, however, that if the date of any adjourned meeting is more than 30 days after the date for which the meeting was originally noticed, or if a new record date is fixed for the adjourned meeting, written notice of the place, if any, date, time and means of remote communications, if any, of the adjourned meeting shall be given in conformity herewith.

2.9 Voting Rights. Unless otherwise provided in the Certificate of Incorporation, each stockholder shall at every meeting of the stockholders be entitled to one vote for each share of the capital stock having voting power held by such stockholder.

2.10 Action at Meetings.

(a) When a quorum is present at any meeting, the vote of the holders of a majority of the voting power of the capital stock present in person or represented by proxy and entitled to vote on the question shall decide any question brought before such meeting, unless the question is one upon which by express provision of law or of the Certificate of Incorporation or of these bylaws, a different vote is required, in which case such express provision shall govern and control the decision of such question.

(b) At any meeting of stockholders at which directors are to be elected, when a quorum is present: (i) each nominee in an uncontested election shall be elected by the vote of the majority of the votes cast with respect to that director’s election; and (ii) in a contested election, the nominees receiving a plurality of the votes cast shall be elected. For purposes of this Section 2.10, (i) a “contested election” means the number of nominees exceeds the number of directors to be elected in such election; (ii) an “uncontested election” means the number of nominees equals the number of directors to be elected in such election; and (iii) a “majority of the votes cast” means by the vote of the majority of the voting power of the capital stock issued and outstanding, present in person or represented by proxy and entitled to vote for the election of directors.

(c) The Board shall nominate or elect as a director only persons who agree to tender, promptly following his or her election or re-election to the Board, an irrevocable resignation that

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will be effective upon (i) the failure of the candidate to receive the required vote at the next annual meeting at which he or she faces re-election and (ii) the acceptance by the Board of such resignation.

(d) If an incumbent director fails to receive the required vote for re-election in an uncontested election, the nominating and corporate governance committee of the Board will determine whether such director’s resignation should be accepted and make a recommendation to the Board, which shall make the final determination whether to accept the resignation. The Board will publicly disclose the Board’s decision within 90 days from the date of certification of the election results. If such incumbent director is a member of the nominating and corporate governance committee and does not agree to abstain from participating in the committee’s deliberations and decision regarding such resignation, then such committee shall act through a sub-committee consisting of one or more members who did not fail to receive the required vote in the election. If such incumbent does not agree to abstain from participating in the Board’s deliberations and decision regarding such resignation, then the Board shall act through a special committee consisting entirely of directors who did not fail to receive the required vote in the election.

(e) If a director’s resignation is accepted by the Board pursuant to this Section 2.10, or if a nominee for director is not elected and the nominee is not an incumbent director, then the Board may fill the resulting vacancy pursuant to the applicable provisions of the Certificate of Incorporation or may decrease the size of the Board pursuant to the provisions of the Certificate of Incorporation.

2.11 Record Date for Stockholder Notice and Voting. For purposes of determining the stockholders entitled to notice of, or to vote at, any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any right in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix, in advance, a record date, which shall not be more than 60 days nor fewer than 10 days before the date of any such meeting nor more than 60 days before any other action to which the record date relates. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting. If the Board does not so fix a record date, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.

2.12 Proxies. Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. All proxies must be filed with the Secretary of the corporation or the inspector of election for the meeting at the beginning of such meeting in order to be counted in any vote at the meeting. Subject to the limitation set forth in the last clause of the first sentence of this Section 2.12, a duly executed proxy that does not state that it is irrevocable shall continue in full force and effect unless (i) revoked by the person executing it, before the vote pursuant to that proxy, by a writing delivered to the corporation stating that the proxy is revoked or by a

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subsequent proxy executed by, or attendance at the meeting and voting in person by, the person executing the proxy, or (ii) written notice of the death or incapacity of the maker of that proxy is received by the corporation before the vote pursuant to that proxy is counted.

2.13 Inspectors of Election. The corporation shall, in advance of any meeting of stockholders, appoint one or more inspectors of election to act at the meeting and make a written report thereof. The corporation may designate one or more persons to act as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability.

2.14 No Action Without a Meeting. No action required or permitted to be taken at any annual or special meeting of the stockholders of the corporation may be taken without a meeting and the power of the stockholders to consent in writing, without a meeting, to the taking of any action is specifically denied.

ARTICLE 3

Directors

3.1 Election, Tenure and Qualifications. At each annual meeting of the stockholders, directors shall be elected for that class of directors whose terms are then expiring, except as otherwise provided in Section 3.2, and each director so elected shall hold office until such director’s successor is duly elected and qualified or until such director’s earlier resignation, removal, death or incapacity.

Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors. Subject to the rights of holders of any class or series of stock having a preference over the common stock as to dividends or upon liquidation, nominations of persons for election to the Board at the annual meeting may be made (i) by or at the direction of the Board (or any duly authorized committee thereof) or (ii) by a stockholder who is a stockholder of record at the time of giving of the notice provided for in this Section and at the time of the annual meeting, who is entitled to vote for the election of directors at the meeting, and who complies with the notice procedures set forth in this Section. A stockholder may make such a nomination only if such stockholder has given timely notice to the Secretary of the corporation in proper written form of the stockholder’s intent to make such a nomination.

To be timely, with respect to an annual meeting of stockholders, the stockholder’s notice must be delivered by a nationally recognized courier service or mailed by first class United States mail, postage or delivery charges prepaid, and received at the principal executive offices of the corporation, addressed to the attention of the Secretary of the corporation, not more than 120 days nor less than 90 days prior to the first anniversary date of the preceding year’s annual meeting of stockholders; provided, however, that in the event that no annual meeting was held in the preceding year or the annual meeting is called for a date that is more than 30 days before or more than 60 days after the first anniversary date of the preceding year’s annual meeting of

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stockholders, notice by the stockholder to be timely must be so received by the Secretary of the corporation not later than the close of business on the later of (x) the 90th day prior to such annual meeting and (y) the 10th day following the earlier to occur of the day on which notice of the date of the scheduled annual meeting was mailed or the day on which public announcement of the date of such scheduled annual meeting was first made. In no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period (or extend any time period) for the giving of the stockholder’s notice as described above.

A stockholder’s notice to the Secretary shall set forth the following: (i) as to each person whom the stockholder proposes to nominate for election or reelection as a director, (A) the name, age, business address and residence address of the person, (B) the principal occupation or employment of the person, (C) the class, series and number of shares of capital stock of the corporation that are owned of record and beneficially by the person, (D) a statement whether the person, if elected, intends to tender, promptly following such person’s election or re-election as a director, an irrevocable resignation effective upon (x) such person’s failure to receive the required vote for re-election at the next meeting of stockholders at which such person would face re-election and (y) acceptance of such resignation by the Board, in accordance with these bylaws or the corporation’s corporate governance guidelines, (E) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among the stockholder, the beneficial owner on whose behalf the nomination is being made, if any, or any person who is an associated person of the stockholder or the beneficial owner, on the one hand, and the person, and such person’s respective affiliates and associates, or others (including their names) acting in concert therewith, on the other hand, including all information that would be required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the Securities and Exchange Commission assuming for this purpose that the stockholder, the beneficial owner on whose behalf the nomination is being made, if any, and any person who is an associated person of the stockholder or the beneficial owner were the “registrant” and such person were a director or executive officer of such registrant, (F) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder, and (G) the person’s written consent to serve as a director if elected; (ii) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination is being made, (A) the name and address, as they appear on the corporation’s books, of the stockholder, the name and address of the beneficial owner, if any, and the name and address of any person who is an associated person of the stockholder and the beneficial owner, (B) the class, series and number of shares of the corporation that are held of record by the stockholder, the beneficial owner, if any, and any person who is an associated person of the stockholder and the beneficial owner as of the date of the notice, and a representation that the stockholder will provide the corporation in writing the information required by this clause (B) updated as of the record date for the meeting promptly following the later of the record date or the date on which public announcement of the record date was first made, (C) a representation as to whether the stockholder or the beneficial owner, if any, intends, or is or intends to be part of a group that intends, to deliver a proxy statement or form of proxy to holders of at least the percentage of the corporation’s outstanding shares that, together with the shares owned by the stockholder or the beneficial owner and any such group, would be required to approve the nomination or otherwise to solicit proxies from stockholders in support of the nomination, and (D) any other information

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relating to the stockholder, the beneficial owner, if any, and any person who is an associated person of the stockholder or the beneficial owner that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for the election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder; (iii) as to the stockholder giving the notice or, if the notice is given on behalf of a beneficial owner on whose behalf the nomination is being made, as to the beneficial owner, (A) the class, series and number of shares of the corporation that are owned beneficially by the stockholder or beneficial owner and any person who is an associated person thereof as of the date of the notice, (B) any derivative or short positions held or beneficially held by the stockholder or beneficial owner and any person who is an associated person thereof and whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of, or any other agreement, arrangement or understanding (including any profit interests, options, and borrowed or loaned shares) has been made, the effect or intent of which is to mitigate loss to, manage the risk or benefit of share price changes for, or increase or decrease the voting power of, the stockholder or beneficial owner or any person who is an associated person thereof with respect to the corporation’s securities, (C) a representation that the stockholder will provide the corporation in writing the information required by the preceding clauses (A) and (B) updated as of the record date for the meeting promptly following the later of the record date or the date on which public announcement of the record date was first made, and (D) a description of any agreement, arrangement or understanding with respect to the nomination between or among the stockholder or beneficial owner and any person who is an associated person thereof, and any others (including their names) acting in concert with any of the foregoing (including any agreement that would be required to be disclosed pursuant to Item 5 or Item 6 of Schedule 13D under the Exchange Act, regardless of whether the requirement to file a Schedule 13D is applicable to the stockholder or beneficial owner), and a representation that the stockholder or beneficial owner will provide the corporation in writing the information required by this clause (D) updated as of the record date for the meeting promptly following the later of the record date or the date on which public announcement of the record date was first made; and (iv) a representation that the stockholder giving the notice (or a qualified representative of the stockholder) intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice. The corporation may require any proposed nominee to furnish such other information as may reasonably be required by the corporation to determine the eligibility of such proposed nominee to serve as an independent director of the corporation or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such nominee. No person shall be eligible for election as a director of the corporation unless nominated in accordance with the procedures set forth herein. Notwithstanding the foregoing provisions of this Section, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section; provided, however, that any references in this Section to the Exchange Act or the rules and regulations thereunder are not intended to and shall not limit the requirements applicable to proposals as to any nomination to be considered pursuant to this Section.

In connection with any annual meeting of the stockholders, the Chair of the Board (or such other person presiding at such meeting in accordance with these bylaws) shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he or she should so determine, he or she shall so declare to

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the meeting and the defective nomination shall be disregarded. Notwithstanding anything in these bylaws to the contrary, unless otherwise required by law, if a stockholder intending to make a nomination at an annual pursuant to the preceding paragraph does not provide the updated information required under clauses (ii) and (iii) of the preceding paragraph to the corporation promptly following the later of the record date or the date on which public announcement of the record date was first made, or the stockholder giving the notice (or a qualified representative of the stockholder) does not appear at the meeting to present the nomination, such nomination shall be disregarded, notwithstanding that proxies in respect of such nomination may have been received by the corporation. For purposes of this Section, to be considered a qualified representative of the stockholder, a person must be a duly authorized officer, manager or partner of such stockholder or authorized by a writing executed by such stockholder (or a reliable reproduction or electronic transmission of the writing) delivered to the corporation prior to the proposing of the nomination at the meeting by the stockholder giving the notice stating that the person is authorized to act for the stockholder as proxy at the meeting of stockholders.

3.2 Enlargement and Vacancies. Except as otherwise provided in the Certificate of Incorporation relating to the rights of the holders of any series of preferred stock to elect directors, the sole power to fill vacancies and newly created directorships resulting from any increase in the authorized number of directors shall be vested in the Board through action by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and each director so chosen shall hold office for the remainder of the full term of the class to which he or she has been elected expires and until such director’s successor is duly elected and qualified or until such director’s earlier death, resignation or removal from office. If there are no directors in office, then an election of directors may be held in the manner provided by statute. In the event of a vacancy in the Board, the remaining directors, except as otherwise provided by law or these bylaws, may exercise the powers of the full Board until the vacancy is filled.

3.3 Resignation and Removal. Any director may resign at any time upon written notice to the corporation at its principal place of business or to the Chief Executive Officer or the Secretary. Such resignation shall be effective upon receipt of such notice unless the notice specifies such resignation to be effective at some other time or upon the happening of some other event. Any director or the entire Board may be removed, but only for cause, by the holders of a majority of the shares then entitled to vote at an election of directors, unless otherwise specified by law or the Certificate of Incorporation.

3.4 Powers. The business of the corporation shall be managed by or under the direction of the Board, which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these bylaws directed or required to be exercised or done by the stockholders.

3.5 Chair of the Board; Vice Chair of the Board. If the Board appoints a Chair of the Board, such Chair shall, when present, preside at all meetings of the stockholders and the Board. The Chair shall perform such duties and possess such powers as are customarily vested in the office of the Chair of the Board or as may be vested in the Chair by the Board. The Board may appoint a Vice Chair of the Board. The Vice Chair of the Board shall perform such duties and

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possess such powers as may be vested in the Vice Chair by the Board. In the absence or disability of the Chair of the Board, the Vice Chair of the Board shall also perform the duties and exercise the powers of the Chair of the Board.

3.6 Place of Meetings. The Board may hold meetings, both regular and special, either within or without the State of Delaware.

3.7 Annual Meetings. The annual meetings of the Board shall be held immediately following the annual meeting of stockholders, and no notice of such meeting shall be necessary to the Board, provided a quorum shall be present, or shall be held at the next regularly scheduled meeting of the Board or at such other date, time and place as shall be designated from time to time by the Board and stated in the notice of the meeting. The annual meetings shall be for the purposes of organization, and an election of officers and the transaction of other business.

3.8 Regular Meetings. Regular meetings of the Board may be held without notice at such time and place as may be determined from time to time by the Board; provided that any director who is absent when such a determination is made shall be given prompt notice of such determination.

3.9 Special Meetings. Special meetings of the Board may be called by the Chair of the Board, the Vice Chair of the Board, the Chief Executive Officer (if a director), or on the written request of two or more directors, or by one director in the event that there is only one director in office. Notice of the time and place, if any, of special meetings shall be delivered personally or by telephone to each director, or sent by first-class mail or commercial delivery service, facsimile transmission, or by electronic mail or other electronic means, charges prepaid, sent to such director’s business or home address as they appear upon the records of the corporation. In case such notice is mailed, it shall be deposited in the United States mail at least four (4) days prior to the time of holding of the meeting. In case such notice is delivered personally or by telephone or by commercial delivery service, facsimile transmission, or electronic mail or other electronic means, it shall be so delivered at least twenty-four (24) hours prior to the time of the holding of the meeting. A notice or waiver of notice of a meeting of the Board need not specify the purposes of the meeting.

3.10 Quorum, Action at Meeting, Adjournments. A majority of the number of directors last fixed by the Board as the authorized number of directors shall constitute a quorum for the transaction of business, except as provided in Section 3.2 with respect to filling the vacancies and newly created directorships and except as provided below with respect to adjournment of meetings. The act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board, except as may be otherwise specifically provided by law or by the Certificate of Incorporation. If a quorum shall not be present at any meeting of the Board, a majority of the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

3.11 Action Without Meeting. Unless otherwise restricted by the Certificate of Incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting, if all members of the Board or committee, as the case may be, consent thereto in writing or by electronic transmission, and

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the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board or committee.

3.12 Telephone Meetings. Unless otherwise restricted by the Certificate of Incorporation or these bylaws, any member of the Board or any committee thereof may participate in a meeting of the Board or of any committee, as the case may be, by means of conference telephone or by any form of communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.

3.13 Committees. The Board may, by resolution passed by a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the Board for adoption), designate one or more committees, each committee to consist of one or more of the directors of the corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting, whether or not the member or members present constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to (i) approving or adopting, or recommending to the stockholders, any action or matter expressly required by the General Corporation Law of the State of Delaware (the “DGCL”) to be submitted to stockholders for approval or (ii) adopting, amending or repealing any of these bylaws. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board. Each committee shall keep regular minutes of its meetings and make such reports to the Board as the Board may request. Except as the Board may otherwise determine, any committee may make rules for the conduct of its business, but unless otherwise provided by the directors or in such rules, its business shall be conducted as nearly as possible in the same manner as is provided in these bylaws for the conduct of its business by the Board.

3.14 Fees and Compensation of Directors. Unless otherwise restricted by the Certificate of Incorporation or these bylaws, the Board shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the Board and may be paid a fixed sum for attendance at each meeting of the Board or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.

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ARTICLE 4

Officers

4.1 Officers Designated. The officers of the corporation shall be a Chief Executive Officer, a President, a Secretary and a Chief Financial Officer, who shall be elected by the Board. The Board may also elect a Treasurer, one or more Vice Presidents, and one or more Assistant Secretaries or Assistant Treasurers and such other officers as the Board may deem desirable or appropriate and may give any of them such further designations or alternate titles as it considers desirable. In addition to officers elected by the Board, the corporation may have one or more appointed Vice Presidents, an appointed Treasurer and one or more appointed Assistant Secretaries or Assistant Treasurers. Such appointed officers may be appointed by the Chief Executive Officer. Any number of offices may be held by the same person, unless the Certificate of Incorporation or these bylaws otherwise provide.

4.2 Election. The Board at its first meeting after each annual meeting of stockholders shall choose a Chief Executive Officer, a President, a Secretary and a Chief Financial Officer. Other officers may be elected by the Board at such meeting, at any other meeting, or by written consent.

4.3 Tenure. Each officer of the corporation shall hold office until such officer’s successor is elected and qualified, unless a different term is specified in the vote choosing or appointing such officer, or until such officer’s earlier death, resignation or removal. Any officer may be removed with or without cause at any time by the affirmative vote of a majority of the Board or a committee duly authorized to do so and, unless provided otherwise by Board resolution, an officer appointed by the Chief Executive Officer also may be removed by the Chief Executive Officer. Designation of an officer shall not of itself create any contractual rights. Any vacancy occurring in any office of the corporation may be filled by the Board, at its discretion. Any officer may resign by delivering such officer’s written resignation to the corporation at its principal place of business or to the Chief Executive Officer or the Secretary. Such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event.

4.4 Chief Executive Officer. In the absence of the Chair of the Board, the Chief Executive Officer shall preside at all meetings of the stockholders and at all meetings of the Board. The Chief Executive Officer may call meetings of the Board to be held, subject to the limitations prescribed by law or these bylaws. The Chief Executive Officer shall be responsible for providing general supervision, direction and control of the business of the corporation and its officers and shall see that all orders and resolutions of the Board are carried into effect. He or she shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board to some other officer or agent of the corporation. The Chief Executive Officer shall have such other powers and have such other duties as the Board may from time to time prescribe.

4.5 President. Unless provided otherwise by resolution of the Board, the President shall, in the event there be no Chief Executive Officer or in the absence of the Chief Executive

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Officer or in the event of his or her disability or refusal to act, perform the duties of the Chief Executive Officer, and when so acting, shall have the powers of and be subject to all the restrictions upon the Chief Executive Officer. The President shall perform such other duties and have such other powers as may from time to time be prescribed for such person by the Board or the Chief Executive Officer.

4.6 Chief Financial Officer. The Chief Financial Officer shall supervise the corporation’s treasury functions and financial reporting to external bodies. The Chief Financial Officer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the Board or the Chief Financial Officer or as the Chief Financial Officer deems appropriate. The Chief Financial Officer shall disburse, or cause to be disbursed, the funds of the corporation as may be ordered by the Board or the Chief Executive Officer, taking proper vouchers for such disbursements, and shall render to the Chief Executive Officer and the Board, at its regular meetings, or when the Board so requires, an account of all his or her transactions as Chief Financial Officer and of the financial condition of the corporation. The Chief Financial Officer shall perform such other duties and have other powers as may from time to time be prescribed by the Board or the Chief Executive Officer.

4.7 Vice President. Unless provided otherwise by resolution of the Board, the Vice President (or in the event there be more than one, the Vice Presidents in the order designated by the directors, or in the absence of any designation, in the order of their election), shall, in the absence of the President or in the event of his or her disability or refusal to act, perform the duties of the President, and when so acting, shall have the powers of and be subject to all the restrictions upon the President. The Vice President(s) shall perform such other duties and have such other powers as may from time to time be prescribed for them by the Board, the Chief Executive Officer or the President.

4.8 Secretary. The Secretary shall attend all meetings of the Board, committees of the Board and the stockholders when requested by the person presiding at such meetings and shall record all votes and the proceedings of the meetings in a book to be kept for that purpose. The Secretary shall give, or cause to be given, notice of all meetings of stockholders and special meetings of the Board, and shall perform such other duties as may from time to time be prescribed by the Board, the Chair of the Board or the Chief Executive Officer, under whose supervision he or she shall act. The Secretary shall have custody of the seal of the corporation, and the Secretary, or an Assistant Secretary, shall have authority to affix the same to any instrument requiring it, and, when so affixed, the seal may be attested by his or her signature or by the signature of such Assistant Secretary. The Board may give general authority to any other officer to affix the seal of the corporation and to attest the affixing thereof by his or her signature. The Secretary shall keep, or cause to be kept, at the principal executive office or at the office of the corporation’s transfer agent or registrar, a share register, or a duplicate share register, showing the names of all stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates issued for the same and the number and date of cancellation of every certificate surrendered for cancellation.

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4.9 Assistant Secretary. The Assistant Secretary, or if there be more than one, any Assistant Secretaries in the order designated by the Board (or in the absence of any designation, in the order of their election) shall assist the Secretary in the performance of his or her duties and, in the absence of the Secretary or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as may from time to time be prescribed by the Board.

4.10 Treasurer and Assistant Treasurers. The Treasurer (if one is appointed) shall have such duties as may be specified by the Chief Financial Officer to assist the Chief Financial Officer in the performance of his or her duties and shall perform such other duties and have other powers as may from time to time be prescribed by the Board or the Chief Executive Officer. It shall be the duty of any Assistant Treasurers to assist the Treasurer in the performance of his or her duties and to perform such other duties and have such other powers as may from time to time be prescribed by the Board or the Chief Executive Officer.

4.11 Delegation of Authority. The Board may from time to time delegate the powers or duties of any officer to any other officers or agents, notwithstanding any provision hereof.

ARTICLE 5

Notices

5.1 Delivery. Whenever, under the provisions of law, or of the Certificate of Incorporation or these bylaws, written notice is required to be given to any director or stockholder, such notice may be given by mail, addressed to such director or stockholder, at such person’s address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail or delivered to a nationally recognized courier service. Unless written notice by mail is required by law, written notice may also be given by commercial delivery service, facsimile transmission, electronic mail or similar electronic means addressed to such director or stockholder at such person’s address as it appears on the records of the corporation, in which case such notice shall be deemed to be given when delivered into the control of the persons charged with effecting such transmission, or when actually transmitted by the person giving the notice by facsimile or electronic mail or similar electronic means, to the recipient. Oral notice or other in-hand delivery, in person or by telephone, shall be deemed given at the time it is actually given.

5.2 Waiver of Notice. Whenever any notice is required to be given under the provisions of law or of the Certificate of Incorporation or of these bylaws, a written waiver, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors or members of a committee of directors need be specified

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in any written waiver of notice or any waiver by electronic transmission unless so required by the Certificate of Incorporation or these bylaws.

ARTICLE 6

Indemnification and Insurance

6.1 Indemnification.

Each person who was or is made a party or is threatened to be made a party to or is involved (including, without limitation, as a witness) in any actual or threatened action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “proceeding”), by reason of the fact that he or she or a person of whom he or she is the legal representative is or was a director or officer of the corporation (or any predecessor), or such director or officer of the corporation is or was serving at the request of the corporation (or any predecessor) as a director, officer, employee or agent of another corporation or of a partnership, limited liability company, joint venture, trust, employee benefit plan sponsored or maintained by the corporation, or other enterprise (or any predecessor of any of such entities) (hereinafter an “Indemnitee”), shall be indemnified and held harmless by the corporation to the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than said law permitted the corporation to provide prior to such amendment), or by other applicable law as then in effect, against all expense, liability and loss (including attorneys’ fees and related disbursements, judgments, fines, excise taxes or penalties under the Employee Retirement Income Security Act of 1974, as amended from time to time, penalties and amounts paid or to be paid in settlement) actually and reasonably incurred or suffered by such Indemnitee in connection therewith. Each director or officer of the corporation (or any predecessor) who is or was serving as a director, officer, employee or agent of a subsidiary of the corporation shall be deemed to be serving, or have served, at the request of the corporation (or any predecessor). The corporation shall not be required to indemnify or make advances to a person (A) in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized by the Board, either generally or in the specific instance, and (B) if the obligation to indemnify or make advances under the circumstances is specifically limited by the terms of any agreement between Indemnitee and the corporation. The right to indemnification conferred in this Section 6.1 shall be a contract right.

Any indemnification (but not advancement of expenses) under this Article 6 (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director or officer is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the DGCL, as the same exists or hereafter may be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than said law permitted the corporation to provide prior to such amendment). Such determination shall be made with respect to a person who is a director or officer at the time of such determination (A) by a majority vote of the directors who are not or were not parties to the proceeding in respect of which indemnification is being sought by Indemnitee (the “Disinterested Directors”), even

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though less than a quorum, (B) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum, (C) if there are no such Disinterested Directors, or if the Disinterested Directors so direct, by independent legal counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee, or (D) by the stockholders.

6.2 Advance Payment. The right to indemnification under this Article 6 shall include the right to be paid by the corporation the expenses incurred by the Indemnitee in defending any such proceeding in advance of its final disposition, such advances to be paid by the corporation within thirty (30) days after the receipt by the corporation of a statement or statements (containing reasonable detail of the expenses incurred) from the claimant requesting such advance or advances from time to time; provided, however, that if the DGCL requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon receipt by the corporation of a written undertaking by or on behalf of such director or officer to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under Section 6.1 or otherwise.

6.3 Non-Exclusivity and Survival of Rights; Amendments. The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article 6 shall not be deemed exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, bylaws, agreement, vote of stockholders or Disinterested Directors or otherwise, and shall continue as to a person who has ceased to be a director, officer, employee or agent of the corporation and shall inure to the benefit of the heirs, executors and administrators of such a person. Any repeal or modification of the provisions of this Article 6 shall not in any way diminish or adversely affect the rights of any director, officer, employee or agent of the corporation hereunder in respect of any occurrence or matter arising prior to any such repeal or modification.

6.4 Insurance. The corporation may purchase and maintain insurance on its own behalf and on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against any expense, liability or loss asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the provisions of the DGCL.

6.5 Severability. If any word, clause, provision or provisions of this Article 6 shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (i) the validity, legality and enforceability of the remaining provisions of this Article 6 (including, without limitation, each portion of any section or paragraph of this Article 6 containing any such provision held to be invalid, illegal or unenforceable, that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (ii) to the fullest extent possible, the

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provisions of this Article 6 (including, without limitation, each such portion of any section or paragraph of this Article 6 containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

6.6 Reliance. Persons who after the date of the adoption of this provision become or remain directors or officers of the corporation shall be conclusively presumed to have relied on the rights to indemnity, advance of expenses and other rights contained in this Article 6 in entering into or continuing such service. The rights to indemnification and to the advance of expenses conferred in this Article 6 shall apply to claims made against an Indemnitee arising out of acts or omissions that occurred or occur both prior and subsequent to the adoption hereof.

6.7 Indemnification of Other Persons. This Article 6 not limit the right of the corporation, to the extent and in the manner permitted by law, to indemnify and to advance expenses to persons other than those persons identified in Section 6.1 when and as authorized by the Board or by the action of a committee of the Board or designated officers of the corporation established by or designated in resolutions approved by the Board; provided, however, that the payment of expenses incurred by such a person in advance of the final disposition of the proceeding shall be made only upon receipt by the corporation of a written undertaking by such person to repay all amounts so advanced if it shall ultimately be determined that such person is not entitled to be indemnified under this Article 6 or otherwise.

ARTICLE 7

Capital Stock

7.1 Uncertificated Shares. Shares of the corporation shall be uncertificated and shall not be represented by certificates, except to the extent required by applicable law or as may otherwise be authorized by the Secretary or an Assistant Secretary. In the event shares are represented by certificates, such certificates shall be registered upon the books of the corporation and shall be signed by the Chief Executive Officer or the President, or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the corporation, shall bear the seal of the corporation or a facsimile thereof, and shall be countersigned by a transfer agent and the registrar for the shares. No certificate for a fractional share of common stock shall be issued. Certificates signed by the Chief Executive Officer or President, or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the corporation, being such at the time of such signing, if properly countersigned as set forth above by a transfer agent and the registrar, and if regular in other respects, shall be valid, whether such officers hold their respective positions at the date of issue or not. Any signature or countersignature on certificates may be an actual signature or a printed or engraved facsimile thereof.

7.2 Transfer of Stock. Transfer of shares represented by certificates shall be made on the books of the corporation only upon the surrender of a valid certificate or certificates for not less than such number of shares, duly endorsed by the person named in the certificate or by an attorney lawfully constituted in writing. Transfer of uncertificated shares shall be made on the

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books of the corporation upon receipt of proper transfer instructions from the registered owner of the uncertificated shares, an instruction from an approved source duly authorized by such owner or from an attorney lawfully constituted in writing. The corporation may impose such additional conditions to the transfer of its shares as may be necessary or appropriate for compliance with applicable law or to protect the corporation, a transfer agent or the registrar from liability with respect to such transfer.

7.3 Registered Stockholders. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

7.4 Lost, Stolen or Destroyed Certificates. The Board may designate certain persons to authorize the issuance of new certificates or uncertificated shares to replace certificates alleged to have been lost or destroyed, upon the filing with such designated persons of both an affidavit or affirmation of such loss or destruction and a bond of indemnity or indemnity agreement covering the issuance of such replacement certificates or uncertificated shares, as may be requested by and be satisfactory to such designated persons.

ARTICLE 8

General Provisions

8.1 Dividends. Dividends upon the capital stock of the corporation, subject to any restrictions contained in the DGCL or the provisions of the Certificate of Incorporation, if any, may be declared by the Board at any regular or special meeting or by unanimous written consent. Dividends may be paid in cash, in property or in shares of capital stock, subject to the provisions of the Certificate of Incorporation.

8.2 Checks. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the Board, or such officers of the corporation as may be designated by the Board to make such designation, may from time to time designate.

8.3 Corporate Seal. The Board may, by resolution, adopt a corporate seal. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the word “Delaware.” The seal may be used by causing it or a facsimile thereof to be impressed or affixed or otherwise reproduced. The seal may be altered from time to time by the Board.

8.4 Execution of Corporate Contracts and Instruments. The Board, except as otherwise provided in these bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the Board or within the agency power of an officer, no officer, agent or employee shall have

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any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.

8.5 Representation of Shares of Other Corporations. The Chief Executive Officer, the President or any Vice President, the Chief Financial Officer or the Treasurer or any Assistant Treasurer, or the Secretary or any Assistant Secretary of the corporation is authorized to vote, represent and exercise on behalf of the corporation all rights incident to any and all shares of any corporation or corporations or similar ownership interests of other business entities standing in the name of the corporation. The authority herein granted to said officers to vote or represent on behalf of the corporation any and all shares or similar ownership interests held by the corporation in any other corporation or corporations or other business entities may be exercised either by such officers in person or by any other person authorized so to do by proxy or power of attorney duly executed by said officers.

ARTICLE 9

Amendments

The Board is expressly empowered to adopt, amend or repeal these bylaws; provided, however, that any adoption, amendment or repeal of these bylaws by the Board shall require the approval of at least sixty-six and two-thirds percent of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any resolution providing for adoption, amendment or repeal is presented to the Board). The stockholders shall also have power to adopt, amend or repeal these bylaws at any regular or special meeting of stockholders; provided, however, that in addition to any vote of the holders of any class or series of stock of the corporation required by law or by the Certificate of Incorporation, the affirmative vote of the holders of at least sixty-six and two-thirds percent of the voting power of all of the then outstanding shares of the stock of the corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required for such adoption, amendment or repeal by the stockholders of any provision of these bylaws and notice of such adoption, amendment or repeal shall be contained in the notice of such meeting.

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EX-10.1

Exhibit 10.1

RETAINED OBLIGATION AGREEMENT

Dated as of December 15, 2008

between

CLEARWATER PAPER CORPORATION

and

POTLATCH CORPORATION

TABLE OF CONTENTS

	Page
ARTICLE I RETAINED OBLIGATION	2
Section 1.01. Retained Obligation.	2
Section 1.02. No Amendments to Debentures	2
Section 1.03. Clearwater to Seek Refinancing	2
Section 1.04. Satisfaction and Discharge of Debentures.	3
Section 1.05. Satisfaction of Indenture Obligations	3
Section 1.06. Escrow Account.	3
ARTICLE II REPAYMENT OBLIGATION	5
Section 2.01. Notice of Inability to Pay Retained Obligation.	5
Section 2.02. Loans to Clearwater.	5
Section 2.03. Notes.	6
Section 2.04. Clearwater to Seek to Refinance the Note	7
Section 2.05. Prepayment.	7
Section 2.06. Payments on Banking Days	7
Section 2.07. Collateral	7
ARTICLE III REPRESENTATIONS AND WARRANTIES	8
Section 3.01. Organization and Good Standing	8
Section 3.02. Power; Authorization; Enforceable Obligations	8
Section 3.03. No Conflicts	8
ARTICLE IV COVENANTS	9
Section 4.01. Effectiveness of Covenants	9
Section 4.02. Payment of Principal and Interest	9
Section 4.03. Maintenance of Office or Agency.	9
Section 4.04. Corporate Existence	10
Section 4.05. Limitations on Liens and Encumbrances	10
Section 4.06. Limitations on Sales and Sale and Leaseback Transactions	10
Section 4.07. Statement by Officers as to Default	10
Section 4.08. Consolidation, Merger, Conveyance or Transfer.	11
ARTICLE V EVENTS OF DEFAULT; REMEDIES	12
Section 5.01. Events of Default.	12

i

Section 5.02. Remedies for Events of Default	13
Section 5.03. Remedies for Breach	13
Section 5.04. Default Rate	13
ARTICLE VI MISCELLANEOUS	14
Section 6.01. No Waiver	14
Section 6.02. Notices	14
Section 6.03. Costs, Expenses and Attorneys’ Fees	15
Section 6.04. Successors, Assignment	15
Section 6.05. Entire Agreement; Amendment	16
Section 6.06. No Third-Party Beneficiaries	16
Section 6.07. Time	16
Section 6.08. Severability of Provisions	16
Section 6.09. Definitions.	16
Section 6.10. Interpretation	18
Section 6.11. Counterparts	19
Section 6.12. Governing Law	19

ii

RETAINED OBLIGATION AGREEMENT

THIS RETAINED OBLIGATION AGREEMENT (this “Agreement”) is entered into as of December 15, 2008, by and between CLEARWATER PAPER CORPORATION, a Delaware corporation formerly known as Potlatch Forest Products Corporation (“Clearwater”), and POTLATCH CORPORATION, a Delaware corporation (“Potlatch”), and shall be effective as of the Effective Time (as defined in Section 6.09).

RECITALS

WHEREAS, on December 4, 1989 the predecessor of Potlatch Forest Holdings, Inc., a Delaware corporation and wholly-owned subsidiary of Potlatch (“PFHI”), issued $100,000,000 9 ¹/8% Credit Sensitive Debentures due 2009 (the “Debentures”) pursuant to an Indenture dated as of April 1, 1986 (as supplemented by the First Supplemental Indenture dated as of February 3, 2006, the “Indenture”) between PFHI and U.S. Bank National Association as successor trustee under the Indenture (“Indenture Trustee”); and

WHEREAS, on October 10, 2005, Potlatch incorporated Clearwater as a wholly-owned subsidiary in connection with a series of transactions the result of which was, on January 1, 2006, to convert Potlatch into a Real Estate Investment Trust (as defined in Sections 856-860 of the Internal Revenue Code of 1986, as amended) and to transfer to Clearwater all of its manufacturing facilities that produce bleached pulp products, including paperboard and tissue products, and wood products, Potlatch’s harvest and log sales and real estate sales and development businesses; and

WHEREAS, in connection with the aforementioned conversion of Potlatch into a Real Estate Investment Trust and transfer to Clearwater of the aforementioned assets, Section 3.1(a) of the Contribution and Assumption Agreement, dated December 30, 2005 (the “Contribution Agreement”), between Potlatch and Clearwater, provided, “In consideration of the contribution by Potlatch to . . . [Clearwater] as set forth in Section 2.1, . . . [Clearwater] agrees with Potlatch to assume and duly and punctually to make all payments of principal (and premium, if any) and interest on the Potlatch Indebtedness in accordance with the terms thereof, and each of Potlatch and . . . [Clearwater] expects that . . . [Clearwater] shall make the entirety of each such payment (it being understood that the provisions of this Section 3.1 are not intended to, and do not, affect the contractual relationship between Potlatch and the holders of the Potlatch Indebtedness)”; and

WHEREAS, the “Potlatch Indebtedness” assumed by Clearwater as described in the preceding recital included PFHI’s obligations under the Debentures; and

WHEREAS, following the execution and delivery of this Agreement, Potlatch will distribute to its stockholders all outstanding shares of common stock of Clearwater; and

WHEREAS, while Potlatch and Clearwater expect Clearwater to be able to satisfy its obligations under the Contribution Agreement with respect to the Debentures as interest and principal payments on the Debentures become due and payable, the parties desire by this Agreement to memorialize their understanding of their rights and obligations in the unlikely

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event that events in the credit markets may preclude Clearwater from obtaining funds to refinance the Debentures on commercial terms; and

WHEREAS, the parties desire to confirm their respective rights and obligations with respect to Section 3.1(a) of the Contribution Agreement with respect to the Debentures (capitalized terms used herein have the respective meanings given them in Section 6.09) and to enter into other agreements as set forth herein:

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

ARTICLE I

RETAINED OBLIGATION

Section 1.01. Retained Obligation.

(a) Clearwater hereby (i) confirms and restates, solely with respect to the Debentures, its obligation in Section 3.1(a) of the Contribution Agreement, which provides, “In consideration of the contribution by Potlatch to . . . [Clearwater] as set forth in Section 2.1, . . . [Clearwater] agrees with Potlatch to assume and duly and punctually to make all payments of principal (and premium, if any) and interest on the Potlatch Indebtedness in accordance with the terms thereof, and each of Potlatch and . . . [Clearwater] expects that . . . [Clearwater] shall make the entirety of each such payment (it being understood that the provisions of this Section 3.1 are not intended to, and do not, affect the contractual relationship between Potlatch and the holders of the Potlatch Indebtedness)” and (ii) acknowledges that the Debentures are included in the “Potlatch Indebtedness” referred to in such Section 3.1(a). For the avoidance of doubt, Clearwater’s obligations under this Agreement shall not include any obligations or liabilities that constituted “Potlatch Indebtedness” under the Contribution Agreement other than those of PFHI under the Debentures, but shall include the obligation to make accelerated payments of amounts due with respect to the Debentures to the extent such accelerated payments are required for any reason under the Indenture.

(b) Clearwater’s obligation under Section 1.01(a) to pay interest under the Debentures shall include any additional interest that may become due and payable thereunder after the date of this Agreement as a result of any change in the debt rating, after the date of this Agreement, on the Debentures by S&P or Moody’s as provided in the Debentures.

Section 1.02. No Amendments to Debentures. Without Clearwater’s prior written consent, Potlatch shall not, and shall cause PFHI not to, amend or agree to amend any term or condition of the Debentures.

Section 1.03. Clearwater to Seek Refinancing. Clearwater shall use commercially reasonable efforts to issue, as soon as reasonably practical, debt or equity securities or borrow money from one or more financial institutions or other lenders, in each case, on terms and

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conditions reasonably acceptable to Clearwater, in an aggregate amount sufficient to satisfy and discharge the Indenture with respect to the Debentures as described in Section 1.04. Notwithstanding the foregoing, Clearwater shall not be required to borrow moneys under the Loan and Security Agreement dated November 26, 2008 (as the same may be amended, amended and restated or replaced from time to time, the “Revolving Loan Agreement”) among Clearwater, the financial institutions party thereto as lenders, and Bank of America, N.A., as agent, to satisfy the obligation set forth in the preceding sentence. Clearwater shall, from time to time, upon request by Potlatch, advise Potlatch of its efforts to issue the securities or to borrow the moneys described in this Section 1.03.

Section 1.04. Satisfaction and Discharge of Debentures.

(a) Concurrently with its receipt of Net Cash Proceeds from any Equity Issuance, Debt Incurrence or Disposition on or before December 1, 2009, where the amount of such Net Cash Proceeds is sufficient to satisfy and discharge the Indenture with respect to the Debentures pursuant to Section 401(1)(B)(iii) of the Indenture, Clearwater shall deposit in trust with the Indenture Trustee the money or U.S. Government Obligations (or a combination thereof) necessary to so satisfy and discharge the Indenture with respect to the Debentures (the sufficiency of such deposit amount to be confirmed by a nationally recognized firm of independent certified public accountants designated by Potlatch), provided, however, that Clearwater may reduce in whole or in part the amount required to be so deposited by concurrently delivering to the Indenture Trustee on behalf of PFHI for cancellation pursuant to Sections 309 and 401(1)(A) of the Indenture, Debentures acquired by Clearwater.

(b) At any time before December 1, 2009 Clearwater may deposit in trust with the Indenture Trustee money or U.S. Government Obligations (or a combination thereof) necessary to so satisfy and discharge the Indenture with respect to the Debentures (the sufficiency of such deposit amount to be confirmed by a nationally recognized firm of independent certified public accountants designated by Potlatch), provided, however, that Clearwater may reduce in whole or in part such amount by concurrently delivering to the Indenture Trustee on behalf of PFHI for cancellation pursuant to Sections 309 and 401(1)(A) of the Indenture, Debentures acquired by Clearwater.

Section 1.05. Satisfaction of Indenture Obligations. In connection with the actions taken by Clearwater pursuant to Section 1.01(a) or 1.04 or otherwise to satisfy and discharge the Indenture with respect to the Debentures, Clearwater shall, at its cost and expense, cooperate with PFHI in connection with PFHI’s preparation, execution and delivery of the “Company Request”, the “Officers’ Certificate” and the “Opinion of Counsel” (each, as defined in the Indenture) which are required to be delivered by PFHI to the Indenture Trustee pursuant to Section 401 of the Indenture in order to satisfy and discharge the Indenture with respect to the Debentures.

Section 1.06. Escrow Account.

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(a) If Clearwater shall arrange for any Equity Issuance, Debt Incurrence or Disposition before December 1, 2009 and such Net Cash Proceeds are expected or should reasonably be expected to be insufficient to satisfy and discharge the Indenture with respect to the Debentures as contemplated by Section 1.04, then:

(i) Clearwater shall notify Potlatch no less than 10 Business Days before the consummation of such Equity Issuance, Debt Incurrence or Disposition that Clearwater expects to complete such transaction but does not expect that the Net Cash Proceeds therefrom will be sufficient to satisfy and discharge the Indenture as contemplated in Section 1.04; and

(ii) As soon as reasonably practicable, but in no event later than two Business Days before the date on which such Equity Issuance, Debt Incurrence or Disposition shall be consummated, Clearwater shall enter into an escrow agreement (the “Escrow Agreement”) with a bank (the “Escrow Agent”) designated by Potlatch and reasonably acceptable to Clearwater, that shall provide that (A) Clearwater and Potlatch shall appoint such bank as their escrow agent for purposes of such escrow agreement, (B) Clearwater shall establish an escrow account (the “Escrow Account”) with such bank solely for the purpose of holding the Net Cash Proceeds from such Equity Issuance, Debt Incurrence or Disposition as provided in the escrow agreement, (C) Potlatch shall have a first priority security interest in the Escrow Account and the funds therein (and in connection therewith, the Escrow Agent shall agree in the Escrow Agreement that Potlatch shall have “control” over the Escrow Account for purposes of perfecting such security interest), (D) the Escrow Agent will enter into a control agreement that will perfect Potlatch’s security interest in the Escrow Account and the funds therein, in form and substance reasonably satisfactory to Potlatch, (E) Clearwater will deposit the entire Net Cash Proceeds of such Equity Issuance, Debt Incurrence or Disposition into the Escrow Account, (F) the Escrow Agent will invest the funds deposited in the escrow account as directed by Clearwater, subject to investment guidelines previously agreed with Potlatch, (G) all Net Cash Proceeds and the earnings thereon will be disbursed to the Indenture Trustee on December 1, 2009 towards satisfaction and discharge of the Indenture with respect to the Debentures pursuant to Section 401(1)(B)(i) of the Indenture, (H) Clearwater shall pay all fees, expenses and other charges of the Escrow Agent, (I) all funds and earnings on the funds in the Escrow Account shall be the property of Clearwater, subject to the security interest in favor of Potlatch, and (J) Clearwater shall indemnify the Escrow Agent for all matters for which indemnification is agreed under such Escrow Agreement.

(b) Concurrently with its receipt of Net Cash Proceeds from any Equity Issuance, Debt Incurrence or Disposition before December 1, 2009 as described in Section 1.06(a), Clearwater shall:

(i) deposit the same in the Escrow Account; and

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(ii) notify Potlatch that such deposit has been made and the amount thereof.

(c) If the Escrow Account is established pursuant to this Section 1.06, Clearwater shall timely deliver to the Escrow Agent all necessary wire transfer instructions and account information the Escrow Agent shall require for it to ensure that the Indenture Trustee will receive and accept the funds transferred from the Escrow Account to the Indenture Trustee on December 1, 2009.

ARTICLE II

REPAYMENT OBLIGATION

Section 2.01. Notice of Inability to Pay Retained Obligation.

(a) Upon request from Potlatch, Clearwater shall advise Potlatch from time to time whether it has or reasonably expects to have the ability to pay the interest payment due on the Debentures on June 1, 2009. In any event, if Clearwater anticipates or should reasonably anticipate that it will be unable to make such interest payment, it will notify Potlatch no later than six Business Days before that date that it will be unable to make such payment.

(b) Upon request from Potlatch, Clearwater shall advise Potlatch from time to time whether it has or reasonably expects to have the ability to pay the principal and interest payment due on the Debentures on December 1, 2009. In any event, if Clearwater anticipates or should reasonably anticipate that it will be unable to make such principal and interest payment, it will notify Potlatch no later than six Business Days before that date that it will be unable to make such payment.

Section 2.02. Loans to Clearwater.

(a) In the event the maturity of the Debentures shall be accelerated for any reason (an “Acceleration Event”) and Clearwater does not pay in full all outstanding principal and interest due and payable under the Debentures, and Potlatch or any subsidiary of Potlatch (a “Lender”) pays any outstanding principal and interest thereon, Clearwater shall be deemed to have received a loan from Lender in such amount; and Clearwater shall repay such loan, and otherwise reimburse Lender in full for such amount, together with all accrued interest thereon, no later than December 1, 2011.

(b) If Clearwater does not pay any interest on the Debentures when the same shall be due and payable on June 1, 2009, and Lender pays such interest, Clearwater shall be deemed to have received a loan from Lender in such amount; and Clearwater shall repay such loan, and otherwise reimburse Lender in full for such amount, together with all accrued interest thereon, no later than December 1, 2011.

(c) If Clearwater does not pay any principal or interest under the Debentures when the same shall be due and payable on December 1, 2009, and

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Lender pays such principal or interest, Clearwater shall be deemed to have received a loan from Lender in such amount; and Clearwater shall repay such loan and otherwise shall reimburse Lender in full for all such amount, together with all accrued interest thereon, no later than December 1, 2011.

(d) Interest shall accrue on the obligation:

(i) under Section 2.02(a), at a rate per annum equal to: (A) the rate of interest applicable to the Debentures immediately prior to the Acceleration Event from the date on which the loan is deemed to be made thereunder until December 1, 2009; (B) the rate of interest applicable to the Debentures immediately prior to the Acceleration Event plus one percent (1%) from December 1, 2009 until December 1, 2010; and (C) the rate of interest applicable to the Debentures immediately prior to the Acceleration Event plus two percent (2%) from December 1, 2010 until the obligations to the Lender under this Section 2.02 shall have been paid in full;

(ii) under Section 2.02(b) from June 1, 2009 until December 1, 2009 at a rate per annum equal to the rate of interest applicable to the Debentures on June 1, 2009, plus one percent (1%);

(iii) under Section 2.02(c) at a rate per annum equal to (A) the rate of interest applicable to the Debentures immediately prior to their maturity plus one percent (1%) from December 1, 2009 until December 1, 2010 and (B) the rate of interest applicable to the Debentures immediately prior to their maturity plus two percent (2%) from December 1, 2010 until the obligations to the Lender under this Section 2.02 shall have been paid in full.

(e) Interest shall be calculated on the basis of 360 days in a year and the number of days actually lapsed. Clearwater shall pay all accrued interest on the obligations in this Section 2.02 on each June 1 and December 1 and on any day on which it prepays, in part or whole, such obligations.

Section 2.03. Notes.

(a) If Clearwater receives a loan pursuant to Section 2.02(a), Clearwater shall, on the date of such loan, execute and deliver to Lender a promissory note, substantially in the form of Exhibit A hereto (“Note”). Prior to Clearwater’s execution and delivery thereof, Lender shall complete such Note by inserting the date, the principal amount thereof and the rate of interest determined pursuant to Section 2.02(d).

(b) If Clearwater receives a loan pursuant to Section 2.02(b), Clearwater shall, on or before June 1, 2009, execute and deliver to Lender a Note. Prior to Clearwater’s execution and delivery thereof, Lender shall complete such Note by inserting the date, the principal amount thereof and the rate of interest determined pursuant to Section 2.02(d).

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(c) If Clearwater receives a loan pursuant to Section 2.02(c), Clearwater shall, on or before December 1, 2009, execute and deliver to Lender a Note, and, if a loan was received pursuant to Section 2.02(b), the outstanding principal amount of that loan and any accrued and unpaid interest thereon. Prior to Clearwater’s execution and delivery thereof, Lender shall complete such Note by inserting the date, the principal amount thereof and the rate of interest determined pursuant to Section 2.02(d).

(d) If Lender has received a Note for the loan made pursuant to Section 2.02(b) and another Note pursuant to Section 2.02(c), Lender shall cancel the Note for the loan made pursuant to Section 2.02(b) and deliver the same to Clearwater (after adding the principal amount of and accrued interest on that Note to the Note delivered pursuant to Section 2.02(c)).

Section 2.04. Clearwater to Seek to Refinance the Note. If Clearwater shall become obligated to Lender under Section 2.02(a) or (c), Clearwater shall use commercially reasonable efforts to issue, as soon as reasonably practical, debt or equity securities or borrow money from one or more financial institutions or other lenders, in each case, on terms and conditions reasonably acceptable to Clearwater, in an aggregate amount sufficient to prepay the Note and all interest accrued thereon. Clearwater shall, from time to time, upon request by Potlatch, advise Potlatch of its efforts to issue the securities or to borrow the moneys described in this Section 2.04. Notwithstanding the foregoing, Clearwater shall not be required to borrow moneys under the Revolving Loan Agreement.

Section 2.05. Prepayment.

(a) Concurrently with its receipt of Net Cash Proceeds from any Equity Issuance, Debt Incurrence or Disposition after December 1, 2009, whether or not such Net Cash Proceeds are sufficient to prepay in full such obligation, Clearwater shall prepay, in whole or part, the outstanding principal amount of, and accrued interest on, the obligations in Section 2.02, to the extent of such Net Cash Proceeds.

(b) Any prepayment made pursuant to Section 2.05(a) shall be applied first to the payment of interest and then to principal.

(c) Clearwater shall notify Potlatch at least 10 Business Days in advance of any prepayment it will make pursuant to Section 2.05(a).

Section 2.06. Payments on Banking Days. If any payment of principal or interest shall be due and payable on a Note, in the absence of this Section, on any day that is not a Business Day, such payment shall be due and payable on the next Business Day.

Section 2.07. Collateral. As security for all obligations of Clearwater under the Note and the other obligations under this Agreement after such Note has been or was required to have been issued, concurrently with its execution and delivery of this Agreement, Clearwater shall execute and deliver a mortgage, in form and substance reasonably satisfactory to Lender (the “Mortgage”), pursuant to which it mortgages and grants a first priority lien and security interest in all of its fee title and leasehold real property interests, fixtures, equipment and goods, other

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than inventory and accounts receivable, in its facility located at Cypress Bend, Arkansas, subject to exceptions acceptable to Lender, and books and records which contain information about, and the proceeds of, the foregoing collateral. Lender may record the Mortgage and file such other documents and instruments to perfect its security interest in the collateral described in the Mortgage as Lender shall deem appropriate, but in any event on or after the date a Note is required to have been issued by Clearwater pursuant to Section 2.03; provided, however, that Lender shall not record and perfect the Mortgage with respect to a Note issued pursuant to Section 2.03(a) at any time before December 1, 2009 unless Clearwater caused the Acceleration Event resulting in the issuance of such Note.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

Clearwater represents and warrants to Potlatch that:

Section 3.01. Organization and Good Standing. Clearwater (a) is duly incorporated, validly existing and is in good standing under the laws of the State of Delaware, (b) has the corporate or other necessary power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged and (c) is duly qualified as a foreign entity and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, other than in such jurisdictions where the failure to be so qualified and in good standing would not reasonably be expected to have a material adverse effect on it or its business.

Section 3.02. Power; Authorization; Enforceable Obligations. Clearwater has the corporate power and authority, and the legal right, to make, deliver and perform the Transaction Documents, and has taken all necessary corporate or other necessary action to authorize the transactions on the terms and conditions of this Agreement and to authorize the execution, delivery and performance of the Transaction Documents. Other than any consents that may be required under the Transaction Documents or under Potlatch’s revolving credit facility or under the Revolving Loan Agreement, no consent or authorization of, filing with, notice to or other similar act by or in respect of, any governmental authority or any other Person is required to be obtained or made by or on behalf of Clearwater in connection with the transactions hereunder or with the execution, delivery, performance, validity or enforceability of the Transaction Documents. This Agreement has been, and each other Transaction Document will be, duly executed and delivered on behalf of Clearwater. This Agreement constitutes, and each other Transaction Document when executed and delivered will constitute, a legal, valid and binding obligation of Clearwater enforceable against it in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).

Section 3.03. No Conflicts. Neither the execution and delivery of the Transaction Documents, nor the consummation of the transactions contemplated therein, nor performance of and compliance with the terms and provisions thereof by Clearwater will (a) violate or conflict

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with any provision of its articles or certificate of incorporation or bylaws or other organizational or governing documents of Clearwater, (b) violate, contravene or materially conflict with any law or any other law, regulation, order, writ, judgment, injunction, decree or permit applicable to it, (c) violate, contravene or conflict with contractual provisions of, or cause an event of default under, any material indenture, loan agreement, mortgage, deed of trust, contract or other agreement or instrument to which it is a party or by which it may be bound or (d) result in or require the creation of any Lien upon or with respect to its properties, except pursuant to this Agreement.

ARTICLE IV

COVENANTS

Section 4.01. Effectiveness of Covenants. The covenants in Sections 4.05 and 4.06(b) shall be effective upon the execution and delivery of this Agreement and shall continue in full force and effect until all obligations under Sections 1.01 and 2.02 have been satisfied and discharged, paid in full in accordance with their terms, or otherwise terminated. The other covenants in this Article IV shall be effective upon Clearwater’s becoming obligated to issue a Note pursuant to Section 2.03 and shall continue until all obligations under Section 2.02 and the Note have been satisfied and discharged or paid in full in accordance with their terms, or otherwise terminated.

Section 4.02. Payment of Principal and Interest. Clearwater covenants and agrees for the benefit of Lender that it will duly and punctually pay the principal of and interest on the obligations in Sections 2.02, 2.03 and 2.05.

Section 4.03. Maintenance of Office or Agency.

(a) Clearwater will maintain an office or agency where the Note may be presented or surrendered for payment, and where notices and demands to or upon Clearwater in respect of the Note and this Agreement may be served. Clearwater will give prompt written notice to Lender of the location, and any change in the location, of such office or agency. If at any time Clearwater shall fail to maintain any such required office or agency or shall fail to furnish Lender with the address thereof, such presentations, surrenders, notices and demands may be made or served at the offices of Lender, and Clearwater hereby appoints Lender as its agent to receive all such presentations, surrenders, notices and demands.

(b) Clearwater may also from time to time designate one or more other offices or agencies^. where the Note may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve Clearwater of its obligation to maintain an office or agency for such purposes. Clearwater will give prompt written notice to Lender of any such designation or rescission and of any change in the location of any such other office or agency.

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Section 4.04. Corporate Existence. Subject to Section 4.08, Clearwater will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights (charter and statutory) and franchises; provided, however, that Clearwater shall not be required to preserve any such^. right or franchise if its board of directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of Clearwater and that the loss thereof is not disadvantageous in any material respect to Lender.

Section 4.05. Limitations on Liens and Encumbrances. So long as there is outstanding any obligation under Section 1.01(a) or 2.02 or the Note, Clearwater will not itself, nor will it permit any Subsidiary to, create, assume or incur any Lien on any of its assets, tangible or intangible, except for “Permitted Liens” (as defined in the Revolving Loan Agreement).

Section 4.06. Limitations on Sales and Sale and Leaseback Transactions.

(a) Clearwater will not, and will not permit any Subsidiary to, directly or indirectly, sell or transfer (other than to Clearwater or a Subsidiary) any assets the aggregate value of which exceeds $10,000,000 (other than such an asset sold or transferred to an industrial development corporation or governmental instrumentality in connection with a revenue or pollution control financing) now owned or hereafter acquired with the intention that Clearwater or any Subsidiary shall take back a lease thereof (other than a lease for a term of not more than three years or any lease entered into solely for tax purposes) unless (a) the proceeds of such sale shall at least be equal to the fair value (as determined in good faith by Clearwater) of such assets, and, subject to Section 2.05, (b) an amount equal to the cash portion of the net proceeds of such sale shall be applied within 180 days either before or after the effective date of any such transaction (i) to the retirement of the Note or (ii) to the purchase of property, facilities or equipment (other than the property, facilities or equipment involved in such sale) having a value at least equal to the cash portion of the net proceeds of such sale. Notwithstanding the foregoing, the Net Cash Proceeds of any Disposition shall be applied as set forth in Section 2.05.

(b) Clearwater will not, and will not permit any Subsidiary to, directly or indirectly, sell or transfer (other than to Clearwater or a Subsidiary) any assets described in Section 2.07 as the potential collateral or collateral for Clearwater’s obligations under the Note, the aggregate value of which exceeds $10,000,000, without the prior written consent of Potlatch.

Section 4.07. Statement by Officers as to Default. Clearwater will deliver to Lender, within 120 days after each December 31 following the date hereof, a written statement signed by the Chairman of its board of directors, a Vice Chairman, the President or a Vice President and by the Chief Financial Officer, Treasurer, an Assistant Treasurer, the Controller or an Assistant Controller of Clearwater stating, as to each signer thereof, that

(a) a review of the activities of Clearwater during such year and of performance under this Agreement has been made under his or her supervision, and

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(b) to the best of his or her knowledge, based on such review, Clearwater has fulfilled all its obligations under this Agreement through-out such year, or, if there has been a default in the fulfillment of any such obligation, specifying each such default known to him or her and the nature and status thereof.

Section 4.08. Consolidation, Merger, Conveyance or Transfer.

(a) Clearwater shall not consolidate with or merge into any other Person or convey or transfer its properties and assets substantially as an entirety to any Person, unless:

(i) the Person formed by such consolidation or into which Clearwater is merged or the Person which acquires by conveyance or transfer the properties and assets of Clearwater substantially as an entirety shall be a Person organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and shall expressly assume, by an agreement in form and substance satisfactory to Lender, executed and delivered to Lender, the due and punctual payment of the principal of and interest on the Note and the performance of every covenant of this Agreement on the part of Clearwater to be performed or observed;

(ii) immediately after giving effect to such transaction, no Event of Default and no event which, after notice or lapse of time or both, would become an Event of Default, shall have occurred and be continuing; and

(iii) Clearwater has delivered to Lender an officers’ certificate and an opinion of counsel, each in form and substance satisfactory to Lender stating that such consolidation, merger, conveyance or transfer and such assumption agreement comply with this Section 4.08 and that all conditions precedent herein provided for relating to such transaction have been met.

(b) Upon any consolidation or merger or any conveyance or transfer of the properties and assets of Clearwater substantially as an entirety in accordance with Section 4.08(a), the successor Person formed by such consolidation or into which Clearwater is merged or to which such conveyance or transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, Clearwater under this Agreement with the same effect as if such successor Person had been named as Clearwater herein; provided, however, that no such conveyance or transfer shall have the effect of releasing the Person named as “Clearwater” in the first paragraph of this Agreement or any successor Person which shall theretofore have become such in the manner prescribed in this Section from its liability as obligor and maker on the Note.

(c) Clearwater shall not lease its properties and assets substantially as an entirety to any Person.

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ARTICLE V

EVENTS OF DEFAULT; REMEDIES

Section 5.01. Events of Default.

“Event of Default”, wherever used herein with respect to the Transaction Documents, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body) shall occur during the period while any obligation under Section 2.02 or a Note shall be outstanding:

(a) default in the payment of any interest upon a Note when it becomes due and payable, and continuance of such default for a period of 10 days;

(b) default in the payment of the principal of a Note when payment or prepayment is due and payable;

(c) default in the performance, or breach, of any covenant or warranty of Clearwater in this Agreement, and continuance of such default or breach for a period of 30 days after there has been given, pursuant to Section 6.02, to Clearwater by Lender a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a “Notice of Default” hereunder;

(d) a default under any bond, debenture, note or other evidence of Indebtedness for money borrowed in excess of $10,000,000 by Clearwater or under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed in excess of $10,000,000 by Clearwater (including this Agreement), whether such Indebtedness now exists or shall hereafter be created, which default (i) shall consist of a failure to pay such Indebtedness at final maturity and after the expiration of any applicable grace period or (ii) shall have resulted in such Indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, without such acceleration having been rescinded or annulled or such Indebtedness having been discharged;

(e) the entry by a court having jurisdiction in the premises of (A) a decree or order for relief in respect of Clearwater in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudging Clearwater a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of Clearwater under any applicable Federal or State law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of Clearwater or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance

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of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; or

(f) the commencement by Clearwater of a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of Clearwater in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable Federal or State law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of Clearwater or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by Clearwater in furtherance of any such action.

Section 5.02. Remedies for Events of Default. Upon the occurrence of any Event of Default, Lender shall have all rights, powers and remedies available under each of the Transaction Documents, or accorded by law, including without limitation the right to resort to any or all security for any credit subject hereto and to exercise any or all of the rights of a beneficiary or secured party pursuant to applicable law. All rights, powers and remedies of Lender may be exercised at any time by Lender and from time to time after the occurrence of an Event of Default, are cumulative and not exclusive, and shall be in addition to any other rights, powers or remedies provided by law or equity.

Section 5.03. Remedies for Breach. Without limiting the generality of Section 5.02, Potlatch and Lender shall each have all rights and remedies available under applicable law for any breach of this Agreement or any Transaction Document even though such breach shall not constitute an Event of Default; provided, however, that notwithstanding anything to the contrary contained herein, in the event an Acceleration Event occurs other than as a result of Clearwater’s failure to pay interest under the Debentures when the same is due and payable thereunder and Lender does not make a loan to Clearwater pursuant to Section 2.02, Clearwater shall not be deemed to be in breach of its obligations under Section 1.01 unless and until Clearwater does not pay the interest on the Debentures when the same would have become due and payable on June 1, 2009 absent such Acceleration Event or Clearwater does not pay the interest or principal on the Debentures when the same would have become due and payable on December 1, 2009 absent such Acceleration Event. Clearwater and Potlatch agree that where money damages would be an inadequate remedy for a breach, and they agree that money damages would not be an adequate remedy for a breach of Section 4.05, Potlatch shall be entitled to specific performance.

Section 5.04. Default Rate. Clearwater shall pay Lender interest on any amount of principal or interest not paid when due under the Note issued pursuant to Section 2.03(b) at the rate at which interest shall then accrue thereunder plus two percent (2%) per annum.

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ARTICLE VI

MISCELLANEOUS

Section 6.01. No Waiver. No delay, failure or discontinuance of Potlatch or Lender in exercising any right, power or remedy under any of the Transaction Documents shall affect or operate as a waiver of such right, power or remedy; nor shall any single or partial exercise of any such right, power or remedy preclude, waive or otherwise affect any other or further exercise thereof or the exercise of any other right, power or remedy. Any waiver, permit, consent or approval of any kind by Potlatch or Lender of any breach of or default under any of the Transaction Documents must be in writing and shall be effective only to the extent set forth in such writing.

Section 6.02. Notices. All notices, requests and demands which any party is required or may desire to give to any other party under any provision of this Agreement must be in writing delivered to each party at the following address:

      to Clearwater: Clearwater Paper Corporation

601 W. Riverside Avenue, Suite 1100

Spokane, WA 99201

Attention: Linda K. Massman, VP, Finance and CFO

Facsimile no.: (509) 342-2570

Email address: Linda.Massman@clearwater.com

With a copy to:

Clearwater Paper Corporation

601 W. Riverside Avenue, Suite 1100

Spokane, WA 99201

Attention: Michael Gadd, VP and General Counsel

Facsimile no.: (509) 342-2570

Email address: Michael.Gadd@clearwater.com

With a copy to:

Pillsbury Winthrop Shaw Pittman LLP

50 Fremont Street

San Francisco, CA 94105-2228

Attention: Blair White, Esq.

Facsimile no.: (415) 983-1200

Email address: blair.white@pillsburylaw.com

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      to Potlatch: Potlatch Corporation

601 W. First Avenue, Suite 1600

Spokane, WA 99201

Attention: Eric J. Cremers, VP, Finance and CFO

Facsimile no.: (509) 835-1561

Email address: Eric.Cremers@potlatchcorp.com

With a copy to:

Potlatch Corporation

601 W. First Avenue, Suite 1600

Spokane, WA 99201

Attention: Pamela Mull, VP and General Counsel

Facsimile no.: (509) 835-1561

Email address: Pamela.Mull@potlatchcorp.com

With a copy to:

Pillsbury Winthrop Shaw Pittman LLP

50 Fremont Street

San Francisco, CA 94105-2228

Attention: Blair White, Esq.

Facsimile no.: (415) 983-1200

Email address: blair.white@pillsburylaw.com

or to such other address as any party may designate by written notice to all other parties. Each such notice, request and demand shall be deemed given or made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by mail, upon the earlier of the date of receipt or three days after deposit in the U.S. mail, first-class and postage prepaid; (c) if sent by facsimile, upon receipt; and (d) if sent by electronic mail upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement); provided that if such notice or other communication is not received during the normal business hours of the recipient, such notice or communication shall be deemed to have been received at the opening of business on the next local business day for the recipient. With respect to any notice, a “local business day” is a day on which the recipient of such notice is open for business.

Section 6.03. Costs, Expenses and Attorneys’ Fees. Clearwater shall pay to Potlatch or Lender immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys’ fees, expended or incurred by Potlatch or Lender in connection with the enforcement of its rights or the collection of any amounts which become due to Potlatch or Lender under any of the Transaction Documents.

Section 6.04. Successors, Assignment. This Agreement shall be binding upon and inure to the benefit of the administrators, legal representatives, successors and assigns of the parties; provided however, that Clearwater may not assign or transfer its interests or rights hereunder without Potlatch’s prior written consent.

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Section 6.05. Entire Agreement; Amendment. This Agreement and the other Transaction Documents constitute the entire agreement between Clearwater and Potlatch with respect to subject hereto and supersede all prior negotiations, communications, discussions and correspondence concerning the subject matter hereof. This Agreement may be amended or modified only in writing signed by each party hereto.

Section 6.06. No Third-Party Beneficiaries. This Agreement is made and entered into for the sole protection and benefit of the parties hereto and their respective permitted successors and assigns, and no other person or entity shall be a third-party beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any other of the Transaction Documents to which it is not a party.

Section 6.07. Time. Time is of the essence of each and every provision of this Agreement and each other of the Transaction Documents.

Section 6.08. Severability of Provisions. If any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or any remaining provisions of this Agreement.

Section 6.09. Definitions.

(a) “Acceleration Event” has the meaning given it in Section 2.02(a).

(b) “Business Day” means a day other than a Saturday, Sunday or other day on which banks in Spokane, Washington and New York, New York are authorized or required to be closed for business.

(c) “Cash Equivalents” means, as at any date, (a) securities issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof, (b) dollar denominated time deposits and certificates of deposit of any bank, (c) commercial paper and variable or fixed rate notes issued by any Person, (d) repurchase agreements entered into by any Person with a bank or trust company and (e) investments in money market investment programs registered under the Investment Company Act of 1940, as amended.

(d) “Clearwater” has the meaning given it in the Introduction.

(e) “Code” means the Internal Revenue Code of 1986, as amended.

(f) “Contribution Agreement” has the meaning given it in the third recital.

(g) “Debentures” has the meaning given it in the first recital.

(h) “Debt Incurrence” means the issuance by Clearwater of (a) any Indebtedness of Clearwater for borrowed money, or (b) any Indebtedness of Clearwater evidenced by bonds, debentures, notes or similar instruments.

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(i) “Disposition” means, as to any asset or right of Clearwater, (a) any sale, lease, assignment or other transfer not in the ordinary course of business, (b) any loss, destruction or damage thereof or (c) any condemnation, confiscation, requisition, seizure or taking thereof, in each case excluding Dispositions the Net Cash Proceeds of which do not in the aggregate equal or exceed $50,000,000.

(j) “Effective Time” means 12:01 A.M. Eastern Standard Time on the “Distribution Date” (as defined in the Separation and Distribution Agreement dated December 15, 2008 between Potlatch and Clearwater).

(k) “Equity Issuance” means any issuance by Clearwater to any Person of (a) shares of its Capital Stock, (b) any shares of its capital stock pursuant to the exercise of options or warrants, (c) any shares of its capital stock pursuant to the conversion of any debt securities to equity or (d) any options or warrants relating to its capital stock. The term “Equity Issuance” shall not be deemed to include issuances pursuant to current or future employee plans of Clearwater.

(l) “Escrow Account” has the meaning given it in Section 1.06(a)(ii).

(m) “Escrow Agent” has the meaning given it in Section 1.06(a)(ii).

(n) “Escrow Agreement” has the meaning given it in Section 1.06(a)(ii).

(o) “Indebtedness” of a corporation means any and all obligations for money borrowed which in accordance with generally accepted accounting principles would be included on the liabilities side of a balance sheet of such corporation as of the date as of which such indebtedness was incurred.

(p) “Indenture” has the meaning given it in the first recital.

(q) “Indenture Trustee” has the meaning given it in the first recital.

(r) “Lender” has the meaning given it in Section 2.02(a).

(s) “Lien” means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement, and, except with respect to any lease, the filing of or agreement to file any financing statement under the Uniform Commercial Code of any jurisdiction).

(t) “Moody’s” means Moody’s Investors Service, Inc.

(u) “Mortgage” has the meaning given it in Section 2.07.

(v) “Net Cash Proceeds” means the aggregate cash or Cash Equivalents proceeds received by Clearwater in respect of any Disposition, Equity Issuance or Debt Incurrence, net of (a) direct costs (including, without limitation, legal, accounting and investment banking fees, and sales commissions) related thereto, and (b) taxes paid or payable as a result thereof; it being understood that “Net Cash

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Proceeds” shall include, without limitation, any cash or Cash Equivalents received upon the sale or other disposition of any non-cash consideration received by Clearwater in any Disposition, Equity Issuance or Debt Incurrence. In addition, the “Net Cash Proceeds” of any Disposition shall include any property or casualty insurance proceeds paid with respect to the loss, damage or destruction of property and other amounts which constitute “Net Proceeds” (or any comparable term) of such transaction under, and as defined in the documents evidencing or governing any Indebtedness.

(w) “Note” has the meaning given it in Section 2.03(a); and a reference to the Note, at any time, shall be the Note outstanding at that time, if any.

(x) “Person” means any individual, partnership, joint venture, firm, corporation, limited liability company, association, trust or other enterprise (whether or not incorporated) or any governmental authority.

(y) “PFHI” has the meaning given it in the first recital.

(z) “Potlatch” has the meaning given it in the Introduction.

(aa) “Revolving Loan Agreement” has the meaning given it in Section 1.03.

(bb) “S&P” means Standard and Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc.

(cc) “Subsidiary” means, as to any Person at any time, (a) any Person more than 50% of whose capital stock or equity interests of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such Person (irrespective of whether or not at such time, any class or classes of such Person shall have or might have voting power by reason of the happening of any contingency) is at such time owned by such Person directly or indirectly through Subsidiaries, and (b) any partnership, association, joint venture or other entity of which such Person directly or indirectly through Subsidiaries owns at such time more than 50% of the Capital Stock of such entity.

(dd) “Transaction Document” means this Agreement, the Note, the Mortgage, or any other document, instrument or agreement delivered in connection with the foregoing, all as amended, restated or otherwise modified from time to time.

Section 6.10. Interpretation. In the case of this Agreement and each other Transaction Document, (a) the meanings of defined terms are equally applicable to the singular and plural forms of the defined terms; (b) Exhibit and Section references are to such Transaction Document unless otherwise specified; (c) the term “including” is not limiting and means “including but not limited to”; (d) in the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including”; the words “to” and “until” each mean “to but excluding”, and the word “through” means “to and including”; (e) unless otherwise expressly provided in such Transaction Document, (i) references to agreements and other contractual

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instruments shall be deemed to include all subsequent amendments and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of any Transaction Document, and (ii) references to any statute or regulation shall be construed as including all statutory and regulatory provisions amending, replacing, supplementing or interpreting such statute or regulation; (f) this Agreement and the other Transaction Documents may use several different limitations to regulate the same or similar matters, all of which are cumulative and each shall be performed in accordance with its terms; and (g) this Agreement and the other Transaction Documents are the result of negotiations among and have been reviewed by counsel to Clearwater and Potlatch and are the products of all parties; accordingly, they shall not be construed against Potlatch merely because of Potlatch’s involvement in their preparation.

Section 6.11. Counterparts. This Agreement may be executed in any number of counterparts, each of which when executed and delivered shall be deemed to be an original, and all of which when taken together shall constitute one and the same Agreement.

Section 6.12. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first written above.

CLEARWATER PAPER CORPORATION
By	/s/    Gordon L. Jones
	Gordon L. Jones
POTLATCH CORPORATION
By	/s/    Michael J. Covey
	Michael J. Covey

Potlatch Forest Holdings, Inc., a Delaware corporation, hereby assigns to Potlatch Land & Lumber, LLC, a Delaware limited liability company (“PLL”), and PLL hereby accepts from PFHI, all its right, title and interest in the obligations described in Section 1.01(a) and other provisions relating thereto under this Agreement.

POTLATCH FOREST HOLDINGS, INC.
By	/s/    Michael J. Covey
	Michael J. Covey
POTLATCH LAND & LUMBER LLC
By	/s/    Eric J. Cremers
	Eric J. Cremers

Signature Page to Retained Obligation Agreement

EXHIBIT A

SECURED NOTE

$[        ] Spokane, Washington

[June][December] 1, 2009

FOR VALUE RECEIVED, the undersigned, CLEARWATER PAPER CORPORATION, a Delaware corporation (“Clearwater”), promises to pay to the order of [POTLATCH CORPORATION], a Delaware corporation (“Potlatch”), at 601 West First Avenue, Suite 1600, Spokane, WA 99201, Attention: Eric J. Cremers, Vice President Finance and Chief Financial Officer, or such other address as Potlatch may notify Clearwater, the principal sum of [specify amount in words] Dollars ($[specify amount in numbers]), together with interest as hereinafter provided. This note evidences a loan by Potlatch to Clearwater under Section 2.02 of the Retained Obligation Agreement dated December 15, 2008 between Potlatch and Clearwater (said Agreement as amended or modified from time to time the “Retained Obligation Agreement”). Capitalized terms not otherwise defined herein have the meanings set forth in the Retained Obligation Agreement. The Retained Obligation Agreement is incorporated herein as though fully set forth and Clearwater acknowledges its reading and execution. The entire unpaid principal balance hereof and all accrued and unpaid interest shall be due and payable on December 1, 2011. On each June 1 and December 1, Clearwater shall pay Potlatch accrued interest, computed on the basis of a 360-day year, for the actual number of days elapsed, on the unpaid balance of this Note, at the per annum rate [specify rate determined pursuant to Section 2.04(c) of the Retained Obligation Agreement] per annum.

To secure the payment of this Note and the obligations in Article II of the Retained Obligation Agreement, Clearwater has granted to Potlatch a continuing security interest in and lien on the collateral described in the Retained Obligation Agreement.

In addition to all remedies provided by law upon default on payment of this Note, or upon an Event of Default, Potlatch may, at its option:

(1) Declare this Note and the Obligations immediately due and payable;

(2) Collect interest on this Note at the default rate set forth in the Retained Obligation Agreement; and

(3) Exercise any and all remedies provided for in the Retained Obligation Agreement.

CLEARWATER WAIVES PRESENTMENT FOR PAYMENT, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, PROTEST AND NOTICE OF PROTEST FOR NON-PAYMENT OF THIS NOTE. THIS NOTE AND THE LOAN EVIDENCED HEREBY SHALL BE GOVERNED BY THE TERMS OF THE APPLICABLE PROVISION SET FORTH IN THE RETAINED OBLIGATION AGREEMENT.

CLEARWATER PAPER CORPORATION,

a Delaware corporation

Signed by:                                                              

Print Name:                                                            

Title/Capacity:                                                       

EX-10.2

Exhibit 10.2

TRANSITION SERVICES AGREEMENT

THIS TRANSITION SERVICES AGREEMENT (this “Agreement”) is made as of December 15, 2008, by and between Potlatch Land & Lumber, LLC, a Delaware limited liability company (“Potlatch”), and Clearwater Paper Corporation, a Delaware corporation (formerly named Potlatch Forest Products Corporation) (“Clearwater”) (each, a “Party,” and together, the “Parties”).

RECITALS:

WHEREAS, Potlatch Corporation and Clearwater have entered into that certain Separation and Distribution Agreement, dated as of December 15, 2008 (the “Separation and Distribution Agreement”), pursuant to which and subject to the terms and conditions set forth therein, the Retained Business and the Pulp-Based Business shall be separated into two independent companies (the “Separation”), and the Clearwater Common Stock shall thereafter be distributed on a pro rata basis to Potlatch Corporation’s shareholders (capitalized terms not otherwise defined in this Agreement shall have the meaning set forth in the Separation and Distribution Agreement); and

WHEREAS, in order to facilitate the Separation, the Parties have agreed that certain shared services and certain common uses of facilities and equipment should continue for a transitional period after the Effective Time.

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

1. Description of Transition Services.

(a) Potlatch shall (or shall cause its applicable Affiliate, as necessary, to), subject to the terms and provisions of this Agreement (including Exhibit A):

(i) provide Clearwater (or its Affiliate, as applicable) with general services of a financial, technical, commercial, administrative or advisory nature as set forth on Exhibit A (the “Potlatch Services”);

(ii) where applicable, assist Clearwater (or its Affiliate, as applicable) in the efficient transfer of each of the Potlatch Services, including training of the personnel primarily responsible for each of the Potlatch Services going forward; and

(iii) render such other specific services as may be from time to time reasonably requested, within the scope of the services set forth on Exhibit A or, if such additional services are not contemplated by Exhibit A, at its discretion and its reasonable ability to supply such additional services at the time of such request.

Unless otherwise specifically provided on Exhibit A, Potlatch will provide each of the Potlatch Services until the date that is 18 months after the Distribution Date. Clearwater may, at its option, upon no less than 30 days’ prior written notice (or such other period as the Parties may

mutually agree), direct Potlatch to no longer provide all or any category or portion of the Potlatch Services.

(b) Clearwater shall (or shall cause its applicable Affiliate, as necessary, to), subject to the terms and provisions of this Agreement (including Exhibit B):

(i) provide Potlatch (or its Affiliate, as applicable) with general services of a financial, technical, commercial, administrative or advisory nature as set forth on Exhibit B (the “Clearwater Services,” and together with the Potlatch Services, the “Transition Services”);

(ii) where applicable, assist Potlatch (or its Affiliate, as applicable) in the efficient transfer of each of the provided Clearwater Services, including training of the personnel primarily responsible for each of the Clearwater Services going forward; and

(iii) render such other specific services as may be from time to time reasonably requested, within the scope of the services set forth on Exhibit B or, if such additional services are not contemplated by Exhibit B, at its discretion and its reasonable ability to supply such additional services at the time of such request.

Unless otherwise specifically provided on Exhibit B, Clearwater will provide each of the Clearwater Services until the date that is 18 months after the Distribution Date. Potlatch may, at its option, upon no less than 30 days’ prior written notice (or such other period as the Parties may mutually agree), direct Clearwater to no longer provide all or any category or portion of the Clearwater Services.

2. Consideration for Services. Each Party receiving the services (the “Receiving Party”) shall pay the Party providing the services (the “Performing Party”) in accordance with this Section 2, and each Performing Party shall accept as consideration for the services rendered hereunder, the following service charges:

(a) for the Transition Services rendered pursuant to Section 1(a)(i) and Section 1(b)(i), the Receiving Party will be charged the fees set forth on Exhibit A or Exhibit B, as applicable; and

(b) for any additional services rendered pursuant to Section 1(a)(iii) and Section 1(b)(iii), the Receiving Party will be charged certain fees to be negotiated and agreed to in good faith by the Parties at the time such services are requested.

The monthly and hourly fees set forth on Exhibit A and Exhibit B will be equitably adjusted, as mutually agreed upon by the parties in writing, throughout the term of the Agreement as necessary to reflect any increase or decrease in services or other appropriate adjustment.

3. Terms of Payment. Each Performing Party shall submit in writing an invoice covering its charges for services it renders hereunder. Such invoice shall be submitted on a monthly basis and shall contain a summary description of the charges and services rendered. Payment shall be made no later than 30 days after the invoice date.

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4. Method of Payment. All amounts payable for services shall be remitted in U.S. dollars to a bank to be designated in the invoice or otherwise in writing, unless otherwise provided for and agreed upon in writing by the Parties. Detailed billing information will be provided upon request.

5. WARRANTIES. THIS IS A SERVICE AGREEMENT. EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, THERE ARE NO EXPRESS WARRANTIES OR GUARANTIES AND THERE ARE NO IMPLIED WARRANTIES OR GUARANTIES, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY, TITLE AND FITNESS FOR A PARTICULAR PURPOSE.

6. Indemnity. Each Party shall indemnify, defend and hold harmless the other Party and its Affiliates, directors, officers, employees and agents, and each of the successors and assigns of any of the foregoing, from and against any and all Third Party Claims relating to, arising out of or resulting from gross negligence or willful misconduct of such Party in the performance of its obligations hereunder, or breach of this Agreement, other than to the extent such Third Party Claims are attributable to the gross negligence, negligence, willful misconduct or breach of this Agreement by any Person so indemnified.

7. Limitation on Liability.

(a) In no event shall either Party have any liability, whether based on contract, tort (including, without limitation, negligence), warranty or any other legal or equitable grounds, for any punitive, consequential, special, indirect loss or damage suffered by the other Party arising from or related to this Agreement, including without limitation, loss of data, profits (excluding profits under this Agreement), interest or revenue, or use or interruption of business, even if such Party is advised of the possibility of such losses or damages.

(b) In no event shall a Party be liable for the acts or omissions of third party providers of equipment or services.

(c) In no event will a Party’s liability, whether based on contract, tort (including without limitation, negligence), warranty or any other legal or equitable grounds, exceed in the aggregate the amount of fees paid or owed to such Party for services provided pursuant to this Agreement for the six month period prior to the date the claim giving rise to such liability occurred or, if six months has not elapsed between the Effective Time and the date giving rise to such liability, then the amount of aggregate monthly fees set forth on Exhibit A or Exhibit B, as applicable, multiplied by six; provided, however, that in either case such fees shall exclude any amounts paid or to be paid to third party providers for equipment or services.

(d) The limitations set forth in Section 7(c) above shall not apply to liabilities which may arise as the result of (i) willful misconduct or gross negligence of a Party or its Affiliates; (ii) indemnity obligations pursuant to Section 6; (iii) the other party’s breach of the confidentiality obligations set forth in this Agreement; (iv) amounts inadvertently overpaid by either Party, or (v) amounts for charges otherwise due and payable under this Agreement.

8. Termination.

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(a) This Agreement shall terminate on June 16, 2010, but may be terminated earlier in accordance with the following:

(i) upon the mutual written agreement of the Parties;

(ii) by either Party for material breach of any of the terms hereof by the other Party if the breach is not cured within 30 calendar days after written notice of breach is delivered to the defaulting Party; or

(iii) by either Party upon written notice to the other Party if the other Party shall become insolvent or shall make an assignment for the benefit of creditors, or shall be placed in receivership, reorganization, liquidation or bankruptcy.

(b) Upon any termination, each Party shall be compensated for all Transition Services performed to the date of termination in accordance with the provisions of this Agreement.

(c) In the event of a termination and upon expiration of this Agreement (or one or more of the services), the Performing Party shall be entitled to the payment or reimbursement of, and the Receiving Party shall pay and reimburse the Performing Party within 30 days of such termination or expiration for all amounts due to the Performing Party under this Agreement, including amounts incurred in connection with the provision of services through the date of such termination or expiration that are not yet due and payable to the Performing Party under this Agreement. Upon termination by the Receiving Party of any service(s) hereunder pursuant to the last sentence of Section 1(a) or the last sentence of Section 1(b), as applicable, the Receiving Party shall reimburse the Performing Party for any and all costs and expenses accruing after such termination and incurred by the Performing Party as a result of the provision of the service(s) (e.g., additional license fees).

9. Performance of Transition Services. The Performing Party shall perform its duties and discharge its obligations under this Agreement in a commercially reasonable manner based upon its current practices (including the software and equipment utilized by the Performing Party) in providing analogous services for itself or its Affiliates as of the Effective Time (or prior practices in the absence of a current practice) and in accordance with any service levels and performance obligations specified in the applicable section of Exhibit A or Exhibit B, as applicable. This obligation is subject to the following conditions:

(a) The Performing Party shall not be required to perform any service in a manner that would constitute a violation of applicable law;

(b) The Performing Party shall not be required to perform any service for the benefit of any Person other than the Receiving Party and its Affiliates;

(c) Except as set forth in Exhibit A or Exhibit B, as applicable, the Performing Party shall not be obligated to (i) hire or train additional employees, (ii) purchase, lease or license any additional equipment or software (iii) use or make available to the Receiving Party any upgrades, improvements or other changes in the equipment or software used by the Performing Party to the extent that the Performing Party would incur additional cost or expense not advanced by the

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Receiving Party in doing so, or (iv) pay any cost related to the transfer or conversion of information to the Receiving Party upon termination of the services;

(d) Except as set forth in Exhibit A or Exhibit B, the Performing Party shall be solely responsible for maintaining, during the applicable service period, equipment, software, licenses, personnel, facilities and other resources reasonably necessary for its provision of the services for which it is responsible that are substantially equivalent to those resources that were available to the Performing Party at the Effective Time;

(e) The Receiving Party shall, and shall cause its applicable Affiliates to, make available on a timely basis to the Performing Party and to any third party provider, (i) information reasonably requested by such Person to enable the performance of services, and (ii) reasonable access to the premises of the Receiving Party and such Affiliates and the systems, software and networks located therein, to the extent necessary for the purpose of providing the services; and

(f) The Receiving Party shall use commercially reasonable efforts to reduce or eliminate its dependency on each service as soon as is reasonably practicable.

10. Independent Contractor. Each Performing Party is providing services pursuant to this Agreement as an independent contractor and the Parties hereby acknowledge that they do not intend to create a joint venture, partnership or any other type of agency between them.

11. Confidentiality. Each Party shall keep confidential, and use reasonable efforts to cause its Affiliates and each of their respective officers, directors, employees, agents and advisors to keep confidential, all information relating to the other Party, and its respective subsidiaries and businesses obtained in connection with the provision or receipt of services under or pursuant to this Agreement, all in accordance with, and subject to the terms of the confidentiality provisions of the Separation and Distribution Agreement. Nothing in this Section 11 shall be construed to prevent the Receiving Party from disclosing information relating to this Agreement or the services provided to the Receiving Party upon receipt of the written consent of the Performing Party, which consent will not be unreasonably withheld or delayed, to the extent that such disclosure is required to permit the Receiving Party to arrange for the provision of such services after the termination of this Agreement.

12. Ownership of Information. Any information owned by one Party or any of its Affiliates that is provided to another Party or any of its Affiliates pursuant to this Agreement shall remain the property of the providing Party. Except to the extent necessary for the Performing Party or any of its Affiliates to provide services to the Receiving Party or any of its Affiliates under this Agreement, nothing contained in this Agreement shall be construed as granting or conferring rights of license or otherwise in any such information. Furthermore, each Receiving Party acknowledges that it will acquire no right, title or interest (including any license rights or rights of use) in any intellectual property that is owned or licensed by any Performing Party, by reason of the provision of the services provided hereunder. No Receiving Party will remove or alter any copyright, trademark, confidentiality or other proprietary notices that appear on any intellectual property owned or licensed by any Performing Party, and each Receiving Party shall reproduce any such notices on any and all copies thereof. No Receiving Party will

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attempt to decompile, translate, reverse engineer or make excessive copies of any intellectual property owned or licensed by any Performing Party, and each Receiving Party shall promptly notify such Performing Party of any such attempt of which it becomes aware.

13. Records. Each Performing Party shall maintain and retain records related to the provision of its services under this Agreement consistent with its policies regarding its own retention of records. As needed from time to time during the period in which services are provided, and upon termination of the provision of any service, the Parties agree to provide each other with records related to the provision of the services under this Agreement to the extent that (i) such records exist in the ordinary course of business, (ii) the Party providing such records is reimbursed for any costs related to supplying such records, and (iii) such records are reasonably necessary for the requesting Party to comply with its obligations under this Agreement or applicable law.

14. Amendment; Waiver. This Agreement may be modified or amended only by the agreement of the Parties hereto in writing, duly executed by the authorized representatives of each Party. 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.

15. Force Majeure. Any delays in or failure of performance by any Party hereto, other than the payment of money, shall not constitute a default hereunder if and to the extent such delays or failures of performance are caused by occurrences beyond the reasonable control of such Party, including, but not limited to: acts of God or the public enemy; expropriation or confiscation of facilities; compliance with any order or request of any governmental authority; acts of war; riots or strikes or other concerted acts of personnel; or any causes, whether or not of the same class or kind as those specifically named above, which are not within the reasonable control of such Party, and which by the exercise of reasonable diligence, such Party is unable to prevent.

16. Assignment. This Agreement shall not be assignable by either Party hereto without the prior written consent of the other Party hereto, which consent shall not be unreasonably withheld. When duly assigned in accordance with the foregoing, this Agreement shall be binding upon and shall inure to the benefit of the assignee.

17. Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or by facsimile transmission or mailed by registered or certified mail (return receipt requested) to the Party at the following address for each Party (or at such other address for a Party as shall be specified by like notice to the other Party):

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If to Potlatch, to:

Potlatch Land & Lumber, LLC

601 W. First Avenue, Suite 1600

Spokane, WA 99201

Facsimile: (509) 835-1561

Attention: General Counsel

If to Clearwater, to:

Clearwater Paper Corporation

601 W. Riverside Avenue, Suite 1100

Spokane, WA 99201

Facsimile: (509) 342-2570

Attention: General Counsel

18. Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Washington.

19. No Third Party Beneficiaries. Except as set forth in Section 6, nothing in this Agreement, express or implied, is intended to confer on any Person other than the Parties, and their respective successors and permitted assigns, any rights or remedies of any nature whatsoever under or by virtue of this Agreement.

20. Responsible Parties. Each Party shall be responsible for its Affiliates’ compliance with the terms and conditions of this Agreement.

21. Dispute Resolution. All disputes arising between the Parties relating to this Agreement shall be handled in accordance with Article 11 of the Separation and Distribution Agreement.

22. Severability. The Parties agree that (i) the provisions of this Agreement shall be severable in the event that for any reason whatsoever any of the provisions hereof are invalid, void or otherwise unenforceable, (ii) any such invalid, void or otherwise unenforceable provisions shall be replaced by other provisions which are as similar as possible in terms to such invalid, void or otherwise unenforceable provisions but are valid and enforceable, and (iii) the remaining provisions shall remain valid and enforceable to the fullest extent permitted by applicable law.

23. Counterparts. This Agreement may be executed in multiple counterparts (any one of which need not contain the signatures of more than one Party), each of which shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.

[signature page follows]

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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date and year first above written.

POTLATCH LAND & LUMBER, LLC,
a Delaware limited liability company
By:	/s/    Michael J. Covey
Name:	Michael J. Covey
CLEARWATER PAPER CORPORATION,
a Delaware corporation
By:	/s/    Gordon L. Jones
Name:	Gordon L. Jones

Signature Page to Transition Services Agreement

EXHIBIT A

SERVICES TO BE RENDERED BY POTLATCH

Tax Services

Potlatch will provide tax compliance services to Clearwater relative to the preparation of federal and state income tax returns, sales and use tax returns, and property tax reporting. Potlatch will provide assistance on tax planning issues relating to U.S. federal income, excise, state and local income, franchise, property and sales tax matters. Potlatch will, as requested by Clearwater, prepare the Clearwater monthly and year end financial tax accruals including financial reporting disclosures.

Tax services will be provided to Clearwater at a cost of $13,000 per month and will be available for up to 18 months after the Distribution Date except in relation to audits of returns prepared by Potlatch on behalf of Clearwater, in which case the parties will agree in advance on the period to be covered and the amount of involvement by Potlatch.

Internal Audit Services

Potlatch will provide internal audit services to Clearwater consisting of (i) year-end audit work; (ii) information systems audit work; and (iii) financial and operational audit work. Other Internal Audit related services may be performed on an as needed basis. These services will be provided at a cost of $27,000 per month.

Resource Accounting Services

Potlatch will provide accounting and transaction processing support for Clearwater for its Lewiston Lumber and pulp and paperboard operations in Lewiston and Arkansas. The accounting services will include processing of log and fiber purchases through the fiber system and month-end accounting including reporting. The services will be provided to at a cost of $5,000 per month.

Corporate Reporting Services

Potlatch will provide certain corporate-level accounting and consolidation services during the transition period. The services will consist primarily of the preparation and review of journal entries and supporting information, consolidation of financial statements and reports, and general training during the transition period. In addition, Potlatch will provide assistance related to the preparation of external financial reports, such as earnings releases, quarterly reports on Form 10-Q, the annual report on Form 10-K and Form 11-K reports. These services will be provided at a cost of $13,000 per month.

Human Resources

Potlatch will assist Clearwater with administration services related to the following matters:

• Health and Welfare Benefit Plans, including Health Care Plans, Prescription Drug, Dental and Vision; Stop-loss Insurance and COBRA, and Life Insurance contracted through MetLife Insurance Company and retiree drug subsidy benefits;

• Incentive Compensation, including short term cash awards and long term incentive awards in the form of performance shares, stock options and restricted stock units;

• Retirement Plans, including defined benefit qualified retirement plans provided to Clearwater employees, and supplemental retirement plans provided to certain eligible employees;

• 401(k) Savings Plans;

• Miscellaneous human resource services as follows;

• relocation program services, educational assistance and disability program services; and

• salaried job descriptions and evaluation and maintenance of pay grades, salary and compensation planning.

These services will be provided at a cost of $33,000 per month.

Resource Timber Sales Services

Potlatch will provide paid-as-cut (PAC) timber sales services to Clearwater as follows:

• PAC Timber Sale harvest contracting and administration, including logging operations pricing, scheduling and timber sale administration;

• Scaling of PAC timber, including check scale services and scaling office administration with the State of Idaho; and

• Accounting for PAC timber, including the administration of receipt and settlement of PAC stumpage and contractor payments.

Clearwater shall terminate its use of these services as promptly as commercially reasonable.

These services will be provided at a cost of $5,000 per month.

Technology Services

Potlatch will provide the following technology services (the “Potlatch Technology Services”) in a manner that is consistent with the performance of such services in support of the Pulp-Based Business immediately prior to the Distribution Date:

Application Support: Potlatch shall provide technical support of the applications listed below (the “Clearwater Applications”) as necessary to maintain systems performance, functionality,

10

and stability of these applications. Such support shall include assisting end users with questions about system functionality, data, and reporting, and be provided at the costs set forth below. Potlatch personnel will also act as the liaison between Potlatch, Clearwater and software vendors or consultants with respect to the Clearwater Applications and equipment described below.

Application Support for the following Clearwater Applications	Service Fee
Baywood – Wood Settlement	$5400 per month
Cognos Financial Reporting	$700 per month
Email – Microsoft Exchange	$2625 per month
Logility – Transportation	$2700 per month
LumberTrack for Clearwater Lumber mill	$2200 per month
Reporting software (Crystal Reports, SQL services)	$75/hr per resource

Technical Infrastructure Support: Potlatch shall be responsible for monitoring and managing the infrastructure components listed below (the “Infrastructure Components”) as well as the hardware, operating systems, middleware, software and administrative tools that support such Infrastructure Components.

This support also includes the management of required services to support this infrastructure such as VMWare virtualization software, Windows Server 2003, Active Directory, Domain Name System, Windows Update System (WSUS), Live Communicator, and Sharepoint services. Security Services include the monitoring and management of Symantec firewall, Password synchronization, PGP encryption, and the Iprism Internet filter. These services will be provided at the costs set forth below.

Infrastructure Support:	Service Fee
Windows Services (Active Directory, Windows Update Services, Sharepoint, Live Communicator, Domain Name System)	$5250 per month
Server hardware and VMWare OS support	$5425 per month
Telecommunication – WAN, Voice, VPN	$7875 per month
IS Security services (Symantec firewall, Password synchronization, PGP encryption, Iprism Internet filter)	$6000 per month
Rightfax server for faxing	$75/hr per resource

Telecommunication Services: Potlatch shall be responsible for the operation, administration and management of the Network, including network engineering, network connectivity and operations and voice communications. For purposes of this Exhibit A, “Network” means the equipment, software, telecommunications facilities, lines, interconnect devices, wiring, cabling and fiber that are used to create, connect and transmit data, voice and video signals between: (i) Clearwater’s LANs; and (ii) Clearwater facilities and non-Clearwater locations that do business with Clearwater and for which Clearwater is responsible for providing connectivity (each a “Network Location”). The Network commences with and includes WAN interconnect equipment (e.g., router, CSU/DSU, dial-up services at a Network Location and ends with and includes the WAN interconnect equipment at another Network Location; provided that, with

11

respect to voice communications services, the Network extends to and includes IP telephony at Clearwater’s facilities. The Network does not include Clearwater’s LANs.

General Maintenance and Staff Support: Potlatch shall perform maintenance, software and firmware upgrades to the Clearwater Applications and Infrastructure Components as necessary to address security issues or upgrades required under maintenance agreements for such Clearwater Applications and Infrastructure Components. These services will be provided at a cost of $75 per hour.

Training and Documentation Support: Potlatch will provide training for the applications and equipment associated with the Potlatch Technology Services to the extent necessary to allow Clearwater to transition to a stand-alone technology infrastructure. These services will be provided at a cost of $75 per hour.

Implied Services: The parties understand and agree that the Potlatch Technology Services are being provided to maintain the technology infrastructure that supported the Pulp-Based Business in substantially the same manner as such infrastructure was maintained immediately prior to the Distribution Date to the extent necessary to allow Clearwater to transition to a stand-alone technology infrastructure that will support the Pulp-Based Business. To the extent the description of Services set forth in this Exhibit A does not address a particular circumstance or is otherwise unclear or ambiguous, the scope of the Potlatch Technology Services shall be interpreted and construed so as to give full effect to the above referenced service descriptions.

Additional Services: Clearwater may submit to Potlatch a written request for services not contemplated or described in this Exhibit A (the “Additional Potlatch IT Services”), together with specifications reasonably sufficient to allow Potlatch to determine the estimated cost and timeline for completing such additional services. To the extent that Potlatch, in its sole discretion and election, agrees to provide the Additional Potlatch IT Services, Potlatch will prepare and deliver to Clearwater, a written estimate of the cost of such service and the timing for completion within a reasonable period of time. Clearwater shall notify Potlatch in writing if Clearwater desires to have Potlatch proceed with providing the Additional Potlatch IT Services. These services will be provided at a cost of $75 per hour.

If Potlatch, in its reasonable but sole discretion, determines that Potlatch requires the assistance of a third-party to perform any Additional Potlatch IT Services, Potlatch shall engage such third-party and Clearwater shall pay the fees, costs and expenses charged by such third-party (including reasonable travel and living expenses).

Clearwater understands and agrees that in the course of performing services hereunder, Potlatch shall not use any Potlatch-licensed software on Clearwater’s behalf or for Clearwater’s benefit. Clearwater is solely responsible for acquiring licenses to the software applications listed above. To the extent any approval, authorization or permission is required to grant Potlatch the rights necessary to perform the services described in this Exhibit A, Clearwater shall be solely responsible for securing such rights.

Notwithstanding the last sentence of Section 1(a) of the Agreement, Clearwater may elect to terminate the Potlatch Technology Services, in whole or in part, upon at least ninety (90) days’ prior written notice to Potlatch.

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At all times during the term of this Agreement, Potlatch shall comply with Clearwater’s Corporate Security, Computer Security and Global Information Technology Standards (collectively, the “Standards”), as they may be amended or modified by Clearwater from time to time during the term of this Agreement. Potlatch acknowledges that it has received a copy of such Standards as they exist on the date of this Agreement.

Notwithstanding anything to the contrary herein, Potlatch shall not attach to, install or otherwise incorporate into the Clearwater environment any equipment, software, product, infrastructure or other device without Clearwater’s prior written consent.

Potlatch and Clearwater shall each designate an individual to act as the authorized representative for all communications with respect to the Potlatch Technology Services.

13

EXHIBIT B

SERVICES TO BE RENDERED BY CLEARWATER

Accounts Payable Services

Clearwater will provide Potlatch and its subsidiaries accounts payable processing and accounting and travel and entertainment processing services at a cost of $17,500 per month.

Central Purchasing

Clearwater central purchasing personnel will provide bidding, negotiating and supply contract management services to Potlatch, including those related to maintenance, repair and operating supplies and travel agreements. These services will be provided for a cost of $7,000 per month.

Human Resources

Clearwater will provide Human Resource support and administration related to payroll and payroll processing services and random drug testing and outplacement programs.

These services will be provided at a cost of $13,000 per month.

Transportation Services

Clearwater will provide transportation services support to Potlatch related to transportation system maintenance and related technical areas, freight payment, rail shipping and lease car management, report generation, Sarbanes Oxley requirements, and backup support as necessary.

These services will be provided at a cost of $12,000 per month. These services and associated costs will be reviewed and adjusted as mutually agreed every three months.

Treasury-Related Services

Clearwater will provide certain treasury and credit related services to Potlatch, including;

• General cash and debt management;

• Establishing customer credit limits and monitoring of customer receivable balances;

• Shared-service accounts receivable services;

• Insurance coverage;

Other Treasury related services may be performed on an as needed basis.

These services will be provided at a cost of $11,000 per month.

14

Wood Products Accounting

Clearwater will provide accounting services to Potlatch for its St. Maries Lumber, St. Maries Plywood, St. Maries River Railroad, and Post Falls Particleboard mills. This will include month end accounting, operating statements and maintenance and reconciliations of general ledger accounts. These services will be provided at a cost of $12,000 per month.

In addition, Clearwater will provide invoicing support for Potlatch’s wood products division, including all invoicing functions and reporting. These services will be provided at a cost of $4,000 per month.

Corporate Accounting

Clearwater will provide certain corporate-level accounting services to Potlatch. These services will consist primarily of the preparation and review of journal entries and supporting information; fixed asset accounting; assistance with the preparation of information related to external financial reports, such as quarterly reports on Form 10-Q, the annual report on Form 10-K, and Form 5500 pension reports; and general training and advice during the transition period. These services will be provided at a cost of $11,000 per month.

Technology Services

Clearwater will provide the following technology services (the “Clearwater Technology Services”) in a manner that is consistent with the performance of such services in support of the Retained Business immediately prior to the Distribution Date.

Application Support: Clearwater shall provide technical support of the applications listed below (the “Potlatch Applications”) as necessary to maintain systems performance, functionality, and stability of these applications. Such support shall include assisting end users with questions about system functionality, data, and reporting and be provided at the costs set forth below. Clearwater personnel will also act as the liaison between Potlatch, Clearwater and software vendors or consultants with respect to the Potlatch Applications and equipment described below.

Name of Application	Service Fee
JD Edwards finance and accounting system	$ 8,500 per month
KRONOS – Time collection System	$ 3,500 per month
UltiPro – Payroll and Benefits system	$ 3,500 per month

iSeries Support: Clearwater shall be responsible for monitoring and managing the IBM iSeries midrange mainframe computer including but not limited to the hardware, operating systems, middleware, software and administrative tools necessary to support this system including backup and recovery equipment and associated software. Such services will be provided at a cost of $12,250 per month, which will later be reduced based on new equipment lease rates scheduled for April of 2009.

15

General Maintenance and Staff Support: Clearwater shall perform maintenance, software and firmware upgrades to the Potlatch Applications and technical infrastructure components as necessary to address security issues or upgrades required under maintenance agreements for the equipment and software described above. These services will be provided at a cost of $75 per hour.

Training and Documentation Support: Clearwater will provide training for the applications and equipment associated with the Clearwater Technology Services to the extent necessary to allow Potlatch to transition to a stand-alone technology infrastructure. These services will be provided at a cost of $75 per hour.

Help Desk Services: Clearwater shall be responsible for operating a primary help desk process that will coordinate user support functions among Clearwater personnel, Potlatch personnel and external suppliers (the “Help Desk”). The Help Desk will provide problem determination, resolution and/or tracking, as applicable, with respect to problems arising from, or relating to, the Potlatch Applications. The Help Desk will provide full services from 6 am. to 5:00 pm Pacific Time daily Monday through Friday, with on-call support after 5:00 pm and on weekends. These services will be provided at a cost of $2000 per month.

Implied Services: The parties understand and agree that the Clearwater Technology Services are being provided to maintain the technology infrastructure that supported the Retained Business in substantially the same manner as such infrastructure was maintained immediately prior to the Distribution Date to the extent necessary to allow Potlatch to transition to a stand-alone technology infrastructure that will support the Retained Business. To the extent the description of Services set forth in this Exhibit B does not address a particular circumstance or is otherwise unclear or ambiguous, the scope of the Clearwater Technology Services shall be interpreted and construed so as to give full effect to the above referenced service descriptions.

Additional Services: Potlatch may submit to Clearwater a written request for services not contemplated or described in this Exhibit B (the “Additional Clearwater IT Services”), together with specifications reasonably sufficient to allow Clearwater to determine the estimated cost and timeline for completing such additional services. To the extent that Clearwater, in its sole discretion and election, agrees to provide the Additional Clearwater IT Services, Clearwater will prepare and deliver to Potlatch, a written estimate of the cost of such service and the timing for completion. Potlatch shall notify Clearwater in writing if Potlatch desires to have Clearwater proceed with providing the Additional Clearwater IT Services. These services will be provided at a cost of $75 per hour.

If Clearwater, in its reasonable but sole discretion, determines that Clearwater requires the assistance of a third-party to perform any Additional Service, Clearwater shall engage such third-party and Potlatch shall pay the fees, costs and expenses charged by such third-party (including reasonable travel and living expenses).

Potlatch understands and agrees that in the course of performing services hereunder, Clearwater shall not use any Clearwater-licensed software on Potlatch’s behalf or for Potlatch’s benefit. Potlatch is solely responsible for acquiring licenses to the software applications listed in above. To the extent any approval, authorization or permission is required to grant Clearwater the rights necessary to perform the services described in this Exhibit B, Potlatch shall be solely responsible for securing such rights.

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Notwithstanding the last sentence of Section 1(a) of the Agreement, Potlatch may elect to terminate the Clearwater Technology Services, in whole or in part, upon at least ninety (90) days’ prior written notice to Clearwater.

At all times during the term of this Agreement, Clearwater shall comply with Potlatch’s Corporate Security, Computer Security and Global Information Technology Standards (collectively, the “Standards”), as they may be amended or modified by Potlatch from time to time during the term of this Agreement. Clearwater acknowledges that it has received a copy of such Standards as they exist on the date of this Agreement.

Notwithstanding anything to the contrary herein, Clearwater shall not attach to, install or otherwise incorporate into the Potlatch environment any equipment, software, product, infrastructure or other device without Potlatch’s prior written consent.

Clearwater and Potlatch shall each designate an individual to act as the authorized representative for all communications with respect to the Clearwater Technology Services.

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EX-10.3

Exhibit 10.3

EMPLOYEE MATTERS AGREEMENT

by and between

POTLATCH CORPORATION

and

CLEARWATER PAPER CORPORATION

Dated as of December 15, 2008

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

i

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

ii

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

iii

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

iv

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

v

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

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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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EX-10.4

Exhibit 10.4

TAX SHARING AGREEMENT

by and among

POTLATCH CORPORATION,

POTLATCH FOREST HOLDINGS, INC.,

POTLATCH LAND & LUMBER, LLC,

and

CLEARWATER PAPER CORPORATION

Dated as of December 15, 2008

TABLE OF CONTENTS

		Page
ARTICLE I DEFINITIONS		2
ARTICLE II PREPARATION AND FILING OF TAX RETURNS		7
Section 2.1	Potlatch Entities’ Responsibility	7
Section 2.2	Clearwater’s Responsibility	7
Section 2.3	Agent	7
Section 2.4	Manner of Tax Return Preparation	7
Section 2.5	Tax Services	8
ARTICLE III LIABILITY FOR TAXES		8
Section 3.1	Potlatch Entities’ Liability for Section 2.1 Taxes	8
Section 3.2	Clearwater’s Liability for Section 2.2 Taxes	9
Section 3.3	Subsequent Adjustments	9
ARTICLE IV SPIN-OFF TAXES AND ALLOCATION		9
Section 4.1	Spin-off Taxes	9
Section 4.2	Private Letter Rulings; Tax Opinion	10
Section 4.3	Carryback of Net Operating Losses	11
Section 4.4	Continuing Covenants	12
Section 4.5	Allocation of Tax Assets	13
ARTICLE V INDEMNIFICATION		13
Section 5.1	Generally	13
Section 5.2	Inaccurate, Incomplete or Untimely Information	13
Section 5.3	Adjustments to Payments	14
Section 5.4	Reporting of Indemnifiable Loss	14
Section 5.5	No Indemnification for Tax Items	15
Section 5.6	REIT Status	15
Section 5.7	Double Recovery	15
ARTICLE VI PAYMENTS		15
Section 6.1	In General	15
Section 6.2	Treatment of Payments	15
Section 6.3	Prompt Performance	15
Section 6.4	After Tax Amounts	15
Section 6.5	Interest	16

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Section 6.6	REIT Savings	16
ARTICLE VII TAX PROCEEDINGS		17
Section 7.1	Audits	17
Section 7.2	Notice	17
Section 7.3	Remedies	17
Section 7.4	Control of Spin-off Tax Proceedings	18
ARTICLE VIII MISCELLANEOUS PROVISIONS		18
Section 8.1	Cooperation and Exchange of Information	18
Section 8.2	Dispute Resolution	19
Section 8.3	Notices	19
Section 8.4	Changes in Law	20
Section 8.5	Confidentiality	20
Section 8.6	Assignment	21
Section 8.7	Affiliates	21
Section 8.8	Authority	21
Section 8.9	Entire Agreement	21
Section 8.10	Governing Law and Jurisdiction	21
Section 8.11	Counterparts	22
Section 8.12	Severability	22
Section 8.13	Parties in Interest	22
Section 8.14	Failure or Indulgence Not Waiver	22
Section 8.15	Setoff	22
Section 8.16	Amendments	22
Section 8.17	Interpretation	22

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TAX SHARING AGREEMENT

This Tax Sharing Agreement (this “Agreement”) is dated as of December 15, 2008, by and among Potlatch Corporation, a Delaware corporation (“Potlatch”), Potlatch Forest Holdings, Inc., a Delaware corporation and wholly owned subsidiary of Potlatch (“Holdings”), Clearwater Paper Corporation f/k/a Potlatch Forest Products Corporation, a Delaware corporation and currently a direct, wholly owned subsidiary of Potlatch (“Clearwater”), and Potlatch Land & Lumber, LLC, a Delaware limited liability company and currently a direct, wholly owned subsidiary of Clearwater (“RetainCo,” and together with Potlatch, Holdings, and Clearwater, the “Parties,” with each sometimes referred to herein as a “Party”).

RECITALS

WHEREAS, the Boards of Directors of the Parties have each determined that it is appropriate and desirable to separate the Pulp-Based Business from the Retained Business and accordingly have caused the Parties to enter into the Separation and Distribution Agreement dated as of December 15, 2008 (the “Separation Agreement”);

WHEREAS, as set forth in the Separation Agreement, and subject to the terms and conditions thereof, the Parties currently contemplate that Clearwater will contribute and transfer to RetainCo, and RetainCo will receive and assume, assets and liabilities currently held by Clearwater and associated with the Retained Business and Clearwater will distribute all of the stock of RetainCo to Holdings in a transaction intended to qualify as a tax-free reorganization and distribution under sections 368(a)(1)(D) and 355 of the Code (the “Internal Spin-off”);

WHEREAS, as set forth in the Separation Agreement, and subject to the terms and conditions thereof, the Parties currently contemplate that, following the Internal Spin-off, Holdings will distribute all of its shares of Clearwater common stock to Potlatch and Potlatch will distribute all of its shares of Clearwater common stock received from Holdings to Potlatch shareholders in a transaction intended to qualify as a tax-free distribution of the shares of a controlled corporation under section 355 of the Code (the “Public Spin-off”);

WHEREAS, in contemplation of the Internal Spin-off and the Public Spin-off (collectively, the “Spin-offs”) pursuant to which RetainCo and its subsidiaries will become direct and indirect subsidiaries of Potlatch and Holdings (each of Potlatch, Holdings, RetainCo, and the subsidiaries of RetainCo, a “Potlatch Entity”) and will cease to be direct and indirect subsidiaries of Clearwater, and Clearwater will become an independent corporation whose shares are listed on the New York Stock Exchange, the Parties have determined to enter into this Agreement, setting forth their agreement with respect to certain Tax matters; and

WHEREAS, the Parties desire to set forth their agreement on the rights and obligations of the Potlatch Entities, on the one hand, and Clearwater, on the other hand, with

respect to handling and allocating federal, state and local and foreign Taxes, in periods beginning prior to the Closing Date, Taxes resulting from transactions effectuated in connection with the Spin-offs and various other Tax matters.

NOW, THEREFORE, in consideration of the foregoing and the terms, conditions, covenants and provisions of this Agreement, the Parties mutually covenant and agree as follows:

ARTICLE I

DEFINITIONS

“After Tax Amount” means any additional amount necessary to reflect (through a gross-up mechanism) the hypothetical Tax consequences of the receipt or accrual of any payment required to be made under this Agreement (including payment of an additional amount or amounts hereunder and the effect of the deductions available for interest paid or accrued and for Taxes such as state and local Income Taxes), determined by using the highest marginal corporate Tax rate (or rates, in the case of an item that affects more than one Tax) for the relevant taxable period (or portion thereof).

“Audit” includes any audit, assessment of Taxes, or other examination by any Taxing Authority, proceeding, or appeal of such a proceeding relating to Taxes, whether administrative or judicial, including proceedings relating to competent authority determinations.

“Clearwater Representation Letter” means an officer’s certificate in which certain representations, warranties and covenants are made on behalf of Clearwater in connection with the issuance of a Tax Opinion.

“Closing Date” means the date on which the Public Spin-off is effected.

“Code” means the Internal Revenue Code of 1986, as amended, and any successor thereto.

“Combined Return” means any Tax Return, other than with respect to United States federal Income Taxes, filed on a consolidated, combined (including nexus combination, worldwide combination, domestic combination, line of business combination or any other form of combination) or unitary basis wherein Clearwater joins in the filing of such Tax Return (for any taxable period or portion thereof) with one or more Potlatch Entities.

“Control” means the ownership of stock possessing at least 50 percent of the total combined voting power of all classes of stock entitled to vote.

“Dispute Resolution Commencement Date” has the meaning set forth in Section 8.3.

“Dispute” has the meaning set forth in Section 8.3.

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“Escrow Agreement” has the meaning set forth in Section 6.3.

“Estimated Tax Installment Date” means the estimated Tax installment due dates prescribed in section 6655(c) of the Code and any other date on which an installment of Taxes is required to be made.

“Filing Party” has the meaning set forth in Section 7.1.

“Final Determination” means the final resolution of liability for any Tax for any taxable period, by or as a result of: (i) a final and unappealable decision, judgment, decree or other order by any court of competent jurisdiction; (ii) a final settlement with the IRS, a closing agreement or accepted offer in compromise under Code sections 7121 or 7122, or a comparable agreement under the laws of other jurisdictions, which resolves the entire liability for such Tax for any taxable period; (iii) any allowance of a refund or credit in respect of an overpayment of Tax, but only after the expiration of all periods during which such refund may be recovered by the jurisdiction imposing the Tax; or (iv) any other final disposition, including by reason of the expiration of the applicable statute of limitations.

“Income Tax” means any federal, state, local or foreign Tax determined by reference to income, net worth, gross receipts or capital, or any such Taxes imposed in lieu of such Tax.

“Indemnifiable Loss Deduction” has the meaning set forth in Section 5.3.

“Indemnified Loss” has the meaning set forth in Section 5.3.

“Indemnifying Party” has the meaning set forth in Section 5.3.

“Indemnitee” has the meaning set forth in Section 5.3.

“Independent Firm” means an accounting firm which has not, except pursuant to Section 8.3, performed any services since January 1, 2006 for any Party.

“Internal Spin-off” has the meaning given in the recitals to this Agreement.

“Initial Ruling” means any private letter ruling issued by the IRS in connection with the Spin-offs in response to Potlatch’s initial request for such a letter ruling.

“IRS” means the United States Internal Revenue Service or any successor thereto, including, but not limited to its agents, representatives, and attorneys.

“Non-Income Spin-off Taxes” means any Taxes other than Income Taxes imposed on any Party as a result of or in connection with the Spin-offs that would not have been imposed but for the Spin-offs.

“Option” means an option to acquire common stock, or other equity-based incentives the economic value of which is designed to mirror that of an option, including non-qualified stock options, discounted non-qualified stock options, cliff options to the extent stock is

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issued or issuable (as opposed to cash compensation), and tandem stock options to the extent stock is issued or issuable (as opposed to cash compensation).

“Owed Party” has the meaning set forth in Section 6.3.

“Owing Party” has the meaning set forth in Section 6.3.

“Payment Period” has the meaning set forth in Section 6.3(e).

“Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof.

“Post-Spin Period” means a taxable period beginning after the Closing Date.

“Potlatch Entity” has the meaning set forth in the recitals to this Agreement.

“Potlatch Representation Letter” means an officer’s certificate in which certain representations, warranties and covenants are made on behalf of any Potlatch Entity in connection with the issuance of a Tax Opinion.

“Pre-Spin Period” means a taxable period beginning before the Closing Date, including, for the avoidance of doubt, any taxable period that begins before the Closing Date and ends following the Closing Date.

“Pre-Spin Refinancing” means the series of transactions to be undertaken by Clearwater immediately preceding the Spin-offs whereby Clearwater will issue notes and contribute a portion of the proceeds of such notes to RetainCo in consideration of the assumption by RetainCo of a portion of Clearwater’s indebtedness.

“Prohibited Act” has the meaning set forth in Section 4.4.

“Public Spin-off” has the meaning set forth in the recitals to this Agreement.

“Pulp-Based Business” has the meaning set forth in the Separation Agreement.

“Qualifying Income” has the meaning set forth in Section 6.3.

“REIT” has the meaning set forth in Section 5.7.

“REIT Failure Taxes” means any Taxes that are imposed upon Potlatch as a result of Potlatch’s failure to satisfy the REIT income test requirements of section 856(c)(2) and 856(c)(3) of Code, which failure would not have occurred but for gain recognized by Potlatch from: (i) the failure of the Spin-offs to qualify as tax-free under sections 368(a)(1)(D) or 355 of the Code; or (ii) the application of section 355(d) or section 355(e) of the Code. REIT Failure Taxes include, but shall not be limited to: (i) corporate-level Taxes imposed on Potlatch during such years as Potlatch is ineligible to reelect REIT status as a result of the application of section 856(g) of the Code; and (ii) Taxes imposed under sections 856(c)(7), 856(g)(5), 857(b)(5), or

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4981 of the Code, or any section of the Code imposing interest, penalties, or additions to tax on such Taxes, as a result of the failure described in the immediately preceding sentence.

“REIT Savings Escrow Notice” has the meaning set forth in Section 6.3.

“Restated Tax Saving Amount” has the meaning set forth in Section 5.4.

“Restricted Period” has the meaning set forth in Section 4.4.

“Retained Business” has the meaning set forth in the Separation Agreement.

“Ruling Documents” means (1) the initial request for a private letter ruling under section 355 and various other sections of the Code, filed with the IRS in connection with the Spin-offs, together with any supplemental filings or ruling requests or other materials subsequently submitted in connection with such request on behalf of Potlatch, its subsidiaries and shareholders to the IRS, the appendices and exhibits thereto, and any rulings issued by the IRS to any Potlatch Entity in response to such request or (2) any similar filings submitted to, or rulings issued by, any other Tax Authority in connection with the Spin-offs.

“Separation Agreement” has the meaning set forth in the recitals to this Agreement.

“Separation Date” means the effective date and time of the transfers of property, assumption of liability, license, undertaking or agreement in connection with the separation of the Retained Business and the Pulp-Based Business, as set forth in the Separation Agreement.

“Spin-off Taxes” means any Taxes imposed on Clearwater or any Potlatch Entity resulting from, or arising in connection with, the failure of the Internal Spin-off or the Public Spin-off to be tax-free to such party under section 355 and section 368(a)(1)(D) of the Code, as the case may be (including, without limitation, any Tax resulting from the application of section 355(d) or section 355(e) of the Code) or corresponding provisions of the laws of any other jurisdictions, including any REIT Failure Taxes. Each Tax referred to in the immediately preceding sentence shall be determined using the highest marginal federal and state corporate Income Tax rate for the relevant taxable period (or portion thereof).

“Spin-offs” has the meaning set forth in the recitals to this Agreement.

“Supplemental Ruling Documents” means (1) any request for a Supplemental Ruling and any materials, appendices and exhibits submitted or filed therewith and any Supplemental Rulings issued by the IRS to any Potlatch Entity in response to any such request and (2) any similar filings submitted to, or rulings issued by, any other Taxing Authority in connection with the Spin-offs.

“Supplemental Ruling” means (1) any ruling issued by the IRS in connection with the Spin-offs other than a ruling in response to Potlatch’s initial request for a private letter ruling, and (2) any similar ruling issued by any other Taxing Authority addressing the application of a provision of the laws of another jurisdiction to the Spin-offs.

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“Tax” and “Taxes” include all taxes, charges, fees, duties, levies, imposts, rates or other assessments imposed by any federal, state, local or foreign Taxing Authority, including, but not limited to, income, gross receipts, excise, property, sales, use, license, capital stock, transfer, franchise, payroll, withholding, social security, value added and other taxes, and any interest, penalties or additions attributable thereto.

“Tax Asset” means any Tax Item that has accrued for Tax purposes, but has not been used during a taxable period, and that could reduce a Tax in another taxable period, including, but not limited to, a net operating loss, net capital loss, investment tax credit, foreign tax credit, charitable deduction, credit related to alternative minimum tax and any other Tax credit.

“Tax Benefit” means a reduction in the Tax liability of a taxpayer for any taxable period. A Tax Benefit shall be deemed to have been realized or received from a Tax Item in a taxable period only if and to the extent that the Tax liability of the taxpayer for such period, after taking into account the effect of the Tax Item on the Tax liability of such taxpayer in the current period and all prior periods, is less than it would have been if such Tax liability were determined without regard to such Tax Item.

“Tax Detriment” means an increase in the Tax liability of a taxpayer for any taxable period. A Tax Detriment shall be deemed to have been realized or received from a Tax Item in a taxable period only if and to the extent that the Tax liability of the taxpayer for such period, after taking into account the effect of the Tax Item on the Tax liability of such taxpayer in the current period and all prior periods, is more than it would have been if such Tax liability were determined without regard to such Tax Item.

“Tax Item” means any item of income, gain, loss, deduction or credit, or other attribute that may have the effect of increasing or decreasing any Tax.

“Tax Opinion” means an opinion issued to Potlatch by Skadden, Arps, Slate, Meagher & Flom LLP with respect to the qualification of the Spin-offs for tax-free treatment under sections 368(a)(1)(D) and 355 of the Code.

“Tax Return” means any return, report, certificate, form or similar statement or document (including any related or supporting information or schedule attached thereto and any information return, amended tax return, claim for refund or declaration of estimated tax) required to be supplied to, or filed with, a Taxing Authority in connection with the determination, assessment or collection of any Tax or the administration of any laws, regulations or administrative requirements relating to any Tax.

“Tax Saving Amount” has the meaning set forth in Section 5.3.

“Tax Services” has the meaning set forth in Section 2.5(a).

“Taxing Authority” means any governmental authority or any subdivision, agency, commission or authority thereof or any quasi-governmental or private body having jurisdiction over the assessment, determination, collection or imposition of any Tax (including the IRS).

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“Transition Services Agreement” means the Transition Services Agreement between Potlatch, Holdings, Clearwater, and RetainCo dated as of December 15, 2008.

“Treasury Regulations” means the final and temporary (but not proposed) income tax regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).

ARTICLE II

PREPARATION AND FILING OF TAX RETURNS

Section 2.1 Potlatch Entities’ Responsibility. The Potlatch Entities shall have sole and exclusive responsibility for the preparation and filing of:

(a) all Tax Returns with respect to the Potlatch Entities and Clearwater for Pre-Spin Periods (including, for the avoidance of any doubt, any Pre-Spin Period with respect to which RetainCo files any Tax Return on a consolidated, combined, unitary or similar basis with Clearwater);

(b) all Tax Returns with respect to the Potlatch Entities for Post-Spin Periods.

Section 2.2 Clearwater’s Responsibility. Clearwater shall have sole and exclusive responsibility for the preparation and filing of all Tax Returns with respect to Clearwater for Post-Spin Periods.

Section 2.3 Agent. Subject to the other applicable provisions of this Agreement, Clearwater hereby irrevocably designates Potlatch as its sole and exclusive agent and attorney-in-fact to take such action (including execution of documents) as Potlatch, in its reasonable discretion, may deem appropriate in any and all matters (including Audits) relating to any Tax Return described in Section 2.1(a).

Section 2.4 Manner of Tax Return Preparation.

(a) Unless otherwise required by a Taxing Authority, the Parties shall prepare and file all Tax Returns, and take all other actions, in a manner consistent with this Agreement and the Separation Agreement, and, to the extent not inconsistent with this Agreement, the Separation Agreement or applicable law, any Ruling Documents and any Supplemental Ruling Documents. All Tax Returns shall be filed on a timely basis (taking into account applicable extensions) by the party responsible for filing such Tax Returns under this Agreement.

(b) Subject to Section 2.4(a), Potlatch shall have the exclusive right, in its reasonable discretion, with respect to any Tax Return described in Section 2.1 to determine (1) the manner in which such Tax Return shall be prepared and filed, including the elections, methods of accounting, positions, conventions and principles of taxation to be used and the manner in which any Tax Item shall be reported, (2) whether any extensions may be requested, (3) the elections that will be made on such Tax Return, (4) whether any amended Tax Return(s)

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shall be filed, (5) whether any claim(s) for refund shall be made, (6) whether any refund shall be paid by way of refund or credited against any liability for the related Tax, and (7) whether to retain outside firms to prepare or review such Tax Returns; provided, that Potlatch shall prepare all Tax Returns described in Section 2.1(a) in a manner consistent with its past Tax reporting practices.

(c) Within sixty (60) days after filing the Tax Return for the tax year that includes the Closing Date, Potlatch shall notify Clearwater of the Tax attributes associated with Clearwater and with RetainCo, and the Tax bases of the assets and liabilities, transferred to RetainCo pursuant to the Separation Agreement. Potlatch shall provide Clearwater with preliminary estimates of such information on or before January 20, 2009.

Section 2.5 Tax Services.

(a) In General. It is the intention of the Parties that except as specifically provided herein, the Transition Services Agreement shall govern the provision of tax services by the Potlatch Entities to Clearwater (the “Tax Services”).

(b) Right to Review. Potlatch shall provide or cause to be provided any Tax Return (or portion or excerpt thereof relating exclusively to Clearwater) to be filed by Potlatch on behalf of Clearwater pursuant to the Potlatch Entities’ provision of Tax Services at least ten (10) business days prior to the due date of such Tax Return, including extensions. Clearwater shall have the right to comment on any such Tax Return (or portion or excerpt thereof, as applicable), and Potlatch shall reasonably consider Clearwater’s comments.

(c) Information. Potlatch shall provide or cause to be provided to Clearwater copies of all Tax Returns (or portions or excerpts thereof relating exclusively to Clearwater) filed on behalf of Clearwater, in each case within fifteen (15) days of filing, pursuant to the Potlatch Entities’ provision of Tax Services and promptly provide any notices or communications from any Taxing Authority relating to any Tax or Tax Return of Clearwater covered by the Tax Services.

(d) List of Tax Returns. As soon as practicable after the Closing Date, Potlatch shall provide to Clearwater an updated list of all Tax Returns to be filed by Potlatch on behalf of Clearwater pursuant to Section 2.1(a).

ARTICLE III

LIABILITY FOR TAXES

Section 3.1 Potlatch Entities’ Liability for Section 2.1 Taxes. The Potlatch Entities shall be liable for all Taxes due with respect to all Tax Returns described in Section 2.1, and shall be liable for any Tax deficiency assessed with respect to such Tax Returns. The Potlatch Entities shall be entitled to receive and retain all refunds of Taxes previously paid by any Potlatch Entities with respect to such Taxes.

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Section 3.2 Clearwater’s Liability for Section 2.2 Taxes. Clearwater shall be liable for all Taxes due with respect to Tax Returns described in Section 2.2, and shall be liable for any Tax deficiency assessed with respect to such Tax Returns. Clearwater shall be entitled to receive and retain all refunds of Taxes previously paid by Clearwater with respect to such Taxes.

Section 3.3 Subsequent Adjustments. If, as a result of any payment by a Potlatch Entity of a Tax in connection with an audit, adjustment, or amended Tax Return described in Section 2.1, Clearwater receives a reciprocal (i.e., arising directly from such adjustment) Tax Benefit, Clearwater shall pay the amount of such Tax Benefit to RetainCo. If, as a result of any payment by Clearwater of a Tax in connection with an audit, adjustment, or amended Tax Return described in Section 2.2, the Potlatch Entities receive a reciprocal net Tax Benefit on an aggregate basis, the Potlatch Entities shall pay the amount of such Tax Benefit to Clearwater.

ARTICLE IV

SPIN-OFF TAXES AND ALLOCATION

Section 4.1 Spin-off Taxes.

(a) Potlatch Entities’ Liability for Spin-off Taxes. Notwithstanding Article III, the Potlatch Entities shall be liable for one hundred percent (100%) of any Spin-off Taxes that are attributable to, or result from, one or more of the following:

(i) any action or omission by any Potlatch Entity that is materially inconsistent with any material or information, or that constitutes a material breach of any material covenant or material representation, pertaining to the Potlatch Entities in the Ruling Documents, Supplemental Ruling Documents, Initial Ruling, or Supplemental Ruling, or the Potlatch Representation Letter, if any;

(ii) any action or omission by any Potlatch Entity after the Closing Date, including, without limitation, a cessation, transfer to affiliates, or disposition of its active trades or businesses, or an issuance of stock, stock buyback or payment of an extraordinary dividend by any Potlatch Entity following the Spin-offs;

(iii) any acquisition of any stock or assets of any Potlatch Entity by one or more other Persons occurring prior to or following the Spin-offs; or

(iv) any issuance of stock by any Potlatch Entity, or change in ownership of stock in any Potlatch Entity, that causes section 355(d) or section 355(e) of the Code to apply to the Spin-offs.

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(b) Clearwater’s Liability for Spin-off Taxes. Notwithstanding Article III, Clearwater shall be liable for one hundred percent (100%) of any Spin-off Taxes that are attributable to, or result from, one or more of the following:

(i) any action or omission by Clearwater that is materially inconsistent with any material or information, or that constitutes a material breach of any material covenant or material representation, pertaining to Clearwater in the Ruling Documents, Supplemental Ruling Documents, Initial Ruling, or Supplemental Ruling, or the Clearwater Representation Letter, if any;

(ii) any action or omission by Clearwater after the Closing Date, including without limitation, a cessation, transfer to affiliates or disposition of its active trades or businesses, or an issuance of stock, stock buyback or payment of an extraordinary dividend by Clearwater following the Spin-offs;

(iii) any acquisition of any stock or assets of Clearwater by one or more other Persons following the Spin-offs; or

(iv) any issuance of stock by Clearwater, or change in ownership of stock in Clearwater, that causes section 355(d) or section 355(e) of the Code to apply to the Spin-offs.

(c) First Party Responsible. The first party to act or fail to act in a manner that results in the imposition of Spin-off Taxes shall be liable for one hundred percent (100%) of such Spin-off Taxes pursuant to Section 4.1(a) or 4.1(b), as applicable; provided, that if such first party is able to act, and does act, in a manner that results in Spin-off Taxes not being imposed, then such first party shall not be liable for any Spin-off Taxes imposed as a result of any act or omission by the other party subsequent to the first party’s action or omission.

(d) No Party Responsible. If Spin-off Taxes are imposed and no Party bears responsibility for the imposition of such taxes under Section 4.1(c), then Clearwater shall be liable for twenty percent (20%) of such Spin-off Taxes pursuant to Section 4.1(a) or 4.1(b), and the Potlatch Entities shall be liable for eighty percent (80%), of such Spin-off Taxes pursuant to Section 4.1(a) or 4.1(b).

(e) Liability for Non-Income Spin-off Taxes. The liability for any Non-Income Spin-off Taxes shall be borne by Clearwater only if such liability arises with respect to the Pre-Spin Refinancing. The liability for all other Non-Income Spin-off Taxes shall be borne by the Potlatch Entities.

Section 4.2 Private Letter Rulings; Tax Opinion.

(a) Information. Potlatch has provided Clearwater with copies of the Ruling Documents, if any, submitted on or prior to the date specified in the preamble to this Agreement, and shall provide Clearwater with copies of any Ruling Documents or Supplemental Ruling Documents prepared after such date prior to the submission of such Ruling Documents or Supplemental Ruling Documents, as applicable, to a Taxing Authority. Potlatch shall provide

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Clearwater with a copy of the Potlatch Representation Letter and a copy of the Tax Opinion, if any. Clearwater shall provide Potlatch with a copy of the Clearwater Representation Letter.

(b) Cooperation by Clearwater. Clearwater shall cooperate with Potlatch, and shall take any and all actions reasonably requested by Potlatch, in connection with (i) Potlatch’s submission of any Ruling Documents prepared after the date specified in the preamble to this Agreement and (ii) Potlatch’s request for a Tax Opinion.

(c) Supplemental Rulings.

(i) In General. At the reasonable request of Clearwater, Potlatch shall cooperate with Clearwater and use its reasonable best efforts to seek to obtain, as expeditiously as possible, a Supplemental Ruling or other guidance from the IRS or any other Taxing Authority for the purpose of confirming the continuing validity of any ruling issued by any Taxing Authority addressing the application of the law to the Spin-offs; provided that Potlatch shall not be obligated to seek a Supplemental Ruling if it reasonably believes that seeking such Supplemental Ruling would adversely affect Potlatch, its shareholders or any Potlatch Affiliate. Further, in no event shall Potlatch be required to file any Supplemental Ruling Documents unless Clearwater represents that (A) it has read the Supplemental Ruling Documents and (B) all information and representations, if any, relating to Clearwater contained in the Supplemental Ruling Documents are true, correct and complete in all material respects. Clearwater shall reimburse the Potlatch Entities for all costs and expenses incurred by any Potlatch Entity in obtaining a Supplemental Ruling requested by Clearwater. Clearwater shall not seek any guidance (whether written or oral) from the IRS or any other Taxing Authority concerning the Spin-offs except as set forth in this Section 4.2(c).

(ii) Participation Rights. If Potlatch requests a Supplemental Ruling or other guidance after the date specified in the preamble to this Agreement: (A) Potlatch shall keep Clearwater informed in a timely manner of all material actions taken or proposed to be taken by Potlatch in connection therewith; (B) Potlatch shall (1) reasonably in advance of the submission of any such Supplemental Ruling Documents provide Clearwater with a draft copy thereof, (2) reasonably consider Clearwater’s comments on such draft copy, (3) provide Clearwater with a final copy of the Supplemental Ruling Documents, and (4) provide Clearwater with notice reasonably in advance of, and Clearwater shall have the right to attend, any meetings with the Taxing Authority (subject to the approval of the Taxing Authority) that relate to such Supplemental Ruling.

Section 4.3 Carryback of Net Operating Losses. Clearwater shall not elect under section 172(b)(3) of the Code or any similar provision of any state, local or foreign Tax law to relinquish any right to carry back net operating losses. Clearwater shall use commercially reasonable efforts to file an amended Tax Return to carry back such losses to the extent permitted by law, and Clearwater shall pay to RetainCo the amount of any refund of Taxes so obtained, net of Clearwater’s reasonable expenses in obtaining such refund.

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Section 4.4 Continuing Covenants.

(a) In General. Clearwater and the Potlatch Entities (1) shall not take any action reasonably expected to result in an increased Tax liability to the other, a reduction in a Tax Asset of the other or an increased liability to the other under this Agreement and (2) shall take any action reasonably requested by the other that would reasonably be expected to result in a Tax Benefit or avoid a Tax Detriment to the other, provided that such action does not result in any additional cost not fully compensated for by the requesting party. The Parties hereby acknowledge that the preceding sentence is not intended to limit, and therefore shall not apply to, the rights of the parties with respect to matters otherwise covered by this Agreement.

(b) Spin-off Tax Liabilities.

(i) For 24 months following the Closing Date (the “Restricted Period”), Clearwater shall not (A) redeem or otherwise repurchase any capital stock other than pursuant to open market stock repurchase programs meeting the requirements of Section 4.05(1)(b) of Rev. Proc. 96-30, 1996-1 C.B. 696, or (B) enter into any agreements or arrangements with respect to transactions or events (including, but not limited to, capital contributions or acquisitions, entering into any partnership or joint venture arrangements, stock issuances, stock acquisitions, option grants, or a series of such transactions or events (but excluding the Spin-offs)), in the case of each of clauses (A) and (B) above that, if considered part of a plan that includes the Internal Spin-off or the Public Spin-off would result in one or more persons acquiring, directly or indirectly, stock of Clearwater representing a “50-percent or greater interest” therein within the meaning of section 355(d)(4) of the Code (any act inconsistent with the intended tax-free treatment of the Spin-offs described in the Tax Opinion and any act described in clauses (A) and (B) above, collectively, a “Prohibited Act”). Notwithstanding the foregoing, the following shall not be considered a Prohibited Act: (x) the issuance of any compensatory stock or compensatory stock options, the issuance of any stock pursuant to any equity award, compensatory option, or restricted stock unit, or the repurchase of any restricted stock, if such issuance or repurchase satisfies the conditions of Treasury Regulation § 1.355-7(d)(8)(i); or (y) the issuance of stock to a retirement plan qualified under section 401(a) or 403(a) of the Code in a transaction that satisfies the requirements of Treasury Regulation § 1.355-7(d)(9).

(ii) Notwithstanding the foregoing, Clearwater may take any of the Prohibited Acts, subject to Section 4.1, if Clearwater (A) first obtains (at its expense) an opinion in form and substance reasonably acceptable to the Potlatch Entities of a nationally recognized law firm or accounting firm reasonably acceptable to the Potlatch Entities, which opinion may be based on usual and customary factual representations, or (B) obtains a supplemental ruling from the IRS, in each case that such Prohibited Act(s), and any transaction related thereto, will not affect (x) the qualification of the Spin-offs under section 355 and section 368(a)(1)(D) of the Code and (y) the nonrecognition of gain to Potlatch or to Clearwater in the Spin-offs. Clearwater may also take any of the Prohibited

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Acts, subject to Section 4.1, with the written consent of Potlatch in Potlatch’s sole and absolute discretion. During the Restricted Period, Clearwater shall provide, and shall cause its Affiliates to provide, all information reasonably requested by Potlatch relating to any transaction involving an acquisition (directly or indirectly) of Clearwater’s stock within the meaning of section 355(e) of the Code. The Parties acknowledge that the payment of monetary compensation would not be an adequate remedy for a breach of the obligations described in the Prohibited Acts, and Clearwater consents to the issuance and entry of an injunction to prevent a breach of the obligations contained in the Prohibited Acts, subject to the waiver and consent described in the preceding sentence.

(iii) Notwithstanding anything in this Agreement to the contrary, Clearwater shall be responsible for, and shall indemnify and hold the Potlatch Entities harmless from, any Spin-off Taxes resulting from any Prohibited Act taken by Clearwater or any of its Affiliates, regardless of whether the exception contained in Section 4.4(b)(ii) is satisfied with respect to such act.

Section 4.5 Allocation of Tax Assets. Potlatch and Clearwater shall cooperate in determining the allocation of any Tax Assets or Tax liabilities among the Parties. In the absence of controlling legal authority or unless otherwise provided under this Agreement, Tax Assets or Tax liabilities shall be allocated to the legal entity that incurred the cost or burden associated with the creation of such Tax Assets or Tax liabilities.

ARTICLE V

INDEMNIFICATION

Section 5.1 Generally. The Potlatch Entities shall jointly and severally indemnify Clearwater and its directors, officers and employees, and hold them harmless from and against any and all Taxes or Tax deficiencies for which any Potlatch Entity is liable under this Agreement and any loss, cost, damage or expense, including reasonable attorneys’ fees and costs, that are attributable to, or result from the failure of any Potlatch Entity or any director, officer or employee to make any payment required to be made under this Agreement. Clearwater shall indemnify the Potlatch Entities and their respective directors, officers and employees, and hold them harmless from and against any and all Taxes or Tax deficiencies for which Clearwater is liable under this Agreement and any loss, cost, damage or expense, including reasonable attorneys’ fees and costs, that are attributable to, or result from, the failure of Clearwater or any director, officer or employee to make any payment required to be made under this Agreement.

Section 5.2 Inaccurate, Incomplete or Untimely Information. The Potlatch Entities shall jointly and severally indemnify Clearwater and its directors, officers and employees, and hold them harmless from and against any loss, cost, damage, fine, penalty, or other expense of any kind attributable to the negligence of the Potlatch Entities in supplying Clearwater with inaccurate, incomplete or untimely information, in connection with the preparation of any Tax Return. Clearwater shall indemnify the Potlatch Entities and their respective directors, officers and employees, and hold them harmless from and against any loss,

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cost, damage, fine, penalty, or other expense of any kind attributable to the negligence of Clearwater in supplying any Potlatch Entity with inaccurate, incomplete or untimely information, in connection with the preparation of any Tax Return.

Section 5.3 Adjustments to Payments. Any party that is entitled to receive a payment (the “Indemnitee”) under this Agreement from another party (the “Indemnifying Party”) with respect to any Taxes, losses, costs, damages or expenses suffered or incurred by the Indemnitee (an “Indemnified Loss”) shall pay to such Indemnifying Party, or the Indemnifying Party shall pay to the Indemnitee, as applicable, an amount equal to the difference between any “Tax Saving Amount” actually realized by the Indemnitee in the year of the payment and the amount of the Indemnified Loss. For purposes of this Section 5.3, the Tax Saving Amount shall equal the amount by which the Income Taxes of the Indemnitee or any of its affiliates are reduced (including, without limitation, through the receipt of a refund, credit or otherwise), plus any related interest received by the Indemnitee (net of Tax) from a Taxing Authority, as a result of claiming as a deduction or offset on any relevant Tax Return amounts attributable to an Indemnified Loss (the “Indemnifiable Loss Deduction”).

Section 5.4 Reporting of Indemnifiable Loss. In the event that an Indemnitee incurs an Indemnified Loss, such Indemnitee shall claim as a deduction or offset on any relevant Tax Return (including, without limitation, any claim for refund) such Indemnified Loss to the extent such position is supported by “substantial authority” (within the meaning of Section 1.6662-4(d) of the Treasury Regulations) with respect to United States federal, state and local Tax Returns or has similar appropriate authoritative support with respect to any Tax Return other than a United States federal, state or local Tax Return. Except as otherwise provided in this Agreement, the Indemnitee shall have primary responsibility for the preparation of its Tax Returns and reporting thereon such Indemnifiable Loss Deduction; provided, that the Indemnitee shall consult with, and provide the Indemnifying Party with a reasonable opportunity to review and comment on the portion of the Indemnitee’s Tax Return relating to the Indemnified Loss. If a Dispute arises between the Indemnitee and the Indemnifying Party as to whether there is “substantial authority” (with respect to United States federal, state and local Tax Returns) or similar appropriate authoritative support (with respect to any Tax Return other than a United States federal, state or local Tax Return) for the claiming of an Indemnifiable Loss Deduction, such Dispute shall be resolved in accordance with the principles and procedures set forth in Section 8.3. Potlatch and Clearwater shall act in good faith to coordinate their Tax Return filing positions with respect to the taxable periods that include an Indemnifiable Loss Deduction. There shall be an adjustment to any Tax Saving Amount calculated under Section 5.3 hereof in the event of an Audit which results in a Final Determination that increases or decreases the amount of the Indemnifiable Loss Deduction reported on any relevant Tax Return of the Indemnitee. The Indemnitee shall promptly inform the Indemnifying Party of any such Audit and shall attempt in good faith to sustain the Indemnifiable Loss Deduction at issue in the Audit. Upon receiving a written notice of a Final Determination in respect of an Indemnifiable Loss Deduction, the Indemnitee shall redetermine the Tax Saving Amount attributable to the Indemnifiable Loss Deduction under Section 5.3 hereof, taking into account the Final Determination (the “Restated Tax Saving Amount”). If the Restated Tax Saving Amount is greater than the Tax Saving Amount, the Indemnitee shall promptly pay the Indemnifying Party an amount equal to the difference between such amounts. If the Restated Tax Saving Amount is less than the Tax Saving Amount, then the Indemnifying Party shall pay to the Indemnitee an

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amount equal to the difference between such amounts promptly after receipt of written notice setting forth the amount due and the computation thereof.

Section 5.5 No Indemnification for Tax Items. Except as otherwise provided in Section 5.6, nothing in this Agreement shall be construed as a guarantee of the existence or amount of any loss, credit, carryforward, basis or other Tax Item, whether past, present or future, of any Party.

Section 5.6 REIT Status. The Parties acknowledge that Potlatch intends to continue to qualify as a real estate investment trust within the meaning of section 856 of the Code (a “REIT”). Notwithstanding anything to the contrary in this Agreement Clearwater shall use its best efforts to avoid taking any action that could reasonably be expected to cause Potlatch to fail to qualify as a REIT for any taxable year.

Section 5.7 Double Recovery. Notwithstanding anything herein to the contrary, no party shall be entitled to indemnification hereunder for any amount to the extent such party has otherwise been reimbursed for such amount.

ARTICLE VI

PAYMENTS

Section 6.1 In General. Except as provided in Section 6.6, in the event that one party (the “Owing Party”) is required to make a payment to another party (the “Owed Party”) pursuant to this Agreement, then such payments shall be made according to this Article VI. All payments shall be made to the Owed Party or to the appropriate Taxing Authority as specified by the Owed Party within the time prescribed for payment in this Agreement, or if no period is prescribed, within twenty (20) days after delivery of written notice of payment owing together with a computation of the amounts due.

Section 6.2 Treatment of Payments. Unless otherwise required by any Final Determination, the parties agree that any payments made by one party to another party (other than payments of interest pursuant to Section 6.5 and payments of After Tax Amounts pursuant to Section 6.4) pursuant to this Agreement shall be treated for all Tax and financial accounting purposes as nontaxable payments (dividend distributions or capital contributions, as the case may be) made immediately prior to the Spin-offs and, accordingly not includible in the taxable income of the recipient.

Section 6.3 Prompt Performance. All actions required to be taken by any party under this Agreement shall be performed within the time prescribed for performance in this Agreement, or if no period is prescribed, such actions shall be performed promptly.

Section 6.4 After Tax Amounts. If pursuant to a Final Determination it is determined that the receipt or accrual of any payment made under this Agreement (other than payments of interest pursuant to Section 6.5) is subject to any Tax, the party making such payment shall be liable for (a) the After Tax Amount with respect to such payment and (b) interest at the rate described in Section 6.5 on the amount of such Tax from the date such Tax

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accrues through the date of payment of such After Tax Amount. A party making a demand for a payment pursuant to this Agreement and for a payment of an After Tax Amount with respect to such payment shall separately specify and compute such After Tax Amount. However, a party may choose not to specify an After Tax Amount in a demand for payment pursuant to this Agreement without thereby being deemed to have waived its right subsequently to demand an After Tax Amount with respect to such payment.

Section 6.5 Interest. Payments pursuant to this Agreement that are not made within the period prescribed in this Agreement (the “Payment Period”) shall bear interest for the period from and including the date immediately following the last date of the Payment Period through and including the date of payment at a per annum rate equal to the prime rate as published in The Wall Street Journal on the last day of such Payment Period, plus two percent (2%). Such interest shall be payable at the same time as the payment to which it relates and shall be calculated on the basis of a year of 365 days and the actual number of days for which due.

Section 6.6 REIT Savings.

(a) REIT Savings Escrow. In the event that Potlatch shall determine that any payment provided for under this Agreement could reasonably be expected to give rise to a successful challenge to Potlatch’s status as a REIT, Potlatch may provide notice to Clearwater no less than fifteen (15) business days before the date on which such payment is to be made that Potlatch intends to apply this Section 6.6 to the payment (a “REIT Savings Escrow Notice”). Upon receipt of a valid REIT Savings Escrow Notice and at such time as the payment is required under this Agreement, Clearwater shall deposit such payment into escrow with an escrow agent approved by Potlatch, which approval shall not be unreasonably withheld, and pursuant to a written escrow agreement (the “Escrow Agreement”) reflecting the terms set forth in this Section 6.6 and otherwise reasonably acceptable to each of Potlatch and the escrow agent.

(b) Escrow Agreement. The Escrow Agreement shall provide that the payment in escrow or the applicable portion thereof shall be released to Potlatch on an annual basis based upon the delivery by Potlatch to the escrow agent of any one or a combination of the following: (i) a letter from Potlatch’s independent tax advisors indicating the maximum amount that can be paid by the escrow agent to Potlatch without causing Potlatch to fail to meet the requirements of Sections 856(c)(2) and (3) of the Code for the applicable taxable year of Potlatch determined as if the payment of such amount did not constitute income described in sections 856(c)(2)(A)-(H) or 856(c)(3)(A)-(I) of the Code (such income, “Qualifying Income”), in which case the escrow agent shall release to Potlatch such maximum amount stated in the advisor’s letter, or (ii) a letter from Potlatch’s counsel indicating that Potlatch received a ruling from the IRS holding that the receipt by Potlatch of such payment would either constitute Qualifying Income or would be excluded from gross income within the meaning of sections 856(c)(2) and (3) of the Code (or alternatively, Potlatch’s outside counsel or accountant has rendered a legal opinion or a tax opinion, respectively, to the effect that the receipt by Potlatch of such payment would either constitute Qualifying Income or would be excluded from gross income within the meaning of sections 856(c)(2) and (3) of the Code), in which case the escrow agent shall release to Potlatch the remainder of such payment. The Escrow Agreement shall also provide that Potlatch shall bear all costs and expenses under the Escrow Agreement and that any portion of any payment held in escrow for ten (10) years shall be released by the escrow agent to

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Clearwater. Clearwater shall not be a party to the Escrow Agreement and shall not bear any liability, cost or expense resulting directly or indirectly from the Escrow Agreement (other than any Taxes associated with the release of funds to Clearwater from the escrow). Potlatch shall fully indemnify Clearwater and hold Clearwater harmless from and against any such liability, cost or expense (other than any Taxes associated with the release of funds to Clearwater from the escrow).

(c) Cooperation. Clearwater shall cooperate in good faith to amend this Section 6.6 at the reasonable request of Potlatch in order to (x) maximize the portion of such payment that may be distributed to Potlatch hereunder without causing Potlatch to fail to meet the requirements of sections 856(c)(2) and (3) of the Code, (y) improve Potlatch’s chances of securing a favorable ruling described in this Section 6.6 or (z) assist Potlatch in obtaining a favorable legal opinion from its outside counsel or accountant as described in this Section 6.6. Potlatch shall reimburse Clearwater for the reasonable costs and expenses of such cooperation.

ARTICLE VII

TAX PROCEEDINGS

Section 7.1 Audits. The party responsible for preparing and filing a Tax Return pursuant to Article I (the “Filing Party”) shall have the exclusive right to control, contest, and represent the interests of any Party in any Audit relating to such Tax Return and, in its reasonable discretion, to resolve, settle or agree to any deficiency, claim or adjustment proposed, asserted or assessed in connection with or as a result of any such Audit. The Filing Party’s rights shall extend to any matter pertaining to the management and control of an Audit, including execution of waivers, choice of forum, scheduling of conferences and the resolution of any Tax Item. Any costs incurred in handling, settling, or contesting an Audit shall be borne by the Filing Party. The Filing Party shall, to the extent such information is available, advise the non-Filing Party of any significant Tax issue subject to an Audit by any Taxing Authority, and shall keep the non-Filing Party informed with respect to any contest, compromise or settlement thereof.

Section 7.2 Notice. Within twenty (20) business days after a party receives a written notice or other information from a Taxing Authority of the existence of a Tax issue that may give rise to an indemnification obligation under this Agreement, such party shall notify the other party of such issue, and thereafter shall promptly forward to the other party copies of notices and material communications with any Taxing Authority relating to such issue. The failure of one party to notify the other party of any matter relating to a particular Tax for a taxable period or to take any action specified in this Agreement shall not relieve such other party of any liability and/or obligation which it may have under this Agreement with respect to such Tax for such taxable period, except to the extent that such other party’s rights under this Agreement are materially prejudiced by such failure.

Section 7.3 Remedies. Clearwater agrees that no claim against any Potlatch Entity and no defense to Clearwater’s liabilities or obligations to any Potlatch Entity under this Agreement shall arise from the resolution by Potlatch of any deficiency, claim or adjustment relating to the redetermination of any Tax Item of any Potlatch Entity.

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Section 7.4 Control of Spin-off Tax Proceedings. Potlatch shall have the exclusive right and sole discretion to control, contest, and represent the interests of any Party in any Audits relating to Spin-off Taxes and to resolve, settle or agree to any deficiency, claim or adjustment proposed, asserted or assessed in connection with or as a result of any such Audit. Potlatch’s rights shall extend to any matter pertaining to the management and control of such Audit, including execution of waivers, choice of forum, scheduling of conferences and the resolution of any Tax Item. Clearwater shall be entitled through counsel of its choosing and reasonably acceptable to Potlatch to monitor the conduct or settlement of any such Audit by Potlatch, and Potlatch shall provide Clearwater and such counsel with such information as either of them may reasonably request (which request may be general or specific), but all costs and expenses incurred in such monitoring shall be borne by Clearwater. Clearwater may assume sole control of any Audits relating to Spin-off Taxes if it acknowledges in writing that it has sole liability for any Spin-off Taxes that might arise in such Audit.

ARTICLE VIII

MISCELLANEOUS PROVISIONS

Section 8.1 Cooperation and Exchange of Information.

(a) Cooperation. Potlatch and Clearwater shall each cooperate fully (and each shall cause its respective Affiliates to cooperate fully) with all reasonable requests from another Party hereto, or from an agent, representative or advisor to such party, in connection with the preparation and filing of Tax Returns, claims for refund, and Audits concerning issues or other matters covered by this Agreement. Such cooperation shall include, without limitation:

(i) the retention until the expiration of the applicable statute of limitations, and the provision upon request, of Tax Returns, books, records (including information regarding ownership and Tax basis of property), documentation and other information relating to the Tax Returns, including accompanying schedules, related work papers, and documents relating to rulings or other determinations by Taxing Authorities;

(ii) the execution of any document that may be reasonable in connection with any Tax Proceeding, or the filing of a Tax Return or refund claim by Clearwater or a Potlatch Entity, including certification, to the best of a Party’s knowledge, of the accuracy and completeness of the information it has supplied or any power of attorney required by the applicable Taxing Authority to be provided by one Party to another Party for the performance by such other Party of acts required or permitted under this Agreement; and

(iii) the use of the Party’s reasonable best efforts to obtain any documentation that may be necessary or reasonably helpful in connection with any of the foregoing.

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Each party shall use commercially reasonable efforts to comply in connection with the foregoing matters within ten (10) business days or such shorter period as may be required by the applicable Taxing Authority or otherwise in connection with the Tax Proceeding. Each party shall make its employees and facilities available on a reasonable and mutually convenient basis in connection with the foregoing matters.

(b) Failure to Perform. If a party materially fails to comply with any of its obligations set forth in Section 8.1(a) upon reasonable request and notice by the other party, and such failure results in the imposition of additional Taxes, the non-performing party shall be liable in full for such additional Taxes notwithstanding anything to the contrary in this Agreement.

Section 8.2 Dispute Resolution. Any dispute, controversy or claim arising out of or relating to this Agreement or the breach, termination or validity hereof (“Dispute”) which arises between Clearwater and any Potlatch Entity shall first be negotiated between the appropriate senior executives of Potlatch and Clearwater who shall have the authority to resolve the matter. Such executives shall meet to attempt in good faith to negotiate a resolution of the Dispute prior to pursuing other available remedies, within ten (10) days of receipt by Potlatch or Clearwater, as applicable, of notice of a Dispute, which date of receipt shall be referred to herein as the “Dispute Resolution Commencement Date.” If the senior executives are unable to resolve the Dispute within thirty (30) days from the Dispute Resolution Commencement Date, then Potlatch and Clearwater shall jointly retain a nationally recognized Independent Firm to resolve the Dispute. If Potlatch and Clearwater cannot mutually agree upon an Independent Firm, then any Dispute which Potlatch and Clearwater cannot resolve within thirty (30) days from the Dispute Resolution Commencement Date shall be resolved by a nationally recognized accounting firm selected by the American Arbitration Association; provided, that the American Arbitration Association shall not select any accounting firm that is then providing auditing or tax services to any of the Parties. The accounting firm selected by the American Arbitration Association shall act as an arbitrator to resolve all points of disagreement, and its decision shall be final and binding upon all parties involved. Any such arbitration shall be conducted in Spokane, Washington. Following the decision of such firm, Potlatch and Clearwater shall each take or cause to be taken any action necessary to implement the decision of such firm. Potlatch and Clearwater shall share equally the administrative costs of the arbitration and such firm’s fees and expenses, and shall each bear their respective other costs and expenses related to the arbitration.

Section 8.3 Notices. Notices, offers, requests or other communications required or permitted to be given by any party pursuant to the terms of this Agreement shall be given in writing to Potlatch or Clearwater, as applicable, to the following addresses or facsimile numbers:

If to any Potlatch Entity, at:

c/o Potlatch Corporation

601 W. First Avenue, Ste. 1600

Spokane, Washington 99201

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Attention: General Counsel

with a copy to Potlatch’s tax department at the same address.

If to Clearwater, at:

601 West Riverside Avenue

Suite 1100

Spokane, Washington 99201

Attention: General Counsel

or to such other address or facsimile number as the party to whom notice is given may have previously furnished to the other in writing as provided herein. Any notice involving non-performance, termination, or renewal shall be sent by hand delivery, recognized overnight courier or, within the United States, may also be sent via certified mail, return receipt requested. All other notices may also be sent by facsimile, confirmed by first class mail. All notices shall be deemed to have been given when received, if hand-delivered; when receipt is confirmed, if transmitted by facsimile or similar electronic transmission method; one (1) working day after it is sent, if sent by recognized overnight courier; and three (3) days after it is postmarked, if mailed by first class mail or certified mail, return receipt requested, with postage prepaid.

Section 8.4 Changes in Law.

(a) Any reference to a provision of the Code, Treasury Regulations, or a law of another jurisdiction shall include a reference to any applicable successor provision or law.

(b) If, due to any change in applicable law or regulations or their interpretation by any court of law or other governing body having jurisdiction subsequent to the date specified in the preamble to this Agreement, performance of any provision of this Agreement or any transaction contemplated hereby shall become impracticable or impossible, the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such provision.

Section 8.5 Confidentiality. Each of the parties hereto shall hold and cause its directors, officers, employees, advisors and consultants to hold in strict confidence, unless compelled to disclose by judicial or administrative process or, in the opinion of its counsel, by other requirements of law, all information (other than any such information relating solely to the business or affairs of such party) concerning the other parties hereto furnished it by such other party or its representatives pursuant to this Agreement (except to the extent that such information can be shown to have been (1) in the public domain through no fault of such party or (2) later lawfully acquired from other sources not under a duty of confidentiality by the party to which it was furnished), and no party shall release or disclose such information to any other person, except its directors, officers, employees, auditors, attorneys, financial advisors, bankers or other consultants who shall be advised of and agree to be bound by the provisions of this Section 8.5. Each of the parties hereto shall be deemed to have satisfied its obligation to hold confidential

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information concerning or supplied by the other parties if it exercises the same care as it takes to preserve confidentiality for its own similar information.

Section 8.6 Assignment. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective legal representatives and successors, and nothing in this Agreement, express or implied, is intended to confer upon any other Person any rights or remedies of any nature whatsoever under or by reason of this Agreement. This Agreement may be enforced separately by Clearwater and each Potlatch Entity. No party may assign this Agreement or any rights or obligations hereunder, without the prior written consent of the other parties hereto, and any such assignment shall be void; provided, that Clearwater and each Potlatch Entity may assign this Agreement to a successor entity in conjunction with such party’s reincorporation.

Section 8.7 Affiliates. Potlatch shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any Potlatch Entity; provided, that if it is contemplated that a Potlatch Entity may cease to be a controlled, directly or indirectly, by Potlatch as a result of a transfer of its stock or other ownership interests to a third party in exchange for consideration in an amount approximately equal to the fair market value of the stock or other ownership interests transferred and such consideration is not distributed outside of the group of Potlatch Entities to the shareholders of Potlatch, then Potlatch shall request in writing no later than thirty (30) days prior to such cessation that Clearwater execute a release of such Potlatch Entity from its obligations under this Agreement effective as of such transfer, provided that Potlatch shall succeed to the rights of such Potlatch Entity under this Agreement and shall have confirmed in writing the obligations of Potlatch and the remaining Potlatch Entities with respect to their own obligations and the obligations of the departing Potlatch Entity, and that such departing Potlatch Entity shall have executed a release of any rights it may have against Clearwater by reason of this Agreement.

Section 8.8 Authority. Each of the parties hereto represents, on behalf of itself and its affiliates, to the other that (a) it has the corporate power and authority to execute, deliver and perform this Agreement, (b) the execution, delivery and performance of this Agreement by it have been duly authorized by all necessary corporate or other action, (c) it has duly and validly executed and delivered this Agreement and (d) this Agreement is a legal, valid and binding obligation, enforceable against it in accordance with its terms subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and general equity principles.

Section 8.9 Entire Agreement. This Agreement, the Separation Agreement, the other Ancillary Agreements and the Exhibits and Schedules attached hereto and thereto, constitute the entire agreement between the parties with respect to the subject matter hereof and shall supersede all prior written and oral and all contemporaneous oral agreements and understandings with respect to the subject matter hereof.

Section 8.10 Governing Law and Jurisdiction. This Agreement shall be construed in accordance with, and all Disputes hereunder shall be governed by, the laws of the State of Washington, excluding its conflict of law rules.

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Section 8.11 Counterparts. This Agreement, including the Schedules and Exhibits hereto, and the other documents referred to herein, may be executed in counterparts, each of which shall be deemed to be an original but all of which shall constitute one and the same agreement.

Section 8.12 Severability. If any term or other provision of this Agreement or the Schedules or Exhibits attached hereto is determined by a non-appealable decision by a court, administrative agency or arbitrator to be invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the fullest extent possible.

Section 8.13 Parties in Interest. This Agreement, including the Schedules and Exhibits hereto, and the other documents referred to herein, shall be binding upon the Parties, inure solely to the benefit of Clearwater and the Potlatch Entities and their respective permitted assigns, and nothing in this Agreement, express or implied, is intended to confer upon any other Person any rights or remedies of any nature whatsoever under or by reason of this Agreement.

Section 8.14 Failure or Indulgence Not Waiver. No failure or delay on the part of any party hereto in the exercise of any right hereunder shall impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty or agreement herein, nor shall any failure to exercise, or any single or partial exercise, of any such right preclude other or further exercise thereof or of any other right.

Section 8.15 Setoff. All payments to be made by any party under this Agreement may be netted against payments due to such party under this Agreement, but otherwise shall be made without setoff, counterclaim or withholding, all of which are hereby expressly waived.

Section 8.16 Amendments. No change or amendment will be made to this Agreement except by an instrument in writing signed on behalf of each of the parties to this Agreement.

Section 8.17 Interpretation. When a reference is made in this Agreement to an Article or a Section, or to an Exhibit or a Schedule, such reference shall be to an Article or Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated. The headings contained in this Agreement, in any Exhibit or Schedule, and in the table of contents to this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Any capitalized term used in any Schedule or Exhibit but not otherwise defined therein, shall have the meaning assigned to such term in this Agreement.

[SIGNATURE PAGE FOLLOWS]

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WHEREFORE, the parties have signed this Tax Sharing Agreement effective as of the date first set forth above.

POTLATCH CORPORATION
By:	/s/    Michael J. Covey
Name:	Michael J. Covey
POTLATCH FOREST HOLDINGS, INC.
By:	/s/    Michael J. Covey
Name:	Michael J. Covey
POTLATCH LAND & LUMBER, LLC
By:	/s/    Michael J. Covey
Name:	Michael J. Covey
CLEARWATER PAPER CORPORATION
By:	/s/    Gordon L. Jones
Name:	Gordon L. Jones

Signature Page to Tax Sharing Agreement

EX-99.1

Exhibit 99.1

Clearwater Paper Corporation

601 W. Riverside Avenue, Suite 1100

Spokane, Washington 99201

News Release

Contact:	(News media)	(Investors)
	Matt Van Vleet	Doug Spedden
	509.290.0298	509.835.1549

CLEARWATER PAPER SHARES TO BEGIN TRADING ON NYSE FOLLOWING

COMPLETION OF TAX-FREE SPIN-OFF FROM POTLATCH CORPORATION

Spokane, Wash. – December 16, 2008 – Clearwater Paper Corporation (NYSE: CLW) today announced that it has successfully completed its previously announced spin-off from Potlatch Corporation (NYSE: PCH) and that shares of Clearwater Paper will begin “regular way” trading on December 17, 2008 on the New York Stock Exchange (NYSE) under the symbol “CLW.” The spin-off from Potlatch was completed through a distribution of one share of Clearwater Paper common stock for every 3.5 shares of Potlatch stock held by Potlatch stockholders as of the December 9, 2008 record date.

Gordon L. Jones, president and chief executive officer of Clearwater Paper said, “As a stand-alone company with direct access to the public capital markets and greater flexibility, Clearwater Paper has the ability to leverage its distinct strengths and unique operations to pursue future growth opportunities, particularly in the attractive product segments of private label tissue and bleached paperboard. We have assembled an experienced and talented management team, and we look forward to building on our solid position in the industry and implementing strategies that we believe will deliver long-term value to our shareholders.”

ABOUT CLEARWATER PAPER

Clearwater Paper manufactures quality bleached paperboard, consumer tissue and wood products at six facilities across the country. The company is a premier supplier of private label tissue to major retail grocery chains, and also produces bleached paperboard used by quality-conscious printers and packaging converters. Clearwater Paper’s 2,400 employees build shareholder value by developing strong customer relationships through quality and service.

FORWARD-LOOKING STATEMENTS

This press release contains certain forward-looking statements within the meaning of the Private Litigation Reform Act of 1995 as amended, including without limitation, statements about the spin-off of Potlatch’s pulp-based businesses and the effect of the spin-off on Clearwater Paper’s growth opportunities. These forward-looking statements are based on current expectations, estimates, assumptions and projections that are subject to change, and actual results may differ materially from the forward-looking statements. Factors that could cause Clearwater Paper’s actual results to differ materially include, but are not limited to, changes in the United States and international economies; changes in raw material, energy, and other costs; changes in exchange rates between the U.S. dollar and other currencies; changes in the level of construction activity; changes in tariffs, quotas and trade agreements involving wood products; changes in worldwide demand for Clearwater Paper’s products; changes in worldwide production and production capacity in the forest products industry; competitive pricing pressures for Clearwater Paper’s products; unanticipated manufacturing disruptions; changes in general and industry-specific environmental laws and regulations; unforeseen environmental liabilities or expenditures; weather conditions; and other risks and uncertainties described from time to time in Clearwater Paper’s public filings with the Securities and Exchange Commission. Clearwater Paper does not undertake to update any forward-looking statements.

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