STOCK OPTION AGREEMENT
POTLATCH CORPORATION 1995 STOCK INCENTIVE PLAN
THIS AGREEMENT made and entered into the day specified in
the attached addendum to this Agreement by and between
POTLATCH CORPORATION, a Delaware corporation (the "Corporation")
and the outside director of the Corporation named in the attached
addendum ("Outside Director"),
W I T N E S S E T H:
That to encourage stock ownership by directors of the
Corporation and for other valuable consideration, the parties
agree as follows:
1. Definitions.
(a) "Agreement" means this stock option agreement.
(b) "Board" means the Board of Directors of the
Corporation.
(c) "Change in Control" means an event or transaction
described in Subparagraph (a), (b), (c) or (d) of Paragraph 3
(without regard to the 30- and 365-day periods also described in
those Subparagraphs).
(d) "Code" means the Internal Revenue Code of 1986, as
amended.
(e) "Common Stock" means the $1 par value Common Stock of
the Corporation.
(f) "Committee" means the committee appointed by the Board
to administer the Plan. If Outside Director is a member of such
Committee, Outside Director shall not participate in any actions
and determinations of the Committee with respect to this
Agreement.
(g) "Corporation" means Potlatch Corporation, a Delaware
corporation.
(h) "Date of Grant" means the date specified in Section 1
of the addendum to this Agreement.
(i) "Exercise Price" means the price per Share designated
in Section 2 of the addendum to this Agreement at which this
Option may be exercised.
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Exhibit (10)(n)(v)
(j) "Fair Market Value" of a Share as of a specified date
means the closing price at which Shares are traded at the close
of business on such date as reported in the New York Stock
Exchange composite transactions published in the Western Edition
of The Wall Street Journal, or if no trading of Shares is
reported for that day, on the next preceding day on which trading
was reported.
(k) "Nonqualified Stock Option" means an Option other than
an incentive stock option described in Code section 422(b).
(1) "Option" means a stock option granted pursuant to the
Plan.
(m) "Option Period" means the term of this Option as
provided in Paragraph 3 of this Agreement.
(n) "Partial Exercise" means an exercise with respect to
less than all of the vested but unexercised Shares subject to
Option held by the person exercising the Option.
(o) "Plan" means the Potlatch Corporation 1995 Stock
Incentive Plan, pursuant to which the parties have entered into
this Agreement.
(p) "Purchase Price" means the Exercise Price times the
number of whole shares with respect to which this Option is
exercised.
(q) "Securities Act" means the Securities Act of 1933, as
amended.
(r) "Share" means one share of Common Stock, adjusted in
accordance with Section 13 of the Plan.
(s) "Subsidiary" means any corporation in an unbroken chain
of corporations beginning with the Corporation if each of the
corporations other than the last corporation in the unbroken
chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other
corporations in such chain.
2. The Corporation grants to Outside Director the option
to purchase that number of shares of Common Stock specified in
Section 3 of the addendum to this Agreement for the Exercise
Price specified in Section 2 of the addendum to this Agreement,
on the terms and conditions stated in this Agreement.
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This Option has been granted pursuant to the Plan, a copy of
the text of which Outside Director may obtain upon request to the
Corporation.
3. Subject to the conditions stated in this Agreement, the
period during which the Option may be exercised (the "Vesting
Schedule") shall be as follows:
Number of Shares Vesting Schedule*
50% of the number of shares From one year from the Date
specified in Section 3 of of Grant to end of term for
the addendum Option
50% of the number of shares From two years from the
specified in Section 3 of Date of Grant to end of
the addendum term for Option
No Partial Exercise of this Option may be for less than a
multiple of 10 Shares.
Beginning six months after the Date of Grant, Outside
Director shall have the right to exercise the Option (or to call
the related stock appreciation right as described in Paragraph
4), in whole or in part:
(a) Within 30 days following the consummation of any
transaction approved by the stockholders of the Corporation
in which the Corporation will cease to be an independent
publicly owned corporation (including, without limitation, a
reverse merger transaction in which the Corporation becomes
the subsidiary of another corporation) or the sale or other
disposition of all or substantially all of the assets of the
Corporation;
(b) Within 365 days following the date on which more
than one-third (determined by rounding down to the next
whole number) of the individual members of the Board neither
(i) were directors of the Corporation on a date three years
earlier nor (ii) are individuals whose election or
nomination for election as directors was affirmatively voted
on by at least a majority of those directors described in
(i) above who were still in office as of the date the Board
approved such election or nomination;
(c) Within 365 days following the date on which any
"person" (as such term is used in sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the
* See Paragraph 5 for further explanation of end of term for Option.
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"1934 Act")) that has acquired Shares pursuant to a tender
offer subject to section 14(d) of the 1934 Act becomes
entitled to vote 20% or more of the aggregate voting power
of the capital stock of the Corporation issued and
outstanding; and
(d) Within 30 days prior to any dissolution or
liquidation of the Corporation or any merger or
consolidation in which the Corporation is not the surviving
corporation, but not earlier than the date on which any
required stockholder approval is obtained.
If an option is not exercised during any 30-day period described
in (a) or (d) above, the option shall terminate at the close of
business on the last day of the 30-day period; provided that if
periods described in (a) and (d) are contiguous or overlap,
unexercised options shall terminate at the close of business on
the last day of the second 30-day period.
4. In the event of a Change in Control, this Option shall
automatically include a stock appreciation right that may be
called only during the periods described in Subparagraphs (a),
(b), (c) or (d) of Paragraph 3. During any such period, Outside
Director may surrender all or part of this Option and exercise
the stock appreciation right in lieu of exercising all or any
part of this Option, provided that at least six months have
elapsed from the Date of Grant and that the Fair Market Value of
the Common Stock on the date of such exercise is higher than the
Exercise Price specified in Section 2 of the addendum to this
Agreement. The exercise of a stock appreciation right is referred
to in this Paragraph 4 as the "call." Upon the call of a stock
appreciation right, Outside Director shall be entitled to receive
payment of an amount equal to the difference obtained by
subtracting the aggregate option price of the shares subject to
the Option (or the portion of such Option) from the Fair Market
Value of such Shares on the date of such call. In the case of a
stock appreciation right that is called during either of the
30-day periods described in Paragraph 3(a) or 3(d), for purposes
of measuring the value of the stock appreciation right, "Fair
Market Value" shall be the greater of (a) the value of the
consideration per share that the Outside Director would have
received in connection with the transaction described in
Paragraph 3(a) or 3(d) as a stockholder of the Corporation if he
or she had exercised the Option prior to the consummation of such
transaction, or (b) the value determined in good faith by the
Committee (as composed on the day preceding the date of
consummation of the transaction described in Paragraph 3(a) or
3(d)), taking into consideration all relevant facts and
circumstances.
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For all purposes under this Agreement (unless the context
requires otherwise), the terms "exercise" or "exercisable" shall
be deemed to include the terms "call" or "callable" as such terms
may apply to a stock appreciation right, and in the event of the
call of a stock appreciation right the underlying Option
will be deemed to have been exercised for all purposes under the
Plan.
Payment of a stock appreciation right shall be made as soon
as reasonably practicable following receipt by the Corporation of
the notice described in Paragraph 8. Payment of the stock
appreciation right shall be made in such form as may be permitted
pursuant to the rules and regulations adopted from time to time
by the Committee, as in effect on the date the stock appreciation
right is called.
5. The term of this Option shall end and this Option shall
not be exercisable after 10 years from the Date of Grant or, if
earlier, upon the termination of Outside Director's services as a
director of the Corporation subject to the following provisions:
(a) If the termination of services is caused by
Outside Director's death, this Option, to the extent that it
was exercisable under Paragraph 3 of this Agreement at the
date of death and had not previously been exercised, may be
exercised at any time before the end of the Option Period as
specified in the Option Agreement by Outside Director's
executors or administrators or by any person or persons who
shall have acquired this Option directly from Outside
Director by bequest or inheritance.
(b) If the termination of services is caused by
retirement after five years of service as an Outside
Director of the Corporation, this Option, to the extent it
was exercisable under Paragraph 3 of this Agreement at the
date of such termination and had not previously been
exercised, may be exercised at any time before the end of
the Option Period as specified in the Option Agreement.
(c) If the termination of services is for any reason
other than death or retirement, this Option, to
the extent that it was exercisable under Paragraph 3 of this
Agreement at the date of such termination and had not
previously been exercised, may be exercised within three
months after the date of such termination; provided that in
such case the right to call a stock appreciation right as
described in Paragraph 4 shall terminate on the date Outside
Director's services terminate unless Outside Director
requests and the Committee permits the call of the stock
appreciation right within three months after the date of
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such termination. Notwithstanding the foregoing, if the
termination of services is for cause, the option shall cease
to be exercisable or callable at the time of such
termination. The Board shall determine whether Outside
Director's services are terminated for cause in accordance
with the Corporation's Restated Certificate of
Incorporation.
6. The Corporation agrees that it will at all times during
the Option Period reserve and keep available sufficient
authorized but unissued or reacquired Common Stock to satisfy the
requirements of this Agreement. The number of Shares reserved and
the Exercise Price shall be proportionately adjusted for any
increase or decrease in the number of issued and outstanding
Shares by reason of stock dividends, stock splits,
consolidations, recapitalizations, reorganizations or like
events, as determined by the Committee pursuant to the Plan.
7. Subject to any required action by the stockholders, if
the Corporation shall be the surviving corporation in any merger,
consolidation or other reorganization, this Option shall apply to
the securities to which a holder of the number of Shares subject
to this Option would have been entitled. Except to the extent
Paragraph 3 (and Paragraph 4) permit the exercise of Options (and
stock appreciation rights) within a specified time period before
or after a Change in Control, a dissolution or liquidation of the
Corporation or a merger, consolidation or other reorganization in
which the Corporation is not the surviving corporation shall
cause this Option to terminate on the effective date of such
dissolution, liquidation or reorganization, unless the agreement
of merger, consolidation or reorganization shall otherwise
provide. In the event that the Corporation undergoes a reverse
merger transaction, Outside Director (or Outside Director's
representative) shall be entitled to receive the same
consideration in such transaction (including, without limitation,
cash) as other stockholders are entitled to receive.
8. Outside Director, or Outside Director's representative,
may exercise this Option by giving written notice to the
Corporation at Spokane, Washington, attention of the Secretary,
specifying the election to exercise the Option, the number of
Shares for which it is being exercised and the method of payment
for the amount of the Purchase Price of the Shares for which this
Option is exercised. Such payment shall be made:
(a) In United States dollars delivered at the time of
exercise;
(b) Subject to the conditions stated in rules and
regulations adopted by the Committee, by the surrender of
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Shares in good form for transfer, owned by the person
exercising this Option and having an aggregate Fair Market
Value on the date of exercise equal to the Purchase Price;
or
(c) In any combination of Subparagraphs (a) and (b)
above, if the total of the cash paid and the Fair Market
Value of the Shares surrendered equals the Purchase Price of
the Shares for which this Option is being exercised.
The notice shall be signed by the person or persons
exercising this Option, and in the event this Option is being
exercised by the representative of Outside Director, shall be
accompanied by proof satisfactory to the Corporation of the right
of the representative to exercise the Option. No Share shall be
issued until full payment has been made. After receipt of full
payment, the Corporation shall cause to be issued a certificate
or certificates for the Shares for which this Option has been
exercised, registered in the name of the person or persons
exercising the Option (or in the name of such person or persons
and another person as community property or as joint tenants),
and cause such certificate or certificates to be delivered to or
upon the order of such person or persons.
9. In the event the Corporation determines that it is
required to withhold state or federal income tax as a result of
the exercise of this Option, as a condition to the exercise of
the Option, Outside Director will make arrangements satisfactory
to the Corporation to enable it to satisfy such withholding
requirements.
10. Neither Outside Director nor Outside Director's
representative shall have any rights as a stockholder with
respect to any Shares subject to this Option until such Shares
shall have been issued to Outside Director or Outside Director's
representative.
11. Unless at the time Outside Director gives notice of the
exercise of this Option, the Shares to be issued are registered
under the Securities Act, the notice shall include a statement to
the effect that all Shares for which this Option is being
exercised are being purchased for investment, and without present
intention of resale, and will not be sold without registration
under the Securities Act or exemption from registration, and such
other representations as the Committee may require. The
Corporation may permit the sale or other disposition of any
Shares acquired pursuant to any such representation if it is
satisfied that such sale or other disposition would not
contravene applicable state or federal securities laws. Unless
the Corporation shall determine that, in compliance with the
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Securities Act or other applicable statute or regulation, it is
necessary to register any of the Shares for which this Option has
been exercised, and unless such registration, if required, has
been completed, certificates to be issued upon the exercise of
this Option shall contain the following legend:
"The Shares represented by this certificate have not
been registered under the Securities Act of 1933 and may be
offered, sold or transferred only if registered pursuant to
the provisions of that Act or if an exemption from
registration is available."
12. Except as otherwise provided in this Agreement, this
Option and the rights and privileges conferred by this Agreement
shall not be transferred, assigned, pledged or hypothecated in
any way (whether by operation of law or otherwise) and shall not
be subject to sale under execution, attachment or similar
process. Upon any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of this Option, or of any right
or privilege conferred by this Agreement, contrary to the
provisions of this Paragraph, or upon any attempted sale under
any execution, attachment or similar process upon the rights and
privileges conferred by this Agreement, this Option and the
rights and privileges conferred by this Agreement shall
immediately become null and void.
13. Nothing in this Agreement shall be construed as giving
Outside Director the right to be retained as a director of the
Corporation.
14. This Agreement shall be interpreted and construed in
accordance with the laws of the State of Delaware without regard
to choice of law principles.
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ADDENDUM TO STOCK OPTION AGREEMENT
POTLATCH CORPORATION 1995 STOCK INCENTIVE PLAN
Name of Outside Director: _____________________________
1. Date of Grant: _______________________
2. Exercise Price: $ ____________ per share, which is agreed
to be one hundred percent (100%) of the Fair Market Value of
the common stock subject to the Option on the Date of Grant.
3. The number of Shares subject to this Option is (check one):
____ 2,000 Shares (Plan Approval/Director Election)
____ 1,000 Shares (Annual Grant)
This number is subject to adjustment as provided in
Section 13 of the Plan and Paragraph 6 of this stock option
agreement.
The document entitled Stock Option Agreement - Potlatch
Corporation 1995 Stock Incentive Plan is incorporated by this
reference into this addendum.
IN WITNESS WHEREOF, the Corporation has caused this addendum
to the stock option agreement to be executed on its behalf by its
duly authorized representative and the Outside Director has
executed the same on the date indicated below.
POTLATCH CORPORATION
Date:__________________ By_______________________
Secretary
Date:__________________ By_______________________
Outside Director
Outside Director Option
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Adopted 12/3/98