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 employee of the Corporation named in the attached
addendum ("Employee"),
W I T N E S S E T H:
That to encourage stock ownership by employees 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.
(g) "Corporation" means Potlatch Corporation, a Delaware
corporation.
(h) "Date of Grant" means the date on which the Committee
determined to grant this Option, as specified in Section 1 of the
addendum to this Agreement.
(i) "Disability" means the Employee is unable to engage in
any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected
to result in death or which has lasted or can be expected to last
for a continuous period of at least 12 months.
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Exhibit (10)(n)(iv)
(j) "Exercise Price" means the price per Share designated
in Section 2 of the addendum to this Agreement at which this
Option may be exercised.
(k) "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.
(1) "Incentive Stock Option" means an Option described in
Code section 422(b).
(m) "Nonqualified Stock Option" means an Option other than
an Incentive Stock Option.
(n) "Option" means a stock option granted pursuant to the
Plan.
(o) "Option Period" means the term of this Option as
provided in Paragraph 3 of this Agreement.
(p) "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.
(q) "Plan" means the Potlatch Corporation 1995 Stock
Incentive Plan, pursuant to which the parties have entered into
this Agreement.
(r) "Purchase Price" means the Exercise Price times the
number of whole shares with respect to which this Option is
exercised.
(s) "Securities Act" means the Securities Act of 1933, as
amended.
(t) "Share" means one share of Common Stock, adjusted in
accordance with Section 13 of the Plan.
(u) "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.
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2. The Corporation grants to Employee 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.
This Option has been granted pursuant to the Plan, a copy of
the text of which Employee may obtain upon request to the
Corporation.
3. Subject to the conditions stated in this Agreement,
unless a different period is specified in Section 5 of the
addendum to 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, Employee 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
* See Paragraph 5 for further explanation ofend of term for Option.
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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
"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, Employee
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, Employee 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- 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 Employee
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
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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.
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 seven years from the Date of Grant if
this Option is designated as an Incentive Stock Option in Section
4 of the addendum to this Agreement or 10 years from the Date of
Grant if this Option is designated as a Nonqualified Stock Option
in Section 4 of such addendum or, if earlier, upon the
termination of Employee's employment with the Corporation or its
Subsidiaries, subject to the following provisions:
(a) If the termination of employment is caused by
Employee'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 Employee's executors or
administrators or by any person or persons who shall have
acquired this Option directly from Employee by bequest or
inheritance.
(b) If the termination of employment is caused by
Disability or Early, Normal or Late Retirement under the
Potlatch Corporation Salaried Employees' Retirement Plan,
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.
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(c) If the termination of employment is for any reason
other than death, Disability, or Early, Normal or Late
Retirement under the Potlatch Corporation Salaried
Employees' Retirement Plan, 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 Employee's
employment terminates unless Employee requests and the
Committee permits the call of the stock appreciation right
within three months after the date of such termination.
Notwithstanding the foregoing, if the termination of
employment is by reason of Employee's misconduct, the option
shall cease to be exercisable or callable at the time of
such termination. As used in this Paragraph, "misconduct"
means that Employee has engaged in unfair competition with
the Corporation or a Subsidiary, induced any customer of the
Corporation or a Subsidiary to breach any contract with the
Corporation or a Subsidiary, made any unauthorized
disclosure of any of the secrets or confidential information
of the Corporation or a Subsidiary, committed an act of
embezzlement, fraud or theft with respect to the property of
the Corporation or a Subsidiary, or engaged in conduct which
is not in good faith and which directly results in material
loss, damage or injury to the business, reputation or
employees of the Corporation or a Subsidiary. The Committee
shall determine whether Employee's employment is terminated
by reason of misconduct. In making such determination the
Committee shall act fairly and shall give Employee an
opportunity to be heard and present evidence on Employee's
behalf.
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
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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, Employee (or Employee'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. Employee, or Employee's representative, may exercise
20% or more of the portion of this Option that has become vested
under Paragraph 3 of this Agreement by giving written notice to
the Corporation at Spokane, Washington, attention of the Vice
President, Employee Relations, 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
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 Employee, 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),
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and cause such certificate or certificates to be delivered to or
upon the order of such person or persons.
9. Payments or transfers to the Employee under this
Agreement shall be limited to the amount (the "Capped Amount")
necessary to avoid characterization of any amount payable to the
Employee (including, but not limited to, amounts payable under
this Agreement) as an "excess parachute payment" as defined in
section 280G of the Code, except in the event that the total
amount that the Employee would receive from all "parachute
payments" (as defined in Code section 280G), net of all
applicable taxes, including the excise tax that would be imposed
pursuant to Code section 4999, would exceed the Capped Amount,
net of all applicable taxes.
The firm of independent certified public accountants serving
as the Corporation's outside auditor as of the date of a Change
in Control shall determine whether any amount would constitute an
"excess parachute payment," disregarding any payments or benefits
available to the Employee under any plan, contract or program if
the Employee irrevocably elects to relinquish such payments or
benefits before receipt of such payments or benefits.
10. 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, Employee will make arrangements satisfactory to the
Corporation to enable it to satisfy such withholding
requirements.
11. Neither Employee nor Employee'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 Employee or Employee's representative.
12. Unless at the time Employee 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
Securities Act or other applicable statute or regulation, it is
necessary to register any of the Shares for which this Option has
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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."
13. 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.
14. Nothing in this Agreement shall be construed as giving
Employee the right to be retained as an employee or as impairing
the rights of the Corporation to terminate his or her employment
at any time, with or without cause.
15. 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 Employee: _________________________
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 Stock Option Agreement
is _______, subject to adjustment as provided in Section 13
of the Plan and Paragraph 6 of this Stock Option Agreement.
4. This Option is: A Nonqualified Stock Option
5. The Vesting Schedule for this Option is: The schedule
specified in Paragraph 3 of the Stock Option Agreement,
except that no exercise or call will be permitted for a
fractional Share.
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 Employee has executed the
same on the date indicated below.
POTLATCH CORPORATION
Date: ________________ By _________________________________
Vice President Employee Relations
Date: ________________ By _________________________________
Employee
Employee Option
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Adopted 12/3/98
