SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended Commission File
December 31, 1994 Number 1-5313
POTLATCH
Potlatch Corporation
A Delaware Corporation (IRS Employer Identification
Number 82-0156045)
One Maritime Plaza
San Francisco, California 94111
Telephone (415) 576-8800
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, New York Stock Exchange
($1 par value) Pacific Stock Exchange
Chicago Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing require-
ments for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant at January 31, 1995, was approximately $1,025 million.
The number of shares of common stock outstanding as of January 31, 1995:
29,224,481 shares of Common Stock, par value of $1 per share.
Documents Incorporated by Reference
Portions of the definitive proxy statement for the 1995 annual meeting of stock-
holders are incorporated by reference in Part III hereof.
<PAGE>
POTLATCH CORPORATION AND CONSOLIDATED SUBSIDIARIES
Index to 1994 Form 10-K
Page
Number
PART I
ITEM 1. Business 2 - 4
ITEM 2. Properties 5
ITEM 3. Legal Proceedings 6
ITEM 4. Submission of Matters to a Vote of Security Holders 6
Executive Officers of the Registrant 7
PART II
ITEM 5. Market for Registrant's Common Equity and
Related Stockholder Matters 8
ITEM 6. Selected Financial Data 8
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
ITEM 8. Financial Statements and Supplementary Data 8
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 9
PART III
ITEM 10. Directors and Executive Officers of the
Registrant 9
ITEM 11. Executive Compensation 9
ITEM 12. Security Ownership of Certain Beneficial
Owners and Management 9
ITEM 13. Certain Relationships and Related Transactions 9
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 9
SIGNATURES 10
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES 11
EXHIBIT INDEX 36 - 38
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<PAGE>
PART I
ITEM 1. Business
General
Potlatch Corporation (the "company"), incorporated in 1903, is an
integrated forest products company with substantial timber resources. It is
engaged principally in the growing and harvesting of timber and the
manufacture and sale of wood products, printing papers and other pulp-based
products. Its timberlands and all of its manufacturing facilities are located
within the continental United States.
Information relating to the amounts of revenue, operating profit or loss
and identifiable assets attributable to each of the company's industry
segments for 1992-1994 is included in Note 12 to the financial statements on
pages 31-32 of this report.
Fiber Resources
The principal source of raw material used in the company's operations is
timber, obtained from its own timberlands and purchased on the open market.
The company owns in fee approximately 1.5 million acres of timberland: 497,000
acres in Arkansas, 678,000 acres in Idaho and 345,000 acres in Minnesota. In
addition, the company owns and is developing 10,000 acres in Oregon as a
hybrid poplar tree farm for pulp fiber. The company plans to acquire an
additional 12,000 acres for this purpose in 1995.
The amount of timber harvested in any one year from company-owned lands
varies according to the requirements of sound forest management, as well as
the supply of timber available for purchase on the open market. By
continually improving forestry and silviculture techniques and other forest
management practices, the company has been able to increase the volume of wood
fiber available from its timberlands and to provide for a continuous supply
of wood fiber in the future. In most cases, the cost of timber from company
land is substantially less than that of timber obtained on the open market.
The company's fee lands provided approximately 59 percent of its sawlogs
and plywood logs in 1994 and an average of 62 percent over the past five
years. Including the raw materials used for pulp and oriented strand board,
the percentages decline to 35 percent for 1994 and 38 percent for the past
five years. Additional logs were obtained principally under cutting contracts
from lands owned by federal, state and local governments and from private
purchases. Such cutting contracts cover areas of varying size and generally
have terms ranging from a few months to several years. The company enters
into many such contracts each year. At December 31, 1994, the market value
of uncut timber remaining under timber cutting contracts approximated $60.7
million. The company is not unconditionally obligated for that amount on such
contracts and uncut timber values are subject to change depending on the
market value at time of harvest.
At the present time, timber from the company's own lands, together with
outside purchases, is adequate to support manufacturing operations. In recent
years the timber supply from federal lands has been increasingly curtailed
largely due to environmental pressures that are expected to continue into the
foreseeable future. Although this trend has had a favorable effect on
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<PAGE>
earnings for the company as a whole, it has had an adverse effect on wood
costs. The long-term effect of this trend on company earnings cannot be
predicted. However, the company has implemented plans to develop additional
fiber supplies, primarily hybrid poplar, for the Lewiston, Idaho, pulp mill
and by the year 2000 expects to provide approximately 70 percent of chip fiber
requirements for this mill from resources it controls, compared with
approximately 40 percent currently.
The company assumes substantially all risk of loss from fire and other
hazards on the standing timber it owns, as do most owners of timber tracts in
the United States.
Wood Products
The company manufactures and markets oriented strand board, plywood,
particleboard, lumber and other wood products. These products are sold
through the company's sales offices primarily to wholesalers for nationwide
distribution.
To produce these solid wood products, the company owns and operates several
manufacturing facilities in Arkansas, Idaho and Minnesota. A description of
these facilities is included under Item 2 of this report.
The forest products industry is highly competitive, and the company
competes with substantially larger forest products companies and companies
which manufacture substitutes for wood and wood fiber products. For both
lumber and plywood products, the company's share of the market is not
significant to the total U. S. market for these products. However, the
company does have a significant market share of oriented strand board, which
is a product that competes with plywood. The company's principal methods of
competing are product quality, service and price.
Printing Papers
The company produces coated free sheet printing papers at two facilities
in Minnesota. A description of these facilities is included under Item 2 of
this report.
Pulp for these paper mills is supplied primarily by the company's bleached
kraft pulp mill in Minnesota and secondarily by purchases of market pulp,
including recycled pulp. Coated papers are used for annual reports, showroom
catalogs, art reproductions and high quality advertising.
Printing papers are sold principally to paper merchants for distribution.
Various company sales offices located throughout the United States are
utilized to service our customers. Although the company does not consider
itself among the larger manufacturers of printing papers, it is one of the
nation's leading producers of premium coated papers. The principal methods
of competing are product quality, service and price.
Other Pulp-Based Products
The company produces and markets bleached kraft pulp and paperboard,
tissue, toweling and napkins. A description of the facilities used to produce
these products is included under Item 2 of this report.
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<PAGE>
The company is a major producer of bleached kraft paperboard in the United
States. Bleached kraft paperboard manufactured by the company is used for the
packaging of milk and other foods, pharmaceuticals and toiletries, and for
paper cups and paper plates. The company does not consider itself among the
larger national manufacturers of any of its other pulp-based products.
However, the company is the leading west coast producer of private label
household tissue products. The company's principal methods of competing are
product quality, service and price.
The company produces household tissues which are packaged to order for
grocery and drug chains, club stores and cooperative buying organizations.
Facial and bathroom tissues, paper towels and napkins are sold to consumers
under customer brand names. These products compete with nationally advertised
and other private label brands.
Methods of sale and distribution of the company's other pulp-based products
vary for its several products. The majority of pulp sales are generally
through brokers. The company, in general, maintains domestic sales offices
through which it sells paperboard to packaging converters. The majority of
international paperboard sales are made through sales representative offices
in Japan and Australia. The balance of such sales are made through brokers
and agents. Tissue products are sold through food brokers or directly to
major retail outlets.
Environment
Information regarding environmental matters is included under Item 3 -
Legal Proceedings on page 6 and Management's Discussion and Analysis of
Financial Condition and Results of Operations on pages 14-15 of this report.
Employees
As of December 31, 1994, the company had approximately 6,700 employees.
Labor contracts expiring in 1995 are as follows:
<TABLE>
<CAPTION>
Contract Approximate
Expiration Hourly
Date Location Union Employees
<S> <C> <C> <C>
April 30 Wood Products Ozan Unit International 130
Prescott, Arkansas Woodworkers of
America
September 1 Idaho Pulp & Paperboard United Paperworkers 1,250
and Consumer Products International Union
Lewiston, Idaho & International
Brotherhood of
Electrical Workers
October 14 Minnesota Wood Products Independent Union of 140
Grand Rapids, Minnesota Waferboard Workers
</TABLE>
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<PAGE>
ITEM 2. Properties
The principal manufacturing facilities of the company, together with
their respective 1994 capacities and production are as follows:
<TABLE>
<CAPTION>
Capacity Production
<S> <C> <C>
Wood Products
Oriented Strand Board Plants: (A)
Bemidji, Minnesota 499,200 m.sq.ft. 491,937 m.sq.ft.
Cook, Minnesota 242,400 m.sq.ft. 240,007 m.sq.ft.
Grand Rapids, Minnesota 350,300 m.sq.ft. 348,454 m.sq.ft.
Sawmills:
Prescott, Arkansas 63,000 m.bd.ft. 63,089 m.bd.ft.
Warren, Arkansas (B) 101,700 m.bd.ft. 76,749 m.bd.ft.
Lewiston, Idaho 113,000 m.bd.ft. 99,927 m.bd.ft.
St. Maries, Idaho 80,800 m.bd.ft. 84,129 m.bd.ft.
Bemidji, Minnesota 79,400 m.bd.ft. 80,002 m.bd.ft.
Plywood Plants: (A)
Jaype, Idaho 150,000 m.sq.ft. 141,796 m.sq.ft.
St. Maries, Idaho 160,000 m.sq.ft. 156,247 m.sq.ft.
Particleboard Plant: (C)
Post Falls, Idaho 67,800 m.sq.ft. 66,803 m.sq.ft.
Split-Cedar Mill: (D)
Santa, Idaho 3,188 m.bd.ft.
Hardwood Flooring Plant: (E)
Stuttgart, Arkansas 1,175 m.bd.ft.
Printing Papers
Pulp Mill:
Cloquet, Minnesota 192,600 tons 191,455 tons
Printing Paper Mills:
Brainerd, Minnesota 138,500 tons 146,704 tons
Cloquet, Minnesota 194,200 tons 193,972 tons
Other Pulp-Based Products
Pulp Mills:
Cypress Bend, Arkansas 248,500 tons 235,423 tons
Lewiston, Idaho 441,100 tons 388,944 tons
Bleached Paperboard Mills:
Cypress Bend, Arkansas 271,100 tons 254,569 tons
Lewiston, Idaho 340,000 tons 294,622 tons
Tissue Mill:
Lewiston, Idaho 141,300 tons 134,510 tons
Tissue Converting Facilities:
Lewiston, Idaho 100,600 tons 94,741 tons
North Las Vegas, Nevada 24,100 tons 22,685 tons
<FN>
(A) 3/8" Basis
(B) There are two sawmills in Warren.
(C) 3/4" Basis
(D) This facility was sold in September 1994.
(E) This facility was closed in September and sold in December 1994.
</TABLE>
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<PAGE>
ITEM 3. Legal Proceedings
In June 1994, the company received a Notice of Violation ("NOV") issued by
the Idaho Department of Health and Welfare ("IDHW") alleging 41 violations of
State of Idaho environmental laws relating to air quality at the company's
facilities in Lewiston, Idaho. Many of the alleged violations include
continuing violations over a period of time. The IDHW also submitted a list
of 14 alleged federal New Source Performance Standard violations. The
aggregate penalty proposed by the IDHW for settlement of all of the alleged
state and federal violations is approximately $2.7 million. The company
believes it has legal and equitable defenses to many of the alleged violations
and has held settlement discussions with the IDHW and the United States
Environmental Protection Agency ("EPA"). The company will continue to discuss
settlement of all outstanding issues.
In August 1993, the company received a NOV from the EPA. The NOV alleged
that construction of the company's three oriented strand board plants in
Minnesota commenced prior to obtaining proper permits and that particulate
emissions from the dryers at one plant exceeded applicable limits. The
Minnesota Pollution Control Agency ("MPCA") had previously issued NOVs to the
company which set forth the same allegations. In early January 1994, the
company entered into an agreement with the MPCA which resolved the alleged
violations under its NOVs by agreeing to install additional pollution control
equipment at all three plants and pay a civil penalty of $300,000. The
agreement did not resolve the EPA allegations. In January 1995, the EPA
informed the company that it referred the matter to the United States
Department of Justice to commence a civil enforcement action against the
company. The company believes that it has legal and equitable defenses to the
alleged violations.
The company believes that adequate provision has been made for any amounts
which may be paid as a result of the alleged violations described above.
ITEM 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the
fourth quarter of the fiscal year ended December 31, 1994.
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<PAGE>
Executive Officers of the Registrant
Information as of March 1, 1995, and for the past five years concerning the
executive officers of the company is as follows:
John M. Richards (age 57), first elected an officer in 1972, has served as
Chairman of the Board and Chief Executive Officer since May 1994. Prior to
May 1994 he was President and Chief Operating Officer. He was elected a
director of the company effective January 1991. He is a member of the Finance
Committee of the Board of Directors.
L. Pendleton Siegel (age 52), first elected an officer in 1983, has served
as President and Chief Operating Officer since May 1994. From August 1993 to
May 1994, he was Executive Vice President, Pulp-Based Operations and Planning.
From March 1992 through July 1993, he was Group Vice President, Pulp and
Paperboard. Prior to March 1992, he was Group Vice President, Wood Products.
In addition, from October 1990 through May 1994, he was also responsible for
planning and business development.
Robert V. Hershey (age 62), first elected an officer in 1993, has served
as Vice President, Northwest Paper Division since August 1993. From June 1991
through July 1993, he was an appointed officer serving as Vice President,
Manufacturing, Northwest Paper Division. Prior to that he served as Vice
President, Manufacturing, for the Northwest Paper Division's Cloquet plant.
Richard L. Paulson (age 53), first elected an officer in 1992, has served
as Vice President, Consumer Products since January 1993. Prior to that he was
an appointed officer serving as Vice President, Manufacturing, for the
Northwest Paper Division's Brainerd plant.
George E. Pfautsch (age 59), first elected an officer in 1971, has served
as Senior Vice President, Finance since October 1989. From January 1993
through May 1994, he also served as Treasurer.
Charles R. Pottenger (age 55), first elected an officer in 1991, has served
as Group Vice President, Pulp and Paperboard since August 1993. From February
1991 through July 1993, he was Vice President, Northwest Paper Division.
Prior to February 1991, he was an appointed officer serving as Northwest Paper
Division Vice President, Manufacturing.
Thomas J. Smrekar (age 52), first elected an officer in 1992, has served
as Group Vice President, Wood Products since March 1992. Prior to March 1992,
he was an appointed officer serving as Minnesota Wood Products Division Vice
President.
NOTE: The aforementioned officers of the company are elected to hold office
until the next annual meeting of the Board of Directors. Each officer holds
office until the officer's successor has been duly elected and has qualified
or until the earlier of the officer's death, resignation, retirement or
removal by the board.
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<PAGE>
PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholder
Matters
The company's common stock is traded on the New York, Chicago and Pacific
Stock Exchanges. Quarterly and yearly price ranges were:
<TABLE>
<CAPTION>
1994 1993
Quarter High Low High Low
<S> <C> <C> <C> <C>
1st $49.50 $40.50 $51.88 $44.25
2nd 42.25 38.00 50.50 40.75
3rd 44.25 38.00 44.63 38.25
4th 41.38 35.50 47.75 40.00
Year 49.50 35.50 51.88 38.25
</TABLE>
In general, all holders of Potlatch common stock who own shares 48
consecutive calendar months or longer ("long-term holders") are entitled to
exercise four votes per share of stock so held, while stockholders who are not
long-term holders are entitled to one vote per share. All stockholders are
entitled to only one vote per share on matters arising under certain
provisions of the company's charter. There were approximately 3,500 common
stockholders of record at December 31, 1994.
Quarterly dividend payments per common share for the past two years were:
<TABLE>
<CAPTION>
Quarter 1994 1993
<S> <C> <C>
1st $ .39 $ .375
2nd .39 .375
3rd .39 .375
4th .40 .39
----- ------
$1.57 $1.515
===== ======
</TABLE>
ITEMS 6, 7 and 8.
The information called for by Items 6, 7 and 8, inclusive, of Part II of
this form, is contained in the following sections of this Report at the pages
indicated below:
Page
Number
ITEM 6 Selected Financial Data 12
ITEM 7 Management's Discussion
and Analysis of Financial
Condition and Results of
Operations 12-16
ITEM 8 Financial Statements and
Supplementary Data 17-35
-8-
<PAGE>
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
ITEM 10. Directors and Executive Officers of the Registrant
Information regarding the directors of the company is set forth under the
heading "Information with Respect to Nominees for Election and Directors
Continuing in Office" on pages 3-5 of the company's definitive proxy
statement, dated March 27, 1995, for the 1995 annual meeting of stockholders
(the "1995 Proxy Statement"), which information is incorporated herein by
reference. Information concerning Executive Officers is included in Part I
of this report following Item 4.
ITEM 11. Executive Compensation
Information set forth under the heading "Compensation of Directors and the
Named Executive Officers" on pages 9-19 of the 1995 Proxy Statement, is
incorporated herein by reference.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
Information regarding security ownership of management, included under the
heading "Stock Ownership of Directors and Executive Officers" on pages 7-8
of the 1995 Proxy Statement, is incorporated herein by reference.
ITEM 13. Certain Relationships and Related Transactions
Information set forth under the heading "Certain Transactions" on page 19
of the 1995 Proxy Statement, is incorporated herein by reference.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
1. Exhibits are listed in the Exhibit Index on pages 36-38 of this
Form 10-K.
2. Financial statement schedules are listed in the Index to Consolidated
Financial Statements and Schedules on page 11 of this Form 10-K.
3. No reports on Form 8-K were filed for the quarter ended December 31, 1994.
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<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
POTLATCH CORPORATION
(Registrant)
Date: March 23, 1995 By John M. Richards
----------------------
John M. Richards
Chairman of the Board
and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on March 23, 1995, by the following persons on
behalf of the company in the capacities indicated.
By John M. Richards
-----------------------------
John M. Richards RICHARD A. CLARKE*
Director and Chairman of Director
the Board and Chief KENNETH T. DERR*
Executive Officer Director
(Principal Executive Officer) ALLEN F. JACOBSON*
Director
By L. Pendleton Siegel GEORGE F. JEWETT, JR.*
----------------------------- Director
L. Pendleton Siegel RICHARD B. MADDEN*
President and Chief Director
Operating Officer RICHARD M. MORROW*
(Principal Operating Officer) Director
VIVIAN W. PIASECKI*
By George E. Pfautsch Director
----------------------------- TONI REMBE*
George E. Pfautsch Director
Senior Vice President, REUBEN F. RICHARDS*
Finance Director
(Principal Financial Officer) RICHARD M. ROSENBERG*
Director
By Terry L. Carter ROBERT G. SCHWARTZ*
----------------------------- Director
Terry L. Carter CHARLES R. WEAVER*
Controller Director
(Principal Accounting Officer) FREDERICK T. WEYERHAEUSER*
Director
DR. WILLIAM T. WEYERHAEUSER*
Director
*By Sandra T. Powell
------------------
Sandra T. Powell
(Attorney-in-fact)
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<PAGE>
POTLATCH CORPORATION AND CONSOLIDATED SUBSIDIARIES
Index to Consolidated Financial Statements and Schedules
Page
Number
The following documents are filed as part of this Report:
Consolidated Financial Statements:
Selected Financial Data 12
Management's Discussion and Analysis of
Financial Condition and Results of Operations 12 - 16
Statements of Earnings for the years ended December 31,
1994, 1993 and 1992 17
Balance Sheets at December 31, 1994 and 1993 18
Statements of Cash Flows for the years ended December 31,
1994, 1993 and 1992 19
Statements of Stockholders' Equity for the years ended
December 31, 1994, 1993 and 1992 20
Summary of Principal Accounting Policies 21 - 22
Notes to Financial Statements 23 - 33
Independent Auditors' Report 34
Schedules:
II. Valuation and Qualifying Accounts 35
All other schedules are omitted because they are
not required, not applicable or the required
information is given in the consolidated
financial statements.
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<PAGE>
<TABLE>
Potlatch Corporation and Consolidated Subsidiaries
Selected Financial Data
(Dollars in thousands - except per-share amounts)
<CAPTION>
1994 1993 1992 1991 1990
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $1,471,258 $1,368,854 $1,326,612 $1,236,988 $1,252,906
Net earnings:
Before accounting changes 48,995 38,339 78,914 55,802 98,612
After accounting changes 48,995 6,635 78,914 55,802 98,612
Working capital 142,728 129,138 153,537 125,190 86,187
Current ratio* 1.6 to 1 1.7 to 1 1.9 to 1 1.7 to 1 1.4 to 1
Long-term debt
(noncurrent portion) $ 633,473 $ 707,131 $ 634,209 $ 563,014 $ 391,892
Stockholders' equity 920,207 919,664 955,581 914,750 896,122
Debt to stockholders'
equity ratio .69 to 1 .77 to 1 .66 to 1 .62 to 1 .44 to 1
Capital expenditures $ 104,389 $ 201,655 $ 179,539 $ 267,038 $ 317,650
Total assets* 2,081,229 2,085,652 2,015,747 1,908,631 1,731,248
Net earnings per common share:
Before accounting changes $1.68 $ 1.31 $ 2.71 $1.92 $3.41
After accounting changes 1.68 .22 2.71 1.92 3.41
Cash dividends
per common share 1.57 1.515 1.425 1.34 1.23
========================================================================================================================
<FN>
* 1990-1993 amounts have been restated to conform to the 1994 presentation.
</TABLE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity
Liquidity of a company can be measured by several factors. Of major
importance are:
Capability of generating earnings and cash flow
Maintenance of a sound financial structure
Access to capital markets
Maintenance of adequate working capital
In 1994, the company's net cash provided by operations, excluding working
capital changes, as presented in the Statements of Cash Flows on page 19,
totaled $197.9 million, compared with $170.7 million in 1993 and $166.2
million in 1992.
The ratio of long-term debt to stockholders' equity was .69 to 1 at
December 31, 1994, compared with .77 to 1 at December 31, 1993, and .66 to 1
at December 31, 1992. The improvement in 1994 was largely due to a reduction
in outstanding commercial paper classified as long-term debt from $75.0
million at December 31, 1993, to $20.0 million at December 31, 1994. Total
commercial paper outstanding at December 31, 1994, was $33.0 million. Also
affecting the ratio was the reclassification of $15.0 million of the company's
medium-term notes from long-term to current due to the debt maturing within
one year.
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<PAGE>
At December 31, 1994, the company had credit lines totaling $150.0 million
for general corporate purposes. Of that amount, $50.0 million was in short-
term lines and $100.0 million was in a revolving credit and term loan
agreement. At December 31, 1994, there were no borrowings by the company
under any credit lines; however, the company uses the credit lines to back its
issuance of commercial paper. At December 31, 1994, a portion of the
revolving credit was being used to back outstanding commercial paper.
One of the company's stated objectives is to maintain a sound financial
structure. The company's long-term debt to equity ratio of .69 to 1 at
December 31, 1994, is somewhat above the range of its targeted financial
structure. The company believes that the combination of its internal cash
flow and projected levels of dividends and capital spending in 1995 will
permit it to return to its targeted range within the next year.
The company also believes that debt ratings within investment grade
categories are important for long-term access to capital markets. At the end
of 1994, the company's senior long-term debt was rated A- by Standard & Poors
and Duff and Phelps, and Baa1 by Moody's. With the company's ability to
generate cash flow and its access to capital markets, the company believes it
is capable of funding capital expenditures, working capital and other
liquidity needs for the foreseeable future.
At December 31, 1994, working capital was $142.7 million, compared with
$129.1 million at December 31, 1993, and $153.5 million at December 31, 1992.
The improvement for 1994 was largely due to increases of $26.4 million in
short-term investments and $18.8 million in receivables, which were partially
offset by increases of $12.9 million in notes payable, $11.8 million in
current installments on long-term debt and $5.9 million in accounts payable
and accrued liabilities.
Capital Resources and Funding
Capital expenditures totaled $104.4 million in 1994, compared with $201.7
million in 1993 and $179.5 million in 1992.
In 1994, the company spent $37.9 million in the wood products segment.
Significant projects included the completion of the new sawmill in Warren,
Arkansas, installation of a new log processing center at the Lewiston, Idaho,
sawmill and installation of required pollution control equipment at the Grand
Rapids, Minnesota, oriented strand board plant. The Warren sawmill, which is
progressing steadily to its designed capabilities, will improve lumber quality
and the yield from the available log supply while making more efficient use
of manpower. The new log processing center in Lewiston will reduce
manufacturing costs as well as increase production and improve yield.
Capital spending in the printing papers segment totaled $25.2 million,
where the first phase of the modernization and expansion of the Cloquet,
Minnesota, pulp mill continued during 1994. Also included were expenditures
for the rebuild of a paper machine at the Brainerd, Minnesota, facility.
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<PAGE>
Spending in the other pulp-based products segment totaled $40.8 million,
including two major projects in the Consumer Products Division where an older
tissue machine was rebuilt in Lewiston and the warehouse at the North Las
Vegas, Nevada, tissue converting facility was expanded. These two projects
improve the division's competitive position by improving product quality and
service. Other pulp-based products spending also included the continuing
development of acreage near Boardman, Oregon, to grow hybrid poplar trees for
pulp fiber to be used at the Lewiston pulp mill.
Authorized but unexpended appropriations totaled $332.5 million at
December 31, 1994. Of that amount, $225.1 million is budgeted to be expended
in 1995. Such expenditures will include the continuing modernization and
expansion of the Cloquet pulp mill; the continued rebuild of a paper machine
in Brainerd; the continued development of the hybrid poplar tree farm in
Boardman; the upgrade of the green stacker, planer and kiln at the Prescott,
Arkansas, sawmill; and installation of pollution control equipment at the
Minnesota oriented strand board plants. As in 1994, the 1995 capital program
will be funded primarily from internally generated sources.
Historically, the company has spent less on capital expenditures than the
annual amount budgeted. In 1994, the company spent $63.8 million less than
the $168.2 million budgeted. Spending on projects may be delayed due to
acquisition of environmental permits, acquisition of equipment, engineering,
weather and other factors. It is likely that the company will again spend
less than the budgeted amount in 1995.
In December 1994, the company announced a stock repurchase program which
authorizes the company to purchase up to 1 million shares of its common stock
over several years. Under the program, the company can purchase shares of
common stock from time to time through open market and privately negotiated
transactions at prices deemed appropriate by management. The purchases of
such shares are planned to be accomplished while also maintaining the
company's targeted financial structure.
Environment
The company is subject to extensive federal and state environmental control
regulations at its operating facilities. The company endeavors to comply with
all environmental regulations and monitors its activities on a regular basis
for such compliance. Compliance with environmental regulations requires
capital expenditures as well as additional operating costs. Capital
expenditures specifically designated for environmental compliance totaled
approximately $17.0 million during 1994 and are budgeted to be $25.0 million
in 1995. In addition, the company made expenditures for pollution control
facilities as part of major mill modernizations and expansions currently under
way.
In late 1993, the Environmental Protection Agency published proposed
regulations applicable to the pulp and paper industry. This extensive set of
regulations is designed to address both air and water emissions. As proposed,
the regulations would require modifications to process equipment and
procedures. Based on an examination of the capital costs of the proposals,
the company estimates that compliance would require capital expenditures in
the broad range of $200.0 million. Of this amount, approximately $100.0
million is already included in the planned expansion and modernization project
-14-
<PAGE>
under way at the Cloquet, Minnesota, pulp mill, which is expected to cost in
excess of $500.0 million. The company does not expect that such compliance
costs would have a material adverse effect on its competitive position.
Results of Operations
Comparison of 1994 with 1993
Potlatch consolidated net sales of $1.47 billion increased 7 percent from
1993's $1.37 billion. Earnings were $49.0 million, compared with $38.3
million before the one-time effects of accounting changes for 1993. Earnings
per common share for 1994 were $1.68, which included a $.21 per share first
quarter charge for early retirement programs. Earnings per share for 1993
were $1.31 before the one-time effects of accounting changes.
Market improvements in most of the company's pulp-based businesses, along
with continued favorable market conditions for wood products, resulted in
higher earnings for 1994. The operating difficulties experienced by the
Lewiston, Idaho, pulp and paperboard mill in 1993 were reduced in 1994, but
some problems continue with the pulp mill washers. Although no reduction of
current operating levels is anticipated, the company is planning to replace
these washers.
The wood products segment reported earnings of $160.3 million,
approximately equal to the $160.2 million earned in 1993. Higher net sales
realizations for the company's lumber and panel products were offset by
startup costs of the new sawmill in Warren, Arkansas, and costs associated
with the installation of new log processing equipment at the Lewiston, Idaho,
sawmill. Late in the year the company sold two small manufacturing
operations: a split-cedar mill in Idaho and a hardwood flooring plant in
Arkansas.
At the present time, timber from the company's own lands, together with
outside purchases, is adequate to support manufacturing operations. In recent
years the timber supply from federal lands has been increasingly curtailed
largely due to environmental pressures that are expected to continue into the
foreseeable future. Although this trend has had a favorable effect on
earnings for the company as a whole, it has had an adverse effect on wood
costs. The long-term effect of this trend on company earnings cannot be
predicted. However, the company has implemented plans to develop additional
fiber supplies for the Lewiston, Idaho, pulp mill and by the year 2000 expects
to provide approximately 70 percent of chip fiber requirements for this mill
from resources it controls, compared with approximately 40 percent currently.
Earnings for the printing papers segment were $40.2 million, a substantial
improvement over 1993's $15.8 million. Higher shipments and net sales
realizations, resulting from a strengthening marketplace, along with
production improvements at the segment's facilities, were largely responsible
for the increase. An improved product mix also contributed to the positive
results.
The other pulp-based products segment, which includes the Pulp and
Paperboard Group and the Consumer Products Division, reported a loss of $53.5
million versus a loss of $40.9 million for 1993. The 1994 results include a
first quarter charge for early retirement programs of $10.0 million. The
company anticipates annual savings of $10.0 million as a result of the
-15-
<PAGE>
programs. Higher paperboard shipments for the Pulp and Paperboard Group were
partially offset by lower paperboard net sales realizations and costs
associated with operating problems during the year. Sales of market pulp had
been curtailed since late 1993. However, market conditions improved
considerably from the beginning of 1994 and resulted in the resumption of
market pulp sales during the second quarter. The Consumer Products Division
increased product shipments 10 percent in 1994, but higher pulp costs and a
very competitive tissue market resulted in a loss for the year.
Comparison of 1993 with 1992
Potlatch consolidated net sales of $1.37 billion in 1993 increased slightly
over 1992's $1.33 billion. Earnings per common share before accounting
changes were $1.31 in 1993 compared with $2.71 for 1992. Including a one-
time, after-tax net charge of $31.7 million related to new accounting
requirements for postretirement benefits and income taxes, the company earned
$6.6 million or $.22 per common share in 1993. The results for 1992 include
a nonrecurring, net after-tax gain of $14.7 million or $.51 per common share
from the sale of the company's packaging operations and a charge related to
a litigation settlement.
Despite very favorable market conditions for wood products, earnings
continued to be adversely affected by weak market conditions throughout 1993
for the company's pulp-based products. Operating difficulties at the
Lewiston, Idaho, pulp and paperboard mill also negatively affected earnings.
Earnings for the wood products segment were $160.2 million, an increase of
61 percent over 1992's $99.8 million. Substantially higher net sales
realizations for most of the company's wood products were the primary reason
for the improved results. Timber supply constraints in the Pacific Northwest
continued to have a significant positive influence on product pricing in 1993,
as they did in 1992.
In 1993 the printing papers segment reported earnings of $15.8 million,
down from the $27.3 million earned in 1992. The poor market conditions for
printing papers of the past few years continued in 1993. Shipments increased
modestly during the year, but realizations were lower than in 1992.
The other pulp-based products segment, which includes the Pulp and
Paperboard Group and the Consumer Products Division, reported a loss of $40.9
million for 1993, compared with earnings of $33.3 million in 1992. Lower
paperboard shipments and sales realizations as a result of very depressed
market conditions combined with higher wood costs in Idaho were largely
responsible for the decline. Operating difficulties and extended shutdowns
at both of the company's pulp and paperboard mills in Lewiston, Idaho, and
Cypress Bend, Arkansas, during 1993 also contributed to the disappointing
results. The Consumer Products Division also incurred a loss for the year due
to very competitive markets and higher operating costs associated with the
startup of the new tissue machine in Lewiston and the new converting facility
in North Las Vegas, Nevada.
Income Taxes
The company's effective tax rates for 1994, 1993 and 1992 were 35.5
percent, 41.0 percent and 36.7 percent, respectively.
-16-
<PAGE>
<TABLE>
Potlatch Corporation and Consolidated Subiaries
Statements of Earnings
(Dollars in thousands - except per-share amounts)
<CAPTION>
For the years ended December 31 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $1,471,258 $1,368,854 $1,326,612
- ----------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Depreciation, amortization and cost of
fee timber harvested 138,251 123,544 107,165
Materials, labor and other operating
expenses 1,121,491 1,064,260 1,006,887
Selling, general and administrative
expenses 82,799 83,958 83,409
- ----------------------------------------------------------------------------------------------------------------------
1,342,541 1,271,762 1,197,461
- ----------------------------------------------------------------------------------------------------------------------
Earnings from operations 128,717 97,092 129,151
Interest expense, net of capitalized
interest of $2,799 ($6,384 in 1993 and
$16,581 in 1992) (51,137) (46,230) (34,902)
Interest and dividend income 348 1,352 3,790
Other income (expense), net (1,967) 12,790 26,575
- ----------------------------------------------------------------------------------------------------------------------
Earnings before taxes on income and cumulative
effect of accounting changes 75,961 65,004 124,614
Provision for taxes on income (Note 4) 26,966 26,665 45,700
- ----------------------------------------------------------------------------------------------------------------------
Net earnings before cumulative
effect of accounting changes 48,995 38,339 78,914
Cumulative effect of accounting
changes for postretirement
benefits and income taxes,
net of tax (Notes 4 and 10) - (31,704) -
- ----------------------------------------------------------------------------------------------------------------------
Net earnings $ 48,995 $ 6,635 $ 78,914
======================================================================================================================
Net earnings per common share:
Before accounting changes* $1.68 $1.31 $2.71
After accounting changes* 1.68 .22 2.71
======================================================================================================================
<FN>
* Net earnings per common share for 1994 include a charge of $.21 for early retirement programs, 1992 includes unusual
items which produced a net gain of $.51 per share.
The accompanying notes and summary of principal accounting policies are an integral part of these financial statements.
</TABLE>
-17-
<PAGE>
<TABLE>
Potlatch Corporation and Consolidated Subsidiaries
Balance Sheets
(Dollars in thousands - except per-share amounts)
<CAPTION>
At December 31 1994 1993
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash (Note 8) $ 9,018 $ 6,813
Short-term investments (Note 8) 46,789 20,421
Receivables, net of allowance for doubtful
accounts of $2,625 ($2,057 in 1993) 137,418 118,601
Inventories (Note 1) 152,236 155,560
Prepaid expenses (Note 4) 25,857 25,758
- -------------------------------------------------------------------------------------------------
Total current assets 371,318 327,153
Land, other than timberlands 9,089 9,105
Plant and equipment, at cost less
accumulated depreciation of $1,018,500
($926,032 in 1993) (Note 2) 1,313,939 1,340,028
Timber, timberlands and related logging
facilities, net (Note 3) 346,199 343,044
Other assets 40,684 66,322
- -------------------------------------------------------------------------------------------------
$2,081,229 $2,085,652
=================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable (Notes 5 and 8) $ 12,881 $ -
Current installments on long-term debt (Notes 5 and 8) 18,831 7,057
Accounts payable and accrued liabilities (Note 6) 196,878 190,958
- -------------------------------------------------------------------------------------------------
Total current liabilities 228,590 198,015
- -------------------------------------------------------------------------------------------------
Long-term debt (Notes 5 and 8) 633,473 707,131
- -------------------------------------------------------------------------------------------------
Other long-term obligations (Note 7) 147,877 120,388
- -------------------------------------------------------------------------------------------------
Deferred taxes (Note 4) 151,082 140,454
- -------------------------------------------------------------------------------------------------
Stockholders' equity:
Preferred stock
Authorized 4,000,000 shares - -
Common stock, $1 par value
Authorized 40,000,000 shares, issued 32,721,980 shares 32,722 32,722
Additional paid-in capital 125,564 125,346
Retained earnings 836,628 836,845
Common shares in treasury 3,497,499 (3,522,834 in 1993) (74,707) (75,249)
- -------------------------------------------------------------------------------------------------
Total stockholders' equity 920,207 919,664
- -------------------------------------------------------------------------------------------------
$2,081,229 $2,085,652
=================================================================================================
<FN>
December 31, 1993 amounts have been restated to conform to the 1994 presentation in which book overdrafts are
classified as a current liability.
The accompanying notes and summary of principal accounting policies are an integral part of these financial statements.
</TABLE>
-18-
<PAGE>
<TABLE>
Potlatch Corporation and Consolidated Subsidiaries
Statements of Cash Flows
(Dollars in thousands)
<CAPTION>
For the years ended December 31 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATIONS
Net earnings $ 48,995 $ 6,635 $ 78,914
Adjustments to reconcile net earnings
to cash provided by operations:
Cumulative effect of accounting changes - 31,704 -
Depreciation, amortization and cost of
fee timber harvested 138,251 123,544 107,165
Deferred taxes 12,764 18,069 7,291
Net gain on disposition of plant
and properties (2,131) (9,254) (27,156)
- ----------------------------------------------------------------------------------------------------------------------
Cash provided by operations excluding
working capital changes 197,879 170,698 166,214
- ----------------------------------------------------------------------------------------------------------------------
Increase in receivables (18,817) (3,583) (14,336)
Decrease (increase) in inventories 3,324 (3,931) (3,907)
Increase in prepaid expenses (99) (5,619) (3,821)
Increase in accounts payable
and accrued liabilities 618 14,638 2,608
- ----------------------------------------------------------------------------------------------------------------------
Cash provided by (used for) working
capital changes (14,974) 1,505 (19,456)
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided by operations 182,905 172,203 146,758
- ----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING
Change in book overdrafts 5,302 1,953 90
Increase (decrease) in notes payable 12,881 - (14,981)
Proceeds from long-term debt - 79,525 75,124
Repayment of long-term debt (61,884) (3,488) (3,846)
Issuance of treasury stock 542 1,181 2,366
Dividends on common stock (45,870) (44,214) (41,476)
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) financing (89,029) 34,957 17,277
- ----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING
Decrease (increase) in short-term investments 11,904 (6,761) 1,003
Decrease (increase) in deferred charges
included in other assets (158) 3,575 (14,359)
Increase in investments included in other assets (4,715) (12,152) (9,911)
Additions to plant and equipment, and to
land other than timberlands (95,254) (137,898) (170,857)
Additions to timber, timberlands and
related logging facilities (9,135) (63,757) (8,682)
Disposition of plant and properties 4,561 10,349 37,158
Other, net 1,126 (10,411) (5,843)
- ----------------------------------------------------------------------------------------------------------------------
Net cash used for investing (91,671) (217,055) (171,491)
- ----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash 2,205 (9,895) (7,456)
Balance at beginning of year 6,813 16,708 24,164
- ----------------------------------------------------------------------------------------------------------------------
Balance at end of year $ 9,018 $ 6,813 $ 16,708
======================================================================================================================
<FN>
During 1994, the company's investment in corporate owned life insurance in the amount of $38.3 million was reclassified
from Other assets to Short-term investments.
Net interest paid (net of amounts capitalized) in 1994, 1993 and 1992 was $51.2 million, $44.0 million and $34.5 million,
respectively. Net income taxes paid in 1994, 1993 and 1992 were $12.4 million, $13.0 million and $55.8 million,
respectively.
The accompanying notes and summary of principal accounting policies are an integral part of these financial statements.
</TABLE>
-19-
<PAGE>
<TABLE>
Potlatch Corporation and Consolidated Subsidiaries
Statements of Stockholders' Equity
(Dollars in thousands - except per-share amounts)
<CAPTION>
For the years ended December 31 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of year $125,346 $124,865 $123,838
Exercise of stock options 218 481 1,027
- ---------------------------------------------------------------------------------------------------------------------
Balance at end of year $125,564 $125,346 $124,865
=====================================================================================================================
RETAINED EARNINGS
Balance at beginning of year $836,845 $874,424 $836,986
Net earnings 48,995 6,635 78,914
Common dividends, $1.57 per share ($1.515 per
share in 1993 and $1.425 per share in 1992) (45,870) (44,214) (41,476)
Minimum pension liability adjustment (3,342) - -
- ---------------------------------------------------------------------------------------------------------------------
Balance at end of year $836,628 $836,845 $874,424
=====================================================================================================================
COMMON SHARES IN TREASURY
Balance at beginning of year 3,522,834 shares
(3,578,159 in 1993 and 3,688,899 in 1992) $ 75,249 $ 76,430 $ 78,796
Exercise of stock options 25,335 shares
(55,325 in 1993 and 110,740 in 1992) (542) (1,181) (2,366)
- ---------------------------------------------------------------------------------------------------------------------
Balance at end of year 3,497,499 shares
(3,522,834 in 1993 and 3,578,159 in 1992) $ 74,707 $ 75,249 $ 76,430
=====================================================================================================================
<FN>
The accompanying notes and summary of principal accounting policies are an integral part of these financial statements.
</TABLE>
-20-
<PAGE>
Potlatch Corporation and Consolidated Subsidiaries
Summary of Principal Accounting Policies
Consolidation
The financial statements include the accounts of Potlatch Corporation and
its subsidiaries after elimination of significant intercompany transactions
and accounts. There are no significant unconsolidated subsidiaries.
Inventories
Inventories are stated at the lower of cost or market. The last-in, first-
out method is used to determine cost of most wood products. The average cost
method is used to determine cost of all other inventories.
Earnings Per Common Share
Earnings per common share are computed on the weighted average number of
common shares outstanding each year. Outstanding stock options are common
stock equivalents but are excluded from earnings per common share computations
due to immateriality. The weighted average number of common shares used in
earnings per common share computations for 1994, 1993 and 1992 were
29,217,261, 29,183,871 and 29,110,179, respectively.
Properties
Property, plant and equipment are valued at cost less accumulated
depreciation. Depreciation of buildings, equipment and other depreciable
assets is determined by using the straight-line method on estimated useful
lives. Estimated useful lives of plant and equipment range from 2 to 40
years.
Timber, timberlands and related logging facilities are valued at cost net
of the cost of fee timber harvested and depreciation or amortization. Logging
roads and related facilities are amortized over their useful lives or as
related timber is removed. Cost of fee timber harvested is determined
annually based on the estimated volumes of recoverable timber and related
cost.
Major improvements and replacements of property are capitalized.
Maintenance, repairs, and minor improvements and replacements are expensed.
Amounts expensed in 1994, 1993 and 1992 were $167.7 million, $166.6 million
and $155.1 million, respectively. Upon retirement or other disposition of
property, applicable cost and accumulated depreciation or amortization are
removed from the accounts. Any gains or losses are included in earnings.
Income Taxes
The provision for taxes on income is based on earnings reported in the
financial statements. Deferred income taxes are provided on the temporary
differences between reported earnings and taxable income using current tax
laws and rates.
-21-
<PAGE>
Preoperating and Startup Costs
Preoperating costs are expensed as incurred except for charges relating to
major new facilities. Deferred preoperating costs are amortized over a 60-
month period. Startup costs are expensed as incurred.
-22-
<PAGE>
Potlatch Corporation and Consolidated Subsidiaries
Notes to Financial Statements
<TABLE>
Note 1. Inventories
<CAPTION>
(Dollars in thousands) 1994 1993
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Logs, pulpwood, chips and sawdust $ 18,401 $ 18,391
Lumber and other manufactured wood products 7,369 8,184
Pulp, paper and converted paper products 66,937 71,479
Materials and supplies 59,529 57,506
- ------------------------------------------------------------------------------------------------------
$152,236 $155,560
======================================================================================================
Valued at lower of cost or market:
Last-in, first-out basis $ 21,935 $ 15,241
Average cost basis 130,301 140,319
- ------------------------------------------------------------------------------------------------------
$152,236 $155,560
======================================================================================================
</TABLE>
If the last-in, first-out inventory had been priced at lower of current
average cost or market, the values would have been approximately $32.3 million
higher at December 31, 1994, and $27.8 million higher at December 31, 1993.
In 1994 and 1993, reductions in quantities of LIFO inventories valued at lower
costs prevailing in prior years had the effect of increasing earnings, net of
income taxes, by approximately $1.6 million ($.06 per common share) and $2.4
million ($.08 per common share), respectively.
<TABLE>
Note 2. Plant and Equipment
<CAPTION>
(Dollars in thousands) 1994 1993
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Land improvements $ 55,012 $ 53,900
Buildings and structures 367,630 354,678
Machinery and equipment 1,744,809 1,685,432
Other 81,296 78,564
Construction in progress 83,692 93,486
- ------------------------------------------------------------------------------------------------------
$2,332,439 $2,266,060
======================================================================================================
</TABLE>
Depreciation charged against income amounted to $119.6 million in 1994
($108.4 million in 1993 and $95.8 million in 1992).
Authorized but unexpended appropriations totaled $332.5 million at December
31, 1994. Of that amount, $225.1 million is budgeted to be expended in 1995.
<TABLE>
Note 3. Timber, Timberlands and Related Logging Facilities
<CAPTION>
(Dollars in thousands) 1994 1993
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Timber and timberlands $319,482 $319,305
Related logging facilities 26,717 23,739
- ------------------------------------------------------------------------------------------------------
$346,199 $343,044
======================================================================================================
</TABLE>
Timber, timberlands and related logging facilities are stated at cost less
cost of fee timber harvested and amortization. Cost of fee timber harvested
amounted to $15.1 million in 1994 ($12.0 million in 1993 and $9.1 million in
1992). Amortization of logging roads and related facilities amounted to $1.1
million in 1994 ($.7 million in 1993 and 1992).
-23-
<PAGE>
Note 4. Taxes on Income
Effective January 1, 1993, the company adopted the provisions of Statement
of Financial Accounting Standards No. 109, Accounting for Income Taxes. The
statement requires the liability method for recording differences in financial
and taxable income. The company recorded the cumulative effect of the
accounting change in the first quarter of 1993, which increased income by
$43.8 million or $1.50 per share. Prior years' financial statements were not
restated.
Significant components of the provision for taxes on income:
<TABLE>
<CAPTION>
(Dollars in thousands) 1994 1993 1992
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 16,653 $ 15,311 $31,689
State 2,118 1,646 5,874
- ------------------------------------------------------------------------------------------------------
Total current 18,771 16,957 37,563
- ------------------------------------------------------------------------------------------------------
Deferred:
Depreciation 25,271 26,139 12,694
Alternative minimum tax (14,370) (15,222) (2,000)
Pension costs 739 2,803 (1,357)
Postretirement benefits and
related funding (4,527) (4,943) (1,332)
Net operating loss - (1,897) -
Federal tax rate change - 3,245 -
Other 1,082 (417) 132
- ------------------------------------------------------------------------------------------------------
Total deferred 8,195 9,708 8,137
- ------------------------------------------------------------------------------------------------------
Provision for taxes on income $ 26,966 $ 26,665 $45,700
======================================================================================================
</TABLE>
The provision for taxes on income differs from the amount computed by
applying the statutory federal income tax rate (35 percent in 1994 and 1993
and 34 percent in 1992) to earnings before taxes on income and cumulative
effect of accounting changes due to the following:
<TABLE>
<CAPTION>
(Dollars in thousands) 1994 1993 1992
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Computed "expected" tax expense $26,586 $22,751 $42,369
State and local taxes, net of federal
income tax benefits 2,755 2,695 5,355
Federal tax rate change - 3,245 -
All other items (2,375) (2,026) (2,024)
- ------------------------------------------------------------------------------------------------------
Provision for taxes on income $26,966 $26,665 $45,700
Effective tax rate 35.5% 41.0% 36.7%
======================================================================================================
</TABLE>
-24-
<PAGE>
Principal current and noncurrent deferred tax assets and liabilities at
December 31:
<TABLE>
<CAPTION>
(Dollars in thousands) 1994 1993
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current deferred tax assets:
Employee benefits $ 15,101 $ 15,523
Inventories 1,961 2,289
Net operating loss 1,897 1,897
Other 1,713 1,284
- ------------------------------------------------------------------------------------------------------
Total current asset(1) 20,672 20,993
- ------------------------------------------------------------------------------------------------------
Noncurrent deferred tax assets (liabilities):
Postretirement benefits 42,272 37,745
Alternative minimum tax 35,851 21,481
Depreciation (228,790) (198,498)
Other, net (415) (1,182)
- ------------------------------------------------------------------------------------------------------
Total net noncurrent liability (151,082) (140,454)
- ------------------------------------------------------------------------------------------------------
Net deferred tax liability $(130,410) $(119,461)
======================================================================================================
<FN>
(1) Included in Prepaid expenses in the Balance Sheets.
</TABLE>
Noncurrent deferred tax assets at December 31, 1994 and 1993, are net of
valuation allowances of $8.9 million and $8.1 million, respectively. Based
on the company's history of operating earnings and its expectations for the
future, management has determined that operating income will more likely than
not be sufficient to recognize fully all other deferred tax assets.
In the third quarter of 1993, the company adjusted its current and deferred
income tax balances to reflect an increase in the statutory federal tax rate
from 34 percent to 35 percent retroactive to January 1, 1993. The provision
for taxes on income for 1993 includes $3.2 million of expense for the effect
of the tax increase on beginning of the year deferred tax balances.
The company's federal income tax returns have been examined and settlements
have been reached for all years through 1988, except a petition which has been
filed with the U.S. Tax Court regarding the deductibility of certain expenses
on the company's 1985 federal income tax return. Assessments made for the
years 1989 and 1990 are presently being negotiated at the appellate level.
The company believes that adequate provision has been made for possible
assessments of additional taxes.
<TABLE>
Note 5. Debt
<CAPTION>
(Dollars in thousands) 1994 1993
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenue bonds fixed rate 5.8% to 9% due 1994
through 2013 $140,946 $144,144
Revenue bonds variable rate due 2007 through 2014 34,928 34,921
Credit sensitive debentures 9.125% due 2009 100,000 100,000
Sinking fund debentures 9.625% due 2016 100,000 100,000
Medium-term notes fixed rate 7.55% to 9.46%
due 1995 through 2022 250,000 250,000
Commercial paper 6.12% to 6.425%
(3.38% to 3.65% in 1993) 20,000 74,841
Other notes 6,430 10,282
- ------------------------------------------------------------------------------------------------------
652,304 714,188
Less current installments on long-term debt 18,831 7,057
- ------------------------------------------------------------------------------------------------------
Long-term debt $633,473 $707,131
======================================================================================================
</TABLE>
-25-
<PAGE>
The commercial paper is backed by the company's revolving credit agreement,
which enables it to refinance these short-term borrowings to a long-term basis
should the company choose to do so. Because of this capability and the
likelihood of $20.0 million of the commercial paper being outstanding for more
than a year, that amount has been classified as long-term debt. The balance
of commercial paper outstanding at December 31, 1994, is classified as current
notes payable in the Balance Sheets. The weighted average interest rate
payable is 6.302 percent.
The interest rate payable on the 9.125 percent credit sensitive debentures
is subject to adjustment if certain changes in the debt rating of the
debentures occur. No such change in the interest rate payable has occurred.
Certain credit agreements have restrictive covenants. At December 31,
1994, the company was in compliance with such covenants.
Payments due on long-term debt during each of the five years subsequent to
December 31, 1994:
<TABLE>
<CAPTION>
(Dollars in thousands)
- ------------------------------------------------------------------------------------------------------
<S> <C>
1995 $18,800
- ------------------------------------------------------------------------------------------------------
1996 37,000
- ------------------------------------------------------------------------------------------------------
1997 21,400
- ------------------------------------------------------------------------------------------------------
1998 5,000
- ------------------------------------------------------------------------------------------------------
1999 15,000
- ------------------------------------------------------------------------------------------------------
</TABLE>
The above installments do not include any payments on commercial paper
outstanding.
At December 31, 1994, the company had credit lines totaling $150.0 million
for general corporate purposes. Of that amount, $50.0 million was in short-
term lines and $100.0 million was in a revolving credit and term loan
agreement. The short-term credit lines are LIBOR based and permit the company
to borrow at any time through May 31, 1995. The revolving credit and term
loan agreement dated September 1, 1994, contains a 364-day commitment period,
is renewable annually and includes a two-year term loan option. At December
31, 1994, there were no borrowings by the company under any credit lines.
<TABLE>
Note 6. Accounts Payable and Accrued Liabilities
<CAPTION>
(Dollars in thousands) 1994 1993
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Trade accounts payable $ 57,016 $ 54,726
Accrued wages, salaries and employee benefits 53,678 57,878
Accrued taxes other than taxes on income 16,570 15,517
Accrued interest 13,224 11,623
Accrued taxes on income 9,926 8,464
Book overdrafts 24,195 18,893
Other 22,269 23,857
- ------------------------------------------------------------------------------------------------------
$196,878 $190,958
======================================================================================================
</TABLE>
-26-
<PAGE>
<TABLE>
Note 7. Other Long-Term Obligations
<CAPTION>
(Dollars in thousands) 1994 1993
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Postretirement benefits $111,034 $ 98,366
Pension and related liabilities 26,517 11,345
Other 10,326 10,677
- ------------------------------------------------------------------------------------------------------
$147,877 $120,388
======================================================================================================
</TABLE>
Note 8. Disclosures about Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value.
CASH AND SHORT-TERM INVESTMENTS
For short-term investments, the carrying amount approximates fair value.
Short-term investments include bank certificates of deposit, repurchase
agreements, money market preferreds and various other investment grade
securities which can be readily purchased or sold using established markets.
Short-term investments at December 31, 1994, include $45.3 million for the
company's investment in corporate owned life insurance (COLI). COLI does not
qualify as a financial instrument and therefore is not included in the fair
values stated below.
CURRENT NOTES PAYABLE
The fair value of the company's current notes payable, which consists of
commercial paper, is estimated based upon the quoted market prices for the
same or similar issues.
LONG-TERM DEBT
The fair value of the company's long-term debt is estimated based upon the
quoted market prices for the same or similar debt issues. The amount of long-
term debt for which there is no quoted market price is immaterial and the
carrying amount approximates fair value.
Estimated fair values of the company's financial instruments:
<TABLE>
<CAPTION>
1994 1993
Carrying Fair Carrying Fair
(Dollars in thousands) Amount Value Amount Value
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash and short-term investments $ 10,494 $ 10,494 $ 27,234 $ 27,234
Current notes payable 12,881 12,880 - -
Long-term debt 652,304 658,541 714,188 770,014
======================================================================================================
</TABLE>
Note 9. Retirement, Incentive and Savings Plans
Substantially all employees and directors of the company are covered by
noncontributory defined benefit pension plans. These include both company-
sponsored and multi-employer plans. Total pension expense was $4.5 million
in 1994, $6.3 million in 1993 and $7.3 million in 1992. The 1994 pension
expense presented above excludes $4.6 million for early retirement programs
which is included in Other income and expense in the Statements of Earnings.
-27-
<PAGE>
The salaried plan provides benefits based on the participants' final
average pay and years of service. Plans covering hourly employees generally
provide benefits of stated amounts for each year of service. The directors'
plan provides a benefit equal to the retainer in effect at the time the
participant ceases to be a director if the director has completed five years
of service as a nonemployee director. Benefits are paid for the lesser of 10
years or the number of years of service as a nonemployee director.
Pension cost for company-sponsored plans:
<TABLE>
<CAPTION>
(Dollars in thousands) 1994 1993 1992
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned during year $ 8,440 $ 7,512 $ 6,861
Interest cost on projected benefit obligation 24,949 24,641 23,807
Actual return on assets 3,670 (48,160) (33,153)
Net amortization and deferral (35,208) 19,649 7,201
- ------------------------------------------------------------------------------------------------------
Net periodic pension cost $ 1,851 $ 3,642 $ 4,716
======================================================================================================
</TABLE>
Funded status and related balance sheet amounts for company-sponsored
pension plans at December 31:
<TABLE>
<CAPTION>
Plans Where Plans Where
Assets Exceed Accumulated
Accumulated Benefits
Benefits Exceed Assets Total
(Dollars in thousands) 1994 1993 1994 1993 1994 1993
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefit obligation $ 214,012 $ 285,369 $ 95,095 $ 12,926 $ 309,107 $ 298,295
Accumulated benefit obligation 219,562 298,903 105,505 13,973 325,067 312,876
Projected benefit obligation 232,183 313,150 111,907 20,131 344,090 333,281
======================================================================================================
Plan assets at fair value,
primarily publicly traded
equity and fixed income
securities $ 252,204 $ 349,697 $ 83,268 $ 4,829 $ 335,472 $ 354,526
Projected benefit obligation (232,183) (313,150) (111,907) (20,131) (344,090) (333,281)
- ------------------------------------------------------------------------------------------------------
Plan assets above (below)
projected benefit obligation 20,021 36,547 (28,639) (15,302) (8,618) 21,245
Unrecognized prior service cost (3,203) 1,114 19,709 6,516 16,506 7,630
Unrecognized net (gain) loss (184) (15,124) 5,710 (233) 5,526 (15,357)
Unrecognized net transition asset (5,477) (9,048) (1,385) (283) (6,862) (9,331)
Adjustment required to recognize
minimum liability - - (20,271) (742) (20,271) (742)
- ------------------------------------------------------------------------------------------------------
Prepaid (accrued) pension cost $ 11,157 $ 13,489 $ (24,876) $(10,044) $ (13,719) $ 3,445
======================================================================================================
</TABLE>
The projected benefit obligation for the company's unfunded, nonqualified
plans at December 31, 1994 and 1993, was $16.2 million and $15.2 million,
respectively. These amounts are included in the total for Plans Where
Accumulated Benefits Exceed Assets.
As of December 31, 1994, $20.3 million of minimum pension liabilities for
underfunded plans was included in other long-term liabilities, with
corresponding intangible assets of $14.8 million and a charge of $3.4 million
to retained earnings, which is net of deferred taxes of $2.1 million. As of
December 31, 1993, minimum pension liabilities totaled $.7 million, with
corresponding intangible assets of the same amount.
The projected benefit obligation at December 31, 1994, 1993 and 1992, was
determined using an assumed discount rate of 8.25 percent, 7.75 percent and
8.5 percent, respectively, and an assumed long-term rate of salaried
-28-
<PAGE>
compensation increase of 5 percent, 5 percent and 6 percent, respectively.
The assumed rate of return on plan assets was 9.5 percent for 1994, 9.5
percent for 1993 and 9 percent for 1992. The actual return on plan assets has
averaged approximately 12 percent over the past 17 years.
Funding of company-sponsored plans is based on accepted actuarial methods
in accordance with applicable governmental regulations and is determined
separately from the net periodic cost presented above.
Hourly employees at two of the company's manufacturing facilities
participate in a multi-employer defined benefit pension plan, the Paper
Industry Union-Management Pension Fund. Company contributions were $2.6
million for 1994, $2.7 million for 1993 and $2.6 million for 1992 and equaled
the amounts charged to pension expense.
Key management employees participate in a management performance award plan
under which awards are based on certain minimum and standard performance
criteria established each year. All company employees are eligible to
participate in 401(k) savings plans.
Note 10. Postretirement Benefits Other Than Pensions
Effective January 1, 1993, the company adopted Statement of Financial
Accounting Standards No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions. The statement requires accrual basis
recognition of the projected future cost of providing postretirement benefits.
The company elected immediate recognition of the transition obligation, which
amounted to $118.0 million ($75.5 million after income tax benefits or $2.59
per share). The obligation, which is presented in Other long-term obligations
in the Balance Sheets, was partially offset by $31.2 million of plan assets.
The company provides many of its retired employees with health care and
life insurance benefits. Benefits are provided under company-sponsored
defined benefit retiree health care and life insurance plans which cover most
salaried and certain hourly employees. Employees become eligible for these
benefits as they retire from active employment. Most of the retiree health
care plans require retiree contributions and contain other cost sharing
features such as deductibles and coinsurance. The retiree life insurance
plans are primarily noncontributory. The retiree health care plans are
partially funded. The retiree life insurance plans are unfunded.
Net periodic postretirement benefit cost:
<TABLE>
<CAPTION>
(Dollars in thousands) 1994 1993
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Service cost - benefits earned during year $ 3,931 $ 3,450
Interest cost on accumulated
postretirement benefit obligation 11,054 11,510
Actual return on assets 330 (2,259)
Net amortization and deferral (2,026) 449
- -----------------------------------------------------------------------------------------------------
Net periodic postretirement benefit cost $13,289 $13,150
=====================================================================================================
</TABLE>
The 1994 postretirement benefit cost presented above excludes $1.9 million
for early retirement programs which is included in Other income and expense
in the Statements of Earnings. Postretirement benefit cost on a pay-as-you-go
basis totaled $5.7 million for 1992 and has not been restated.
-29-
<PAGE>
Funded status and related balance sheet amounts for postretirement health
care and life insurance plans at December 31:
<TABLE>
<CAPTION>
(Dollars in thousands) 1994 1993
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ (79,359) $ (76,469)
Fully eligible active plan participants (25,541) (24,080)
Other active plan participants (47,427) (45,107)
- -----------------------------------------------------------------------------------------------------
Total accumulated postretirement benefit obligation (152,327) (145,656)
Plan assets at fair value, primarily publicly
traded equity and fixed income securities 25,392 29,884
- -----------------------------------------------------------------------------------------------------
Accumulated postretirement benefit obligation
in excess of plan assets (126,935) (115,772)
Unrecognized prior service cost 8,242 9,390
Unrecognized net loss 7,659 8,016
- -----------------------------------------------------------------------------------------------------
Accrued postretirement benefit cost $(111,034) $ (98,366)
=====================================================================================================
</TABLE>
The discount rate used in determining the accumulated postretirement
benefit obligation at December 31, 1994 and 1993, was 8.25 percent and 7.75
percent, respectively. The expected long-term rate of return on plan assets
for 1994 and 1993 was 9.5 percent.
The health care cost trend rate assumption used in determining the
accumulated postretirement benefit obligation at December 31, 1994 and 1993,
is based on an initial rate of 10 percent, decreasing incrementally to 5
percent over an 8-year period and remaining at that level thereafter. This
assumption has a significant effect on the amounts reported. For example, a
1 percent increase in the health care cost trend rates would have increased
the accumulated postretirement benefit obligation at December 31, 1994, to
$176.7 million and increased the net periodic cost for 1994 to $15.9 million
from the $13.3 million actually recorded.
Funding of postretirement health care plans is based on accepted actuarial
methods in accordance with applicable governmental regulations and is
determined separately from the net periodic cost presented above.
Effective January 1, 1993, the company adopted Statement of Financial
Accounting Standards No. 112, Employers' Accounting for Postemployment
Benefits. The statement requires accrual basis recognition of postemployment
benefits provided to former or inactive employees after employment but before
retirement. The effect of implementing the new standard was not material.
Note 11. Stock Options
Under the company's stock option plans, options for shares of the company's
common stock have been issued to certain key personnel. Options are granted
at market value and may include a stock appreciation right. Options may also
be issued in the form of restricted stock and other share-based awards, none
of which were outstanding at December 31, 1994. Options are fully exercisable
after two years and expire not later than 10 years from the date of grant.
-30-
<PAGE>
Information with respect to the company's stock options:
<TABLE>
<CAPTION>
For the years ended December 31 1994 1993
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Option (share) price range, $ 14.50 $ 14.50
fair market value to to
at date of grant $46.375 $46.375
- -----------------------------------------------------------------------------------------------------
Options (shares) outstanding at January 1 990,085 926,112
Granted 279,050 241,350
Shares exercised (25,335) (55,325)
SARs(1) exercised (42,075) (109,227)
Canceled or expired (36,925) (12,825)
- -----------------------------------------------------------------------------------------------------
Options (shares) outstanding at December 31 1,164,800 990,085
=====================================================================================================
</TABLE>
<TABLE>
<CAPTION>
At December 31 1994 1993
<S> <C> <C>
Options (shares) exercisable 770,200 633,785
Options (shares) outstanding which include
a stock appreciation right 722,925 623,075
Shares reserved for future grants 251,750 493,875
=====================================================================================================
<FN>
(1) Stock appreciation rights (an appropriate accrual has been made).
</TABLE>
Note 12. Segment Information
Potlatch Corporation is an integrated forest products company with
substantial timber resources. It is engaged principally in the growing and
harvesting of timber and the manufacture and sale of wood products, printing
papers and other pulp-based products. Its timberlands and all of its
manufacturing facilities are located within the United States.
Following is a tabulation of business segment information for each of the
past three years:
<TABLE>
<CAPTION>
(Dollars in thousands) 1994 1993 1992
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales to Unaffiliated Customers:(1)
Wood products:
Oriented strand board $ 224,586 $ 194,514 $ 174,557
Lumber 196,577 196,544 159,080
Plywood 73,413 72,815 65,462
Particleboard 17,058 14,593 10,642
Other 41,078 25,159 17,017
- ------------------------------------------------------------------------------------------------------
552,712 503,625 426,758
- ------------------------------------------------------------------------------------------------------
Printing papers 405,553 369,012 365,636
- ------------------------------------------------------------------------------------------------------
Other pulp-based products:
Pulp 10,812 12,915 17,863
Paperboard 335,803 343,419 371,511
Tissue 166,378 139,883 118,162
Packaging(2) - - 26,682
- ------------------------------------------------------------------------------------------------------
512,993 496,217 534,218
- ------------------------------------------------------------------------------------------------------
Total $1,471,258 $1,368,854 $1,326,612
======================================================================================================
Intersegment Sales or Transfers:(3)
Wood products $ 64,111 $ 63,618 $ 66,142
Printing papers 10 - -
Other pulp-based products 159 948 1,733
- ------------------------------------------------------------------------------------------------------
Total $ 64,280 $ 64,566 $ 67,875
======================================================================================================
</TABLE>
-31-
<PAGE>
<TABLE>
<CAPTION>
(Dollars in thousands) 1994 1993 1992
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Income (Loss):
Wood products $ 160,345 $ 160,220 $ 99,833
Printing papers 40,174 15,796 27,316
Other pulp-based products (53,462) (40,944) 33,298
- ------------------------------------------------------------------------------------------------------
147,057 135,072 160,447
Corporate Items:
Administration expense (21,389) (26,922) (30,022)
Interest expense (51,137) (46,230) (34,902)
Interest and dividend income 348 1,352 3,790
Other, net 1,082 1,732 25,301
- ------------------------------------------------------------------------------------------------------
Earnings before taxes on income and
cumulative effect of accounting changes $ 75,961 $ 65,004 $ 124,614
======================================================================================================
Identifiable Assets:
Wood products $ 697,144 $ 689,598 $ 615,093
Printing papers 462,721 458,276 448,312
Other pulp-based products 804,267 824,015 807,597
Corporate 117,097 113,763 144,745
- ------------------------------------------------------------------------------------------------------
Total $2,081,229 $2,085,652 $2,015,747
======================================================================================================
Depreciation, Amortization and
Cost of Fee Timber Harvested:
Wood products $ 49,510 $ 39,909 $ 36,092
Printing papers 31,754 30,521 28,788
Other pulp-based products 55,962 52,142 41,320
Corporate 1,025 972 965
- ------------------------------------------------------------------------------------------------------
Total $ 138,251 $ 123,544 $ 107,165
======================================================================================================
Capital Expenditures:
Wood products $ 37,918 $ 97,612 $ 28,077
Printing papers 25,247 42,482 32,292
Other pulp-based products 40,771 59,559 118,503
Corporate 453 2,002 667
- ------------------------------------------------------------------------------------------------------
Total $ 104,389 $ 201,655 $ 179,539
======================================================================================================
<FN>
(1) Total export sales, including those made through brokers and agents,
amounted to $133.1 million, $106.1 million and $106.1 million in
1994, 1993 and 1992, respectively. Export paperboard sales (a majority
of which were shipped to Japan) amounted to 85 percent, 86 percent and
80 percent, respectively, of total export sales.
(2) The company's packaging operations were sold in April 1992.
(3) Intersegment sales for 1992-1994, the majority of which are based on
prevailing market prices, consisted primarily of chips, pulp logs and
other fiber sales to the pulp, papermaking and converting facilities.
The company's timber, timberlands and related logging facilities
generally have been assigned to the wood products segment.
</TABLE>
-32-
<PAGE>
<TABLE>
Note 13. Financial Results by Quarter (Unaudited)
<CAPTION>
(Dollars in thousands - except per-share amounts) Three Months Ended
- ----------------------------------------------------------------------------------------------------------------------------------
March 31 June 30 September 30 December 31
- ----------------------------------------------------------------------------------------------------------------------------------
1994 1993 1994 1993 1994 1993 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $365,282 $361,543 $345,120 $326,624 $373,324 $338,223 $387,532 $342,464
- ----------------------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Depreciation, amortization
and cost of fee timber
harvested 35,023 28,368 34,387 30,221 35,016 33,132 33,825 31,823
Materials, labor and other
operating expenses 280,351 266,466 270,982 262,202 287,014 273,323 283,144 262,269
Selling, general and
administrative expenses 19,514 21,482 20,915 19,634 22,488 19,615 19,882 23,227
- ----------------------------------------------------------------------------------------------------------------------------------
334,888 316,316 326,284 312,057 344,518 326,070 336,851 317,319
- ----------------------------------------------------------------------------------------------------------------------------------
Earnings from operations(1) $ 30,394 $ 45,227 $ 18,836 $ 14,567 $ 28,806 $ 12,153 $ 50,681 $ 25,145
==================================================================================================================================
Net earnings (loss) $ 5,314 $ (9,542) $ 6,052 $ 2,758 $ 10,741 $ (2,179)(2) $ 26,888 $ 15,598
==================================================================================================================================
Net earnings per common share:
Before accounting changes $.18 $ .76 $.21 $.09 $.37 $(.07)(2) $.92 $.53
After accounting changes .18 (.33) .21 .09 .37 (.07)(2) .92 .53
==================================================================================================================================
<FN>
(1) In 1994 the company began accruing for normal annual maintenance shutdowns over the entire year versus the previous
practice of expensing the costs as incurred. The effect of this change in accounting practice on earnings before
taxes by quarter for 1994 was a decrease of $3.7 million for the first quarter, a decrease of $.7 million for the
second quarter, an increase of $9.1 million for the third quarter and a decrease of $4.7 million for the fourth
quarter. There is no effect on an annual comparison.
(2) Includes a retroactive 1 percent federal tax increase on earnings for the first nine months of 1993 and $3.2
million of expense for the effect of the tax increase on deferred tax balances.
</TABLE>
-33-
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors:
We have audited the accompanying balance sheets of Potlatch Corporation and
consolidated subsidiaries as of December 31, 1994 and 1993 and the related
statements of earnings, stockholders' equity, and cash flows for each of the
years in the three-year period ended December 31, 1994. In connection with
our audits of the financial statements, we also have audited the financial
statement schedule on page 35. These financial statements and financial
statement schedule are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion the financial statements referred to above present fairly,
in all material respects, the financial position of Potlatch Corporation and
consolidated subsidiaries at December 31, 1994 and 1993 and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1994, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken
as a whole, present fairly, in all material respects, the information set
forth herein.
As discussed in the notes to the financial statements, in 1993 the company
adopted the provisions of the Financial Accounting Standards Board's Statement
of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," and Statement of
Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits."
KPMG Peat Marwick LLP
Portland, Oregon
January 25, 1995
-34-
<PAGE>
<TABLE>
POTLATCH CORPORATION AND CONSOLIDATED SUBSIDIARIES Schedule II
Valuation and Qualifying Accounts
For the Years Ended December 31, 1994, 1993 and 1992
(Dollars in thousands)
<CAPTION>
Amounts
charged
Balance at (credited) to
beginning costs and Balance at
Description of year expenses Deductions end of year
----------- ---------- ------------- ---------- -----------
<S> <C> <C> <C> <C>
Reserve deducted from related assets:
Doubtful accounts - Accounts receivable
Year ended December 31, 1994 $2,057 $ 621 $ (53)(1) $2,625
==============================================
Year ended December 31, 1993 $1,781 $ 92 $ 184 (1) $2,057
==============================================
Year ended December 31, 1992 $2,610 $(216) $(613)(1) $1,781
==============================================
<FN>
1 - Accounts written off - net of recoveries.
</TABLE>
-35-
<PAGE>
POTLATCH CORPORATION AND CONSOLIDATED SUBSIDIARIES
Exhibit Index
Exhibit
*(3)(a) Restated Certificate of Incorporation, restated and filed
with the state of Delaware on May 1, 1987, filed as
Exhibit (3)(a) to the Annual Report on Form 10-K for the
fiscal year ended December 31, 1992 ("1992 Form 10-K").
*(3)(c) By-laws, as amended through May 20, 1993, filed as
Exhibit (3)(c) to the Annual Report on Form 10-K for the
fiscal year ended December 31, 1993 ("1993 Form 10-K").
(4) See Exhibits (3)(a) and (3)(c). Registrant also
undertakes to file with the Securities and Exchange
Commission, upon request, any instrument with respect to
long-term debt.
(4)(a) Form of Indenture, dated as of April 1, 1986.
(4)(b) Form of Debenture for the $100 Million Principal Amount
of 9-5/8% Sinking Fund Debentures due April 15, 2016.
(4)(c) Form of Debenture for the $100 Million Principal Amount
of 9-1/8% Credit Sensitive Debentures due December 1,
2009.
(4)(d) Officers' Certificate, dated December 6, 1989.
*(4)(e) Form of Indenture, dated as of November 27, 1990, filed
as Exhibit (4)(e) to the Annual Report on Form 10-K for
the fiscal year ended December 31, 1990 ("1990 Form
10- K").
*(4)(f) Officers' Certificate, dated January 24, 1991, filed as
Exhibit (4)(f) to the 1990 Form 10-K.
*(4)(g) Officers' Certificate, dated December 12, 1991, filed as
Exhibit (4)(g) to the Annual Report on Form 10-K for the
fiscal year ended December 31, 1991 ("1991 Form 10-K").
*(10)(a) Potlatch Corporation Management Performance Award Plan,
as amended effective January 1, 1986, filed as Exhibit
(10)(a) to the 1990 Form 10-K.
(10)(a)(i) Amendment, dated May 5, 1989, to the Plan described in
Exhibit (10)(a).
*Incorporated by reference.
-36-
<PAGE>
*(10)(b) Potlatch Corporation Severance Program for Executive
Employees, as amended and restated as of February 24,
1989, filed as Exhibit (10)(b)(iv) to the 1993 Form 10-K.
*(10)(c) Letter agreement, dated May 21, 1979, between Potlatch
Corporation and George F. Jewett, Jr., regarding
consulting services, filed as Exhibit (10)(c) to the 1990
Form 10-K.
*(10)(c)(i) Amendment, dated February 19, 1986, to agreement
described in Exhibit (10)(c), filed as Exhibit (10)(c)(i)
to the 1990 Form 10-K.
*(10)(d) Potlatch Corporation Salaried Employees' Supplemental
Benefit Plan (As Amended and Restated Effective
January 1, 1988), filed as Exhibit (10)(d)(i) to the 1993
Form 10-K.
*(10)(d)(i) Amendment, effective as of December 31, 1992, to Plan
described in Exhibit (10)(d), filed as Exhibit
(10)(d)(ii) to the 1992 Form 10-K.
*(10)(f) Supplemental Retirement Benefit and Life Insurance
Agreement, dated February 19, 1988, together with
Amendment to Agreement thereto, dated as of January 1,
1992, between Potlatch Corporation and Richard B. Madden,
filed as Exhibit (10)(f)(iii) to the 1992 Form 10-K.
(10)(f)(i) Description of facilities use by Richard B. Madden.
*(10)(g) Potlatch Corporation 1983 Stock Option Plan (effective
September 24, 1983), together with amendments thereto,
dated December 14, 1984, February 24, 1989 and
February 22, 1990, filed as Exhibit (10)(r) to the 1993
Form 10-K.
(10)(g)(i) Form of Stock Option Agreement for the Potlatch
Corporation 1983 Stock Option Plan together with the
Addendum thereto as used for options granted on
December 14, 1989.
(10)(g)(ii) Form of Amendment to Stock Option Agreement together with
the Addendum thereto to add stock appreciation rights to
stock option agreements issued under the Potlatch
Corporation 1983 Stock Option Plan.
*(10)(g)(iii) Form of Stock Option Agreement for the Potlatch
Corporation 1983 Stock Option Plan together with the
Addendum thereto as used for options granted in each
December of 1990-1992, filed as Exhibit (10)(s)(v) to the
1990 Form 10-K.
(10)(h) Potlatch Corporation Deferred Compensation Plan for
Directors, as amended and restated as of May 1991.
*Incorporated by reference.
-37-
<PAGE>
(10)(i) Potlatch Corporation Directors' Retirement Plan,
effective October 1, 1989.
*(10)(j) Compensation of Directors, dated May 20, 1993, filed as
Exhibit (10)(w)(vi) to the 1993 Form 10-K.
*(10)(k) Form of Indemnification Agreement with each director of
Potlatch Corporation, dated as of the dates set forth on
Schedule A and Amendments 1, 2, 3 and 4 to Schedule A,
filed as Exhibit (10)(x) to the 1991 Form 10-K.
*(10)(k)(i) Amendment No. 5 to Schedule A to Exhibit (10)(k), filed
as Exhibit (10)(x)(i) to the 1992 Form 10-K.
*(10)(k)(ii) Amendment No. 6 to Schedule A to Exhibit (10)(k), filed
as Exhibit (10)(x)(ii) to the 1993 Form 10-K.
*(10)(l) Form of Indemnification Agreement with certain officers
of Potlatch Corporation identified on Schedule A and
Amendments 1, 2, and 3 to Schedule A, filed as Exhibit
(10)(y) to the 1991 Form 10-K.
*(10)(l)(i) Amendment No. 4 to Schedule A to Exhibit (10)(l), filed
as Exhibit (10)(y) to the 1992 Form 10-K.
*(10)(l)(ii) Amendment No. 5 to Schedule A to Exhibit (10)(l), filed
as Exhibit (10)(y)(ii) to the 1993 Form 10-K.
*(10)(m) Potlatch Corporation 1989 Stock Incentive Plan adopted
December 8, 1988, and as amended and restated
February 24, 1989, filed as Exhibit (10)(z) to the 1993
Form 10-K.
(10)(m)(i) Form of Stock Option Agreement for the Potlatch
Corporation 1989 Stock Incentive Plan together with the
Addendum thereto as used for options granted on
December 14, 1989.
*(10)(m)(ii) Form of Stock Option Agreement for the Potlatch
Corporation 1989 Stock Incentive Plan together with the
Addendum thereto as used for options granted in each
December of 1990-1994, filed as Exhibit (10)(z)(ii) to
the 1990 Form 10-K.
*(10)(n) Form of Amendments to Stock Options and Stock Incentive
Plans, dated March 30, 1990, filed as Exhibit (10)(aa) to
the 1990 Form 10-K.
(22) Potlatch Corporation Subsidiaries.
(23) Consent of Independent Auditors.
(24) Powers of Attorney.
*Incorporated by reference.
-38-
Potlatch Corporation
TO
The Bank of California,
National Association
Trustee
_________
Indenture
Dated as of April 1, 1986
_________
Exhibit (4)(a)
<PAGE>
Potlatch Corporation
Reconciliation and tie between Trust Indenture Act of 1939 and
Indenture, dated as of April 1, 1986
Trust Indenture
Act Section Indenture Section
310(a)(1) ................................... 609
(a)(2) ................................... 609
(a)(3) ................................... Not Applicable
(a)(4) ................................... Not Applicable
(b) ................................... 608
610
311(a) ................................... 613(a)
(b) ................................... 613(b)
(b)(2) ................................... 703(a)(2)
703(b)
312(a) ................................... 701
702(a)
(b) ................................... 702(b)
(c) ................................... 702(c)
313(a) ................................... 703(a)
(b) ................................... 703(b)
(c) ................................... 703(a), 703(b)
(d) ................................... 703(c)
314(a) ................................... 704
(b) ................................... Not Applicable
(c)(1) ................................... 102
(c)(2) ................................... 102
(c)(3) ................................... Not Applicable
(d) ................................... Not Applicable
(e) ................................... 102
315(a) ................................... 601(a)
(b) ................................... 602
703(a)(6)
(c) ................................... 601(b)
(d) ................................... 601(c)
(d)(1) ................................... 601(a)(1)
(d)(2) ................................... 601(c)(2)
(d)(3) ................................... 601(c)(3)
(e) ................................... 514
316(a) ................................... 101
(a)(1)(A)................................. 502
512
(a)(1)(B)................................. 513
(a)(2) ................................... Not Applicable
(b) ................................... 508
317(a)(1) ................................... 503
(a)(2) ................................... 504
(b) ................................... 1003
318(a) ................................... 107
___________
NOTE: This reconciliation and tie shall not, for any purpose,
be deemed to be part of the Indenture.
<PAGE>
TABLE OF CONTENTS
PAGE
PARTIES........................................................ 1
RECITALS OF THE COMPANY........................................ 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. Definitions:
Act ........................................... 2
Affiliate; control ............................ 2
Attributable Debt ............................. 2
Authenticating Agent .......................... 2
Board of Directors ............................ 3
Board Resolution .............................. 3
Business Day .................................. 3
Code .......................................... 3
Commission .................................... 3
Company ....................................... 3
Company Request; Company Order ................ 3
Consolidated Net Tangible Assets .............. 3
Corporate Trust Office ........................ 4
Corporation ................................... 4
Defaulted Interest ............................ 4
Event of Default .............................. 4
Funded Indebtedness ........................... 4
Holder ........................................ 4
Indebtedness .................................. 4
Indenture ..................................... 4
Interest ...................................... 4
Interest Payment Date ......................... 4
Lien .......................................... 4
Maturity ...................................... 5
Officers' Certificate ......................... 5
Opinion of Counsel ............................ 5
Original Issue Discount Security .............. 5
Outstanding ................................... 5
Paying Agent .................................. 6
Person ........................................ 6
Place of Payment .............................. 6
Predecessor Security .......................... 6
Principal Property ............................ 7
_______
NOTE: This table of contents shall not, for any purpose, be deemed
to be a part of the Indenture.
<PAGE>
ii
PAGE
Redemption Date ............................... 7
Redemption Price .............................. 7
Regular Record Date ........................... 7
Repayment Date ................................ 7
Repayment Price ............................... 8
Responsible Officer ........................... 8
Securities .................................... 8
Security Register and Security Registrar ...... 8
Special Record Date ........................... 8
Stated Maturity ............................... 8
Subsidiary ................................... 8
Timberlands ................................... 8
Trustee ....................................... 9
Trust Indenture Act ........................... 9
U. S. Government Obligations .................. 9
Vice President ................................ 9
SECTION 102. Compliance Certificates and Opinions .......... 9
SECTION 103. Form of Documents Delivered to Trustee ........ 10
SECTION 104. Act of Holders ................................ 11
SECTION 105. Notices, Etc., to Trustee and Company ......... 12
SECTION 106. Notice to Holders; Waiver ..................... 12
SECTION 107. Conflict with Trust Indenture Act ............. 13
SECTION 108. Effect of Headings and Table of Contents ...... 13
SECTION 109. Successors and Assigns ........................ 13
SECTION 110. Separability CLause ........................... 13
SECTION 111. Benefits of Indenture ......................... 13
SECTION 112. Governing Law ................................. 13
SECTION 113. Legal Holidays ................................ 13
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally ............................... 14
SECTION 202. Form of Face of Security ...................... 14
SECTION 203. Form of Reverse of Security ................... 17
SECTION 204. Form of Trustee's Certificate of
Authentication ............................. 22
<PAGE>
iii
ARTICLE THREE
THE SECURITIES
PAGE
SECTION 301. Amount Unlimited; Issuable in Series ......... 22
SECTION 302. Denominations ................................ 24
SECTION 303. Execution, Authentication, Delivery and Dating 24
SECTION 304. Temporary Securities.......................... 26
SECTION 305. Registration, Registration of Transfer and
Exchange ................................... 27
SECTION 306. Mutilated, Destroyed, Lost and Stolen
Securities ................................. 28
SECTION 307. Payment of Interest; Interest Rights Preserved 29
SECTION 308. Persons Deemed Owners ........................ 30
SECTION 309. Cancellation ................................. 31
SECTION 310. Computation of Interest ...................... 31
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture ...... 31
SECTION 402. Application of Trust Money ................... 33
SECTION 403. Satisfaction, Discharge and Defeasance of
Securities of any Series ................... 34
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default ............................ 36
SECTION 502. Acceleration of Maturity, Rescission and
Annulment .................................. 39
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee ..................... 40
SECTION 504. Trustee May File Proofs of Claim ............. 41
SECTION 505. Trustee May Enforce Claims Without Possession
of Securities .............................. 42
SECTION 506. Application of Money Collected ............... 42
SECTION 507. Limitation on Suits .......................... 43
SECTION 508. Unconditional Right of Holders to Receive
Principal, Premium and Interest ............ 44
<PAGE>
iv
PAGE
SECTION 509. Restoration of Rights and Remedies ........... 44
SECTION 510. Rights and Remedies Cumulative ............... 44
SECTION 511. Delay or Omission Not Waiver ................. 44
SECTION 512. Control by Holders ........................... 45
SECTION 513. Waiver of Past Defaults ...................... 45
SECTION 514. Undertaking for Costs ........................ 45
SECTION 515. Waiver of Stay or Extension Laws ............. 46
ARTICLE SIX
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities .......... 46
SECTION 602. Notice of Defaults ........................... 48
SECTION 603. Certain Rights of Trustee .................... 48
SECTION 604. Not Responsible for Recitals or Issuance of
Securities ................................. 50
SECTION 605. May Hold Securities .......................... 50
SECTION 606. Money Held in Trust .......................... 50
SECTION 607. Compensation and Reimbursement ............... 50
SECTION 608. Disqualification; Conflicting Interests ...... 51
(a) Elimination of Conflicting Interest or
Resignation .......................... 51
(b) Notice of Failure to Eliminate
Conflicting Interest or Resign ....... 51
(c) "Conflicting Interest" Defined ......... 51
(d) Definitions of Certain Terms Used in
This Section ......................... 55
(e) Calculation of Percentages of Securities 56
SECTION 609. Corporate Trustee Required, Eligibility ...... 57
SECTION 610. Resignation and Removal, Appointment of
Successor .................................. 58
SECTION 611. Acceptance of Appointment by Successor ....... 59
SECTION 612. Merger, Conversion, Consolidation or
Succession to Business ..................... 61
<PAGE>
v
PAGE
SECTION 613. Preferential Collection of Claims Against
Company .................................... 61
(a) Segregation and Apportionment of Certain
Collections by Trustee, Certain
Exceptions ........................... 61
(b) Certain Creditor Relationships Excluded
from Segregation and Apportionment.... 64
(c) Definitions of Certain Terms Used in
This Section.......................... 65
SECTION 614. Appointment of Authenticating Agent........... 66
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Company to Furnish Trustee Names and Addresses
of Holders.................................. 69
SECTION 702. Preservation of Information; Communications
to Holders.................................. 69
SECTION 703. Reports by Trustee ........................... 71
SECTION 704. Reports by Company............................ 72
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER
SECTION 801. Company May Consolidate, Etc., Only on Certain
Terms....................................... 73
SECTION 802. Successor Corporation Substituted............. 74
SECTION 803. Limitation on Lease of Properties as Entirety. 74
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of
Holders....................................... 74
SECTION 902. Supplemental Indentures with Consent of Holders. 76
SECTION 903. Execution of Supplemental Indentures............ 77
SECTION 904. Effect of Supplemental Indentures............... 77
SECTION 905. Conformity with Trust Indenture Act............. 78
SECTION 906. Reference in Securities to Supplemental
Indentures.................................... 78
<PAGE>
vi
ARTICLE TEN
COVENANTS
PAGE
SECTION 1001. Payment of Principal, Premium and Interest... 78
SECTION 1002. Maintenance of Office or Agency.............. 78
SECTION 1003. Money for Securities Payments to Be Held in
Trust...................................... 79
SECTION 1004. Corporate Existence.......................... 81
SECTION 1005. Limitations on Liens and Encumbrances........ 81
SECTION 1006. Limitations on Sale and Leaseback Trans-
actions.................................... 84
SECTION 1007. Defeasance of Certain Obligations............ 85
SECTION 1008. Statement by Officers as to Default.......... 86
SECTION 1009. Waiver of Certain Covenants.................. 87
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article..................... 87
SECTION 1102. Election to Redeem; Notice to Trustee........ 87
SECTION 1103. Selection by Trustee of Securities to Be
Redeemed................................... 88
SECTION 1104. Notice of Redemption......................... 88
SECTION 1105. Deposit of Redemption Price.................. 89
SECTION 1106. Securities Payable on Redemption Date........ 89
SECTION 1107. Securities Redeemed in Part ................. 90
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. Applicability of Article..................... 90
SECTION 1202. Satisfaction of Sinking Fund Payments with
Securities................................. 90
SECTION 1203. Redemption of Securities for Sinking Fund.... 91
<PAGE>
vii
ARTICLE THIRTEEN
REPAYMENT OF SECURITIES AT OPTION OF HOLDERS
PAGE
SECTION 1301. Applicability of Article..................... 91
SECTION 1302. Notice of Repayment Date .................... 92
SECTION 1303. Deposit of Repayment Price .................. 92
SECTION 1304. Securities Payable on Repayment Date......... 92
SECTION 1305. Securities Repaid in Part.................... 93
TESTIMONIUM................................................... 93
SIGNATURES AND SEALS ......................................... 94
ACKNOWLEDGMENTS............................................... 95
<PAGE>
101
INDENTURE, dated as of April 1, 1986, between Potlatch Corporation,
a corporation duly organized and existing under the laws of the State
of Delaware (herein called the "Company"), having its principal office at
One Maritime Plaza, San Francisco, California 94111, and The Bank of
California, National Association, a national banking association (herein
called the"Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured
and nonconvertible debentures, notes or other evidences of indebtedness
(herein called the "Securities"), to be issued in one or more series as
in this Indenture provided.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed,
for the equal and proportionate benefit of all Holders of the Securities or
of any series thereof, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the mean-
ings assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles, and, except as otherwise herein expressly pro-
<PAGE>
2
101
vided, the term "generally accepted accounting principles" with
respect to any computation required or permitted hereunder shall
mean such accounting principles as are generally accepted at the
date of this instrument; and
(4) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not to
any particular Article, Section or other subdivision.
Certain terms, used principally in Article Six are defined in that
Article.
"Act", when used with respect to any Holder, has the meaning specified
in Section 104.
"Afflliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power
to direct the management and policies of such Person, directly or indirect-
ly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Attributable Debt" means, as to any particular lease entered into
after the date hereof under which any Person is at the time liable and at
any date as of which the amount thereof is to be determined, the total net
amount of rent required to be paid by such Person under such lease during
the remaining primary term thereof, discounted to present values as of such
time in accordance with generally accepted accounting principles from the
respective due dates thereof to such date. The net amount of rent required
to be paid under any such lease for any such period shall be the aggregate
amount of the rent payable by the lessee with respect to such period after
excluding amounts required to be paid on account of maintenance and
repairs, insurance, taxes, assessments, water and utility rates and similar
charges. In the case of any lease which is terminable by the lessee upon the
payment of a penalty, such net amount shall also include the amount of such
penalty, but no rent shall be considered as required to be paid under such
lease subsequent to the first date upon which it may be so terminated.
"Authenticating Agent" means any Person authorized by the Trustee to
act on behalf of the Trustee to authenticate Securities.
<PAGE>
3
101
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly
adopted by the Board of Directors and to be in full force and effect on
the date of such certification, and delivered to the Trustee.
"Business Day", when used with respect to any Place of Payment,
means each Monday, Tuesday, Wednesday, Thursday and Friday which is
not a day on which banking institutions in that Place of Payment or San
Francisco, California, are authorized or obligated by law to close.
"Code" means the Internal Revenue Code of 1954, as amended.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Securities Exchange Act of
1934, or, if at any time after the execution of this instrument such
Commission is not existing and performing the duties now assigned to it
under the Trust Indenture Act, then the body performing such duties at such
time.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor corporation shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor corporation.
"Company Request" or "Company Order" means a written request or
order signed in the name of the Company by its Chairman of the Board, its
Vice Chairman, its President or a Vice President, and by its Treasurer, an
Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered
to the Trustee.
"Consolidated Net Tangible Assets" means the total amount of assets
of the Company and its consolidated Subsidiaries (less applicable reserves)
after deducting therefrom: (a) all current liabilities of the Company and
its consolidated Subsidiaries (excluding intercompany items among the Com-
pany and its consolidated Subsidiaries and excluding any current liabilities
constituting Funded Indebtedness by reason of being renewable or extend-
able and deferred income taxes), and (b) goodwill, trade names, trade-
marks, patents, unamortized debt discount and expense and other like
intangibles, such assets and exclusions and deductions therefrom to be in
such amounts, if any, as would appear on a consolidated balance sheet of
<PAGE>
4
101
the Company and its consolidated Subsidiaries as of the date of comput-
ation, prepared in accordance with generally accepted accounting principles
applied on a consistent basis as in effect on the date of such computation.
"Corporate Trust Office" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be adminis-
tered.
"corporation" includes corporations, associations, companies and busi-
ness trusts.
"Defaulted Interest" has the meaning specified in Section 307.
"Event of Default" has the meaning specified in Section 501.
"Funded Indebtedness" means, with respect to any corporation, in-
debtedness of such corporation if such indebtedness shall be payable more
than one year from the date of computation or shall be extendable or
renewable at the option of such corporation to a time more than one year
after the date of computation; and all guarantees (direct or indirect) of
such indebtedness of others.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"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.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions
hereof and shall include the terms of particular series of Securities estab-
lished as contemplated by Section 301.
"interest", when used with respect to an Original Issue Discount
Security which by its terms bears interest only after Maturity, means
interest payable after Maturity.
"Interest Payment Date", when used with respect to any Security,
means the Stated Maturity of an installment of interest on such Security.
"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).
<PAGE>
5
101
"Maturity", when used with respect to any Security, means the date on
which the principal of such Security or an installment of principal becomes
due and payable as therein or herein provided, whether at the Stated
Maturity or by declaration of acceleration, call for redemption, exercise of
repayment option or otherwise.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, a Vice Chairman, the President or a Vice President, and by the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary,
of the Company, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
an employee of or counsel for the Company (except in the case of an
opinion of counsel deliverable pursuant to Sections 403(j) and 1007(6)),
and who shall be acceptable to the Trustee.
"Original Issue Discount Security" means any Security which provides
for an amount less than the principal amount thereof to be due and payable
upon a declaration of acceleration of the Maturity thereof pursuant to
Section 502.
"Outstanding", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and deliver-
ed under this Indenture, except:
------
(i) Securities theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Securities or portions thereof for whose payment or redemp-
tion (a) money in the necessary amount has been theretofore deposited
with the Trustee or any Paying Agent (other than the Company) in
trust or set aside and segregated in trust by the Company (if the
Company shall act as its own Paying Agent) for the Holders of such
Securities or (b) U.S. Government Obligations as contemplated by
Sections 401 and 403 in the necessary amount have been theretofore
deposited with the Trustee, in trust, for the Holders of such
Securities; provided that, if such Securities are to be redeemed,
notice of such redemption has been duly given pursuant to this Inden-
ture or provision therefor satisfactory to the Trustee has been made;
and
(iii) Securities which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Securities have been authenti-
<PAGE>
6
101
cated and delivered pursuant to this Indenture, other than any such
Securities in respect of which there shall have been presented to
the Trustee proof satisfactory to it that such Securities are held
by a bona fide purchaser in whose hands such Securities are vaild
obligations of the Company:
provided, however, that in determining whether the Holders of the
requisite principal amount of the Outstanding Securities have given any
request, demand, authorization, direction, notice, consent or waiver
hereunder, Securities owned by the Company or any other obligor upon
the Securities or any Affiliate of the Company or of such other obligor
shall be disregarded and deemed not to be Outstanding, except that, in
determining whether the Trustee shall be protected in relying upon any
such request, demand, authorization, direction, notice, consent or
waiver, only Securities which the Trustee knows to be so owned shall be
so disregarded. Securities so owned which have been pledged in good faith
may be regarded as Outstanding if the pledgee establishes to the satis-
faction of the Trustee the pledgee's right so to act with respect to
such Securities and that the pledgee is not the Company or any other
obligor upon the Securities or any Affiliate of the Company or of such
other obligor.
"Paying Agent" means any Person authorized by the Company to pay
the principal of (and premium, if any) or interest on any Securities on
behalf of the Company.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision
thereof.
"Place of Payment", when used with respect to the Securities of any
series, means the place or places (which shall be in the Borough of
Manhattan, The City of New York) where the principal of (and premium,
if any) and interest on the Securities of that series are payable as
specified as contemplated by Section 301.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that
evidenced by such particular Security; and, for the purpose of this
definition, any Security authenticated and delivered under Section 306
in exchange for or in lieu of a mutilated, destroyed, lost or stolen
Security shall be deemed to evidence the same debt as the mutilated,
destroyed, lost or stolen Security.
<PAGE>
7
101
"Principal Property" means (a) any building, structure or other
facility used primarily for manufacturing and located in the United States,
in each case the gross book value (without deduction of any depreciation
reserves) of which on the date as of which the determination is being made
shall exceed 1% of Consolidated Net Tangible Assets, other than any of the
types of facilities described in subsections (b)(4), (b)(5) and (b)(6) of
Section 103 of the Code, or as described in any provisions of the Code
which may hereafter replace such subsections, or any types of facilities
which may hereafter be added to the list of facilities described in such
subsections or their successor provisions, and (b) any timberlands in the
United States owned in fee or under contract for the purchase of the fee by
the Company or any Subsidiary other than such timberlands in the aggregate
not exceeding 10% of the aggregate timberlands acreage in the United
States owned in fee or under contract for the purchase of the fee by
the Company and its Subsidiaries on the date as of which any determination
shall be made; provided, however, that the term "Principal Property" shall
not include any timberlands, buildings, structures, facilities or any portion
of any of the foregoing which, in the opinion of the Board of Directors as
expressed in a Board Resolution, shall not be of material importance to the
total business conducted by the Company and its Subsidiaries taken as an
entirety; and provided, further, that the term Principal Property shall not
include any land, including without limitation timberlands, designated by the
Board of Directors as being held primarily for development and/or sale, or
any land, including without limitation timberlands, held for the exploitation
of minerals or mineral rights.
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to
this Indenture.
"Redemption Price", when used with respect to any Security to be,
redeemed, means the price at which it is to be redeemed pursuant to
this Indenture.
"Regular Record Date" for the interest payable on any Interest
Payment Date on the Securities of any series means the date specified
for that purpose as contemplated by Section 301.
"Repayment Date", when used with respect to any Security of any
series to be repaid, means the date, if any, fixed for such repayment
pursuant to Section 301 of this Indenture.
<PAGE>
8
101
"Repayment Price", when used wtth respect to any Security of any
series to be repaid, means the price, if any, at which it is to be
repaid pursuant to Section 301.
"Responsible Officer", when used with respect to the Trustee, means
the chairman or any vice-chairman of the board of directors, the chair-
man or any vice-chairman of the executive committee of the board of
directors, the president, any vice president, the secretary, the
treasurer, any trust officer, the controller or any other officer of
the Trustee customarily performing functions similar to those performed
by any of the above designated officers.
"Securities" has the meaning stated in the first recital of this
Indenture and more particularly means any Securities authenticated and
delivered under this Indenture.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
"Special Record Date" for the payment of any Defaulted Interest
means a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or any
installment of principal thereof or interest thereon, means the date
specified in such Security as the fixed date on which the principal of
such Security or such installment of principal or interest is due and
payable.
"Subsidiary" means a corporation more than 50% of the outstanding
voting stock of which is owned, directly or indirectly by the Company
or by one or more other Subsidiares, or by the Company and one or more
other Subsidiaries. For the purposes of this definition, "voting stock"
means stock which ordinarily has voting power for the election of
directors, whether at all times or only so long as no senior class of
stock has such voting power by reason of any contingency.
"timberlands" means real property that contains standing timber
which is (or upon the completion of the growth cycle then in process is
expected to become) of a commercial quantity and of merchantable
quality.
<PAGE>
9
101, 102
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have been
appointed pursuant to the applicable provisions of this Indenture, and
thereafter "Trustee" shall mean or include each Person who is then a
Trustee hereunder, and if at any time there is more than one such
Person, "Trustee" as used with respect to the Securities of any series
shall mean the Trustee with respect to Securities of that series.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed, except as
provided in Section 905.
"U.S. Government Obligations" means direct obligations of the
United States for the payment of which its full faith and credit is
pledged, or obligations of a Person controlled or supervised by and
acting as an agency or instrumentality of the United States and the
payment of which is unconditionally guaranteed by the United States.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a
number or a word or words added before or after the title "vice
president".
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish
to the Trustee an Officers' Certificate stating that all conditions pre-
cedent, if any, provided for in this Indenture relating to the proposed
action have been met and an Opinion of Counsel stating that in the opinion of
such counsel all such conditions precedent, if any, have been met, except
that in the case of any such application or request as to which the furnish-
ing of such documents is specifically required by any provision of this
Indenture relating to such particular application or request, no additional
certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condi-
tion or covenant provided for in this Indenture shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
<PAGE>
10
102, 103
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he
has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been met; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been met.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not neeessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but
one such Person may certify or give an opinion with respect to some matters
and one or more other such Persons as to other matters, and any such Person
may certify or give an opinion as to such matters in one or several
documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon an Opinion of Counsel, unless
such officer knows, or in the exercise of reasonable care should know, that
the opinion with respect to the matters upon which his certificate or
opinion is based is erroneous. Any such Opinion of Counsel may be based,
insofar as it relates to factual matters, upon a certificate or opinion of,
or representations by, an officer or officers of the Company stating that
the information with respect to such factual matters is in the possession of
the Company, unless such counsel knows, or in the exercise of reasonable
care should know, that the certificate or opinion or representations with
respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be con-
solidated and form one instrument.
<PAGE>
11
104
SECTION 104. Acts of Holders
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent
duly appointed in writing; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument or
instruments are delivered to the Trustee and, where it is hereby expressly
required, to the Company. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred to
as the "Act" of the Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Indenture and (subject to
Section 601) conclusive in favor of the Trustee and the Company, if made in
the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual
signing such instrument or writing acknowledged to him the execution there-
of. Where such execution is by a signer acting in a capacity other than his
individual capacity, such certificate or affidavit shall also constitute
sufficient proof of his authority. The fact and date of the execution of any
such instrument or writing, or the authority of the Person executing the
same, may also be proved in any other manner acceptable to the Trustee.
(c) The ownership of Securities shall be proved by the Security
Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future
Holder of the same Security and the Holder of every Security issued upon
the registration of transfer thereof or in exchange therefor or in lieu
thereof in respect of anything done, omitted or suffered to be done by the
Trustee or the Company in reliance thereon, whether or not notation of such
action is made upon such Security.
<PAGE>
12
105, 106
SECTION 105. Notices, Etc., to Trustee and Company.
Except as otherwise provided herein, any request, demand, author-
ization, direction, notice, consent, waiver or Act of Holders or other
document provided or permitted by this Indenture to be made upon, given
or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Depart-
ment, Attention: Manager, Corporate Trust Department, 400 California
Street, San Francisco, California 94104, or
(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein ex-
pressly provided) if in writing and mailed, first- class postage
prepaid, to the Company addressed to it at the address of its principal
office specified in the first paragraph of this instrument or at any
other address previously furnished in writing to the Trustee by the
Company.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice of any event or reports to
Holders, such notice or report shall be sufficiently given (unless otherwise
herein expressly provided) if in writing and mailed, first-class postage
prepaid, to each Holder affected by such event, at his address as it appears
in the Security Register (and to such other addressees as may be required in
the case of such notice or report under Section 313(c) of the Trust
Indenture Act), not later than the latest date, and not earlier than the
earliest date, prescribed for the giving of such notice or report. In any
case where notice to Holders is given by mail, neither the failure to mail
such notice, nor any defect in any notice so mailed, to any particular
Holder shall affect the sufficiency of such notice with respect to other
Holders. Where this Indenture provides for notice in any manner, such notice
may be waived in writing by the Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Holders shall be filed with the Trustee,
but such filing shall not be a condition precedent to the validity of any
action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the
Trustee shall constitute a sufficient notification for every purpose
hereunder.
<PAGE>
13
107, 108, 109, 110, 111, 112, 113
SECTION 107. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with another
provision hereof which is required to be included in this Indenture by any
of the provisions of the Trust Indenture Act, such required provision shall
control.
SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
SECTION 110. Separability Clause.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
SECTION 111. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto (including any
Paying Agent appointed pursuant to Section 1002 and Authenticating Agent
appointed pursuant to Section 614 to the extent provided herein) and their
successors hereunder and the Holders, any benefit or any legal or equitable
right, remedy or claim under this Indenture.
SECTION 112. Governing Law.
This Indenture and the Securities shall be governed by and construed in
accordance with the laws of the State of New York.
SECTION 113. Legal Holidays
In any case where any Interest Payment Date, Redemption Date,
Repayment Date or Stated Maturity of any Security shall not be a Business
Day at any Place of Payment or San Francisco, California, then (notwith-
standing any other provision of this Indenture or of the Securities) payment
of interest or principal (and premium, if any) need not be made at such
<PAGE>
14
113, 201, 202
Place of Payment on such date, but may be made on the next succeeding
Business Day at such Place of Payment with the same force and effect as if
made on the Interest Payment Date or Redemption Date, Repayment Date,
or at the Stated Maturity, provided that no interest shall accrue with
respect to such payment for the period from and after such Interest
Payment Date, Redemption Date, Repayment Date or Stated Maturity, as the
case may be.
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally.
The Securities of each series shall be in substanially the form set
forth in this Article, or in such other form as shall be established by or
pursuant to a Board Resolution or in one or more indentures supplemental
hereto, in each case with such appropriate insertions, omissions, subsitu-
tions and other variations as are required or permitted by this Indenture
and as reasonably acceptable to the Trustee, and may have such letters,
numbers or other marks of identification and such legends or endorsements
placed thereon as may be required to comply with the rules of any securities
exchange or as may, consistently herewith, be determined by the officers
executing such Securities, as evidenced by their execution of the Secur-
ities. If the form of Securities of any series is established by action
taken pursuant to a Board Resolution, a copy of an appropriate record of
such action shall be certified by the Secretary or an Assistant Secretary of
the Company and delivered to the Trustee at or prior to the delivery of the
Company Order contemplated by Section 303 for the authentication and
delivery of such Securities.
The Trustee's certificate of authentication shall be in substanially
the form set forth in this Article.
The definitive Securities shall be printed, lithographed or engraved on
steel engraved borders or may be produced in any other manner or
combination of manners, all as determined by the officers executing such
Securities, as evidenced by their execution of such Securities.
SECTION 202. Form of Face of Security.
[If the Security is an Original Issue Discount Sccurity, insert-FOR
PURPOSES OF SECTION 1273 OF THE UNITED STATES INTERNAL REVENUE CODE
<PAGE>
15
202
OF 1954, AS AMENDED, THE ISSUE PRICE OF THIS SECURITY IS ....% OF ITS
PRINCIPAL AMOUNT AND THE ISSUE DATE IS ............, 19....
POTLATCH CORPORATION
No. .... $ ......
Potlatch Corporation, a corporation duly organized and existing under
the laws of the State of Delaware (herein called the "Company", which
term includes any successor corporation under the Indenture hereinafter
referred to), for value received, hereby promises to pay to ...............
...................................., or registered assigns, the principal
sum of ....................................................................
Dollars on ................................................................
[If the Security is to bear interest prior to Maturity, insert-, and to pay
interest thereon from ........... or from the most recent Interest Payment
Date to which interest has been paid or duly provided for, semi-annually on
....... and ....... in each year, commencing ......., at the rate [of ....%
per annum] [per annum from time to time in effect as described below],
until the principal hereof is paid or made available for payment [If
applicable insert-, and (to the extent that the payment of such interest
shall be legally enforceable) at the rate of ....% per annum on any overdue
principal and premium and on any overdue instalment of interest]. The
interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security (or one or more Predecessor Securities)
is registered at the close of business on the Regular Record Date for such
interest, which shall be the ....... or ......... (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any
such interest not so punctually paid or duly provided for will forthwith
cease to be payable to the Holder on such Regular Record Date and may either
be paid to the Person in whose name this Security (or one or more Pred-
ecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities of this
series not less than 10 days prior to such Special Record Date, or be paid
at any time in any other
<PAGE>
16
202
lawful manner not inconsistent with the requirements
of any securities exchange on which the Securities of this series may
be listed, and upon such notice as may be required by such exchange, all as
more fully provided in said Indenture].
[If the Security is not to bear interest at a fixed rate per annum,
insert a description of the manner in which the rate of interest is to be
determined]. [If the Security is not to bear interest prior to Maturity,
insert-The principal of this Security shall not bear interest except in the
case of a default in payment of principal upon acceleration, upon redemp-
tion, upon repayment at the option of the Holder or at Stated Maturity and
in such case the overdue principal of this Security shall bear interest at
the rate of ....% per annum (to the extent that the payment of such interest
shall be legally enforceable), which shall accrue from the date of such
default in payment to the date payment of such principal has been made or
duly provided for. Interest on any overdue principal shall be payable on
demand. Any such interest on any overdue principal that is not so paid on
demand shall bear interest at the rate of ....% per annum (to the extent
that the payment of such interest shall be legally enforceable), which shall
accrue from the date of such demand for payment to the date payment of such
interest has been made or duly provided for, and such interest shall also be
payable on demand.]
Payment of the principal of (and premium, if any) and [if applicable,
insert-any such-] interest on this Security will be made at the office or
agency of the Company maintained for that purpose in the Borough of
Manhattan, The City of New York, in such coin or currency of the [United
States of America] [other country] as at the time of payment is legal tender
for payment of public and private debts [if applicable, insert-; provided,
however, that at the option of the Company payment of interest may be
made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register].
[Insert a brief description of the right, if any, of Holders to elect
repayment.]
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
<PAGE>
17
202, 203
Unless the certificate of authentication hereon has been executed by or
on behalf of the Trustee referred to on the reverse hereof by manual
signature, this Security shall not be entitled to any benefit under the
Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed under its corporate seal.
Dated:
POTLATCH CORPORATION
By ...........................................
[Authorized Officer]
Attest:
...............................
Secretary
SECTION 203. Form of Reverse of Security.
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or
more series under an Indenture, dated as of April 1, 1986 (herein called the
"Indenture"), between the Company and The Bank of California, National
Association, as Trustee (herein called the "Trustee", which term includes
any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties and immunities there-
under of the Company, the Trustee and the Holders of the Securities and of
the terms upon which the Securities are, and are to be, authenticated and
delivered. This Security is one of the series designated on the face hereof
[, limited in aggregate principal amount to $ .........].
[If applicable, insert-The Securities of this series are subject to
redemption upon not less than 30 days' notice by mail, [if applicable,
insert-(1) on ..............in any year commencing with the year ........
and ending with the year ........ through operation of the sinking fund for
this series at a Redemption Price equal to 100% of the principal amount, and
<PAGE>
18
203
(2)] at any time [on or after ........., 19.... ], as a whole or in part,
at the election of the Company, at the following Redemption Prices
(expressed as percentages of the principal amount): If redeemed [on or
before .........., .....%, and if redeemed] during the 12-month period
beginning .......... of the years indicated,
Redemption Redemption
Year Price Year Price
---- ----- ---- -----
and thereafter at a Redemption Price equal to ....% of the principal amount,
together in the case of any such redemption [if applicable, insert-(whether
through operation of the sinking fund or otherwise)] with accrued interest
to the Redemption Date, but an interest installment whose Stated Maturity
is on or prior to such Redemption Date will be payable to the Holders of
such Securities, or one or more Predecessor Securities, of record at the
close of business on the relevant Record Dates referred to on the face
hereof, all as provided in the Indenture.]
[If applicable, insert-The Securities of this series are subject to
redemption upon not less than 30 days' notice by mail, (1) on ............
in any year commencing with the year ..... and ending with the year ......
through operation of the sinking fund for this series at the Redemption
Prices for redemption through operation of the sinking fund (expressed as
percentages of the principal amount) set forth in the table below, and (2)
at any time [on or after ..........], as a whole or in part, at the election
of the Company, at the Redemption Prices for redemption otherwise than
through operation of the sinking fund (expressed as percentages of the
<PAGE>
19
203
principal amount) set forth in the table below: If redeemed during the 12-
month period beginning ................. of the years indicated,
Redemption Price
For Redemption Redemption Price For
Through Operation Redemption Otherwise
of the Than Through Operation
Year Sinking Fund of the Sinking Fund
---- ------------ -------------------
and thereafter at a Redemption Price equal to ........% of the principal
amount, together in the case of any such redemption (whether through
operation of the sinking fund or otherwise) with interest accrued to the
Redemption Date, but an interest installment whose Stated Maturity is on or
prior to such Redemption Date will be payable to the Holders of such
Securities, or one or more Predecessor Securities, of record at the close of
business on the relevant Record Dates referred to on the face hereof, all as
provided in the Indenture.]
[Notwithstanding the foregoing, the Company may not, prior to
................., redeem any Securities of this series as contemplated by
[Clause (2) of] the preceding paragraph as a part of, or in anticipation
of, any refunding operation by the application, directly or indirectly, of
moneys borrowed having an interest cost to the Company (calculated in
accordance with generally accepted financial practice) of less than .....%
per annum.]
[The sinking fund for this series provides for the redemption on
.............. in each year beginning with the year ...... and ending with
the year ...... of [not less than] $.......... [("mandatory sinking fund")
and not more than $..........] aggregate principal amount of Securities of
this series. [Securities of this series acquired or redeemed by the Company
<PAGE>
20
203
otherwise than through [mandatory] sinking fund payments may be
credited against subsequent [mandatory] sinking fund payments otherwise
required to be made.]
In the event of redemption of this Security in part only, a new
Security or Securities of this series for the unredeemed portion hereof will
be issued in the name of the Holder hereof upon the cancellation hereof.
The Indenture contains provisions for defeasance at any time of (a) the
entire indebtedness on this Security and (b) certain restrictive covenants
upon compliance by the Company with certain conditions set forth therein,
which provisions apply to this Security.
[If applicable, insert provisions detailing provisions with respect to
repayment at the option of Holders and the issuance of Securities in lieu of
Securities redeemed or repaid at the option of Holders.]
[If the Security is not an Original Issue Discount Security,-If an
Event of Default with respect to Securities of this series shall occur and
be continuing, the principal of the Securities of this series may be declar-
ed due and payable in the manner and with the effect provided in the
Indenture.]
[If the Security is an Original Issue Discount Security,-If an Event of
Default with respect to Securities of this series shall occur and be contin-
uing, an amount of principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture. Such amount shall be equal to-insert formula for determining the
amount. Upon payment (i) of the amount of principal so declared due and
payable and (ii) of interest on any overdue principal and overdue interest
(in each case to the extent that the payment of such interest shall be
legally enforceable), all of the Company's obligations in respect of the
payment of the principal of and interest, if any, on the Securities of this
series shall terminate.]
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee
with the consent of the Holders of 66 2/3% in aggregate principal amount of
the Securities at the time Outstanding of each series to be affected. The
Indenture also contains provisions permitting the Holders of specified
<PAGE>
2l
203
percentages in principal amount of the Securities of each series at the time
Outstanding, on behalf of the Holders of all Securities of such series, to
waive compliance by the Company with certain provisions of the Indenture
and certain past defaults under the Indenture and their consequences. Any
such consent or waiver by the Holder of this Security shall be conclusive
and binding upon such Holder and upon all future Holders of this Security
and of any Security issued upon the registration of transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent
or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of (and premium,
if any) and interest on this Security at the times, place and rate, and in
the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at
the office or agency of the Company in any place where the principal of (and
premium, if any) and interest on this Security are payable, duly endorsed
by, or accompanied by a written instrument of transfer in form satisfactory
to the Company, the Trustee and the Security Registrar duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one
or more new Securities of this series, of authorized denominations and for
the same aggregate principal amount, will be issued to the designated
transferee or transferees.
The Securities of this series are issuable only in registered form
without coupons in denominations of $.... and any integral multiple thereof.
As provided in the Indenture and subject to certain limitations therein set
forth, Securities of this series are exchangeable for a like aggregate
principal amount of Securities of this series of a different authorized
denomination, as requested by the Holder surrendering the same.
No service charge shall be made to the Holder for any such registration
of transfer or exchange, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in
connection therewith.
<PAGE>
22
203, 204, 301
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and
neither the Company, the Trustee nor any such agent shall be affected by
notice to the contrary.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture. The Indenture and
the Securities will be governed by and construed in accordance with the laws
of the State of New York.
[If applicable, insert form of option to elect repayment.]
SECTION 204. Form of Trustee's Certificate of Authentication.
This is one of the Securities of the series designated pursuant to and
issued under the within-mentioned Indenture.
THE BANK OF CALIFORNIA,
NATIONAL ASSOCIATION
as Trustee
By...........................
Authorized Officer
ARTICLE THREE
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series.
The aggregate principal amount of Securities which may be authenti-
cated and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution, and set forth in an
Officers' Certificate, or established in one or more indentures supplemental
hereto, prior to the issuance of Securities of any series,
(1) the title of the Securities of the series (which shall dist-
inguish the Securities of the series from all other Securities);
(2) any limit upon the aggregate principal amount of the Secu-
rities of the series which may be authenticated and delivered under
<PAGE>
23
301
this Indenture (except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other
Securities of the series pursuant to Section 304, 305, 306, 906, 1107
or 1305);
(3) the date or dates on which the principal of the Securities of
the series is payable;
(4) the rate or rates (including the method of determining any
variable rates) at which the Securities of the series shall bear
interest, if any, the date or dates from which such interest shall
accrue, the Interest Payment Dates on which such interest shall be pay-
able and the Regular Record Date for the interest payable on any
Interest Payment Date;
(5) the place or places where the principal of (and premium, if
any) and interest on Securities of the series shall be payable;
(6) the period or periods within which, the price or prices at
which and the terms and conditions upon which Securities of the series
may be redeemed, in whole or in part, at the option of the Company;
(7) the obligation, if any, of the Company to redeem or purchase
Securities of the series pursuant to any sinking fund or analogous
provisions and the period or periods within which, the price or prices
at which and the terms and conditions upon which Securities of the
series shall be redeemed or purchased, in whole or in part, pursuant to
such obligation;
(8) the period or periods within which, the price or prices at
which and the terms and conditions upon which Securities of the series
may be repaid, in whole or in part, at the option of the Holders;
(9) the right, if any, of the Company to execute and deliver to the
Trustee, and to direct the Trustee to authenticate and deliver in
accordance with a Company Order, a Security of any series in lieu of or
in exchange for any Securities of such series cancelled upon redemption
or repayment;
(10) if other than denominations of $l,000 and any integral
multiple thereof, the denominations in which Securities of the series
shall be issuable;
<PAGE>
24
301, 302, 303
(11) if other than the principal amount thereof, the portion of the
principal amount of Securities of the series which shall be payable
upon declaration of acceleration of the Maturity thereof pursuant to
Section 502;
(12) the currency or currencies, including composite currencies, in
which payment of the principal of (and premium, if any) and interest
on the Securities of the series shall be payable (if other than the
currency of the United States of America);
(13) if the amount of payments of principal of (and premium, if
any) or interest on the Securities of the series may be determined with
reference to an index, the manner in which such amounts shall be
determined; and
(14) any other terms, conditions and rights of the series (which
terms, conditions and rights shall not be inconsistent with the pro-
visions of this Indenture).
All Securities of any one series shall be substantially identical
except as to denomination and except as may otherwise be provided in or
pursuant to such Board Resolution and set forth in such Officers' Certif-
icate or in any such indenture supplemental hereto and as reasonably
acceptable to the Trustee.
If any of the terms of the series are established by action taken
pursuant to a Board Resolution, a copy of an appropriate record of such
action shall be certified by the Secretary or an Assistant Secretary of the
Company and delivered to the Trustee at or prior to the delivery of the
Officers' Certificate setting forth the terms of the series.
SECTION 302. Denominations.
The Securities of each series shall be issuable in registered form
without coupons in such denominations as shall be specified as contemplated
by Section 301. In the absence of any such provisions with respect to the
Securities of any series, the Securities of such series shall be issuable in
denominations of $l,000 and any integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its Vice Chairman, its President or one of its Vice
<PAGE>
25
303
Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the
Company, notwithstanding that such individuals or any of them have ceased
to hold such offices prior to the authentication and delivery of such
Securities or did not hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities of any series executed by
the Company to the Trustee for authentication, together with a Company
Order for the authentication and delivery of such Securities, and the
Trustee in accordance with the Company Order shall authenticate and deliver
such Securities. If the form or terms of the Securities of the series have
been established in or pursuant to one or more Board Resolutions as
permitted by Sections 201 or 301, in authenticating such Securities, and
accepting the additional responsibilities under this Indenture in relation
to such Securities, the Trustee shall be entitled to receive, and (subject
to Section 601) shall be fully protected in relying upon, an Opinion of
Counsel stating,
(a) if the form of such Securities has been established by or
pursuant to a Board Resolution as permitted by Section 201, that such
form has been established in conformity with the provisions of this
Indenture;
(b) if the terms of such Securities have been established by or
pursuant to a Board Resolution as permitted by Section 301, that such
terms have been established in conformity with the provisions of this
Indenture; and
(c) that such Securities, when authenticated and delivered by the
Trustee and issued by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, will constitute valid
and legally binding obligations of the Company, enforceable in accor-
dance with their terms, subject to bankruptcy, insolvency, reorganiza-
tion and other laws of general applicability relating to or affecting
the enforcement of creditors' rights and to general equity principles.
If such form or terms have been so established, the Trustee shall not be
required to authenticate such Securities if the issuance of such Securities
<PAGE>
26
303, 304
pursuant to this Indenture will affect the Trustee's own rights, duties or
immunities under the Securities and this Indenture or otherwise in a manner
which is not reasonably acceptable to the Trustee.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such
Security has been duly authenticated and delivered hereunder and is entitled
to the benefits of this Indenture.
SECTION 304. Temporary Securities.
Pending the preparation of definitive Securities of any series, the
Company may execute, and upon Company Order the Trustee shall authenticate
and deliver, temporary Securities which are printed, lithographed, type-
written, mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Securities in lieu of which
they are issued and with such appropriate insertions, omissions, substitu-
tions and other variations as the officers executing such Securities may
determine, as evidenced by their execution of such Securities.
If temporary Securities of any series are issued, the Company will
cause definitive Securities of that series to be prepared without unreason-
able delay. After the preparation of definitive Securities of such series,
the temporary Securities of such series shall be exchangeable for definitive
Securities of such series upon surrender of the temporary Securities of such
series at the office or agency of the Company in a Place of Payment for that
series, without charge to the Holder. Upon surrender for cancellation of any
one or more temporary Securities of any series the Company shall execute
and the Trustee shall authenticate and deliver in exchange therefor a like
principal amount of definitive Securities of the same series of authorized
denominations. Until so exchanged the temporary Securities of any series
shall in all respects be entitled to the same benefits under this Indenture
as definitive Securities of such series.
<PAGE>
27
305
SECTION 305. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a register (the register maintained in such office and in any other
office or agency of the Company in a Place of Payment being herein
sometimes collectively referred to as the "Security Register") in which,
subject to such reasonable regulations as it may prescribe, the Company
shall provide for the registration of Securities and of transfers of Sec-
urities. The Trustee is hereby appointed "Security Registrar" for the
purpose of registering Securities and transfers of Securities as herein
provided.
Upon surrender for registration of transfer of any Security of any
series at the office or agency in a Place of Payment for that series, the
Company shall execute, and the Trustee shall authenticate and deliver, in
the name of the designated transferee or transferees, one or more new Sec-
urities of the same series, of any authorized denominations and of a like
aggregate principal amount.
At the option of the Holder, Securities of any series may be exchanged
for other Securities of the same series, of any authorized denominations and
of a like aggregate principal amount, upon surrender of the Securities to be
exchanged at such office or agency. Whenever any Securities are so
surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Securities which the Holder making the
exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the
same debt, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company, the Trustee and the Security Registrar duly
executed, by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made to the Holder for any registration of
transfer or exchange of Securities, but the Company may require payment of
a sum sufficient to cover any tax or other governmental charge that may be
<PAGE>
28
305, 306
imposed in connection with any registration of transfer or exchange of
Securities, other than exchanges pursuant to Section 304, 906 or 1107 not
involving any transfer.
The Company shall not be required (i) to issue, register the transfer
of or exchange Securities of any series during a period beginning at the
opening of business 15 days before the day of the mailing of a notice of
redemption of Securities of that series selected for redemption under Sec-
tion 1103 and ending at the close of business on the day of such mailing, or
(ii) to register the transfer of or exchange any Security so selected for
redemption in whole or in part, except the unredeemed portion of any
Security being redeemed in part.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of the same series and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i) evidence
to their satisfaction of the destruction, loss or theft of any Security, and
(ii) such bond, security or indemnity as may be required by them to save
each of them and any agent of either of them harmless, then, in the absence
of actual notice to the Company or the Trustee that such Security has been
acquired by a bona fide purchaser, the Company shall execute and upon its
request the Trustee shall authenticate and deliver, in lieu of any such
destroyed, lost or stolen Security, a new Security of the same series and of
like tenor and principal amount and bearing a number not contemporaneously
outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its
discretion may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected
therewith.
Every new Security of any series issued pursuant to this Section in
lieu of any destroyed, lost or stolen Security shall constitute an original
<PAGE>
29
306, 307
additional contractual obligation of the Company, whether or not the
destroyed, lost or stolen Security shall be at any time enforceable by any-
one, and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Securities of that series duly issued
hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person
in whose name that Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest.
Any interest on any Security of any series which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the
Holder on the relevant Regular Record Date by virtue of having been such
Holder, and such Defaulted Interest may be paid by the Company, at its
election in each case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities of such series
(or their respective Predecessor Securities) are registered at the
close of business on a Special Record Date for the payment of such
Defaulted Interest, which shall be fixed in the following manner. The
Company shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each Security of such series and the
date of the proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate
amount proposed to be paid in respect of such Defaulted Interest or
shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when deposited
to be held in trust for the benefit of the Persons entitled to such
Defaulted Interest as in this Clause provided. Thereupon the Trustee
shall fix a Special Record Date for the payment of such Defaulted
Interest which shall be not more than 15 days and not less than 10 days
prior to the date of the proposed payment and not less than 10 days
<PAGE>
30
307, 308
after the receipt by the Trustee of the notice of the proposed pay-
ment. The Trustee shall promptly notify the Company of such Special
Record Date and, in the name and at the expense of thc Company, shall
cause notice of the proposed payment of such Defaulted Interest and
the Special Record Date therefor to be mailed, first-class postage
prepaid, to each Holder of Securities of such series at his address as
it appears in the Security Register, not less than 10 days prior to
such Special Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor having been so
mailed, such Defaulted Interest shall be paid to the Persons in whose
names the Securities of such series (or their respective Predecessor
Securities) are registered at the close of business on such Special
Record Date and shall no longer be payable pursuant to the following
Clause (2).
(2) The Company may make payment of any Defaulted Interest
on the Securities of any series in any other lawful manner not
inconsistent with the requirements of any securities exchange on which
such Securities may be listed, and upon such notice as may be required
by such exchange, if, after notice given by the Company to the Trustee
of the proposed payment pursuant to this Clause, such manner of
payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Security.
SECTION 308. Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name such Security is registered as the owner of
such Security for the purpose of receiving payment of principal of (and
premium, if any) and (subject to Section 307) interest on such Security and
for all other purposes whatsoever, whether or not such Security be overdue,
and neither the Company, the Trustee nor any agent of the Company or the
Trustee shall be affected by notice to the contrary.
<PAGE>
3l
309, 310, 401
SECTION 309. Cancellation.
Except as otherwise specified as contemplated by Section 301 for
Securities of any series, all Securities surrendered for payment, redemp-
tion, registration of transfer or exchange or for credit against any
sinking fund payment shall, if surrendered to any Person other than the
Trustee, be delivered to the Trustee and shall be promptly cancelled by it.
The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the
Company may have acquired in any manner whatsoever, and all Securities
so delivered shall be promptly cancelled by the Trustee. No Securities shall
be authenticated in lieu of or in exchange for any Sccurities cancelled as
provided in this Section, except as expressly permitted by this Indenture
(including, without limitation, as contemplated by Section 301(9)). All
cancelled Securities held by the Trustee shall be destroyed and the Trustee
shall furnish an affidavit to the Company (setting forth the serial numbers
of such Sccurities) attesting to such destruction.
SECTION 310. Computation of Interest.
Except as otherwise specified as contemplated by Section 301 for
Securities of any series, interest on the Securities of each series shall be
computed on the basis of a year of twelve 30-day months.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be of further
effect (except as to any surviving rights of registration of transfer or
exchange of Securities herein expressly provided for), and the Trustee, at
the expense of the Company, shall execute proper instruments acknowledg-
ing satisfaction and discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered
(other than (i) Securities which have been destroyed, lost, or stolen
<PAGE>
32
401
and which have been replaced or paid as provided in Section 306 and
(ii) Securities for whose payment money has theretofore been deposited
in trust or segregated and held in trust by the Company and
thereafter repaid to the Company or discharged from such trust, as
provided in Section 1003) have been delivered to the Trustee for
cancellation; or
(B) all such Securities not theretofore delivered to the Trustee
for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the
Company, or
(iv) are deemed paid and discharged pursuant to Section 403,
as applicable,
and the Company, in the case of (i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as trust funds in
trust for the purpose an amount of (a) money, or (b) in the case of
(ii) or (iii) above and if no Securities of any series Outstanding are
subject to repayment at the option of Holders, (I) U.S. Government
Obligations which through the payment of interest and principal in
respect thereof in accordance with their terms will provide not later
than one day before the Stated Maturity or Redemption Date, as the
case may be, money in an amount, or (II) a combination of money or
U.S Government Obligations as provided in (I) above, in each case
sufficient, in the opinion of a nationally recognized firm of independ-
ent certified public accountants expressed in a written certificate
thereof delivered to the Trustee, to pay and discharge the entire
indebtedness on such Securities not theretofore delivered to the
Trustee for cancellation, for principal (and premium, if any) and
interest to the date of such deposit (in the case of Securities which
have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
<PAGE>
33
401, 402
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all cond-
itions precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been met.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607, the obligations
of the Trustee to any Authenticating Agent under Section 614 and, if money
or U.S. Government Obligations shall have been deposited with the Trustee
pursuant to subclause (B) of clause (1) of this Section or if money or U.S.
Government Obligations shall have been deposited with or received by the
Trustee pursuant to Section 403, the obligations of the Trustee under
Section 402 and the last paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
(a) Subject to the provisions of the last paragraph of Section 1003,
all money or U.S. Government Obligations deposited with the Trustee pursuant
to Section 401, 403 or 1007 and all money received by the Trustee in respect
of U.S. Government Obligations deposited with the Trustee pursuant to
Section 401, 403 or 1007, shall be held in trust and applied by it, in
accordance with the provisions of the Securities and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Persons
entitled thereto, of the principal (and premium, if any) and interest for
whose payment such money has been deposited with or received by the Trustee
or to make mandatory sinking fund payments or analogous payments as con-
templated by Section 401, 403 or 1007.
(b) The Company shall pay and shall indemnify the Trustee against
any tax, fee or other charge imposed on or assessed against U.S. Govern-
ment Obligations deposited pursuant to Section 401, 403 or 1007 or the
interest and principal received in respect of such obligations other than
any payable by or on behalf of Holders.
(c) The Trustee shall deliver or pay to the Company from time to time
upon Company Request any U.S. Government Obligations or money held by it as
provided in Section 401, 403 or 1007 which, in the opinion of a nationally
recognized firm of independent certified public accountants expressed in a
written certification thereof delivered to the Trustee, are then
<PAGE>
34
402, 403
in excess of the amount thereof which then would have been required to be
deposited for the purpose for which such U.S. Government Obligations or
money was deposited or received. This provision shall not authorize the sale
by the Trustee of any U.S. Government Obligations held under this
Indenture.
SECTION 403. Satisfaction, Discharge and Defeasance of Securities of any
Series.
The Company shall be deemed to have paid and discharged the entire
indebtedness on all the Outstanding Securities of any series on the 91st day
after the date of the deposit referred to in subparagraph (e) hereof, and
the provisions of this Indenture, as it relates to such Outstanding Sec-
urities of such series, shall no longer be in effect (and the Trustee, at
the expense of the Company, shall at Company Request execute proper instru-
ments acknowledging the same), except as to:
(a) the rights of Holders of Securities of such series to receive,
from the trust funds described in subparagraph (e) hereof, (i) payment
of the principal of (and premium, if any) and each installment of
principal of (and premium, if any) or interest on the Outstanding
Securities of such series on the Stated Maturity of such principal or
installment of principal or interest or to and including the Redemption
Date irrevocably designated by the Company pursuant to subparagraph
(k) hereof and (ii) the benefit of any mandatory sinking fund
payments applicable to the Securities of such series on the day on
which such payments are due and payable in accordance with the terms of
this Indenture and the Securities of such series;
(b) the Company's obligations with respect to such Securities of
such series under Sections 305, 306, 1002 and 1003 and, if the Company
shall have irrevocably designated a Redemption Date pursuant to
subparagraph (k) hereof, Sections 1101, 1104 and 1106;
(c) the Company's obligations with respect to the Trustee under
Section 607; and
(d) the rights, powers, trust and immunities of the Trustee
hereunder and the duties of the Trustee under Section 402 and, if the
Company shall have irrevocably designated a Redemption Date
pursuant to subparagraph (k) hereof, Article Eleven and the duty of
<PAGE>
35
403
the Trustee to authenticate Securities of such series issued on reg-
istration of transfer or exchange;
provided that, the following conditions shall have been satisfied:
(e) the Company has deposited or caused to be irrevocably
deposited (except as provided in Section 402) with the Trustee as trust
funds in trust, specifically pledged as security for, and dedicated
solely to, the benefit of the Holders of the Securities of such series,
(i) money in an amount, or (ii) if Securities of such series are not
subject to repayment at the option of Holders, (A) U.S. Government
Obligations which through the payment of interest and principal in
respect thereof in accordance with their terms will provide not later
than one day before the due date of any payment referred to in clause
(x) or (y) of this subparagraph (e) money in an amount or (B) a comb-
ination thereof, sufficient, in the opinion of a nationally recognized
firm of independent certified public accountants expressed in a written
certification thereof delivered to the Trustee, to pay and discharge
(x) the principal of (and premium, if any) and each installment of
principal (and premium, if any) and interest on the Outstanding Sec-
urities of such series on the Stated Maturity of such principal or
installment of principal or interest or to and including the Redemption
Date irrevocably designated by the Company pursuant to subparagraph (k)
hereof and (y) any mandatory sinking fund payments applicable to the
Securities of such series on the day on which such payments are due and
payable in accordance with the terms of this Indenture and of the
Securities of such series;
(f) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which it is bound;
(g) such provision would not cause any Outstanding Securities of
such series then listed on the New York Stock Exchange or other
securities exchange to be delisted as a result thereof;
(h) no Event of Default or event which with notice or lapse of time
would become an Event of Default with respect to the Securities of such
series shall have occurred and be continuing on the date of such
deposit or during the period ending on the 9lst day after such date;
<PAGE>
36
403, 501
(i) the Company has delivered to the Trustee an Officers' Certifi-
cate and an Opinion of Counsel to the effect that the Company has
received from, or there has been published by, the Internal Revenue
Service a ruling to the effect that Holders of the Securities of such
series will not recognize income, gain or loss for Federal income tax
purposes as a result of such deposit, defeasance and discharge and will
be subject to Federal income tax on the same amount and in the same
manner and at the same times, as would have been the case if such
deposit, defeasance and discharge had not occurred;
(j) the Company has delivered to the Trustee an Officers' Certifi-
cate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to the defeasance contemplated by this
Section have been complied with; and
(k) if the Company has deposited or caused to be deposited
money or U.S. Government Obligations to pay or discharge the
principal of (and premium, if any) and interest on the Outstanding
Securities of a series to and including a Redemption Date pursuant to
subparagraph (e) hereof, such Redemption Date shall be irrevocably
designated by a Board Resolution delivered to the Trustee on or prior
to the date of deposit of such money or U.S. Government Obligations,
and such Board Resolution shall be accompanied by an irrevocable
Company Request that the Trustee give notice of such redemption in
the name and at the expense of the Company not less than 30 nor more
than 60 days prior to such Redemption Date in accordance with Section
1104.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
"Event of Default", wherever used herein with respect to Securities of
any series, 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):
<PAGE>
37
501
(1) default in the payment of any interest upon any Security of
that series when it becomes due and payable, and continuance of such
default for a period of 30 days; or
(2) default in the payment of the principal of (or premium, if any,
on) any Security of that series at its Maturity; or
(3) default in the deposit of any sinking fund payment, when and
as due by the terms of a Security of that series; or
(4) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere
in this Section specifically dealt with or which has expressly been
included in this Indenture solely for the benefit of series of Sec-
urities other than that series), and continuance of such default or
breach for a period of 60 days after there has been given, by register-
ed or certified mail, to the Company by the Trustee or to the Company
and the Trustee by the Holders of at least 25% in aggregate principal
amount of the Outstanding Securities of that series 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; or
(5) a default under any bond, debenture, note or other evidence of
indebtedness for money borrowed in excess of $10,000,000 by the
Company (including a default with respect to Securities of any series
other than that series) 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 the Company (including this Indenture), whether such
indebtedness now exists or shall hereafter be created, which default
(i) shall consist of a failure to pay such intebtedness at final
maturity and after the expiration of any applicable grace period or
(ii) shall have resulted in such indebtedness becoming or being declar-
ed 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, in all cases
within a period of 10 days after there shall have been given, by
registered or certified mail, to the Company by the Trustee or to the
<PAGE>
38
501
Company and the Trustee by the Holders of at least 25% in aggregate
principal amount of the Outstanding Securities of that series a written
notice specifying such default and requiring the Company to cause such
indebtedness to be discharged or cause such acceleration to be rescind-
ed or annulled and stating that such notice is a "Notice of Default"
hereunder; provided, however, that, subject to the provisions of
Sections 601 and 602, the Trustee shall not be deemed to have knowledge
of such default unless either (A) a Responsible Officer of the Trustee
shall have actual knowledge of such default or (B) the Trustee shall
have received written notice thereof from the Company, from any Holder,
from the holder of any such indebtedness or from the trustee under any
such mortgage, indenture or other instrument; or
(6) the entry by a court having jurisdiction in the premises of (A)
a decree or order for relief in respect of the Company in an invol-
untary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or (B) a
decree or order adjudging the Company a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization, arrange-
ment, adjustment or composition of or in respect of the Company under
any applicable Federal or State law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the contin-
uance 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
(7) the commencement by the Company of a voluntary case or
proceeding under any applicable Federal or State bankruptcy, in-
solvency, 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 the
Company 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 the Company or of any substantial part of its property,
<PAGE>
39
501, 502
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 the
Company in furtherance of any such action; or
(8) any other Event of Default provided with respect to Securities
of that series.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default with respect to Securities of any series at the
time Outstanding occurs and is continuing, then in every such case the
Trustee or the Holders of not less than 25% in aggregate principal amount of
the Outstanding Securities of that series may declare the principal amount
(or, if the Securities of that series are Original Issue Discount Sec-
urities, such portion of the principal amount as may be specified in the
terms of that series) of all of the Securities of that series to be due and
payable immediately, by a notice in writing to the Company (and to the
Trustee if given by Holders), and upon any such declaration such principal
amount (or specified amount) shall become immediately due and payable.
In the case of any declaration of acceleration of the Stated Maturity
of any Original Issue Discount Securities of a series, the Company shall
furnish the Trustee with an Officers' Certificate stating the amount of
principal to be paid to a Holder of $l,000 principal amount of such
Securities.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter
in this Article provided, the Holders of a majority in aggregate principal
amount of the Outstanding Securities of that series, by written notice to
the Company and the Trustee, may rescind and annul such declaration and its
consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Securities of that series,
(B) the principal of (and premium, if any, on) any Securities of
that series which have become due otherwise than by such declara-
<PAGE>
40
502, 503
tion of acceleration and interest thereon at the rate or rates pre-
scribed therefor in such Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate or rates prescribed
therefor in such Securities, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel;
and
(2) all Events of Default with respect to Securities of that
series, other than the non-payment of the principal of Securities of
that series which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 5O3. Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Company covenants that if
(1) default is made in the payment of any interest on any Security
when such interest becomes due and payable and such default continues
for a period of 30 days, or
(2) default is made in the payment of the principal of (or
premium, if any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of
the Holders of such Securities, the whole amount then due and payable on
such Securities for principal (and premium, if any) and interest and, to the
extent that payment of such interest shall be legally enforceable, interest
on any overdue principal (and premium, if any) and on any overdue interest,
at the rate or rates prescribed therefor in such Securities, and, in
addition thereto, such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
<PAGE>
41
503, 504
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may insti-
tute a judicial proceeding for the collection of the sums so due and unpaid,
may prosecute such proceeding to judgment or final decree and may enforce
the same against the Company or any other obligor upon such Securities and
collect the moneys adjudged or decreed to be payable in the manner
provided by law out of the property of the Company or any other obligor
upon such Securities, wherever situated.
If an Event of Default with respect to Securities of any series occurs
and is continuing, the Trustee may in its discretion proceed to protect and
enforce its rights and the rights of the Holders of Securities of such
series by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in
aid of the exercise of any power granted herein, or to enforce any other
proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Sec-
urities shall then be due and payable as therein expressed or by declaration
or otherwise and irrespective of whether the Trustee shall have made any
demand on the Company for the payment of overdue principal or interest)
shall be entitled and empowered, by intervention in such proceeding or
otherwise,
(i) to file and prove a claim for the whole amount of principal
(and premium, if any) and interest owing and unpaid in respect of the
Securities and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and
of the Holders allowed in such judicial proceeding, and
<PAGE>
42
504, 505, 506
(ii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized
by each Holder to make such payments to the Trustee and, in the event that
the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel, and any other amounts due the Trustee under Section
607.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee
to vote in respect of the claim of any Holder in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of
Securities.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of
any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought
in its own name as trustee of an express trust, and any recovery of judgment
shall, after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel,
be for the ratable benefit of the Holders of the Securities in respect of
which such judgment has been recovered.
SECTION 5O6. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee,
and, in case of the distribution of such money on account of principal (or
premium, if any) or interest, upon presentation of the Securities and the
notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid:
<PAGE>
43
506, 507
FIRST: To the payment of all amounts due the Trustee under
Section 607;
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Securities in
respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind, accord-
ing to the amounts due and payable on such Securities for principal
(and premium, if any) and interest, respectively; and
THIRD: The balance, if any, to the Company.
SECTION 507. Limitation on Suits.
No Holder of any Security of any series shall have any right to
institute any proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee
of a continuing Event of Default with respect to the Securities of that
series;
(2) the Holders of not less than 25% in aggregate principal amount
of the Outstanding Securities of that series shall have made written
request to the Trustee to institute proceedings in respect of such
Event of Default in its own name as Trustee hereunder,
(3) such Holder or Holders have offered to the Trustee indemnity
against the reasonable costs, expenses and liabilities to be incurred
in compliance with such request in such amount and for such person or
persons as shall be reasonably acceptable to the Trustee;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such pro-
ceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority in aggregate principal amount of the Outstanding Securities of
that series;
it being understood and intended that no one or more of such Holders shall
have any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of
any other of such Holders, or to obtain or to seek to obtain priority or
preference over any other of such Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal and
ratable benefit of all of such Holders.
<PAGE>
44
508, 509, 510, 511
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium
and Interest.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of (and premium, if any) and (subject to
Section 307) interest on such Security on the Stated Maturity or Maturities
expressed in such Security (or, in the case of redemption, on the Redemp-
tion Date, or, in the case of repayment at the option of the Holder, on the
Repayment Date) and to institute suit for the enforcement of any such
payment, and such rights shall not be impaired without the consent of such
Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined
adversely to the Trustee or to such Holder, then and in every such case,
subject to any determination in such proceeding, the Company, the Trustee
and the Holders shall be restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies of the Trustee
and the Holders shall continue as though no such proceeding had been
instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last
paragraph of Section 306, no right or remedy herein conferred upon or
reserved to the Trustee or to the Holders is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder,
or otherwise, shall not prevent the concurrent assertion or employment of
any other appropriate right or remedy.
SECTION 511 . Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Sec-
urities to exercise any right or remedy accruing upon any Event of Default
<PAGE>
45
511, 512, 513, 514
shall impair any such right or remedy or constitute a waiver of any such
Event of Default or an acquiescence therein. Every right and remedy given by
this Article or by law to the Trustee or to the Holders may be exercised
from time to time, and as often as may be deemed expedient, by the Trustee
or by the Holders, as the case may be.
SECTION 512. Control by Holders.
The Holders of a majority in aggregate principal amount of the
Outstanding Securities of any series shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred on the Trustee,
with respect to the Securities of such series, provided that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture, and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in aggregate principal amount
of the Outstanding Securities of any series may on behalf of the Holders of
all the Securities of such series waive any past default hereunder with
respect to such series and its consequences, except a default
(1) in the payment of the principal of (or premium, if any) or
interest on any Security of such series, or
(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent
or other default or impair any right consequent thereon.
SECTION 514. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security by
his acceptance thereof shall be deemed to have agreed, that any court may
<PAGE>
46
514, 515, 601
in its discretion require, in any suit for the enforcement of any right or
remedy under this Indenture, or in any suit against the Trustee for any
action taken, suffered or omitted by it as Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit, and
that such court may in its discretion assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in such suit, having
due regard to the merits and good faith of the claims or defenses made by
such party litigant; but the provisions of this Section shall not apply to
any suit instituted by the Company, to any suit instituted by the Trustee,
to any suit instituted by any Holder, or group of Holders, holding in the
aggregate more than 10% in principal amount of the Outstanding Securities of
any series, or to any suit instituted by any Holder for the enforcement of
the payment of the principal of (or premium, if any) or interest on any Sec-
urity on or after the Stated Maturity or Maturities expressed in such Sec-
urity (or, in the case of redemption, on or after the Redemption Date, or,
in the case of repayment at the option of the Holder, on or after the Repay-
ment Date).
SECTION 515. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law
wherever enacted, now or at any time hereafter in force, which may affect
the covenants or the performance of this Indenture; and the Company (to the
extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will
suffer and permit the execution of every such power as though no such law
had been enacted.
ARTICLE SIX
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied
<PAGE>
47
601
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correct-
ness of the opinions expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the requirements of this
Indenture; but in the case of any such certificates or opinions which
by any provision hereof are specifically required to be furnished to
the Trustee, the Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this
Indenture.
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of
his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent
failure to act, or its own wilful misconduct, except that
(1) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it shall be proved that
the Trustee was negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the Holders of a majority in aggregate principal amount of
the Outstanding Securities of any series, relating to the time, method
and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee,
under this Indenture with respect to the Securities of such series; and
(4) no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability
<PAGE>
48
601, 602, 603
in the performance of any of its duties hereunder, or in the exercise
of any of its rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided, every provision
of this Indenture relating to the conduct or affecting the liability of
or affording protection to the Trustee shall be subject to the pro-
visions of this Section.
SECTION 602. Notice of Defaults.
Within 90 days after the occurrence of any default hereunder with
respect to the Securities of any series, the Trustee shall transmit by mail
to all Holders of Securities of such series, as their names and addresses
appear in the Security Register, notice of such default hereunder known to
the Trustee, unless such default shall have been cured or waived; provided,
however, that, except in the case of a default in the payment of the
principal of (or premium, if any) or interest on any Security of such series
or in the payment of any sinking fund installment with respect to Securities
of such series, the Trustee shall be protected in withholding such notice if
and so long as the board of directors, the executive committee or a trust
committee of directors or Responsible Officers of the Trustee in good faith
determine that the withholding of such notice is in the interest of the
Holders of Securities of such series; and provided, further, that in the
case of any default of the character specified in Section 501 (4) with
respect to Securities of such series, no such notice to Holders shall be
given until at least 30 days after the occurrence thereof. For the purpose
of this Section, the term "default" means any event which is, or after
notice or lapse of time or both would become, an Event of Default with
respect to Securities of such series.
SECTION 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed
or presented by the proper party or parties;
<PAGE>
49
603
(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company
Order and any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence
of bad faith on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such
Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document, but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may
see fit, and, if the Trustee shall determine to make such further
inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Company, personally or by agent or
attorney; and
(g) the Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents
or attorneys and the Trustee shall not be responsible for any mis-
conduct or negligence on the part of any agent or attorney appointed
with due care by it hereunder.
<PAGE>
50
604, 605, 606, 607
SECTION 604. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the
Trustee's certificate of authentication, shall be taken as the statements of
the Company, and the Trustee or any Authenticating Agent assumes no
responsibility for their correctness. The Trustee makes no representations
as to the validity or sufficiency of this Indenture or of the Securities.
The Trustee or any Authenticating Agent shall not be accountable for the use
or application by the Company of Securities or the proceeds thereof.
SECTION 605. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to
Sections 608 and 613, may otherwise deal with the Company with the same
rights it would have if it were not Trustee, Authenticating Agent, Paying
Agent, Security Registrar or such other agent.
SECTION 606. Money Held in Trust.
Money held by the Trustee or by any Paying Agent (other than the
Company if the Company shall act as Paying Agent) in trust hereunder need
not be segregated from other funds except to the extent required by law.
Neither the Trustee nor any Paying Agent shall be liable for interest on any
money received by it hereunder except as otherwise agreed with the Company.
SECTION 607. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time reasonable com-
pensation for all services rendered by it hereunder (which com-
pensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any
provision of this Indenture (including the reasonable compensation and
the expenses and disbursements of its agents and counsel), except any
such expense, disbursement or advance as may be attributable to its
negligence or bad faith; and
<PAGE>
5l
607, 608
(3) to indemnify the Trustee for, and to hold it harmless against,
any loss, liability or expense incurred without negligence or bad faith
on its part, arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including the costs
and expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or
duties hereunder.
SECTION 608. Disqualification; Conflicting Interests.
(a) If the Trustee has or shall acquire any conflicting interest, as
defined in this Section, with respect to the Securities of any series, it
shall, within 90 days after ascertaining that it has such conflicting
interest, either eliminate such conflicting interest or resign with respect
to the Securities of that series in the manner and with the effect herein-
after specified in this Article.
(b) In the event that the Trustee shall fail to comply with the prov-
isions of Subsection (a) of this Section with respect to the Securities of
any series, the Trustee shall, within 10 days after the expiration of such
90-day period, transmit by mail to all Holders of Securities of that series,
as their names and addresses appear in the Security Register, notice of such
failure.
(c) For the purposes of this Section, the Trustee shall be deemed to
have a conflicting interest with respect to the Securities of any series if
(1) the Trustee is trustee under this Indenture with respect to the
Outstanding Securities of any series other than that series or is
trustee under another indenture under which any other securities, or
certificates of interest or participation in any other securities, of
the Company are outstanding, unless such other indenture is a colla-
teral trust indenture under which the only collateral consists of Sec-
urities issued under this Indenture, provided that there shall be
excluded from the operation of this paragraph this Indenture with
respect to the Securities of any series other than that series and any
indenture or indentures under which other securities, or certificates
of interest or participation in other securities, of the Company are
outstanding, if
(i) this Indenture and such other indenture or indentures are
wholly unsecured and such other indenture or indentures are here
after qualified under the Trust Indenture Act, unless the Comm-
ission shall have found and declared by order pursuant to Section
<PAGE>
52
608
305(b) or Section 307(c) of the Trust Indenture Act that differ-
ences exist between the provisions of this Indenture with respect
to Securities of that series and one or more other series or the
provisions of such other indenture or indentures which are so
likely to involve a material conflict of interest as to make it
necessary in the public interest or for the protection of investors
to disqualify the Trustee from acting as such under this Indenture
with respect to the Securities of that series and such other series
or under such other indenture or indentures, or
(ii) the Company shall have sustained the burden of proving, on
application to the Commission and after opportunity for hearing
thereon, that trusteeship under this Indenture with respect to the
Securities of that series and such other series or such other
indenture or indentures is not so likely to involve a material
conflict of interest as to make it necessary in the public interest
or for the protection of investors to disqualify the Trustee from
acting as such under this Indenture with respect to the Securities
of that series and such other series or under such other indenture
or indentures;
(2) the Trustee or any of its directors or executive officers is an
obligor upon the Securities or an underwriter for the Company;
(3) the Trustee directly or indirectly controls or is directly or
indirectly controlled by or is under direct or indirect common control
with the Company or an underwriter for the Company;
(4) the Trustee or any of its directors or executive officers is a
director, officer, partner, employee, appointee or representative of
the Company, or of an underwriter (other than the Trustee itself) for
the Company who is currently engaged in the business of underwriting,
except that (i) one individual may be a director or an executive
officer, or both, of the Trustee and a director or an executive
officer, or both, of the Company but may not be at the same time an
executive officer of both the Trustee and the Company, (ii) if and so
long as the number of directors of the Trustee in office is more than
nine, one additional individual may be a director or an executive
officer, or both, of the Trustee and a director of the Company; and
(iii) the Trustee may be designated by the Company or by any under-
writer for the Company to act in the capacity of transfer agent,
registrar, custodian, paying agent, fiscal agent, escrow agent or
<PAGE>
53
608
depositary, or in any other similar capacity, or, subject to the
provisions of paragraph (1) of this Subsection, to act as trustee,
whether under an indenture or otherwise;
(5) 10% or more of the voting securities of the Trustee is
beneficially owned either by the Company or by any director, partner or
executive officer thereof, or 20% or more of such voting securities is
beneficially owned, collectively, by any two or more of such persons;
or 10% or more of the voting securities of the Trustee is beneficially
owned either by an underwriter for the Company or by any director,
partner or executive officer thereof, or is beneficially owned,
collectively, by any two or more such persons;
(6) the Trustee is the beneficial owner of, or holds as collateral
security for an obligation which is in default (as hereinafter in this
Subsection defined), (i) 5% or more of the voting securities, or 10% or
more of any other class of security, of the Company not including the
Securities issued under this Indenture and securities issued under any
other indenture under which the Trustee is also trustee, or (ii) 10% or
more of any class of security of an underwriter for the Company;
(7) the Trustee is the beneficial owner of, or holds as collateral
security for an obligation which is in default (as hereinafter in this
Subsection defined), 5% or more of the voting securities of any person
who, to the knowledge of the Trustee, owns 10% or more of the voting
securities of, or controls directly or indirectly or is under direct or
indirect common control with, the Company;
(8) the Trustee is the beneficial owner of, or holds as collateral
security for an obligation which is in default (as hereinafter in this
Subsection defined), 10% or more of any class of security of any person
who, to the knowledge of the Trustee, owns 50% or more of the voting
securities of the Company; or
(9) the Trustee owns, on May 15 in any calendar year, in the
capacity of executor, administrator, testamentary or inter vivos
trustee, guardian, committee or conservator, or in any other similar
capacity, an aggregate of 25% or more of the voting securities, or of
any class of security, of any person, the beneficial ownership of a
specified percentage of which would have constituted a conflicting
<PAGE>
54
608
interest under paragraph (6), (7) or (8) of this Subsection. As to any
such securities of which the Trustee acquired ownership through be-
coming executor, administrator or testamentary trustee of an estate
which included them, the provisions of the preceding sentence shall not
apply, for a period of two years from the date of such acquisition, to
the extent that such securities included in such estate do not exceed
25% of such voting securities or 25% of any such class of security.
Promptly after May 15 in each calendar year, the Trustee shall make a
check of its holdings of such securities in any of the above-mentioned
capacities as of such May 15. If the Company fails to make payment in
full of the principal of (or premium, if any) or interest on any of the
Securities when and as the same becomes due and payable, and such
failure continues for 30 days thereafter, the Trustee shall make a
prompt check of its holdings of such securities in any of the above-
mentioned capacities as of the date of the expiration of such 30-day
period, and after such date, notwithstanding the foregoing provisions
of this paragraph, all such securities so held by the Trustee, with
sole or joint control over such securities vested in it shall, but only
so long as such failure shall continue, be considered as though bene-
ficially owned by the Trustee for the purposes of paragraphs (6), (7)
and (8) of this Subsection.
The specification of percentages in paragraphs (5) to (9), inclusive,
of this Subsection shall not be construed as indicating that the ownership
of such percentages of the securities of a person is or is not necessary or
sufficient to constitute direct or indirect control for the purposes of
paragraph (3) or (7) of this Subsection.
For the purposes of paragraphs (6), (7), (8) and (9) of this
Subsection only, (i) the terms "security" and "securities" shall include
only such securities as are generally known as corporate securities, but
shall not include any note or other evidence of indebtedness issued to
evidence an obligation to repay moneys lent to a person by one or more
banks, trust companies or banking firms, or any certificate of interest or
participation in any such note or evidence of indebtedness; (ii) an oblig-
ation shall be deemed to be "in default" when a default in payment of
principal shall have continued for 30 days or more and shall not have been
cured; and (iii) the Trustee shall not be deemed to be the owner or holder
of (A) any security which it holds as collateral security, as trustee or
otherwise, for an obligation which is not in default as defined in clause
<PAGE>
55
608
(ii) above, or (B) any security which it holds as collateral security under
this Indenture, irrespective of any default hereunder, or (C) any security
which it holds as agent for collection, or as custodian, escrow agent or
depositary, or in any similar representative capacity.
(d) For the purposes of this Section:
(1) The term "underwriter", when used with reference to the
Company, means every person who, within three years prior to the time
as of which the determination is made, has purchased from the
Company with a view to, or has offered or sold for the Company in
connection with, the distribution of any security of the Company
outstanding at such time, or has participated or has had a direct or
indirect participation in any such undertaking, or has participated or
has had a participation in the direct or indirect underwriting of any
such undertaking, but such term shall not include a person whose
interest was limited to a commission from an underwriter or dealer not
in excess of the usual and customary distributors' or sellers'
commission.
(2) The term "director" means any director of a corporation or
any individual performing similar functions with respect to any organi-
zation, whether incorporated or unincorporated.
(3) The term "person" means an individual, a corporation, a
partnership, an association, a joint-stock company, a trust, an
unincorporated organization or a government or political subdivision
thereof. As used in this paragraph the term "trust" shall include only
a trust where the interest or interests of the beneficiary or bene-
ficiaries are evidenced by a security.
(4) The term "voting security" means any security presently
entitling the owner or holder thereof to vote in the direction or
management of the affairs of a person, or any security issued under or
pursuant to any trust, agreement or arrangement whereby a trustee or
trustees or agent or agents for the owner or holder of such security
are presently entitled to vote in the direction or management of the
affairs of a person.
(5) The term "Company" means any obligor upon the Securities.
<PAGE>
56
608
(6) The term "executive officer" means the president, every vice
president, every trust officer, the cashier, the secretary and the
treasurer of a corporation, and any individual customarily performing
similar functions with respect to any organization whether incorporated
or unincorporated, but shall not include the chairman of the board of
directors.
(e) The percentages of voting securities and other securities specified
in this Section shall be calculated in accordance with the following prov-
isions:
(1) A specified percentage of the voting securities of the Trustee,
the Company or any other person referred to in this Section (each of
whom is referred to as a "person" in this paragraph) means such
amount of the outstanding voting securities of such person as entitles
the holder or holders thereof to cast such specified percentage of the
aggregate votes which the holders of all the oustanding voting
securities of such person are entitled to cast in the direction or
management of the affairs of such person.
(2) A specified percentage of a class of securities of a person
means such percentage of the aggregate amount of securities of the
class outstanding.
(3) The term "amount", when used in regard to securities, means
the principal amount if relating to evidences of indebtedness, the
number of shares if relating to capital shares and the number of units
if relating to any other kind of security.
(4) The term "outstanding" means issued and not held by or for
the account of the issuer. The following securities shall not be deemed
outstanding within the meaning of this definition:
(i) securities of an issuer held in a sinking fund relating to
securities of the issuer of the same class;
(ii) securities of an issuer held in a sinking fund relating to
another class of securities of the issuer, if the obligation
evidenced by such other class of securities is not in default as to
principal or interest or otherwise;
(iii) securities pledged by the issuer thereof as security for an
obligation of the issuer not in default as to principal or interest
or otherwise; and
<PAGE>
57
608, 609
(iv) securities held in escrow if placed in escrow by the issuer
thereof;
provided, however, that any voting securities of an issuer shall be
deemed outstanding if any person other than the issuer is entitled to
exercise the voting rights thereof.
(5) A security shall be deemed to be of the same class as another
security if both securities confer upon the holder or holders thereof
substantially the same rights and privileges; provided, however, that,
in the case of secured evidences of indebtedness, all of which are
issued under a single indenture, differences in the interest rates or
maturity dates of various series thereof shall not be deemed sufficient
to constitute such series different classes and provided, further,
that, in the case of unsecured evidences of indebtedness, differences
in the interest rates or maturity dates thereof shall not be deemed
sufficient to constitute them securities of different classes, whether
or not they are issued under a single indenture.
SECTION 609. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United
States of America, any State thereof or the District of Columbia, authorized
under such laws to exercise corporate trust powers, having a combined
capital and surplus of at least $50,000,000, subject to supervision or
examination by Federal or State authority and having its Corporate Trust
Office in, or maintaining an office or agency for the payment of principal
of and interest and premium, if any, on the Securities in, the Borough of
Manhattan, The City of New York. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section,
the combined capital and surplus of such corporation shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be elig-
ible in accordance with the provisions of this Section, it shall resign
immediately in the manner and with the effect hereinafter specified in this
Article.
<PAGE>
58
610
SECTION 610. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 611.
(b) The Trustee may resign at any time with respect to the Securities
of one or more series by giving written notice thereof to the Company. If
the instrument of acceptance by a successor Trustee required by Section 611
shall not have been delivered to the Trustee within 30 days after the giving
of such notice of resignation, the resigning Trustee may petition any court
of competent jurisdiction for the appointment of a successor Trustee with
respect to the Securities of such series.
(c) The Trustee may be removed at any time with respect to the
securities of any series by Act of the Holders of a majority in aggregate
principal amount of the Outstanding Securities of such series, delivered to
the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608(a) after
written request therefor by the Company or by any Holder who has
been a bona fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609 and
shall fail to resign after written request therefor by the Company or
by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove
the Trustee with respect to all Securities, or (ii) subject to Section 514,
any Holder who has been a bona fide Holder of a Security for at least six
months may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the removal of the Trustee with
respect to all Securities and the appointment of a successor Trustee or
Trustees.
<PAGE>
59
610, 611
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause,
with respect to the Securities of one or more series, the Company, by a
Board Resolution, shall promptly appoint a successor Trustee or Trustees
with respect to the Securities of that or those series (it being understood
that any such successor Trustee may be appointed with respect to the Sec-
urities of one or more or all of such series and that at any time there
shall be only one Trustee with respect to the Securities of any particular
series) and shall comply with the applicable requirements of Section 611.
If, within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee with respect to the Secur-
ities of any series shall be appointed by Act of the Holders of a majority
in aggregate principal amount of the Outstanding Securities of such series
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment in
accordance with the applicable requirements of Section 611, become the
successor Trustee with respect to the Securities of such series and to that
extent supersede the successor Trustee appointed by the Company. If no
successor Trustee with respect to the Securities of any series shall have
been so appointed by the Company or the Holders and accepted appointment in
the manner required by Section 611, any Holder who has been a bona fide
Holder of a Security of such series for at least six months may, on behalf
of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee with
respect to the Securities of such series.
(f) The Company shall give notice of each resignation and each
removal of the Trustee with respect to the Securities of any series and each
appointment of a successor Trustee with respect to the Securities of any
series by mailing written notice of such event by first-class mail, postage
prepaid, to all Holders of Securities of such series as their names and
addresses appear in the Security Register. Each notice shall include the
name of the successor Trustee with respect to the Securities of such series
and the address of its Corporate Trust Office.
SECTION 611. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
<PAGE>
60
611
execute, acknowledge and deliver to the Company and to the retiring
Trustee an instrument accepting such appointment, and thereupon the
resignation or removal of the retiring Trustee shall become effective and
such successor Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, trusts and duties of the retiring
Trustee; but, on the request of the Company or the successor Trustee, such
retiring Trustee shall, upon payment of its charges, execute and deliver an
instrument transferring to such successor Trustee all the rights, powers and
trusts of the retiring Trustee and shall duly assign, transfer and deliver
to such successor Trustee all property and money held by such retiring
Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company,
the retiring Trustee and each successor Trustee with respect to the Sec-
urities of one or more series shall execute and deliver an indenture supple-
mental hereto wherein each successor Trustee shall accept such appointment
and which (1) shall contain such provisions as shall be necessary or desir-
able to transfer and confirm to, and to vest in, each successor Trustee all
the rights, powers, trusts and duties of the retiring Trustee with respect
to the Securities of that or those series to which the appointment of such
successor Trustee relates, (2) if the retiring Trustee is not retiring with
respect to all Securities, shall contain such provisions as shall be deemed
necessary or desirable to confirm that all the rights, powers, trusts and
duties of the retiring Trustee with respect to the Securities of that or
those series as to which the retiring Trustee is not retiring shall continue
to be vested in the retiring Trustee, and (3) shall add to or change any of
the provisions of this Indenture as shall be necessary to provide for or
facilitate the administration of the trusts hereunder by more than one
Trustee, it being understood that nothing herein or in such supplemental
indenture shall constitute such Trustees cotrustees of the same trust and
that each such Trustee shall be trustee of a trust or trusts hereunder
separate and apart from any trust or trusts hereunder administered by any
other such Trustee; and upon the execution and delivery of such supplemental
indenture the resignation or removal of the retiring Trustee shall become
effective to the extent provided therein and each such successor Trustee,
without any further act, deed or conveyance, shall become vested with all
the rights, powers, trusts and duties of the retiring Trustee with respect
to the Securities of that or those series to which the appointment of such
<PAGE>
61
611, 612, 613
successor Trustee relates; but, on request of the Company or any successor
Trustee, such retiring Trustee shall duly assign, transfer and deliver to
such successor Trustee, after deducting all amounts owed to the retiring
Trustee pursuant to Section 607, all property and money held by such
retiring Trustee hereunder with respect to the Securities of that or those
series to which the appointment of such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts
referred to in paragraph (a) or (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
SECTION 612. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party,
or any corporation succeeding to all or substantially all the corporate
trust business of the Trustee, shall be the successor of the Trustee here-
under, provided such corporation shall be otherwise qualified and eligible
under this Article, without the execution or filing of any paper or any
further act on the part of any of the parties hereto. In case any Securities
shall have been authenticated, but not delivered, by the Trustee then in
office, any successor by merger, conversion or consolidation to such
authenticating Trustee may adopt such authentication and deliver the Sec-
urities so authenticated with the same effect as if such successor Trustee
had itself authenticated such Securities.
SECTION 613. Preferential Collection of Claims Against Company.
(a) Subject to Subsection (b) of this Section, if the Trustee shall be
or shall become a creditor, directly or indirectly, secured or unsecured, of
the Company within four months prior to a default, as defined in Subsection
(c) of this Section, or subsequent to such a default, then, unless and until
such default shall be cured, the Trustee shall set apart and hold in a
<PAGE>
62
613
special account for the benefit of the Trustee individually, the Holders of
the Securities and the holders of other indenture securities, as defined in
Subsection (c) of this Section:
(1) an amount equal to any and all reductions in the amount due
and owing upon any claim as such creditor in respect of principal or
interest, effected after the beginning of such four months' period and
valid as against the Company and its other creditors, except any such
reduction resulting from the receipt or disposition of any property
described in paragraph (2) of this Subsection, or from the exercise of
any right of set-off which the Trustee could have exercised if a
petition in bankruptcy had been filed by or against the Company upon
the date of such default; and
(2) all property received by the Trustee in respect of any claims
as such creditor, either as security therefor, or in satisfaction or
composition thereof, or otherwise, after the beginning of such four
months' period, or an amount equal to the proceeds of any such prop-
erty, if disposed of, subject, howewer, to the rights, if any, of the
Company and its other creditors in such property or such proceeds.
Nothing herein contained, however, shall affect the right of the Trustee:
(A) to retain for its own account (i) payments made on account of
any such claim by any Person (other than the Company) who is liable
thereon, and (ii) the proceeds of the bona fide sale of any such claim
by the Trustee to a third Person, and (iii) distributions made in cash,
securities or other property in respect of claims filed against the
Company in bankruptcy or receivership or in proceedings for reorgani-
zation pursuant to the Federal Bankruptcy Act or applicable State law;
(B) to realize, for its own account, upon any property held by it
as security for any such claim, if such property was so held prior to
the beginning of such four months' period;
(C) to realize, for its own account, but only to the extent of the
claim hereinafter mentioned, upon any property held by it as security
for any such claim, if such claim was created after the beginning of
such four months' period and such property was received as security
therefor simultaneously with the creation thereof, and if the Trustee
<PAGE>
63
613
shall sustain the burden of proving that at the time such property was
so received the Trustee had no reasonable cause to believe that a
default, as defined in Subsection (c) of this Section, would occur
within four months; or
(D) to receive payment on any claim referred to in paragraph (B)
or (C), against the release of any property held as security for such
claim as provided in paragraph (B) or (C), as the case may be, to the
extent of the fair value of such property.
For the purposes of paragraphs (B), (C) and (D), property substituted
after the beginning of such four months' period for property held as sec-
urity at the time of such substitution shall, to the extent of the fair
value of the property released, have the same status as the property re-
leased, and, to the extent that any claim referred to in any of such para-
graphs is created in renewal of or in substitution for or for the purpose of
repaying or refunding any pre-existing claim of the Trustee as such
creditor, such claim shall have the same status as such pre-existing claim.
If the Trustee shall be required to account, the funds and property
held in such special account and the proceeds thereof shall be apportioned
among the Trustee, the Holders and the holders of other indenture securities
in such manner that the Trustee, the Holders and the holders of other
indenture securities realize, as a result of payments from such special
account and payments of dividends on claims filed against the Company in
bankruptcy or receivership or in proceedings for reorganization pursuant to
the Federal Bankruptcy Act or applicable State law, the same percentage of
their respective claims, figured before crediting to the claim of the
Trustee anything on account of the receipt by it from the Company of the
funds and property in such special account and before crediting to the re-
spective claims of the Trustee and the Holders and the holders of other
indenture securities dividends on claims filed against the Company in
bankruptcy or receivership or in proceedings for reorganization pursuant to
the Federal Bankruptcy Act or applicable State law, but after crediting
thereon receipts on account of the indebtedness represented by their re-
spective claims from all sources other than from such dividends and from the
funds and property so held in such special account. As used in this
paragraph, with respect to any claim, the term "dividends" shall include
any distribution with respect to such claim, in bankruptcy or receivership
or proceedings for reorganization pursuant to the Federal Bankruptcy Act or
applicable State law, whether such distribution is made in cash, securities
<PAGE>
64
613
or other property, but shall not include any such distribution with respect
to the secured portion, if any, of such claim. The court in which such
bankruptcy, receivership or proceedings for reorganization is pending
shall have jurisdiction (i) to apportion between the Trustee, the Holders
and the holders of other indenture securities, in accordance with the
provisions of this paragraph, the funds and property held in such special
account and proceeds thereof, or (ii) in lieu of such apportionment, in
whole or in part, to give to the provisions of this paragraph due considera-
tion in determining the fairness of the distributions to be made to the
Trustee and the Holders and the holders of other indenture securities with
respect to their respective claims, in which event it shall not be necessary
to liquidate or to appraise the value of any securities or other property
held in such special account or as security for any such claim, or to make a
specific allocation of such distributions as between the secured and
unsecured portions of such claims, or otherwise to apply the provisions of
this paragraph as a mathematical formula.
Any Trustee that has resigned or been removed after the beginning of
such four months' period shall be subject to the provisions of this Sub-
section as though such resignation or removal had not occurred. If any
Trustee has resigned or been removed prior to the beginning of such four
months' period, it shall be subject to the provisions of this Subsection if
and only if the following conditions exist:
(i) the receipt of property or reduction of claim, which would have
given rise to the obligation to account, if such Trustee had continued
as Trustee, occurred after the beginning of such four months' period;
and
(ii) such receipt of property or reduction of claim occurred within
four months after such resignation or removal.
(b) There shall be excluded from the operation of Subsection (a) of
this Section a creditor relationship arising from:
(1) the ownership or acquisition of securities issued under any
indenture, or any security or securities having a maturity of one year
or more at the time of acquisition by the Trustee;
(2) advances authorized by a receivership or bankruptcy court of
competent jurisdiction or by this Indenture, for the purpose of pre-
serving any property which shall at any time be subject to the lien of
<PAGE>
65
613
this Indenture or of discharging tax liens or other prior liens or
encumbrances thereon, if notice of such advances and of the circum-
stances surrounding the making thereof is given to the Holders at the
time and in the manner provided in this Indenture;
(3) disbursements made in the ordinary course of business in the
capacity of trustee under an indenture, transfer agent, registrar, cus-
todian, paying agent, fiscal agent or depositary, or other similar
capacity;
(4) an indebtedness created as a result of services rendered or
premises rented; or an indebtedness created as a result of goods or
securities sold in a cash transaction, as defined in Subsection (c) of
this Section;
(5) the ownership of stock or of other securities of a corporation
organized under the provisions of Section 25(a) of the Federal Reserve
Act, as amended, which is directly or indirectly a creditor of the
Company; and
(6) the acquisition, ownership, acceptance or negotiation of any
drafts, bills of exchange, acceptances or obligations which fall within
the classification of self-liquidating paper, as defined in Subsection
(c) of this Section.
(c) For the purposes of this Section only:
(1) the term "default" means any failure to make payment in full
of the principal of or interest on any of the Securities or upon the
other indenture securities when and as such principal or interest be-
comes due and payable;
(2) the term "other indenture securities" means securities upon
which the Company is an obligor outstanding under any other indenture
(i) under which the Trustee is also trustee, (ii) which contains
provisions substantially similar to the provisions of this Section, and
(iii) under which a default exists at the time of the apportionment of
the funds and property held in such special acoount;
(3) the term "cash transaction" means any transaction in which
full payment for goods or securities sold is made within seven days
<PAGE>
66
613, 614
after delivery of the goods or securities in currency or in checks or
other orders drawn upon banks or bankers and payable upon demand;
(4) the term "self-liquidating paper" means any draft, bill of
exchange, acceptance or obligation which is made, drawn, negotiated or
incurred by the Company for the purpose of financing the purchase,
processing, manufacturing, shipment, storage or sale of goods, wares or
merchandise and which is secured by documents evidencing title to,
possession of, or a lien upon, the goods, wares or merchandise or the
receivables or proceeds arising from the sale of the goods, wares or
merchandise previously constituting the security, provided the security
is received by the Trustee simultaneously with the creation of the
creditor relationship with the Company arising from the making,
drawing, negotiating or incurring of the draft, bill of exchange,
acceptance or obligation;
(5) the term "Company" means any obligor upon the Securities;
and
(6) the term "Federal Bankruptcy Act" means the Bankruptcy Act
or Title 11 of the United States Code.
SECTION 614. Appointment of Authenticating Agent.
At any time when any of the Securities remain Outstanding the Trustee
may appoint an Authenticating Agent or Agents (which may include a
corporation that is a wholly-owned subsidiary of the Trustee or of the
parent of the Trustee) with respect to one or more series of Securities
which shall be authorized to act on behalf of the Trustee to authenticate
Securities of such series issued upon exchange, registration of transfer or
partial redemption thereof or pursuant to Section 306, and Securities so
authenticated shall be entitled to the benefits of this Indenture and shall
be valid and obligatory for all purposes as if authenticated by the Trustee
hereunder. The Trustee shall mail written notice of such appointment by
first-class mail, postage prepaid, to all Holders of Securities of the
series with respect to which such Authenticating Agent will serve, as their
names and addresses appear in the Security Register. Wherever reference is
made in this Indenture to the authentication and delivery of Securities by
the Trustee or the Trustee's certificate of authentication, such reference
shall be deemed to include authentication and delivery on behalf of the
Trustee by an Authenticating Agent and a certificate of authentication
executed on behalf of the Trustee by an Authenticating Agent. Each
<PAGE>
67
614
Authenticating Agent shall be acceptable to the Company and shall at all
times be a corporation organized and doing business under the laws of the
United States of America, any State thereof or the District of Columbia,
authorized under such laws to act as Authenticating Agent, having a combined
capital and surplus of not less than $l,OOO,OOO and subject to supervision
or examination by Federal or State authority. If such Authenticating Agent
publishes reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such Authen-
ticating Agent shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published. If at any time
an Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign
immediately in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating
Agent shall be a party, or any corporation succeeding to the corporate
agency or corporate trust business of an Authenticating Agent, shall cont-
inue to be an Authenticating Agent, provided such corporation shall be
otherwise eligible under this Section, without the execution or filing of
any paper or any further act on the part of the Trustee or the Authenticat-
ing Agent.
An Authenticating Agent may resign with respect to one or more series
of Securities at any time by giving written notice thereof to the Trustee
and to the Company. The Trustee may at any time terminate the agency of an
Authenticating Agent with respect to one or more series of Securities by
giving written notice thereof to such Authenticating Agent and to the
Company. Upon receiving such a notice of resignation or upon such a
termination, or in case at any time such Authenticating Agent shall cease to
be eligible in accordance with the provisions of this Section, the Trustee
may appoint a successor Authenticating Agent which shall be acceptable to
the Company and shall mail written notice of such appointment by first-class
mail, postage prepaid, to all Holders of Securities of the series with
respect to which such Authenticating Agent will serve, as their names and
addresses appear in the Security Register. Any successor Authenticating
Agent upon acceptance of its appointment hereunder shall become vested with
all the rights, powers and duties of its predecessor hereunder, with like
effect as if originally named as an Authenticating Agent. No successor
<PAGE>
68
614
Authenticating Agent shall be appointed unless eligible under the provisions
of this Section. An Authenticating Agent appointed pursuant to this Section
shall be entitled to rely on Sections 104, 111, 308, 603, 604 and 605
hereunder.
The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section, and the
Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 607.
If an appointment with respect to one or more series is made pursuant
to this Section, the Securities of such series may have endorsed thereon, in
addition to the Trustee's certificate of authentication, an alternate
certificate of authentication in the following form:
This is one of the Securities of the series designated pursuant to and
issued under the within-mentioned Indenture.
THE BANK OF CALIFORNIA,
NATIONAL ASSOCIATION
As Trustee
By...............................
As Authenticating Agent on
behalf of the Trustee
By ...............................
Authorized Officer of
Authenticating Agent
Dated: ..................
<PAGE>
69
701, 702
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee
(a) semi-annually, not later than the 15th day after each Regular
Record Date for each series of Securities at the time Outstanding, a
list, in such form as the Trustee may reasonably require, of the names
and addresses of the Holders of Securities of such series as of such
preceding Regular Record Date or, in the case of a series of non-
interest bearing Securities, on a date to be determined as contemplated
pursuant to Section 301, and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15 days
prior to the time such list is furnished;
excluding from any such list names and addresses received by the Trustee in
its capacity as Security Registrar.
SECTION 702. Preservation of Information; Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most
recent list furnished to the Trustee as provided in Section 701 and the
names and addresses of Holders received by the Trustee in its capacity as
Security Registrar. The Trustee may destroy any list furnished to it as pro-
vided in Section 701 upon receipt of a new list so furnished.
(b) If three or more Holders (herein referred to as "applicants") apply
in writing to the Trustee, and furnish to the Trustee reasonable proof that
each such applicant has owned a Security for a period of at least six months
preceding the date of such application, and such application states that the
applicants desire to communicate with other Holders with respect to their
rights under this Indenture or under the Securities and is accompanied by a
copy of the form of proxy or other communication which such applicants
propose to transmit, then the Trustee shall, within five business days after
the receipt of such application, at its election, either
<PAGE>
70
702
(i) afford such applicants access to the information preserved at
the time by the Trustee in accordance with Section 702(a), or
(ii) inform such applicants as to the approximate number of
Holders whose names and addresses appear in the information pre-
served at the time by the Trustee in accordance with Section 702(a),
and as to the approximate cost of mailing to such Holders the form of
proxy or other communication, if any, specified in such application.
If the Trustee shall elect not to afford such applicants access to such
information, the Trustee shall, upon the written request of such applicants,
mail to each Holder whose name and address appear in the information
preserved at the time by the Trustee in accordance with Section 702(a) a
copy of the form of proxy or other communication which is specified in such
request, with reasonable promptness after a tender to the Trustee of the
material to be mailed and of payment, or provision for the payment, of the
reasonable expenses of mailing, unless within five days after such tender
the Trustee shall mail to such applicants and file with the Commission, to-
gether with a copy of the material to be mailed, a written statement to the
effect that, in the opinion of the Trustee, such mailing would be contrary
to the best interest of the Holders or would be in violation of applicable
law. Such written statement shall specify the basis of such opinion. If the
Commission, after opportunity for a hearing upon the objections specified in
the written statement so filed, shall enter an order refusing to sustain any
of such objections or if, after the entry of an order sustaining one or more
of such objections, the Commission shall find, after notice and opportunity
for hearing, that all the objections so sustained have been met and shall
enter an order so declaring, the Trustee shall mail copies of such material
to all such Holders with reasonable promptness after the entry of such order
and the renewal of such tender; otherwise the Trustee shall be relieved of
any obligation or duty to such applicants respecting their application.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either of them shall be held accountable by reason
of the disclosure of any such information as to the names and addresses of
the Holders in accordance with Section 702(b), regardless of the source
from which such information was derived, and that the Trustee shall not be
held accountable by reason of mailing any material pursuant to a request
made under Section 702(b).
<PAGE>
71
703
SECTION 703. Reports By Trustee.
(a) Within 60 days after December 1st of each year commencing with
the year 1986, the Trustee shall transmit by mail to all Holders, as their
names and addresses appear in the Security Register, a brief report dated as
of such December 1st with respect to:
(1) its eligibility under Section 609 and its qualifications under
Section 608, or in lieu thereof, if to the best of its knowledge it has
continued to be eligible and qualified under said Sections, a written
statement to such effect;
(2) the character and amount of any advances (and if the Trustee
elects so to state, the circumstances surrounding the making thereof)
made by the Trustee (as such) which remain unpaid on the date of such
report, and for the reimbursement of which it claims or may claim a
lien or charge, prior to that of the Securities, on any property or
funds held or collected by it as Trustee, except that the Trustee shall
not be required (but may elect) to report such advances if such
advances so remaining unpaid aggregate not more than 1/2 of 1% of the
principal amount of the Securities Outstanding on the date of such
report;
(3) the amount, interest rate and maturity date of all other
indebtedness owing by the Company (or by any other obligor on the
Securities) to the Trustee in its individual capacity, on the date of
such report, with a brief description of any property held as colla-
teral security therefor, except an indebtedness based upon a creditor
relationship arising in any manner described in Section 613(b)(2), (3),
(4) or (6);
(4) the property and funds, if any, physically in the possession of
the Trustee as such on the date of such report;
(5) any additional issue of Securities which the Trustee has not
previously reported; and
(6) any action taken by the Trustee in the performance of its
duties hereunder which it has not previously reported and which in its
opinion materially affects the Securities, except action in respect of
a default, notice of which has been or is to be withheld by the Trustee
in accordance with Section 602.
<PAGE>
72
703, 704
(b) The Trustee shall transmit by mail to all Holders, as their names
and addresses appear in the Security Register, a brief report with respect
to the character and amount of any advances (and if the Trustee elects so to
state, the circumstances surrounding the making thereof) made by the
Trustee (as such) since the date of the last report transmitted pursuant to
Subsection (a) of this Section (or if no such report has yet been so
transmitted, since the date of execution of this instrument) for the
reimbursement of which it claims or may claim a lien or charge, prior to
that of the Securities, on property or funds held or collected by it as
Trustee and which it has not previously reported pursuant to this Subsec-
tion, except that the Trustee shall not be required (but may elect) to
report such advances if such advances remaining unpaid at any time aggregate
10% or less of the principal amount of the Securities Outstanding at such
time, such report to be transmitted within 90 days after such time.
(c) A copy of each such report shall, at the time of such transmission
to Holders, be filed by the Trustee with each stock exchange upon which any
Securities are listed, with the Commission and with the Company. The
Company will notify the Trustee in writing when any Securities are listed on
any stock exchange.
SECTION 704. Reports by Company.
The Company shall:
(1) file with the Trustee, within 15 days after the Company is
required to file the same with the Commission, copies of the annual
reports and of the information, documents and other reports (or copies
of such portions of any of the foregoing as the Commission may from
time to time by rules and regulations prescribe) which the Company
may be required to file with the Commission pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934; or, if the
Company is not required to file information, documents or reports
pursuant to either of said Sections, then it shall file with the
Trustee and the Commission, in accordance with rules and regulations
prescribed from time to time by the Commission, such of the supple-
mentary and periodic information, documents and reports which may be
required pursuant to Section 13 of the Securities Exchange Act of 1934
in respect of a security listed and registered on a national securities
exchange as may be prescribed from time to time in such rules and
regulations;
<PAGE>
73
704, 801
(2) file with the Trustee and the Commission, in accordance with
rules and regulations prescribed from time to time by the Commission,
such additional information, documents and reports with respect to
compliance by the Company with the conditions and covenants of this
Indenture as may be required from time to time by such rules and
regulations; and
(3) transmit by mail to all Holders, as their names and addresses
appear in the Security Register, within 30 days after the filing there-
of with the Trustee, such summaries of any information, documents and
reports required to be filed by the Company pursuant to paragraphs (1)
and (2) of this Section as may be required by rules and regulations
prescribed from time to time by the Commission.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not consolidate with or merge into any other
corporation or convey or transfer its properties and assets substantially as
an entirety to any Person, unless:
(1) the corporation formed by such consolidation or into which the
Company is merged or the Person which acquires by conveyance or
transfer the properties and assets of the Company substantially as an
entirety shall be a corporation 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 indenture supplemental
hereto, executed and delivered to the Trustee, in form satisfactory to
the Trustee, the due and punctual payment of the principal of (and
premium, if any) and interest on all the Securities and the performance
of every covenant of this Indenture on the part of the Company to be
performed or observed;
(2) 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 contin-
uing;
(3) if, as a result of any such consolidation or merger or such
conveyance or transfer, properties or assets of the Company would
<PAGE>
74
801, 802, 803, 901
become subject to a mortgage, pledge, lien, security interest or other
encumbrance which would not be permitted by this Indenture, the
Company or such successor corporation or Person, as the case may be,
shall take such steps as shall be necessary effectively to secure the
Securities equally and ratably with (or, at the option of the Company,
prior to) all indebtedness secured thereby; and
(4) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consoli-
dation, merger, conveyance or transfer and such supplemental in-
denture comply with this Article and that all conditions precedent
herein provided for relating to such transaction have been met.
SECTION 802. Successor Corporation Substituted.
Upon any consolidation or merger or any conveyance or transfer of the
properties and assets of the Company substantially as an entirety in
accordance with Section 801, the successor corporation formed by such
consolidation or into which the Company 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, the Company under this Indenture
with the same effect as if such successor corporation had been named as the
Company herein; provided, however, that no such conveyance or transfer
shall have the effect of releasing the Person named as the "Company" in the
first paragraph of this instrument or any successor corporation which shall
theretofore have become such in the manner prescribed in this Article from
its liability as obligor and maker on any of the Securities.
SECTION 803. Limitation on Lease of Properties as Entirety.
The Company shall not lease its properties and assets substantially as
an entirety to any Person.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by
a Board Resolution, and the Trustee, at any time and from time to time, may
<PAGE>
75
901
enter into one or more indentures supplemental hereto, in form satisfactory
to the Trustee, for any of the following purposes:
(1) to evidence the succession of another corporation to the
Company and the assumption by any such successor of the covenants of
the Company herein and in the Securities; or
(2) to add to the covenants of the Company for the benefit of the
Holders of all or any series of Securities (and if such covenants are
to be for the benefit of less than all series of Securities, stating
that such covenants are expressly being included solely for the benefit
of such series) or to surrender any right or power herein conferred
upon the Company; or
(3) to add any additional Events of Default; or
(4) to add to or change any of the provisions of this Indenture to
such extent as shall be necessary to permit or facilitate the issuance
of Securities in bearer form, registrable or not registrable as to
principal, and with or without interest coupons; or
(5) to change or eliminate any of the provisions of this Indenture,
provided that any such change or elimination shall become effective
only when there is no Security Outstanding of any series created prior
to the execution of such supplemental indenture which is entitled to
the benefit of such provision; or
(6) to secure the Securities pursuant to the requirements of Sec-
tion 1005 or otherwise; or
(7) to establish the form or terms of Securities of any series as
permitted by Sections 201 or 301; or
(8) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one
or more series and to add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the admin-
istration of the trusts hereunder by more than one Trustee, pursuant to
the requirements of Section 611(b); or
(9) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising
<PAGE>
76
901, 902
under this Indenture, provided such action shall not adversely affect
the interests of the Holders of Securities of any series in any
material respect.
The Trustee shall give notice to the Holders of Securities of all
series affected by any such supplemental indenture as provided in Section
106. Such notice shall describe the changes effected by such supplemental
indenture.
SECTION 902. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than 66 2/3% in aggregate
principal amount of the Outstanding Securities of each series affected by
such supplemental indenture, by Act of said Holders delivered to the
Company and the Trustee, the Company, when authorized by a Board
Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders of Securities of such
series under this Indenture; provided, however, that no such supplemental
indenture shall, without the consent of the Holder of each Outstanding
Security affected thereby,
(1) change the Stated Maturity of the principal of, or any
installment of principal of or interest of any Security, or reduce the
principal amount thereof or the rate of interest thereon or any premium
payable upon the redemption thereof, or reduce the amount of the
principal of an Original Issue Discount Security that would be due and
payable upon a declaration of acceleration of the Maturity thereof
pursuant to Section 502, or change any Place of Payment where, or the
coin or currency in which, any Security or any premium or the interest
thereon is payable, or impair the right to institute suit for the
enforcement of any such payment on or after the Stated Maturity thereof
(or, in the case of redemption, on or after the Redemption Date, or, in
the case of repayment at the option of the Holders, on or after the
Repayment Date), or
(2) reduce the percentage in principal amount of the Outstanding
Securities of any series, the consent of whose Holders is required for
any such supplemental indenture, or the consent of whose Holders is
required for any waiver (of compliance with certain provisions of this
<PAGE>
77
902, 903, 904
Indenture or certain defaults hereunder and their consequences) pro-
vided for in this Indenture, or
(3) modify any of the provisions of this Section, Section 513 or
Section 1009, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Security affected
thereby, provided, however, that this clause shall not be deemed to
require the consent of any Holder with respect to changes in the
references to "the Trustee" and concomitant changes in this Section and
Section 1009, or the deletion of this proviso, in accordance with the
requirements of Sections 611(b) and 901(8).
A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies
the rights of the Holders of Securities of such series with respect to such
covenant or other provision, shall be deemed not to affect the rights under
this Indenture of the Holders of Securities of any other series.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications there-
by of the trusts created by this Indenture, the Trustee shall be entitled to
receive, and (subject to Section 601) shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of such supplemental
indenture is authorized or permitted by this Indenture and that such
supplemental indenture will constitute a valid and legally binding obli-
gation of the Company, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, reorganization and other laws of general appli-
cability relating to or affecting the enforcement of creditors' rights and
to general equity principals. The Trustee may, but shall not be obligated
to, enter into any such supplemental indenture which affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supple-
mental indenture shall form a part of this Indenture for all purposes; and
<PAGE>
78
904, 905, 906, 1001, 1002
every Holder of Securities theretofore or thereafter authenticated and
delivered hereunder shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 906. Reference in Securities to Supplemental Indentures.
Securities of any series authenticated and delivered after the exe-
cution of any supplemental indenture pursuant to this Article may, and shall
if required by the Trustee, bear a notation in form approved by the Trustee
as to any matter provided for in such supplemental indenture. If the Company
shall so determine, new Securities of any series so modified as to conform,
in the opinion of the Trustee and the Company, to any such supplemental
indenture may be prepared and executed by the Company and authenticated and
delivered by the Trustee in exchange for Outstanding Securities of such
series.
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium and Interest.
The Company covenants and agrees for the benefit of each series of
Securities that it will duly and punctually pay the principal of (and
premium, if any) and interest on the Securities of that series in accordance
with the terms of such Securities and this Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Company will maintain in each Place of Payment for any series of
Securities an office or agency where Securities of that series may be pre-
sented or surrendered for payment, where Securities of that series may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Company in respect of the Securities of that series
and this Indenture may be served. The Company will give prompt written not-
ice to the Trustee of the location, and any change in the location, of such
office or agency. If at any time the Company shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be
<PAGE>
79
1002, 1003
made or served at the Corporate Trust Office of the Trustee, and the Company
hereby appoints the Trustee as its agent to receive all such presentations,
surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies where the Securities of one or more series 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 the Company of its obligation to
maintain an office or agency in each Place of Payment for Securities of any
series for such purposes. The Company will give prompt written notice to
the Trustee of any such designation or rescission and of any change in the
location of any such other office or agency.
In the case of Original Issue Discount Securities of a series, the
Company shall, prior to any Redemption Date or any Repayment Date
applicable thereto, furnish the Trustee with an Officers' Certificate
stating the amount of principal to be paid to a Holder of $1,000 principal
amount of such Securities.
SECTION 1003. Money for Securities Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent with
respect to any series of Securities, it will, on or before each due date of
the principal of (and premium, if any) or interest on any of the Securities
of that series, segregate and hold in trust for the benefit of the Persons
entitled thereto a sum sufficient to pay the principal (and premium, if any)
or interest so becoming due until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and will promptly notify the
Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for any
series of Securities, it will, on or prior to (and if on, then before 11:00
a.m. (New York City time)) each due date of the principal of (and premium,
if any) or interest on any Securities of that series, deposit with a Paying
Agent a sum sufficient (in immediately available funds, if payment is made
on the due date) to pay the principal (and premium, if any) or interest so
becoming due, such sum to be held in trust for the benefit of the Persons
entitled to such principal, premium or interest, and (unless such Paying
Agent is the Trustee) the Company will promptly notify the Trustee of its
action or failure so to act.
<PAGE>
80
1003
The Company will cause each Paying Agent for any series of Securities
other than the Trustee to execute and deliver to the Trustee an instrument
in which such Paying Agent shall agree with the Trustee, subject to the
provisions of this Section, that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of
(and premium, if any) or interest on Securities of that series in trust
for the benefit of the Persons entitled thereto until such sums shall
be paid to such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities of that series) in the making of any
payment of principal (and premium, if any) or interest on the Sec-
urities of that series; and
(3) at any time during the continuance of any such default, upon
the written request of the Trustee, forthwith pay to the Trustee all
sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay,
or by Company Order direct any Paying Agent to pay, to the Trustee all sums
held in trust by the Company or such Paying Agent, such sums to be held by
the Trustee upon the same trusts as those upon which such sums were held
by the Company or such Paying Agent; and, upon such payment by any
Paying Agent to the Trustee, such Paying Agent shall be released from all
further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or received
by the Trustee in respect of U.S. Government Obligations deposited with the
Trustee pursuant to Section 401, 403 or 1007, or then held by the Company,
in trust for the payment of the principal of (and premium, if any) or
interest on any Security of any series and remaining unclaimed for two years
(less a day) after such principal (and premium, if any) or interest has
become due and payable shall be paid to the Company on Company Request, or
(if then held by the Company) shall be discharged from such trust; and the
Holder of such Security shall thereafter, as an unsecured general creditor,
look only to the Company for payment thereof, and all liability of the
Trustee or such Paying Agent with respect to such trust money, and all
liability of the Company as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being
<PAGE>
81
1003, 1004, 1005
required to make any such repayment, may at the expense of the Company cause
to be published once, in a newspaper published in the English language,
customarily published on each Business Day and of general circulation in the
Borough of Manhattan, The City of New York, notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less
than 30 days from the date of such publication, any unclaimed balance of
such money then remaining will be repaid to the Company.
SECTION 1004. Corporate Existence.
Subject to Article Eight, the Company 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 the Company shall not be required to preserve any such right or
franchise if the Board of Directors shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company
and that the loss thereof is not disadvantageous in any material respect to
the Holders.
SECTION 1005. Limitations on Liens and Encumbrances.
So long as there are Securities of any series Outstanding:
(a) The Company will not itself, nor will it permit any Subsidiary to,
create, assume or incur any Lien (except any existing on the date hereof)
upon any of its or their Principal Properties, or any interest it or they
may have therein, whether owned at the date hereof or hereafter acquired
(unless, in the case of any Lien upon any Principal Property of any
Subsidiary, all obligations and indebtedness thereby secured are held by the
Company or a wholly-owned Subsidiary) as security for any indebtedness
without making effective provision, and the Company covenants that in any
such case effective provision will be made, whereby the Securities (either
alone or together with all or any part of any other indebtedness of the
Company) shall be secured by such Lien equally and ratably (or, at the
option of the Company, prior to) with any and all other obligations and
indebtedness thereby secured; provided, however, that the foregoing restric-
tion shall not apply to:
(1) Liens upon any property or assets owned by any Subsidiary
existing on the date on which such Subsidiary became a Subsidiary;
<PAGE>
82
1005
(2) Liens on any Principal Property exising at the time of its
acquisition and Liens on any Principal Property acquired, constructed
or improved which are created contemporaneously with or within 180
days after (or created pursuant to financing arrangements, a firm
commitment for which is obtained within 180 days after) the com-
pletion of such acquisition, improvement or construction to secure or
provide for payment of the purchase price of property acquired or the
cost of such construction or improvement; if (i) such Lien shall be
limited to the property so acquired or constructed or to the improve-
ments so made, (ii) the amount of the obligations or indebtedness
secured by such Lien shall not be increased after the date of the
acquisition of such property or the completion of such improvements or
construction except to the extent additional construction or improve-
ments shall be made to such property after the date of such acquisition
or the making of such improvements or construction, and (iii) in each
instance where the obligation or indebtedness secured by such Lien
shall constitute an obligation or indebtedness of, or is assumed by,
the Company or such Subsidiary, the principal amount of the obligation
or indebtedness secured by such Lien shall not exceed 100% of the cost
or fair value (as determined in good faith by the Board of Directors),
whichever shall be lower, of the property, construction or improvements
at the time of the acquisition or completion thereof;
(3) Liens for taxes or assessments or governmental charges or
levies not then due and delinquent or the validity of which shall be
contested in good faith; and materialmen's, mechanics', carriers',
workmen's, repairmen's, landlords' or other like Liens securing obliga-
tions not overdue or which shall be contested in good faith, or
deposits to obtain the release of such Liens;
(4) pledges or deposits to secure public or statutory obligations
or to secure payment of workmen's compensation or to secure perform-
ance in connection with tenders, leases of real property, bids or
contracts or to secure (or in lieu of) surety or appeal bonds and
pledges or deposits made in the ordinary course of business for similar
purposes;
(5) any lease, regardless of the manner in which such lease shall
be treated for accounting or tax purposes or any other purpose or any
<PAGE>
83
1005
filing of or agreement to file any financing statement under the
Uniform Commercial Code of any jurisdiction in respect of such lease;
(6) Liens in favor of a governmental unit to secure payments
under any contract or statute, or to secure any indebtedness incurred
in financing the acquisition, construction or improvement of property
subject thereto, including Liens on, and created or arising in connec-
tion with the financing of the acquisition, construction or improvement
of, any facility used or to be used in the business of the Company or
any Subsidiary through the issuance of obligations defined in Section
103(b)(2) of the Code (or any subsequently adopted provisions thereof
defining similar obligations) the income from which shall be excludable
from gross income by virtue of Sections 103(a) and (b)(4), (b)(5) and
(b)(6) of the Code (or any subsequently adopted provisions thereof
providing for a specific exclusion from gross income);
(7) easements or similar encumbrances, the existence of which do
not materially impair the use of the Principal Property subject thereto
for the purposes for which it is held or was acquired;
(8) Liens arising out of any final judgment for the payment of
money aggregating not in excess of $10,000,000; or Liens arising out of
any final judgment for the payment of money provided such judgment
is being contested in good faith;
(9) Liens on timberlands in connection with an arrangement
under which the Company or a Subsidiary is obligated to cut or pay for
timber in order to provide the Lienholder with a specified amount of
money, however determined;
(10) Liens created or assumed in the ordinary course of the
business of exploring for, developing or producing oil, gas or other
minerals (including borrowings in connection therewith) on, or any
interest in, or on any proceeds from the sale of, property acquired for
such purposes, production therefrom (including the proceeds thereof),
or material or equipment located thereon; and
(11) Liens to extend, renew or replace any Liens referred to in
clauses (1) through (10) or this clause (11) of this Subsection 1005(a)
or any Lien existing on the date hereof.
<PAGE>
84
1005, 1006
(b) Notwithstanding the provisions of Subsection (a) above, the
Company or any Subsidiary may create, assume or incur, or suffer to be
created, assumed or incurred any Lien which would otherwise be subject to
the foregoing restriction, provided that at no time shall the aggregate
amount of all outstanding obligations and indebtedness secured by Liens
which, but for this Subsection (b), would be prohibited by this Section
1005, plus the aggregate amount of Attributable Debt in respect of any then
existing leases described in Section 1006 (other than any such leases of
property to the extent that the cash portion of the net proceeds of the sale
of such property shall have been applied in compliance with Section
1006(b)), exceed 5% of Consolidated Net Tangible Assets at the end of the
next preceding fiscal year of the Company.
SECTION 1006. Limitations on Sale and Leaseback Transactions.
So long as there are Securities of any series Outstanding, the Company
will not, and will not permit any Subsidiary to, directly or indirectly,
sell or transfer (other than to the Company or a Subsidiary) any Principal
Property (other than a Principal Property sold or transferred to an indus-
trial development corporation or governmental instrumentality in connection
with a revenue or pollution control financing) now owned or hereafter
acquired with the intention that the Company 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) (herein referred to
as a sale and leaseback transaction) unless (a) the proeeeds of such sale
shall at least be equal to the fair value (as determined in good faith by
the Board of Directors) of such Principal Property, and either (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 trans-
action (i) to the retirement of Funded Indebtedness (other than any thereof
owed to the Company or any Subsidiary) or (ii) to the retirement of Securi-
ties or (iii) 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 proeeeds of such sale,
or (e) the property, facilities or equipment involved in such sale could
have been subjected to a Lien to secure indebtedness in a principal amount
equal to the aggregate amount of Attributable Debt in respect of such sale
without equally and ratably securing the Securities pursuant to Section
1005.
<PAGE>
85
1007
SECTION 1007. Defeasance of Certain Obligations.
The Company may omit to comply with any term, provision or
condition set forth in Sections 1005 or 1006 with respect to the Securities
of any series, provided that the following conditions shall have been
satisfied:
(1) With reference to this Section 1007, the Company has
deposited or caused to be irrevocably deposited (except as provided in
Section 402) with the Trustee as trust funds in trust, specifically
pledged as security for, and dedicated solely to, the benefit of the
Holders of the Securities of such series, (i) money in an amount, or
(ii) if Securities of such series are not subject to repayment at the
option of Holders, (A) U.S. Government Obligations which through the
payment of interest and principal in respect thereof in accordance with
their terms will provide not later than one day before the due date of
any payment referred to in clause (x) or (y) of this subparagraph (1)
money in an amount, or (B) a combination thereof, sufficient, in the
opinion of a nationally recognized firm of independent certified public
accountants expressed in a written certification thereof delivered to
the Trustee, to pay and discharge (x) the principal of (and premium, if
any) and each installment of principal (and premium, if any) and inter-
est on the Outstanding Securities of such series on the Stated Maturity
of such principal or installment of principal or interest or to and
including the Redemption Date irrevocably designated by the Company
pursuant to subparagraph (7) of this Section and (y) any mandatory
sinking fund payments applicable to the Securities of such series on
the day on which such payments are due and payable in accordance with
the terms of the Indenture and of the Securities of such series;
(2) Such deposit shall not, as specified in an Opinion of Counsel,
cause the Trustee with respect to the Securities of such series to have
a conflicting interest as defined in Section 608 and for purposes of
the Trust Indenture Act with respect to the Securities of such series;
(3) Such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which it is bound;
<PAGE>
86
1007, 1008
(4) No Event of Default or event which with notice or lapse of
time would become an Event of Default with respect to the Securities of
such series shall have occurred and be continuing on the date of such
deposit;
(5) The Company shall have delivered to the Trustee an Opinion
of Counsel to the effect that Holders of the Securities of such series
will not recognize income, gain or loss for Federal income tax purposes
as a result of such deposit and defeasance of certain obligations and
will be subject to Federal income tax on the same amount and in the
same manner and at the same times, as would have been the case if such
deposit and defeasance had not occurred;
(6) The Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the defeasance contemplated
by this Section have been met, and
(7) If the Company has deposited or caused to be deposited
money or U.S. Government Obligations to pay or discharge the
principal of (and premium, if any) and interest on the Outstanding
Securities of a series to and including a Redemption Date pursuant to
subparagraph (1) of this Section, such Redemption Date shall be
irrevocably designated by a Board Resolution delivered to the Trustee
on or prior to the date of deposit of such money or U.S. Government
Obligations, and such Board Resolution shall be accompanied by an
irrevocable Company Request that the Trustee give notice of such
redemption in the name and at the expense of the Company not less
than 30 nor more than 60 days prior to such Redemption Date in
accordance with Section 1104.
SECTION 1008. Statement by Officers as to Default.
The Company will deliver to the Trustee, within 120 days after each
December 31 following the date hereof, a written statement signed by the
Chairman of the Board, a Vice Chairman, the President or a Vice President
and by the Treasurer, an Assistant Treasurer, the Comptroller or an Assist-
ant Comptroller of the Company stating, as to each signer thereof, that
(1) a review of the activities of the Company during such year and
of performance under this Indenture has been made under his super-
vision, and
<PAGE>
87
1008, 1009, 1101, 1102
(2) to the best of his knowledge, based on such review, the
Company has fulfilled all its obligations under this Indenture 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 and the
nature and status thereof.
SECTION 1009. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
term, provision or condition set forth in Sections 1005 and 1006, with
respect to the Securities of any series if before the time for such compli-
ance the Holders of at least 66 2/3% in aggregate principal amount of the
Outstanding Securities of such series shall, by Act of such Holders, either
waive such compliance in such instance or generally waive compliance with
such term, provision or condition, but no such waiver shall extend to or
affect such term, provision or condition except to the extent so expressly
waived, and, until such waiver shall become effective, the obligations of
the Company and the duties of the Trustee in respect of any such term,
provision or condition shall remain in full force and effect.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article.
Securities of any series which are redeemable before their Stated
Maturity shall be redeemable in accordance with their terms and (except as
otherwise specified as contemplated by Section 301 for Securities of any
series) in accordance with this Article.
SECTION 1102. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities shall be
evidenced by a Board Resolution. In case of any redemption at the election
of the Company of less than all the Securities of any series, the Company
shall, at least 60 days prior to the Redemption Date fixed by the Company
(unless a shorter notice shall be satisfactory to the Trustee), notify the
Trustee of such Redemption Date and of the principal amount of Securities
of such series to be redeemed. In the case of any redemption of Securities
prior to the expiration of any restriction on such redemption provided in
<PAGE>
88
1102, 1103, 1104
the terms of such Securities or elsewhere in this Indenture, the Company
shall furnish the Trustee with an Officers' Certificate and, where reason-
ably required by the Trustee, an Opinion of Counsel evidencing compliance
with such restriction.
SECTION 1103. Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities of any series are to be redeemed, the
particular Securities to be redeemed shall be selected not more than 60 days
prior to the Redemption Date by the Trustee, from the Outstanding
Securities of such series not previously called for redemption, by such
method as the Trustee shall deem fair and appropriate and which may
provide for the selection for redemption of portions (equal to the minimum
authorized denomination for Securities of that series or any integral
multiple thereof) of the principal amount of Securities of such series of a
denomination larger than the minimum authorized denomination for Securities
of that series.
The Trustee shall promptly notify the Company and the Security
Registrar in writing of the Securities selected for redemption and, in the
case of any Securities selected for partial redemption, the principal amount
thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise re-
quires, all provisions relating to the redemption of Securities shall
relate, in the case of any Securities redeemed or to be redeemed only in
part, to the portion of the principal amount of such Securities which has
been or is to be redeemed.
SECTION 1104. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemp-
tion Date, to each Holder of Securities to be redeemed, at his address
appearing in the Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities of any series are
to be redeemed, the identification (and, in the case of partial redemp-
tion, the principal amounts) of the particular Securities to be redeem-
ed,
<PAGE>
89
1104, 1105, 1106
(4) that on the Redemption Date the Redemption Price will
become due and payable upon each such Security to be redeemed and,
if applicable, that interest thereon will cease to accrue on and after
said date,
(5) the place or places where such Securities are to be surrendered
for payment of the Redemption Price, and
(6) that the redemption is for a sinking fund, if such is the case.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by
the Trustee in the name and at the expense of the Company.
SECTION 1105. Deposit of Redemption Price.
On or prior to the Redemption Date (and if on, then before 11:00 a.m.
(New York City time)), the Company shall deposit with the Trustee or with
a Paying Agent (or, if the Company is acting as its own Paying Agent,
segregate and hold in trust as provided in Section 1003) an amount of
money sufficient (in immediately available funds if payment is made on the
Redemption Date) to pay the Redemption Price of, and (except if the
Redemption Date shall be an Interest Payment Date) accrued interest on,
all the Securities which are to be redeemed on that date.
SECTION 1106. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at
the Redemption Price therein specified, and from and after such date
(unless the Company shall default in the payment of the Redemption Price
and accrued interest) such Securities shall cease to bear interest. Upon
surrender of any such Security for redemption in accordance with said
notice, such Security shall be paid by the Company at the Redemption Price,
together with accrued interest to the Redemption Date; provided, however,
that installments of interest whose Stated Maturity is on or prior to the
Redemption Date shall be payable to the Holders of such Securities, or one
or more Predecessor Securities, registered as such at the close of business
on the relevant Record Dates according to their terms and the provisions of
Section 307.
<PAGE>
90
1106, 1107, 1201, 1202
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate prescribed
therefor in the Security.
SECTION 1107. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be surrendered
at a Place of Payment therefor (with, if the Company or the Trustee so
requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the Holder
thereof or his attorney duly authorized in writing), and the Company shall
execute, and the Trustee shall authenticate and deliver to the Holder of
such Security without service charge, a new Security or Securities of the
same series, of any authorized denomination as requested by such Holder, in
aggregate principal amount equal to and in exchange for the unredeemed
portion of the principal of the Security so surrendered.
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. Applicability of Article.
The provisions of this Article shall be applicable to any sinking fund
for the retirement of Securities of a series except as otherwise specified
as contemplated by Section 301 for Securities of such series.
The minimum amount of any sinking fund payment provided for by the
terms of Securities of any series is herein referred to as a "mandatory
sinking fund payment", and any payment in excess of such minimum amount
provided for by the terms of Securities of any series is herein referred to
as an "optional sinking fund payment". If provided for by the terms of
Securities of any series, the cash amount of any sinking fund payment may
be subject to reduction as provided in Section 1202. Each sinking fund
payment shall be applied to the redemption of Securities of any series as
provided for by the terms of Securities of such series.
SECTION 1202. Satisfaction of Sinking Fund Payments with Securities.
The Company (1) may deliver Outstanding Securities of a series (other
than any previously called for redemption) and (2) may apply as a credit
<PAGE>
9l
1202, 1203, 1301
Securities of a series which have been redeemed either at the election of
the Company pursuant to the terms of such Securities or through the applica-
tion of permitted optional sinking fund payments pursuant to the terms of
such Securities, in each case in satisfaction of all or any part of any
sinking fund payment with respect to the Securities of such series required
to be made pursuant to the terms of such Securities as provided for by the
terms of such series; provided that such Securities have not been previously
so credited. Such Securities shall be received and credited for such purpose
by the Trustee at the Redemption Price specified in such Securities for
redemption through operation of the sinking fund and the amount of such
sinking fund payment shall be reduced accordingly.
SECTION 1203. Redemption of Securities for Sinking Fund.
Not less than 60 days prior to each sinking fund payment date for any
series of Securities, the Company will deliver to the Trustee an Officers'
Cerificate specifying the amount of the next ensuing sinking fund payment
for that series pursuant to the terms of that series, the portion thereof,
if any, which is to be satisfied by payment of cash and the portion thereof,
if any, which is to be satisfied by delivering and crediting Securities of
that series pursuant to Section 1202 and will also deliver to the Trustee
any Securities to be so delivered. Not less than 30 days before each such
sinking fund payment date the Trustee shall select the Securities to be re-
deemed upon such sinking fund payment date in the manner specified in
Section 1103 and cause notice of the redemption thereof to be given in the
name of and at the expense of the Company in the manner provided in Section
1104. Such notice having been duly given, the redemption of such Securities
shall be made upon the terms and in the manner stated in Sections 1106 and
1107.
ARTICLE THIRTEEN
REPAYMENT OF SECURITIES AT OPTION OF HOLDERS
SECTION 1301. Applicability of Article.
Securities of any series which are repayable before their Stated Matur-
ity at the option of the Holders shall be repayable in accordance with their
terms and (except as otherwise specified as contemplated by Section 301 for
Securities of any series) in accordance with this Article.
<PAGE>
92
1302, 1303, 1304
SECTION 1302. Notice of Repayment Date.
Notice of any Repayment Date with respect to Securities of any series
shall be given by the Company not less than 45 nor more than 60 days prior
to such Repayment Date to each Holder of Securities of such series in
accordance with Section 106.
The notice as to the Repayment Date shall state:
(1) the Repayment Date;
(2) the Repayment Price;
(3) the place or places where such Securities are to be surrendered
for payment of the Repayment Price and the date by which Securities
must be so surrendered in order to be repaid;
(4) that exercise of the option to elect repayment is irrevocable;
and
(5) any change or modification to the Securities of such series
remaining outstanding following the Repayment Date.
SECTION 1303. Deposit of Repayment Price.
On or prior to the Repayment Date (and if on, then before 11:00 a.m.
(New York City time)), the Company shall deposit with the Trustee or with
a Paying Agent (or, if the Company is acting as its own Paying Agent,
segregate and hold in trust as provided in Section 1003) an amount of
money sufficient (in immediately available funds if payment is made on the
Repayment Date) to pay the Repayment Price of and (unless the Repayment
Date shall be an Interest Payment Date) accrued interest, if any, on all
of the Securities of such series which are to be repaid on that date.
SECTION 1304. Securities Payable on Repayment Date.
The form of option to elect repayment having been delivered as
specified in the form of Security for such series as provided in Section
203, the Securities of such series so to be repaid shall, on the Repayment
Date, become due and payable at the Repayment Price applicable thereto and
from and after such date (unless the Company shall default in the payment
of the Repayment Price and accrued interest) such Securities shall cease to
bear interest. Upon surrender of any such Security for repayment in
accordance with said notice, such Security shall be paid by the Company at
the Repayment Price together with accrued interest to the Repayment Date;
provided, however, that installments of interest whose Stated Maturity is on
or prior to such Repayment Date shall be payable to the Holders of such
<PAGE>
93
1304, 1305
Securities, or one or more Predecessor Securities, registered as such at the
close of business on the relevant Record Dates according to their terms and
the provisions of Section 307.
If any Security shall not be paid upon surrender thereof for repayment,
the principal (and premium, if any) shall, until paid, bear interest from
the Repayment Date at the rate prescribed therefor in such Security.
SECTION 1305. Securities Repaid in Part.
Any Security which by its terms may be repaid in part at the option of
the Holder and which is to be repaid only in part shall be surrendered at
any office or agency of the Company designated for that purpose pursuant to
Section 1002 (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to
the Company and the Trustee duly executed by, the Holder thereof or his
attorney duly authorized in writing), and the Company shall execute, and
the Trustee shall authenticate and deliver to the Holder of such Security
without service charge, a new Security or Securities of the same series, of
any authorized denomination as requested by such Holder, in aggregate
principal amount equal to and in exchange for the unrepaid portion of the
principal of the Security so surrendered.
--------------
This instrument may be executed in any number of counterparts, each
of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
<PAGE>
94
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto
affixed and attested, all as of the date first above written.
POTLATCH CORPORATION
[CORSORATE SEAL]
/s/ John M. Richards
By .........................
Senior Vice President
Finance and Administration
Attest:
/s/ Sandra T. Powell
........................
Secretary
THE BANK OF CALIFORNIA,
NATIONAL ASSOCIATION
[CORPORATE SEAL]
/s/ C Medved
By .........................
Attest:
/s/
.......................
<PAGE>
95
STATE OF CALIFORNIA |
| ss.:
CITY AND COUNTY OF SAN FRANCISCO |
On the 14th day of April, 1986, before me personally came
John M. Richards, to me known, who, being by me duly sworn, did depose
and say that he is Senior Vice President of POTLATCH CORPORATION, one
of the corporations described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal
affixed to said instruments is such corporate seal; that it was so affixed
by authority of the By-Laws of said corporation, and that he signed his name
thereto by authority of the Board of Directors of said corporation.
OFFICIAL SEAL /s/ Claudia B. Jarrett
CLAUDIA B JARRETT ...........................
NOTARY PUBLIC - CALIFORNIA
SAN FRANCISCO COUNTY
My comm. expires APR 14, 1989
STATE OF CALIFORNIA |
| ss.:
CITY AND COUNTY OF SAN FRANCISCO |
On the 14th day of April, 1986, before me personally came
C. Medved, to me known, who, being by me duly sworn, did depose and
say that he is a Assistant Vice President of THE BANK OF CALIFORNIA,
NATIONAL ASSOCIATION, the national banking association described in
and which executed the foregoing instrument; that he knows the seal of
said association; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by authority of the Board of
Directors of said association, and that he signed his name thereto by
like authority.
/s/ Patricia Ann Hazlitt
OFFICIAL SEAL ............................
PATRICIA ANN HAZLITT
Notary Public-California
SAN FRANCISCO COUNTY
My Comm. Exp. Jan. 12, 1990
REGISTERED REGISTERED
Number
P_________ $_________
POTLATCH CORPORATION
9 5/8% SINKING FUND DEBENTURE DUE APRIL 15, 2016
SEE REVERSE FOR
CERTAIN DEFINITIONS
Potlatch Corporation, a corporation duly organized and existing under the laws
of the State of Delaware (herein called the "Company", which term includes any
successor corporation under the Indenture hereinafter referred to), for value
received, hereby promises to pay to
9 5/8% 9 5/8%
SINKING FUND SINKING FUND
DEBENTURE DEBENTURE
DUE DUE
APRIL 15, 2016 APRIL 15, 2016
, or registered assigns, the principal sum of DOLLARS
REGISTERED
on April 15, 2016 and to pay interest thereon from April 15, 1986 or from the
most recent Interest Payment Date to which interest has been paid or duly
provided for, semi-annually on April 15 and October 15 in each year, commencing
October 15, 1986, at the rate of 9 5/8% per annum until the principal hereof
is paid or made available for payment. The interest so payable, and punctually
paid or duly provided for, on any Interest Payment Date will, as provided in
such Indenture, be paid to the Person in whose name this Security (or one or
more Predecessor Securities) is registered at the close of business on the
Regular Record Date for such interest, which shall be April 1 or October 1
(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. Any such interest not so punctually paid or duly
provided for will forthwith cease to be payable to the Holder on such Regular
Record Date and may either be paid to the Person in whose name this Security
(or one or more Predecessor Securities) is registered at the close of business
on a Special Record Date for the payment of such Defaulted Interest to be fixed
by the Trustee, notice whereof shall be given to Holders of Securities of this
series not less than 10 days prior to such Special Record Date, or be paid at
any time in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Securities of this series may be listed,
and upon such notice as may be required by such exchange, all as more fully
provided in said Indenture.
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Company maintained for
that purpose in the Borough of Manhattan, The City of New York, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that at the
option of the Company payment of interest may be made by check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee referred to on the reverse hereof by manual signature,
this Security shall not be entitled to any benefit under the Indenture or be
valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated:
TRUSTEE'S CERTIFICATE POTLATCH CORPORATION
OF AUTHENTICATION
This is one of the Securities of
the series designated pursuant to
and issued under the within-mentioned
Indenture.
THE BANK OF CALIFORNIA,
NATIONAL ASSOCIATION Attest: By
as Trustee
By /s/ Sandra T. Powell /s/Richard B. Madden
Authorized Officer Secretary Chairman of
the Board
<PAGE>
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or
more series under an Indenture, dated as of April 1, 1986 (herein called the
"Indenture") between the Company and The Bank of California, National
Association, as Trustee (herein called the "Trustee", which term includes any
successor trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights, limitations of rights, duties and immunities thereunder of the Company,
the Trustee and the Holders of the Securities and of the terms upon which the
Securities are, and are to be, authenticated and delivered. This Security is
one of the series designed on the face hereof, limited in aggregate principal
amount to $100,000,000.
The Securities of this series are subject to redemption upon not less than
30 days' notice by mail, (1) on April 15 in any year commencing with the year
1997 and ending with the year 2015 through operation of the sinking fund for
this series at a Redemption Price equal to 100% of the principal amount, and
(2) at any time on or after April 15, 1986, as a whole or in part, at the
election of the Company, at the following Redemption Prices (expressed as
percentages of the principal amount): If redeemed during the 12-month period
beginning April 15 of the years indicated,
Redemption Redemption
Year Price Year Price
- ---- ---------- ---- ----------
1986 ................ 109.63% 1996 ................ 104.81%
1987 ................ 109.14 1997 ................ 104.33
1988 ................ 108.66 1998 ................ 103.85
1989 ................ 108.18 1999 ................ 103.37
1990 ................ 107.70 2000 ................ 102.89
1991 ................ 107.22 2001 ................ 102.41
1992 ................ 106.74 2002 ................ 101.93
1993 ................ 106.26 2003 ................ 101.44
1994 ................ 105.78 2004 ................ 100.96
1995 ................ 105.29 2005 ................ 100.48
and on or after April 15, 2006 at a Redemption Price equal to 100% of the
principal amount, together in the case of any such redemption (whether through
operation of the sinking fund or otherwise) with interest accrued to the
Redemption Date, but an interest installment whose Stated Maturity is on or
prior to such Redemption Date will be payable to the Holders of such Securities,
or one or more Predecessor Securities, of record at the close of business on
the relevant Record Dates referred to on the face hereof, all as provided in
the Indenture.
Notwithstanding the foregoing, the Company may not, prior to April 15,
1996, redeem any Securities of this series as contemplated by Clause (2) of the
preceding paragraph as a part of, or in anticipation of, any refunding operation
by the application, directly or indirectly, of moneys borrowed having an
interest cost to the Company (calculated in accordance with generally accepted
financial practice) of less than 9 5/8% per annum.
The sinking fund for this series provides for the redemption on April 15
in each year beginning with the year 1997 and ending with the year 2015 of not
less than $5,000,000 ("mandatory sinking fund") and not more than $15,000,000
aggregate principal amount of Securities of this series. Securities of this
series acquired or redeemed by the Company otherwise than through mandatory
sinking fund payments may be credited against subsequent mandatory sinking fund
payments otherwise required to be made.
In the event of redemption of this Security in part only, a new Security
or Securities of this series for the unredeemed portion hereof will be issued in
the name of the Holder hereof upon the cancellation hereof.
The Indenture contains provisions for defeasance at any time of (a) the
entire indebtedness on this Security and (b) certain restrictive covenants upon
compliance by the Company with certain conditions set forth therein, which
provisions apply to this Security.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of 66 2/3% in aggregate principal amount of the
Securities at the time Outstanding of each series to be affected. The Indenture
also contains provisions permitting the Holders of specified percentages in
principal amount of the Securities of each series at the time Outstanding, on
behalf of the Holders of all Securities of such series, to waive compliance by
the Company with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the
Holder of this Security shall be conclusive and binding upon such Holder and
upon all future Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any place where the principal of (and
premium, if any) and interest on this Security are payable, duly endorsed by,
or accompanied by a written instrument of transfer in form satisfactory to the
Company, the Trustee and the Security Registrar duly executed by, the Holder
hereof or his attorney duly authorized in writing, and thereupon one or more
new Securities of this series, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities of this series are issuable only in registered form without
coupons in denominations of $1000 and any integral multiples thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for the like aggregate principal
amount of Securities of this series of a different authorized denomination, as
requested by the Holder surrendering the same.
No service charge shall be made to the Holder for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture. The Indenture and the
Securities will be governed by and construed in accordance with the laws of the
State of New York.
The following abbreviations, when used in the inscription on the face of
the within instrument, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - ......Custodian.......
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gift to Minors
Act ...............
JT TEN - as joint tenants with right (State)
of survivorship and not as
tenants in common
Addition abbreviations may also be used though not in the above list.
FOR VALUE RECIEVED the undersigned hereby sell(s), assigns(s) and transfer(s)
unto
Please insert social security or other
identifying number of assignee
- --------------------------------------
- --------------------------------------------------------------------------------
(name and address of assignee, including zip code, must be printed or
typewritten)
- --------------------------------------------------------------------------------
the within Debenture, and all rights thereunder, hereby irrevocably constituting
and appointing
- ----------------------------------------------------------------------- attorney
to transfer said Debenture on the books of the Company, with full power of
substitution in the premises.
Dated: ---------------------------
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within instrument in every particular, without
alteration or enlargement or any change whatever.
---------------------------
SIGNATURE GUARANTEE: Signature(s) applicable to the assignment must be
guaranteed by a commercial bank or trust company or by a member firm of the
New York Stock Exchange.
REGISTERED REGISTERED
Number
P_________ $_________
POTLATCH CORPORATION
9 1/8% CREDIT SENSITIVE DEBENTURE DUE DECEMBER 1, 2009
SEE REVERSE FOR
CERTAIN DEFINITIONS
Potlatch Corporation, a corporation duly organized and existing under the laws
of the State of Delaware (herein called the "Company", which term includes any
successor corporation under the Indenture hereinafter referred to), for value
received, hereby promises to pay to
9 1/8% 9 1/8%
CREDIT SENSITIVE CREDIT SENSITIVE
DEBENTURE DEBENTURE
DUE DUE
DECEMBER 1, 2009 DECEMBER 1, 2009
, or registered assigns, the principal sum of DOLLARS
REGISTERED
on December 1, 2009 and to pay interest thereon from December 1, 1989 or from
the most recent Interest Payment Date to which interest has been paid or duly
provided for, subject to adjustment as provided on the reverse hereof, semi-
annually on June 1 and December 1 in each year, commencing June 1, 1990, at the
rate of 9.125% per annum until the principal hereof is paid or made available
for payment. The interest so payable, and punctually paid or duly provided for,
on any Interest Payment Date will, as provided in such Indenture, be paid to
the Person in whose name this Security (or one or more Predecessor Securities)
is registered at the close of business on the Regular Record Date for such
interest, which shall be the May 15 or November 15 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for will forthwith cease to be
payable to the Holder on such Regular Record Date and may either be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Securities of this series not less than 10 days prior to
such Special Record Date, or be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Securities of this series may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in said Indenture.
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Company maintained for
that purpose in the Borough of Manhattan, The City of New York, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that at the
option of the Company payment of interest may be made by check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee referred to on the reverse hereof by manual signature,
this Security shall not be entitled to any benefit under the Indenture or be
valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated:
TRUSTEE'S CERTIFICATE POTLATCH CORPORATION
OF AUTHENTICATION
This is one of the Securities of
the series designated pursuant to
and issued under the within-mentioned
Indenture.
BANKERS TRUST COMPANY OF CALIFORNIA,
NATIONAL ASSOCIATION Attest: By
as Trustee
By /s/Brian W. Davis /s/Richard B. Madden
Authorized Officer Secretary Chairman of
the Board
<PAGE>
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or
more series under an Indenture, dated as of April 1, 1986 (herein called the
"Indenture") between the Company and Bankers Trust Company of California,
National Association, as successor Trustee (herein called the "Trustee", which
term includes any successor trustee under the Indenture), to which Indenture
and all indentures supplemental thereto reference is hereby made for a statement
of the respective rights, limitations of rights, duties and immunities
thereunder of the Company, the Trustee and the Holders of the Securities and
of the terms upon which the Securities are, and are to be, authenticated and
delivered. This Security is one of the series designated on the face hereof,
limited in aggregate principal amount to $100,000,000.
The Securities of this series may not be redeemed prior to maturity and
not entitled to any sinking fund.
The interest rate payable on this Security shall be based upon the debt
rating on the Securities of this series ("Rating") as determined by Standard &
Poor's Corporation ("S&P") or Moody's Investors Service, Inc. ("Moody's"), or
their successors (as described below), and adjusted if necessary in response to
changes in a Rating. The initial Applicable Rate (as hereinafter defined) on
the Securities of this series will be 9.125% per annum as stated on the face
hereof. This Security shall bear interest at the initial Applicable Rate from
December 1, 1989 to but excluding the earlier of the date of repayment or
(except as provided below) the calendar day on which a change in rating category
(as set forth in the table below) takes effect in either the S&P Rating or
Moody's Rating (a "Rating Adjustment Date"). Beginning with the calendar day
which is a Rating Adjustment Date if any (unless such Rating Adjustment Date
occurs between a Regular Record Date and an interest Payment Date in which case
beginning on such Interest Payment Date), and to but excluding the earlier of
the date of repayment or next Rating Adjustment Date, if any, this Security
shall bear interest at the rate per annum (the " Applicable Rate") set forth
below opposite the lower of the S&P Rating and the Moody's Rating in effect at
the close of business on that Rating Adjustment Date; provided that if only one
such Rating is available on any Rating Adjustment Date, the Applicable Rate
shall be determined solely by reference to such one Rating. If neither S&P nor
Moody's has issued a current Rating, or if the rating system employed by either
such organization is changed from that which is currently employed, then the
Company shall, with the approval of the Trustee, designate such additional
nationally recognized rating organization, or make such adjustments in the
relationship between the Rating and the Applicable Rate, as are consistent with
the table below.
Ratings
- -------------------------------------- Applicable
Moody's S&P Rate
------- --- ----------
Aaa AAA 8.825%
Aa1 - Aa3 AA+ - AA- 8.925
A1 - Baa2 A+ - BBB 9.125
Baa3 BBB- 9.425
Ba1 BB+ 12.500
Ba2 BB 13.000
Ba3 BB- 13.500
B1 or lower B+ or lower 14.000
If one or more Rating Adjustment Dates occur during any interest payment
period, this Security shall bear interest for such interest payment period at
the rate per annum equal to the weighted average of the Applicable Rates in
effect during such interest payment period, calculated by multiplying each
Applicable Rate by the number of days such Applicable Rate is in effect during
each month of such interest payment period, determining the sum of such products
and dividing such sum by the number of days in such interest payment period
which shall be 180 days in all cases. The Applicable Rate and interest on this
Security shall be computed on the basis of a year of twelve 30-day months.
The provisions regarding defeasance set forth in Section 403 of the
Indenture shall apply to the Securities of this series; provided that from and
after the effective date of a discharge as described in such Section, the
Applicable Rate shall be equal to the Applicable Rate in effect on the date
prior to the deposit of money and/or U.S. Government Obligations with respect to
the Securities of this series, and such Applicable Rate shall not thereafter be
affected by any change in Rating. For the purpose of determining the amount of
money and/or U.S. Government Obligations required to be deposited with the
Trustee in order to effect such a discharge, the interest rate on the Securities
of this series shall be assumed to be (i) for the period beginning on the
effective date of such discharge, such Applicable Rate and (ii) for the period
beginning on the date of such deposit and ending on the date prior to the
effective date of such discharge, the highest Applicable Rate indicated in the
table above. The provisions in Section 1007 of the Indenture shall not apply to
this Security.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of 66 2/3% in aggregate principal amount of the
Securities at the time Outstanding of each series to be affected. The Indenture
also contains provisions permitting the Holders of specified percentages in
principal amount of the Securities of each series at the time Outstanding, on
behalf of the Holders of all Securities of such series, to waive compliance by
the Company with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the
Holder of this Security shall be conclusive and binding upon such Holder and
upon all future Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any place where the principal of (and
premium, if any) and interest on this Security are payable, duly endorsed by,
or accompanied by a written instrument of transfer in form satisfactory to the
Company, the Trustee and the Security Registrar duly executed by, the Holder
hereof or his attorney duly authorized in writing, and thereupon one or more
new Securities of this series, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities of this series are issuable only in registered form without
coupons in denominations of $1000 and any integral multiples thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for the like aggregate principal
amount of Securities of this series of a different authorized denomination, as
requested by the Holder surrendering the same.
No service charge shall be made to the Holder for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture. The Indenture and the
Securities will be governed by and construed in accordance with the laws of the
State of New York.
The following abbreviations, when used in the inscription on the face of
the within instrument, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - ......Custodian.......
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gift to Minors
Act ...............
JT TEN - as joint tenants with right (State)
of survivorship and not as
tenants in common
Additional abbreviations may also be used though not in the above list.
_________________________
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and transfer(s)
unto
Please insert social security or other
identifying number of assignee
_____________________________________
| |
|_____________________________________|
________________________________________________________________________________
(NAME AND ADDRESS OF ASSIGNEE, INCLUDING
ZIP CODE, MUST BE PRINTED OR TYPEWRITTEN)
________________________________________________________________________________
the within Debenture, and all rights thereunder,
hereby irrevocably constituting and appointing
________________________________________________________________________attorney
to transfer said Debenture on the books of the Company, with full power of
substitution in the premises.
Dated: _________________________________
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within instrument in every particular, without
alteration or enlargement or any change whatever.
_________________________________
SIGNATURE GUARANTEE: Signature(s) applicable to the assignment must be
guaranteed by a commercial bank or trust company or by a member firm of the
New York Stock Exchange.
POTLATCH CORPORATION
OFFICERS' CERTIFICATE
We, GEORGE E. PFAUTSCH, Senior Vice President,
Finance, and SANDRA T. POWELL, Treasurer, of Potlatch
Corporation, a Delaware corporation (the "Company"), do
hereby certify in accordance with Section 301 of the
Indenture, dated as of April 1, 1986 (the "Indenture"),
between the Company and Bankers Trust Company of California,
National Association, as successor trustee (the
"Trustee"), that, pursuant to resolutions adopted by the
Board of Directors of the Company, the terms of certain debt
securities of the Company under the Indenture are as follows:
1. The title of the securities shall be
"9-1/8% Credit Sensitive Debentures due 2009" (the
"Debentures");
2. The aggregate principal amount of
Debentures which may be authenticated and delivered
under the Indenture shall be $100,000,000 (except
for Debentures authenticated and delivered upon
registration of, transfer of, or in exchange for,
or in lieu of, other Debentures pursuant to the
Indenture);
3. The final maturity of the principal of the
Debentures shall be December 1, 2009;
4. The Debentures shall bear interest at the
rate of 9.125% per annum (subject to adjustment as
provided below), which interest shall accrue from
December 1, 1989 and such interest shall be
payable semi-annually on June 1 and December 1 of
each year, commencing June 1, 1990, to holders of
record at the close of business on the May 15 and
November 15, respectively, next preceding the
Interest Payment Date (as defined in the
Indenture);
5 The interest rate payable on the
Debentures shall be based upon the debt rating on
the Debentures ("Rating") as determined by Standard
& Poor's Corporation ("S&P") or Moody's Investors
Service, Inc. ("Moody's"), or their successors (as
provided in the last sentence of this paragraph 5),
and adjusted if necessary in response to changes in
a Rating. The initial Applicable Rate (as
hereinafter defined) on the Debentures will be
-1-
Exhibit (4)(d)
<PAGE>
9.125% per annum. The Debentures shall bear
interest at the initial Applicable Rate from
December 1, 1989 to but excluding the earlier of
the date of repayment or (except as provided below)
the calendar day on which a change in rating
category (as set forth in the table below) takes
effect in either the S&P Rating or Moody's Rating
(a "Rating Adjustment Date"). Beginning with the
calendar day which is a Rating Adjustment Date if
any (unless such Rating Adjustment Date occurs
between a Record Date and an Interest Payment Date
in which case beginning on such Interest Payment
Date), and to but excluding the earlier of the date
of repayment or next Rating Adjustment Date, if
any, the Debentures shall bear interest at the rate
per annum (the "Applicable Rate") set forth below
opposite the lower of the S&P Rating and the
Moody's Rating in effect at the close of business
on that Rating Adjustment Date; provided that if
only one such Rating is available on any Rating
Adjustment Date, the Applicable Rate shall be
determined solely by reference to such one Rating.
<TABLE>
<CAPTION>
Ratings
---------------------------
Applicable
Moody's S&P Rate
----------- ----------- ----------
<C> <C> <C>
Aaa AAA 8.825 %
Aa1-Aa3 AA+-AA- 8.925
A1-Baa2 A+-BBB 9.125
Baa3 BBB- 9.425
Bal BB+ 12.500
Ba2 BB 13.000
Ba3 BB- 13.500
B1 or lower B+ or lower 14.000
</TABLE>
If one or more Rating Adjustment Dates occur
during any interest payment period, the Debentures
shall bear interest for such interest payment
period at the rate per annum equal to the weighted
average of the Applicable Rates in effect during
such interest payment period, calculated by
multlplying each Applicable Rate by the number of
days such Applicable Rates is in effect during each
month of such interest payment period, determining
the sum of such products and dividing such sum by
the number of days in such interest payment period
which shall be 180 days in all cases. The
Applicable Rate and interest on the Debentures
shall be computed on the basis of a year of twelve
30-day months. If neither S&P nor Moody's has
issued a current Rating, or if the rating system
-2-
<PAGE>
employed by either such organization is changed
from that which is currently employed, then the
Company shall, with the approval of the Trustee,
designate such additional nationally recognized
rating organization, or make such adjustments in
the relationship between the Rating and the
Applicable Rate, as are consistent with the above
table;
6. Not later than 15 days after any change
in the Applicable Rate, the Company shall cause the
Trustee to give notice of such change to all
holders by mailing a written notice of such change
by first class mail to all holders as their names
and addresses appear in the Security Register In
addition, the Company will, upon request of the
holder of a Debenture, provide the Applicable Rate
then in effect;
7. The principal of and interest on the
Debentures shall be payable at the office or agency
of the Company which will initially be the office
of the agent of the Trustee at Bankers Trust
Company, 4 Albany Street, New York, New York 10006,
or at such other places as the Company may
designate; provided, however, that at the option of
the Company payment of interest may be made by
check mailed to the address of the person entitled
thereto as such address shall appear in the
Security Register (as defined in the Indenture);
8. Except as provided in Sections 501 and
502 of the Indenture, there is no option,
obligation or right of the Company to redeem,
purchase, repay or exchange any other securities
for the Debentures prior to maturity;
-3-
<PAGE>
9. The provisions regarding defeasance set forth
in Section 403 of the Indenture shall apply to the
Debentures; provided that from and after the effective
date of discharge described in such Section, the
Applicable Rate shall be equal to the Applicable Rate in
effect on the date prior to the deposit of money and/or
U.S. Government Obligations with respect to the
Debentures, and such Applicable Rate shall not
thereafter be affected by any change in the Rating. For
the purpose of determining the amount of money and/or
U.S. Government Obligations required to be deposited
with the Trustee in order to effect such a discharge,
the interest rate on the Debentures shall be assumed to
be (i) for the period beginning on the effective date of
such discharge, such Applicable Rate and (ii) for the
period beginning on the day of such deposit and ending
on the date prior to the effective date of such
discharge, the highest Applicable Rate indicated in
paragraph 5 above; and
10. The provisions in Section 1007 of the
Indenture shall not apply to the Debentures.
IN WITNESS WHEREOF, We have hereunto signed our
names this 6th day of December, 1989.
/S/ George E. Pfautsch
---------------------------
George E. Pfautsch
Senior Vice President,
Finance
/S/ Sandra T. Powell
---------------------------
Sandra T. Powell
Treasurer
-4-
RESOLUTIONS
AMEND MANAGEMENT PERFORMANCE AWARD PLAN
May 5, 1989
RESOLVED, that Section 2 (k) of the Management Performance
Award Plan ("Plan") be amended to read as follows:
(k) "Participant" means any Employee actively employed by
the Company during an Award Year in an Organizational Unit
in a position designated as a participating position
pursuant to rules and regulations adopted by the Committee
from time to time.
and be it further
RESOLVED, that Section 9 (a) of the Plan be amended to
read as follows:
(a) All Awards under the Plan shall be paid in cash at the
time Awards are announced in accordance with Section 5,
or as soon thereafter as reasonably practicable. Award
amounts shall be prorated for the portion of the Award
Year the Employee was an eligible Participant pursuant to
rules and regulations adopted by the Committee from time
to time. A Participant who is dismissed shall be entitled
to receive an Award only to the extent permitted pursuant
to rules adopted by the Committee.
Exhibit (10)(a)(i)
DESCRIPTION OF FACILITIES USE
BY RICHARD B. MADDEN
The Company provides office space and secretarial services to
Richard B. Madden, who retired as Chairman of the Board and Chief
Executive Officer in May 1994. Such arrangement is primarily
designed to assist Mr. Madden in representing the Company in civic,
community and industry-related activities on an uncompensated
basis.
Exhibit (10)(f)(i)
STOCK OPTION AGREEMENT
POTLATCH CORPORATION 1983 STOCK OPTION 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 ("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" shall mean this stock option
agreement.
(b) "Board" shall mean the Board of Directors of
the Corporation.
(c) "Change in Control" shall mean an event or
transaction described in Subparagraph (a), (b), (c) or (d) of
Paragraph 3 (without regard to the thirty (30) and three
hundred sixty-five (365) day periods also described in those
Subparagraphs).
(d) "Code" shall mean the Internal Revenue Code of
1986, as amended.
(e) "Common Stock" shall mean the $l par value
Common Stock of the Corporation.
(f) "Committee" shall mean the Committee appointed
by the Board to administer the Plan.
(g) "Corporation" shall mean Potlatch Corporation,
a Delaware corporation.
(h) "Date of Grant" shall mean the date on which
the Committee determined to grant this Option, as specified
in Section 1 of the addendum to this Agreement.
-1-
Exhibit (lO)(g)(i)
<PAGE>
(i) "Disability" shall mean 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 not
less than twelve (12) months.
(j) "Exercise Price" shall mean 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 speci-
fied date shall mean the closing price at which such Shares
are traded as of the close of business on such date as
reported on the composite tape, or if no trading of the
Common Stock is reported for that day, on the next preceding
day on which trading was reported.
(l) "Incentive Stock Option" shall mean an Option
described in Code section 422A(b).
(m) "Nonqualified Stock Option" shall mean an
Option other than an Incentive Stock Option.
(n) "Option" shall mean a stock option granted
pursuant to the Plan.
(o) "Option Period" shall mean the term of this
Option as provided in Paragraph 3 of this Agreement.
(p) "Partial Exercise" shall mean an exercise with
respect to less than all of the accrued but unexercised
Shares subject to Option held by the person exercising the
Option.
(q) "Plan" shall mean the Potlatch Corporation
1983 Stock Option Plan, as adopted by the Board on
September 24, 1983, and as amended by the Board on
December 14, 1984 and February 24, 1989, and pursuant to
which the parties have entered into this Agreement.
(r) "Purchase Price" shall mean the Exercise
Price times the number of whole shares with respect to which
this Option is exercised.
(s) "Rules" shall mean the regulations and rules
adopted from time to time by the Committee.
(t) "Securities Act" shall mean the Securities Act
of 1933, as amended.
-2-
<PAGE>
(u) "Share" shall mean one share of Common Stock,
adjusted in accordance with Section 10 of the Plan.
(v) "Subsidiary" shall mean 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 fifty percent
(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 hereby 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 hereinafter
stated, and in consideration for which Employee hereby agrees
to continue in the employment of the Corporation or its
Subsidiaries for a period of at least one (1) year from the
date of 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 herein,
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") and the Call
Periods applicable to such Vesting Schedule pursuant to
Paragraph 4 shall be as follows:
-3-
<PAGE>
Number of Shares Vesting Schedule* Call Period**
50% of the number From one year From one year
of shares from the Date of from the Date of
specified in Grant to end of Grant to end of
Section 3 of the term for Option term for Option
addendum
50% of the number From two years From two years
of shares from the Date of from the Date of
specified in Grant to end of Grant to end of
Section 3 of the term for Option term for Option
addendum
No Partial Exercise of this Option may be for less than ten
(10) Share lots or multiples thereof.
If a period of six (6) months has elapsed from the
Date of Grant, Employee shall have the right to exercise the
Option (or in lieu thereof to call the related stock
appreciation right), in whole or in part:
(a) Within thirty (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 three hundred sixty-five (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
-------------------
* See Paragraph 5 for further explanation of end of term
for Option.
** This column is applicable only if the Option is granted
with a stock appreciation right as indicated in Sec-
tion 6 of the addendum to this Agreement.
-4-
<PAGE>
(i) above who were still in office as of the date
the Board approved such election or nomination;
(c) Within three hundred sixty-five (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 twenty percent
(20%) or more of the aggregate voting power of the
capital stock of the Corporation issued and
outstanding; and
(d) Within thirty (30) days prior to any
dissolution or liquidation of the Corporation or
any merger or consolidation in which the Corpo-
ration 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 thirty (30) day
period described in (a) or (b) above, the option shall
terminate at the close of business on the last day of the
thirty (30) day period; provided, however, that if periods
described in (a) and (b) are continuous or overlap, unexer-
cised options shall terminate at the close of business on the
last day of the second thirty (30) day period.
4. If the Option is designated in Section 6 of
the addendum to this Agreement as being granted with a stock
appreciation right, under the conditions described herein,
Employee may surrender all or part of this Option and exer-
cise the stock appreciation right in lieu of exercising all
or any part of this Option, provided 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 appreci-
ation right shall be referred to herein as the "call"
thereof. 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 thereof) from the Fair Market Value of such Shares on
the date of such call. 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 granted in conjunction with the Option and in the event
of the call of the stock appreciation right the underlying
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<PAGE>
Option will be deemed to have been exercised for all purposes
under the Plan.
If the Option is not designated in Section 6 of the
addendum to this Agreement as being granted with a stock
appreciation right, the Option shall nevertheless automati-
cally include a stock appreciation right that may be called
in the event of a Change in Control, only during the periods
described in Subparagraphs (a), (b), (c) or (d) of Para-
graph 3. In the case of any stock appreciation right that is
called during either of the thirty (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 Employee would have received
in connection with such transaction as a stockholder of the
Corporation if he or she had exercised the Option prior to
the consummation of the transaction described in Para-
graph 3(a) or Paragraph 3(d) 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.
Payment of a stock appreciation right shall be
made as soon as reasonably practicable following receipt by
the Corporation of the form described in Paragraph 8. Pay-
ment of the stock appreciation right shall be made in such
form as may be permitted pursuant to the Rules as in effect
on the date the stock appreciation right is called.
5. The term of this Option shall end and (any
other provision of the Plan to the contrary notwithstanding)
this Option shall not be exercisable after seven (7) 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 ten (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 or called, may be
exercised or called, within twelve (12) months
after Employee's death by Employee's executors or
administrators or by any person or persons who
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<PAGE>
shall have acquired this Option directly from
Employee by bequest or inheritance.
(b) If the termination of Employee's
employment is caused by Disability or 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 or
called within twelve (12) months after the date of
such termination (three (3) months, in the case of
termination by reason of retirement).
(c) If the termination of Employee's
employment is for any reason other than death,
Disability, or 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 (3) months
after the date of such termination; provided,
however, that in such case the right to call a
stock appreciation right 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
(3) 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 on the date of such
termination. As used herein "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
deliberately disregarded the rules of the
Corporation or a Subsidiary in such a manner as to
cause material loss, damage or injury to or
otherwise endanger the property, reputation or
employees of the Corporation or a Subsidiary. The
Committee shall determine whether Employee's
employment is terminated by reason of misconduct.
-7-
<PAGE>
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 so reserved and the Exercise Price thereof
shall be proportionately adjusted for any increase or
decrease in the number of issued and outstanding Shares by
reason of stock dividends, split-ups, 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 pertain and apply to the
securities to which a holder of the number of Shares subject
to this Option would have been entitled. Except insofar as
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,
Employee (or Employee's representative) shall be entitled to
receive the same consideration in such transaction
(including, without limitation, cash) as other shareholders
are entitled to receive.
8. Employee, or Employee's representative, may
call twenty percent (20%) or more of that portion of the
Option which has become vested in accordance with Paragraph 3
of this Agreement at any time during each applicable Call
Period, except as requested by Employee or Employee's
representative and approved by the Committee. For purposes
of the Plan, the date of call shall be the date a form
provided by the Corporation for this purpose is filed by the
Employee or the Employee's representative and received by the
Secretary of the Corporation.
Employee, or Employee's representative, may exercise
this Option by giving written notice to the Corporation at
-8-
<PAGE>
San Francisco, California, attention of the Secretary,
specifying the election to exercise the Option, the number of
Shares in respect of which it is being exercised and the
method of payment for the amount of the Purchase Price of the
Shares as to 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 Corporation to
govern its stock option program, 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 so paid and
the Fair Market Value of the Shares so surrendered
equals the Purchase Price of the Shares with
respect to 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, it 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 therefor has been made.
The Corporation shall thereafter cause to be issued a cer-
tificate or certificates for the Shares as to which this
Option shall have been so exercised, registered in the name
of the person or persons so exercising the Option (or in the
name of such person or persons and another person as commun-
ity 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. 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
-9-
<PAGE>
4999, would exceed the Capped Amount, net of all applicable
taxes.
The firm of independent certified public accoun-
tants 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 or not exercise such
payments or benefits before the payment or enjoyment thereof.
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 and delivered to Employee or
Employee's representative.
12. Unless the Shares to be acquired are regis-
tered under the Securities Act, Employee represents and
agrees that upon the exercise of the Option herein granted
Employee will purchase such Shares for the purpose of
investment and without present intention of resale. 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 in respect of 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
therefrom, 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 be in contravention of 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 with respect to which the exercise
of this Option has been made, and unless such registration,
if required, has been completed, certificates to be issued
upon the exercise of this Option shall contain the following
legend:
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<PAGE>
"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 herein, the
Option herein granted and the rights and privileges
conferred hereby 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 hereby,
contrary to the provisions hereof, or upon any attempted
sale under any execution, attachment or similar process upon
the rights and privileges conferred hereby, this Option and
the rights and privileges conferred hereby 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 con-
strued in accordance with the laws of the State of
California.
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<PAGE>
ADDENDUM TO STOCK OPTION AGREEMENT
POTLACH CORPORATION 1983 STOCK OPTION PLAN
Name of Employee: _________________________________________
1. Date of Grant:_____________, 19___.
2. Exercise Price: $ _______ per share, which is agreed
to be one hundred percent (100%) of the Fair Market
Value of the Shares subject to the Option on the Date of
Grant.
3. The number of Shares subject to this stock option
agreement is _______ Shares, subject to adjustment as
provided in Section 10 of the Plan and Paragraph 6 of
this stock option agreement.
4. This Option is (check one):
[ ] An Incentive Stock Option
[ ] A Nonqualified Stock Option
5. The Vesting Schedule for this Option is (check one):
[ ] The schedule specified in Paragraph 3 of the
stock option agreement except that no exercise
or call will be permitted for a fractional
Share.
[ ] As follows:
6. This Option is granted (check one):
[ ] With a stock appreciation right
[ ] Without a stock appreciation right
The document entitled Stock Option Agreement: Potlatch
Corporation 1983 Stock Option Plan is hereby incorporated by
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 day and year indicated
below.
POTLATCH CORPORATION
Date:________________ By ___________________
Secretary
Date:________________ By ___________________
Employee
AMENDMENT TO STOCK OPTION AGREEMENT
THIS AGREEMENT, entered into by and between
POTLATCH CORPORATION, a Delaware corporation (the "Corpora-
tion"), and the employee of the Corporation named in the
attached addendum to this Agreement ("Employee"),
W I T N E S S E T H:
Whereas the Corporation and Employee have hereto-
fore entered into a stock option agreement as of the Date of
Grant specified in the addendum to this Agreement (the
"Stock Option Agreement"); and
Whereas the parties hereto desire to amend the
Stock Option Agreement as set forth herein;
N o w, T h e r e f o r e, to encourage stock
ownership by employees of the Corporation and for other
valuable consideration, the parties hereto agree as follows:
1. A stock appreciation right is hereby added to
the option granted pursuant to the Stock Option Agreement,
subject to all of the terms and conditions of the Stock
Option Agreement to the same extent as if the Stock Option
Agreement originally had provided for such stock apprecia-
tion right; provided, however, that the stock appreciation
right shall not be exercisable before
2. If the option granted pursuant to the Stock
Option Agreement originally was designated as an Incentive
Stock Option in the Stock Option Agreement, such option is
hereby redesignated as a Nonqualified Stock Option, as
defined in the Stock Option Agreement.
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Exhibit (lO)(g)(ii)
<PAGE>
ADDENDUM TO AMENDMENT TO STOCK OPTION AGREEMENT
1. Stock Option Plan (check one):
[ ] 1983 Stock Option [ ] 1976 Stock Option
Plan Plan
2. Name of Employee:_________________________________________
3. Term of Option: Date of Grant_______________ to __________
4. Exercise Price: $ ________ per share
5. Number of shares subject to the Stock Option Agreement on
date of amendment, subject to adjustment as provided in the
Stock Option Agreement:____________ shares
6. The Option is (check one):
[ ] An Incentive Stock [ X ] A Nonqualified Stock
Option Option
7. The Vesting Schedule and Call Periods for the Option are:
No. of Shares
Outstanding
on Date of Vesting Schedule Call Period
Amendment From To From To
___________ __________ __________ __________ __________
___________ __________ __________ __________ __________
___________ __________ __________ __________ __________
___________ __________ __________ __________ __________
IN WITNESS WHEREOF, the Corporation has caused this
addendum to the 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 _______________________
Secretary
Date ____________________ _______________________
Employee
POTLATCH CORPORATION DEFERRED
COMPENSATION PLAN FOR DIRECTORS
1. Establishment and Purpose.
The Potlatch Corporation Deferred Compensation
Plan for Directors was adopted on December 31, 1980, by the
Board of Directors of Potlatch Corporation to provide
Directors of Potlatch Corporation an opportunity to defer
payment of their Director's Fees. The Plan is also intended
to establish a method of paying Director's Fees which will
assist the Company in attracting and retaining persons of
outstanding achievement and ability as members of the Board
of Directors of the Company. The Plan was amended and
restated to read as set forth herein effective as of May 1,
1991.
2. Definitions.
(a) "Beneficiary" means the person or persons
designated by the Director to receive payment of the
Director's Deferred Compensation Account in the event of the
death of the Director.
(b) "Board" and "Board of Directors" means the
board of directors of the Company.
(c) "Committee" shall mean the Nominating
Committee of the Board.
(d) "Company" means Potlatch Corporation, a
Delaware corporation.
(e) "Deferred Compensation Account" means the
bookkeeping account established pursuant to Section 6 on
behalf of each Director who elects to participate in the
Plan.
(f) "Director" means a member of the Board of
Directors who is not an employee of the Company or any sub-
sidiary thereof.
(g) "Director's Fees" means the amount of compen-
sation paid by the Company to a Director for his or her
services as a Director, including an annual retainer and any
amount payable for attendance at a meeting of the Board of
Directors or any committee thereof. "Director's Fees" shall
not include (i) any reimbursement by the Company of expenses
incurred by a Director incidental to attendance at a meeting
of the Board of Directors or of a committee thereof or of
any other expense incurred on behalf of the Company or
(ii) any amount payable with respect to services rendered
prior to January 1, 1981.
(h) "Dividend Equivalent" means an amount equal
to the cash dividend paid on an outstanding share of the
Company's common stock. Dividend Equivalents shall be
credited to Stock Units as if each Stock Unit were an out-
standing share of the Company's common stock, except that
Dividend Equivalents shall also be credited to fractional
Stock Units.
Exhibit (10)(h)
<PAGE>
(i) "Plan" shall mean the Potlatch Corporation
Deferred Compensation Plan for Directors.
(j) "Stock Units" means the deferred portion of
Director's Fees which is converted into a unit.
(k) "Value" means the closing price of the
Company's common stock as reported in the New York Stock
Exchange, Inc. composite transactions reports for the
Valuation Date.
(l) "Valuation Date" means, for the purposes of
Section 6 or 7, the last trading day of the month preceding
the month in which Director's Fees or Dividend Equivalents
are converted into Stock Units pursuant to Section 6 or 7
and, for purposes of Section 8, the last trading day of the
month preceding the month in which Stock Units are converted
into cash for purposes of Section 8.
(m) "Year" shall mean the calendar year.
3. Eligibility.
Each Director who receives Director's Fees for
service on the Board of Directors shall be eligible to
participate in the Plan.
4. Participation.
In order to participate in the Plan for a par-
ticular Year, a Director must file a deferral election with
the Secretary of the Company prior to January 1 of such
Year; provided, however, that in the case of a newly elected
Director an election to participate shall be effective for
the Year in which the Director is first elected if it is
filed before the date the Director first receives Director's
Fees (but in no event later than one month following the
date of election).
5. Deferral Election.
A Director who elects to participate in the Plan
shall file a deferral election on a form which shall
indicate:
(a) The amount or percentage of Director's
Fees which such Director elects to defer pursuant
to the terms of the Plan. This election shall
apply to amounts deferred under the Plan until
modified by the Director. The Director shall
notify the Secretary of the Company in writing of
any such modification, which shall apply solely to
amounts deferred with respect to Years following
the Year in which the modification is made;
(b) The Year in which payment of the
Director's Deferred Compensation Account and/or
Stock Units shall commence; provided however, that
payments shall commence no later than the Year
following the Year in which the Director attains
age 70 and, in the case of Stock Unit payments, no
earlier than six months after the last date on
which Director's Fees have been converted into
<PAGE>
Stock Units on behalf of the Director (except in
the case of payments made following the Director's
death, total and permanent disability or the date
the Director ceases to qualify as a Director).
(c) Whether the payment of such Director's
Deferred Compensation Account is to be made in a
single lump sum or in a series of approximately
equal installments over a period of years
specified by the Director (but in no event more
than fifteen years);
(d) Whether the deferral election shall be
effective only with respect to Director's Fees
paid for the Year in which the Director's partici-
pation in the Plan is to commence as determined
pursuant to Section 4 above or shall apply with
respect to Director's Fees paid for that Year and
all subsequent Years until revoked or modified by
the Director. The Director shall notify the
Secretary of the Company in writing of any such
revocation or modification, which shall apply
solely to amounts deferred with respect to years
following the Year in which the revocation or
modification is made; and
(e) The percentage of the Director's Fees
deferred pursuant to the election which is to be
converted into Stock Units. This election shall
apply to the Year in which the Director's partici-
pation in the Plan commences and to all subsequent
Years until modified by the Director. The
Director shall notify the Secretary of the Company
in writing of any such modification, which shall
apply solely to amounts deferred with respect to
years following the Year in which the modification
is made.
Irrespective of the period designated pursuant to (d) above
in connection with a Director's initial deferral election
under the Plan, the Director's initial designation as to
time and form of distribution under (b) and (c) above shall
apply to all amounts deferred under the Plan and may not be
revoked or modified by the Director.
6. Treatment of Deferred Accounts.
Upon receipt of a duly filed deferral election,
the Company shall establish a Deferred Compensation Account
to which shall be credited an amount equal to that portion
of the Director's Fees which would have been payable
currently to the Director but for the terms of the deferral
election and which is not converted into Stock Units. If
the deferral election includes an election to convert a
percentage of the Director's Fees deferred pursuant to the
election into Stock Units, the number of full and fractional
Stock Units shall be determined by dividing the amount
subject to such an election by the Value of the Company's
common stock on the Valuation Date.
<PAGE>
Director's Fees shall be credited to Director's
Deferred Compensation Account or converted into Stock Units
as of the following dates:
(a) The deferred portion of one-fourth of
the annual retainer fee shall be credited to such
Account or converted into Stock Units as of the
first day of each calendar quarter; and
(b) The deferred portion of the fee for any
meeting of the Board or any committee thereof
shall be credited to such Account or converted
into Stock Units as of the first day of the month
following the date of such meeting.
7. Treatment of Deferred Compensation
Account and Stock Units During
Deferral Period.
(a) Deferred Compensation Account. Interest
shall be credited on the balance in each Director's Deferred
Compensation Account commencing with the date as of which
any amount is credited to the Deferred Compensation Account
and continuing up to the last day of the quarter preceding
the month in which payment of the amounts deferred pursuant
to the Plan is made. Such interest shall become a part of
the Deferred Compensation Account and shall be paid at the
same time or times as the balance of the Deferred Compensa-
tion Account. Such interest for each calendar quarter
during the deferral period shall be computed at 70% of the
higher of the following averages: (i) the prime rate
charged by the major commercial banks as of the first
business day of each calendar month (as reported in an
official publication of the Federal Reserve System), or
(ii) the average monthly long-term rate of A rated corporate
bonds (as published in Moody's Bond Record). Such interest
shall be compounded quarterly.
(b) Stock Units. Dividend Equivalents shall be
credited to each Stock Unit on each dividend record date.
Such Dividend Equivalents shall themselves be converted into
Stock Units as of the dividend record date by dividing the
amount of the Dividend Equivalents by the Value of the
Company's Common Stock as of the applicable Valuation Date.
(c) Effect of Certain Transactions. In the event
of a change in the number of outstanding shares of the
Company's common stock by reason of a stock split, stock
dividend, or other similar changes in capitalization, an
appropriate adjustment shall be made in the number of each
Director's Stock Units determined as of the date of such
occurrence.
8. Form and Time of Payment of
Deferred Compensation Account.
Payment of a Director's Deferred Compensation
Account shall be made in cash prior to January 31 in each
year in which a payment is to be made in accordance with the
Director's deferral election. Payment of a Director's Stock
<PAGE>
Units shall also be made at such time except that, if the
applicable January 31 occurs within the six-month period
beginning on the last date on which Director's Fees have
been converted into Stock Units on behalf of the Director,
then payment of the Director's Stock Units shall be made on
the last day of the month in which such six-month period
expires. Notwithstanding the previous sentence, Stock Unit
payments may be made following the Director's death, total
and permanent disability or the date the Director ceases to
qualify as a Director, without regard to whether such six-
month period has expired. For the purpose of payment, Stock
Units shall be converted to cash based on the Value of the
Company's common stock on the applicable Valuation Date.
In the case of a Director who has both a Deferred
Compensation Account and Stock Units, if a partial
distribution of a deferred portion of Director's Fees is to
be made and if the Director's Stock Units are immediately
payable in accordance with the previous paragraph, payment
shall be made partially from the Director's Deferred
Compensation Account and partially from Stock Units, in pro-
portion to the relative size of the Deferred Compensation
Account and the Stock Units. If the Director's Stock Units
are not immediately payable in accordance with the previous
paragraph, the partial payment shall be made entirely from
the Director's Deferred Compensation Account.
Notwithstanding the foregoing, the Committee
reserves the right to determine in its sole discretion that
payment shall be made at a different time or times (but no
later than fifteen years after the payment commencement date
specified by the Director in his or her deferral election).
9. Effect of Death of Participant.
Upon the death of a participating Director, all
amounts, if any, remaining in his or her Deferred Compensa-
tion Account and all Stock Units shall be distributed to the
Beneficiary designated by the Director. Such distribution
shall be made at the time or times specified in the
Director's deferral election. The Committee, however,
reserves the right to determine in its sole discretion that
payment shall be made at a different time or times (but no
later than fifteen years after the payment commencement date
specified by the Director in his or her deferral election).
If the designated Beneficiary does not survive the Director
or dies before receiving payment in full of the Director's
Deferred Compensation Account and Stock Units, payment shall
be made to the estate of the last to die of the Director or
the designated Beneficiary.
10. Participant's Rights Unsecured.
The interest under the Plan of any participating
Director and such Director's right to receive a distribution
of his or her Deferred Compensation Account and Stock Units
shall be an unsecured claim against the general assets of
the Company. The Deferred Compensation Account and Stock
<PAGE>
Units shall be bookkeeping entries only and no Director
shall have an interest in or claim against any specific
asset of the Company pursuant to the Plan.
11. Statement of Deferred Compensation
Account and Stock Units.
The Secretary of the Company shall provide an
annual statement of each participating Director's Deferred
Compensation Account and Stock Units no later than
January 31 each year.
12. Nonassignability of Interests.
The interest and property rights of any Director
under the Plan shall not be subject to option nor be assign-
able either by voluntary or involuntary assignment or by
operation of law, including (without limitation) bankruptcy,
garnishment, attachment or other creditor's process, and any
act in violation of this Section 12 shall be void.
13. Administration of the Plan.
The Plan shall be administered by the Committee.
In addition to the powers and duties otherwise set forth in
the Plan, the Committee shall have full power and authority
to administer and interpret the Plan, to establish pro-
cedures for administering the Plan and to take any and all
necessary action in connection therewith. The Committee's
interpretation and construction of the Plan shall be con-
clusive and binding on all persons.
14. Amendment or Termination of the
Plan.
The Board of Directors may amend, suspend or ter-
minate the Plan at any time. In the event of such termina-
tion, the Deferred Compensation Accounts and Stock Units of
participating Directors shall be paid at such times and in
such forms as shall be determined pursuant to Section 8,
unless the Board of Directors shall prescribe a different
time or times for payment of such Accounts and Units.
Execution Copy
POTLATCH CORPORATION DIRECTORS' RETIREMENT PLAN
(Effective October 1, 1989)
SECTION 1. INTRODUCTION.
The Potlatch Corporation Directors' Retirement Plan
(the "Plan") was established effective October 1, 1989 to
provide retirement benefits to Eligible Directors. The Plan
may be amended or terminated at any time, as provided in
Section 8. Capitalized terms used in the Plan are defined in
Section 9.
SECTION 2. ELIGIBILITY AND PARTICIPATION.
Participation in the Plan shall be limited to
Eligible Directors. An Eligible Director shall become a
Participant and shall be eligible to receive a retirement
benefit under the Plan upon completing five Years of Service
as an Eligible Director.
SECTION 3. RETIREMENT BENEFITS.
(a) Amount of Annual Benefit. A Participant's
retirement benefit under the Plan shall be an annual payment
equal to the amount of the regular annual Directors' retainer
fee in effect at the time the Participant ceases to be a
Director. Such amount shall not include supplemental fees
paid for committee chairmanships, attendance at or
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Exhibit (lO)(i)
<PAGE>
participation by telephone in a meeting of the Company's
Directors or any committee of Directors, or any reimbursement
of expenses.
(b) Payment and Duration of Benefit. A Partici-
pant's retirement benefit hereunder shall become payable only
after the Participant's retirement from all service with the
Company and its subsidiaries, whether as a Director or as an
employee. The first payment to the Participant shall be made
on or about the first business day in January following the
Participant's retirement. Annual payments shall continue to
be made on or about the first business day in each succeeding
January until the number of payments to the Participant
equals the lesser of 10 or the number of full Years of
Service that the Participant served as an Eligible Director.
Notwithstanding the foregoing, (i) the Committee (in its sole
discretion) may at any time direct that the present value of
any retirement benefits determined under this Section 3 shall
be paid to the Participant in a lump sum; and (ii) in the
event that a Participant's service terminates within three
years following a Change in Control, the present value of the
Participant's retirement benefits under this Section 3 shall
be paid to the Participant in a lump sum as soon as
practicable following such termination. For purposes of the
preceding sentence, present value shall be calculated using
the interest rate assumption then in effect for determining
lump sum payments under the Retirement Plan. The payment of
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<PAGE>
a lump sum pursuant to (i) or (ii) above shall discharge the
Company from any further obligation to pay retirement
benefits with respect to the Participant under the Plan.
(c) Suspension of Benefit. Payment of retirement
benefits hereunder shall be suspended during any period in
which a Participant returns to service as a Director or
employee of the Company or any of its subsidiaries. Payments
shall recommence after the Participant's service terminates,
at which time the retirement benefit shall be recalculated
to reflect any additional Years of Service and any increase
in the amount of the regular annual Directors' retainer fee.
SECTION 4. BENEFITS UPON DEATH OF PARTICIPANT.
Upon the death of a Participant, the present value
of any unpaid benefits under the Plan shall be paid in a
lump sum to the beneficiary designated by the Participant.
Such present value shall be calculated using the interest
rate assumption then in effect for determining lump sum
payments under the Retirement Plan. If the Participant had
not designated a beneficiary or if the designated benefi-
ciary did not survive the Participant, the lump sum benefit
shall be paid to the Participant's estate. Any payment under
this Section 4 shall be made as soon as practicable after the
Participant's death.
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<PAGE>
SECTION 5. FUNDING.
The Plan shall be unfunded and shall represent an
unsecured obligation of the Company. Benefits hereunder
shall be paid only from the general assets of the Company,
and the Participants and their beneficiaries shall have no
rights to any segregated funds or property of the Company.
SECTION 6. NO ASSIGNMENT.
Except as provided in Section 4, the right of any
person to any payment under the Plan shall not be assignable
or transferable except by will or the laws of descent and
distribution, and any act in violation of this Section 6
shall be void.
SECTION 7. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by the Committee.
The Committee shall have sole discretion to interpret the
terms of the Plan, to determine eligibility under the Plan
and to take any and all actions to administer the Plan as the
Committee deems appropriate. The Committee's interpreta-
tions, determinations and actions under the Plan shall be
conclusive and binding on all persons.
SECTION 8. AMENDMENT AND TERMINATION.
The Company expects to continue the Plan indefi-
nitely. Future conditions, however, cannot be foreseen, and
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<PAGE>
the Committee shall have the authority to amend or terminate
the Plan at any time. In the event of an amendment or
termination of the Plan, a Participant's benefit hereunder
shall not be less than the benefit to which the Participant
would have been entitled if his or her service as an Eligible
Director had terminated immediately prior to such amendment
or termination. Except as otherwise determined by the Com-
mittee, such benefit shall become payable only after the
Participant's service with the Company and its subsidiaries
terminates, as provided in Section 3(b).
SECTION 9. DEFINITIONS.
(a) "Change in Control" means:
(i) The consummation of any transaction
approved by the stockholders of the Company in which
the Company will cease to be an independent publicly
owned corporation (including, without limitation, a
reverse merger transaction in which the Company becomes
the subsidiary of another corporation) or the sale or
other disposition of all or substantially all of the
assets of the Company;
(ii) The date on which more than one-third
(determined by rounding down to the next whole number)
of the Directors neither (A) were Directors on a date
three years earlier nor (B) are Directors whose
election or nomination for election as Directors was
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<PAGE>
affirmatively voted on by at least a majority of those
Directors described in (A) above who were still in
office as of the date the Board of Directors of the
Company approved such election or nomination;
(iii) 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) that has
acquired capital stock of the Company pursuant to a
tender offer subject to section 14(d) of the Securities
Exchange Act of 1934, as amended, becomes entitled to
vote 20% or more of the aggregate voting power of the
capital stock of the Company issued and outstanding; or
(iv) Any dissolution or liquidation of the
Company or any merger or consolidation in which the
Company is not the surviving corporation.
(b) "Committee" means the Nominating Committee of
the Board of Directors of the Company.
(c) "Company" means Potlatch Corporation, a
Delaware corporation.
(d) "Director" means a director of the Company.
(e) "Eligible Director" means a Director who is
not an employee of the Company or any of its subsidiaries.
(f) "Participant" means an individual who met the
requirements of Section 2 and who is receiving or is eligible
to receive a benefit under Section 3.
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<PAGE>
(g) "Plan" means the Potlatch Corporation Direc-
tors' Retirement Plan, as set forth herein and as amended
from time to time.
(h) "Retirement Plan" means the Potlatch Corpora-
tion Salaried Employees' Retirement Plan, as amended from
time to time.
(i) "Years of Service" means completed 12-month
periods of service as an Eligible Director, as determined by
the Committee. All such periods of service shall be aggre-
gated, whether or not continuous. The Committee's determina-
tion of an individual's Years of Service shall be conclusive
and binding on all persons.
SECTION 10. EXECUTION.
To record the adoption of the Plan as set forth
herein effective October 1, 1989, the Company has caused its
authorized officer to execute the same this 4th day of
October, 1989.
POTLATCH CORPORATION
By /s/ Richard B. Madden
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STOCK OPTION AGREEMENT
POTLATCH CORPORATION 1989 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 ("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" shall mean this stock option
agreement.
(b) "Board" shall mean the Board of Directors of
the Corporation.
(c) "Change in Control" shall mean an event or
transaction described in Subparagraph (a), (b), (c) or (d) of
Paragraph 3 (without regard to the thirty (30) and three
hundred sixty-five (365) day periods also described in those
Subparagraphs).
(d) "Code" shall mean the Internal Revenue Code of
1986, as amended.
(e) "Common Stock" shall mean the $1 par value
Common Stock of the Corporation.
(f) "Committee" shall mean the Committee appointed
by the Board to administer the Plan.
(g) "Corporation" shall mean Potlatch Corporation,
a Delaware corporation.
(h) "Date of Grant" shall mean the date on which
the Committee determined to grant this Option, as specified
in Section 1 of the addendum to this Agreement.
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Exhibit (10)(m)(i)
<PAGE>
(i) "Disability" shall mean 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 not
less than twelve (12) months.
(j) "Exercise Price" shall mean 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 speci-
fied date shall mean the closing price at which such Shares
are traded as of the close of business on such date as
reported on the composite tape, or if no trading of the
Common Stock is reported for that day, on the next preceding
day on which trading was reported.
(l) "Incentive Stock Option" shall mean an Option
described in Code section 422A(b).
(m) "Nonqualified Stock Option" shall mean an
Option other than an Incentive Stock Option.
(n) "Option" shall mean a stock option granted
pursuant to the Plan.
(o) "Option Period" shall mean the term of this
Option as provided in Paragraph 3 of this Agreement.
(p) "Partial Exercise" shall mean an exercise with
respect to less than all of the accrued but unexercised
Shares subject to Option held by the person exercising the
Option.
(q) "Plan" shall mean the Potlatch Corporation
1989 Stock Incentive Plan, as adopted by the Board on
December 8, 1988, and as amended by the Board on
February 24, 1989, to be effective on January 1, 1989, and
pursuant to which the parties have entered into this
Agreement.
(r) "Purchase Price" shall mean the Exercise
Price times the number of whole shares with respect to which
this Option is exercised.
(s) "Rules" shall mean the regulations and rules
adopted from time to time by the Committee.
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<PAGE>
(t) "Securities Act" shall mean the Securities Act
of 1933, as amended.
(u) "Share" shall mean one share of Common Stock,
adjusted in accordance with Section 11 of the Plan.
(v) "Subsidiary" shall mean 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 fifty percent
(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 hereby 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 hereinafter
stated, and in consideration for which Employee hereby agrees
to continue in the employment of the Corporation or its
Subsidiaries for a period of at least one (1) year from the
date of 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 herein,
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") and the Call
Periods applicable to such Vesting Schedule pursuant to
Paragraph 4 shall be as follows:
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<PAGE>
Number of Shares Vesting Schedule* Call Period**
50% of the number From one year From one year
of shares from the Date of from the Date of
specified in Grant to end of Grant to end of
Section 3 of the term for Option term for Option
addendum
50% of the number From two years From two years
of shares from the Date of from the Date of
specified in Grant to end of Grant to end of
Section 3 of the term for Option term for Option
addendum
No Partial Exercise of this Option may be for less than ten
(10) Share lots or multiples thereof.
If a period of six (6) months has elapsed from the
Date of Grant, Employee shall have the right to exercise the
Option (or in lieu thereof to call the related stock
appreciation right), in whole or in part:
(a) Within thirty (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 three hundred sixty-five (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
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* See Paragraph 5 for further explanation of end of term
for Option.
** This column is applicable only if the Option is granted
with a stock appreciation right as indicated in Sec-
tion 6 of the addendum to this Agreement.
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<PAGE>
(i) above who were still in office as of the date
the Board approved such election or nomination;
(c) Within three hundred sixty-five (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 "l934 Act")) that has acquired Shares pursuant
to a tender offer subject to Section 14(d) of the
1934 Act becomes entitled to vote twenty percent
(20%) or more of the aggregate voting power of the
capital stock of the Corporation issued and
outstanding; and
(d) Within thirty (30) days prior to any
dissolution or liquidation of the Corporation or
any merger or consolidation in which the Corpo-
ration 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 thirty (30) day
period described in (a) or (b) above, the option shall
terminate at the close of business on the last day of the
thirty (30) day period; provided, however, that if periods
described in (a) and (b) are contiguous or overlap, unexer-
cised options shall terminate at the close of business on the
last day of the second thirty (30) day period.
4. If the Option is designated in Section 6 of
the addendum to this Agreement as being granted with a stock
appreciation right, under the conditions described herein,
Employee may surrender all or part of this Option and exer-
cise the stock appreciation right in lieu of exercising all
or any part of this Option, provided 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 appreci-
ation right shall be referred to herein as the "call"
thereof. 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 thereof) from the Fair Market Value of such Shares on
the date of such call. 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 granted in conjunction with the Option and in the event
of the call of the stock appreciation right the underlying
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<PAGE>
Option will be deemed to have been exercised for all purposes
under the Plan.
If the Option is not designated in Section 6 of the
addendum to this Agreement as being granted with a stock
appreciation right, the Option shall nevertheless automati-
cally include a stock appreciation right that may be called
in the event of a Change in Control, only during the periods
described in Subparagraphs (a), (b), (c) or (d) of Para-
graph 3. In the case of any stock appreciation right that is
called during either of the thirty (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 Employee would have received
in connection with such transaction as a stockholder of the
Corporation if he or she had exercised the Option prior to
the consummation of the transaction described in Para-
graph 3(a) or Paragraph 3(d) 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.
Payment of a stock appreciation right shall be
made as soon as reasonably practicable following receipt by
the Corporation of the form described in Paragraph 8. Pay-
ment of the stock appreciation right shall be made in such
form as may be permitted pursuant to the Rules as in effect
on the date the stock appreciation right is called.
5. The term of this Option shall end and (any
other provision of the Plan to the contrary notwithstanding)
this Option shall not be exercisable after seven (7) 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 ten (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 or called, may be
exercised or called, within twelve (12) months
after Employee's death by Employee's executors or
administrators or by any person or persons who
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<PAGE>
shall have acquired this Option directly from
Employee by bequest or inheritance.
(b) If the termination of Employee's
employment is caused by Disability or 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 or
called within twelve (12) months after the date of
such termination (three (3) months, in the case of
termination by reason of retirement).
(c) If the termination of Employee's
employment is for any reason other than death,
Disability, or 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 (3) months
after the date of such termination; provided,
however, that in such case the right to call a
stock appreciation right 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
(3) 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 on the date of such
termination. As used herein "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
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<PAGE>
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 so reserved and the Exercise Price thereof
shall be proportionately adjusted for any increase or
decrease in the number of issued and outstanding Shares by
reason of stock dividends, split-ups, 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 pertain and apply to the
securities to which a holder of the number of Shares subject
to this Option would have been entitled. Except insofar as
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,
Employee (or Employee's representative) shall be entitled to
receive the same consideration in such transaction
(including, without limitation, cash) as other shareholders
are entitled to receive.
8. Employee, or Employee's representative, may
call twenty percent (20%) or more of that portion of the
Option which has become vested in accordance with Paragraph 3
of this Agreement at any time during each applicable Call
Period, except as requested by Employee or Employee's
representative and approved by the Committee. For purposes
of the Plan, the date of call shall be the date a form
provided by the Corporation for this purpose is filed by the
Employee or the Employee's representative and received by the
Secretary of the Corporation.
Employee, or Employee's representative, may exercise
this Option by giving written notice to the Corporation at
San Francisco, California, attention of the Secretary,
specifying the election to exercise the Option, the number of
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<PAGE>
Shares in respect of which it is being exercised and the
method of payment for the amount of the Purchase Price of the
Shares as to 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 Corporation to
govern its stock option program, 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 so paid and
the Fair Market Value of the Shares so surrendered
equals the Purchase Price of the Shares with
respect to 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, it 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 therefor has been made.
The Corporation shall thereafter cause to be issued a cer-
tificate or certificates for the Shares as to which this
Option shall have been so exercised, registered in the name
of the person or persons so exercising the Option (or in the
name of such person or persons and another person as commun-
ity 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. 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.
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<PAGE>
The firm of independent certified public accoun-
tants 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 or not exercise such
payments or benefits before the payment or enjoyment thereof.
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 and delivered to Employee or
Employee's representative.
12. Unless the Shares to be acquired are regis-
tered under the Securities Act, Employee represents and
agrees that upon the exercise of the Option herein granted
Employee will purchase such Shares for the purpose of
investment and without present intention of resale. 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 in respect of 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
therefrom, 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 be in contravention of 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 with respect to which the exercise
of this Option has been made, 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
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<PAGE>
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 herein, the
Option herein granted and the rights and privileges
conferred hereby 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 hereby,
contrary to the provisions hereof, or upon any attempted
sale under any execution, attachment or similar process upon
the rights and privileges conferred hereby, this Option and
the rights and privileges conferred hereby 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 con-
strued in accordance with the laws of the State of
California.
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ADDENDUM TO STOCK OPTION AGREEMENT
POTLATCH CORPORATION 1989 STOCK INCENTIVE PLAN
Name of Employee:__________________________________________
1. Date of Grant:________________, 19____.
2. Exercise Price: $________ per share, which is agreed
to be one hundred percent (100%) of the Fair Market
Value of the Shares subject to the Option on the Date of
Grant.
3. The number of Shares subject to this stock option
agreement is ________ Shares, subject to adjustment as
provided in Section 11 of the Plan and Paragraph 6 of
this stock option agreement.
4. This Option is (check one):
[ ] An Incentive Stock Option
[ ] A Nonqualified Stock Option
5. The Vesting Schedule for this Option is (check one):
[ ] The schedule specified in Paragraph 3 of the
stock option agreement except that no exercise
or call will be permitted for a fractional
Share.
[ ] As follows:
6. This Option is granted (check one):
[ ] With a stock appreciation right
[ ] Without a stock appreciation right
The document entitled Stock Option Agreement: Potlatch
Corporation 1989 Stock Incentive Plan is hereby incorporated
by 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 day and year indicated
below.
POTLATCH CORPORATION
Date:______________________ By ______________________
Secretary
Date:______________________ By ______________________
Employee
POTLATCH CORPORATION
Subsidiaries
The following subsidiaries are included in the company's consolidated
financial statements.
State in Which Percentage of
Voting Securities
Name Organized Owned
Duluth & Northeastern Railroad Co. Minnesota 100
Cloquet, Minn.
Prescott & Northwestern Railroad Co. Arkansas 100
Prescott, Ark.
St. Maries River Railroad Co. Idaho 100
Lewiston, Idaho
Warren & Saline River Railroad Co. Arkansas 100
Warren, Ark.
All unnamed subsidiaries, when considered in the aggregate as a single
subsidiary, would not constitute a significant subsidiary. No separate
financial statements are filed for any sudsidiary.
Exhibit (22)
Consent of Independent Certified Public Accountants
The Board of Directors
Potlatch Corporation:
We consent to incorporation by reference in the Registration Statements
(Nos. 33-00805, 33-28220, 2-58502, 2-87789, 33-12809, 33-25352, 33-25353,
33-31372, 33-30836, 33-54515 and 33-54517) on Form S-8 of Potlatch Corporation
of our report dated January 25, 1995, relating to the balance sheets of
Potlatch Corporation and consolidated subsidiaries as of December 31, 1994 and
1993 and the related statements of earnings, stockholders' equity, and cash
flows and related financial statement schedule for each of the years in the
three-year period ended December 31, 1994 which report appears in the
December 31, 1994 annual report on the Form 10-K of Potlatch Corporation. As
discussed in our report, the Company changed its method of accounting for
income taxes, postretirement benefits other than pensions and postemployment
benefits in 1993.
KPMG PEAT MARWICK LLP
March 23, 1995
Exhibit (23)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
I, the undersigned, do hereby make, constitute and
appoint Sandra T. Powell or, in her absence or inability to act,
John M. Richards or L. Pendleton Siegel, or any of them, my
attorney-in-fact for me and in my name, place and stead to
execute for me and in my behalf in each or any one of my offices
and capacities with Potlatch Corporation, as shown below, the
Annual Report on Form 10-K of Potlatch Corporation for the fiscal
year ended December 31, 1994 to be filed with the Securities and
Exchange Commission under the Securities Exchange Act of 1934,
and any and all amendments thereto, hereby ratifying, approving
and confirming all that any such attorney-in-fact may do by
virtue of these presents.
IN WITNESS WHEREOF, I have executed these presents this
3rd day of MARCH, 1995.
Richard A. Clarke
DIRECTOR
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
I, the undersigned, do hereby make, constitute and
appoint Sandra T. Powell or, in her absence or inability to act,
John M. Richards or L. Pendleton Siegel, or any of them, my
attorney-in-fact for me and in my name, place and stead to
execute for me and in my behalf in each or any one of my offices
and capacities with Potlatch Corporation, as shown below, the
Annual Report on Form 10-K of Potlatch Corporation for the fiscal
year ended December 31, 1994 to be filed with the Securities and
Exchange Commission under the Securities Exchange Act of 1934,
and any and all amendments thereto, hereby ratifying, approving
and confirming all that any such attorney-in-fact may do by
virtue of these presents.
IN WITNESS WHEREOF, I have executed these presents this
3rd day of MARCH, 1995.
Kenneth T. Derr
DIRECTOR
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
I, the undersigned, do hereby make, constitute and
appoint Sandra T. Powell or, in her absence or inability to act,
John M. Richards or L. Pendleton Siegel, or any of them, my
attorney-in-fact for me and in my name, place and stead to
execute for me and in my behalf in each or any one of my offices
and capacities with Potlatch Corporation, as shown below, the
Annual Report on Form 10-K of Potlatch Corporation for the fiscal
year ended December 31, 1994 to be filed with the Securities and
Exchange Commission under the Securities Exchange Act of 1934,
and any and all amendments thereto, hereby ratifying, approving
and confirming all that any such attorney-in-fact may do by
virtue of these presents.
IN WITNESS WHEREOF, I have executed these presents this
3rd day of MARCH, 1995.
Allen F. Jacobson
DIRECTOR
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
I, the undersigned, do hereby make, constitute and
appoint Sandra T. Powell or, in her absence or inability to act,
John M. Richards or L. Pendleton Siegel, or any of them, my
attorney-in-fact for me and in my name, place and stead to
execute for me and in my behalf in each or any one of my offices
and capacities with Potlatch Corporation, as shown below, the
Annual Report on Form 10-K of Potlatch Corporation for the fiscal
year ended December 31, 1994 to be filed with the Securities and
Exchange Commission under the Securities Exchange Act of 1934,
and any and all amendments thereto, hereby ratifying, approving
and confirming all that any such attorney-in-fact may do by
virtue of these presents.
IN WITNESS WHEREOF, I have executed these presents this
3rd day of MARCH, 1995.
George F. Jewett, Jr.
DIRECTOR
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
I, the undersigned, do hereby make, constitute and
appoint Sandra T. Powell or, in her absence or inability to act,
John M. Richards or L. Pendleton Siegel, or any of them, my
attorney-in-fact for me and in my name, place and stead to
execute for me and in my behalf in each or any one of my offices
and capacities with Potlatch Corporation, as shown below, the
Annual Report on Form 10-K of Potlatch Corporation for the fiscal
year ended December 31, 1994 to be filed with the Securities and
Exchange Commission under the Securities Exchange Act of 1934,
and any and all amendments thereto, hereby ratifying, approving
and confirming all that any such attorney-in-fact may do by
virtue of these presents.
IN WITNESS WHEREOF, I have executed these presents this
3rd day of MARCH, 1995.
Richard B. Madden
DIRECTOR
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
I, the undersigned, do hereby make, constitute and
appoint Sandra T. Powell or, in her absence or inability to act,
John M. Richards or L. Pendleton Siegel, or any of them, my
attorney-in-fact for me and in my name, place and stead to
execute for me and in my behalf in each or any one of my offices
and capacities with Potlatch Corporation, as shown below, the
Annual Report on Form 10-K of Potlatch Corporation for the fiscal
year ended December 31, 1994 to be filed with the Securities and
Exchange Commission under the Securities Exchange Act of 1934,
and any and all amendments thereto, hereby ratifying, approving
and confirming all that any such attorney-in-fact may do by
virtue of these presents.
IN WITNESS WHEREOF, I have executed these presents this
3rd day of MARCH, 1995.
Richard M. Morrow
DIRECTOR
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
I, the undersigned, do hereby make, constitute and
appoint Sandra T. Powell or, in her absence or inability to act,
John M. Richards or L. Pendleton Siegel, or any of them, my
attorney-in-fact for me and in my name, place and stead to
execute for me and in my behalf in each or any one of my offices
and capacities with Potlatch Corporation, as shown below, the
Annual Report on Form 10-K of Potlatch Corporation for the fiscal
year ended December 31, 1994 to be filed with the Securities and
Exchange Commission under the Securities Exchange Act of 1934,
and any and all amendments thereto, hereby ratifying, approving
and confirming all that any such attorney-in-fact may do by
virtue of these presents.
IN WITNESS WHEREOF, I have executed these presents this
3rd day of MARCH, 1995.
Vivian W. Piasecki
DIRECTOR
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
I, the undersigned, do hereby make, constitute and
appoint Sandra T. Powell or, in her absence or inability to act,
John M. Richards or L. Pendleton Siegel, or any of them, my
attorney-in-fact for me and in my name, place and stead to
execute for me and in my behalf in each or any one of my offices
and capacities with Potlatch Corporation, as shown below, the
Annual Report on Form 10-K of Potlatch Corporation for the fiscal
year ended December 31, 1994 to be filed with the Securities and
Exchange Commission under the Securities Exchange Act of 1934,
and any and all amendments thereto, hereby ratifying, approving
and confirming all that any such attorney-in-fact may do by
virtue of these presents.
IN WITNESS WHEREOF, I have executed these presents this
3rd day of MARCH, 1995.
Toni Rembe
DIRECTOR
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
I, the undersigned, do hereby make, constitute and
appoint Sandra T. Powell or, in her absence or inability to act,
John M. Richards or L. Pendleton Siegel, or any of them, my
attorney-in-fact for me and in my name, place and stead to
execute for me and in my behalf in each or any one of my offices
and capacities with Potlatch Corporation, as shown below, the
Annual Report on Form 10-K of Potlatch Corporation for the fiscal
year ended December 31, 1994 to be filed with the Securities and
Exchange Commission under the Securities Exchange Act of 1934,
and any and all amendments thereto, hereby ratifying, approving
and confirming all that any such attorney-in-fact may do by
virtue of these presents.
IN WITNESS WHEREOF, I have executed these presents this
3rd day of MARCH, 1995.
John M. Richards
DIRECTOR
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
I, the undersigned, do hereby make, constitute and
appoint Sandra T. Powell or, in her absence or inability to act,
John M. Richards or L. Pendleton Siegel, or any of them, my
attorney-in-fact for me and in my name, place and stead to
execute for me and in my behalf in each or any one of my offices
and capacities with Potlatch Corporation, as shown below, the
Annual Report on Form 10-K of Potlatch Corporation for the fiscal
year ended December 31, 1994 to be filed with the Securities and
Exchange Commission under the Securities Exchange Act of 1934,
and any and all amendments thereto, hereby ratifying, approving
and confirming all that any such attorney-in-fact may do by
virtue of these presents.
IN WITNESS WHEREOF, I have executed these presents this
3rd day of MARCH, 1995.
Reuben F. Richards
DIRECTOR
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
I, the undersigned, do hereby make, constitute and
appoint Sandra T. Powell or, in her absence or inability to act,
John M. Richards or L. Pendleton Siegel, or any of them, my
attorney-in-fact for me and in my name, place and stead to
execute for me and in my behalf in each or any one of my offices
and capacities with Potlatch Corporation, as shown below, the
Annual Report on Form 10-K of Potlatch Corporation for the fiscal
year ended December 31, 1994 to be filed with the Securities and
Exchange Commission under the Securities Exchange Act of 1934,
and any and all amendments thereto, hereby ratifying, approving
and confirming all that any such attorney-in-fact may do by
virtue of these presents.
IN WITNESS WHEREOF, I have executed these presents this
3rd day of MARCH, 1995.
Richard M. Rosenberg
DIRECTOR
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
I, the undersigned, do hereby make, constitute and
appoint Sandra T. Powell or, in her absence or inability to act,
John M. Richards or L. Pendleton Siegel, or any of them, my
attorney-in-fact for me and in my name, place and stead to
execute for me and in my behalf in each or any one of my offices
and capacities with Potlatch Corporation, as shown below, the
Annual Report on Form 10-K of Potlatch Corporation for the fiscal
year ended December 31, 1994 to be filed with the Securities and
Exchange Commission under the Securities Exchange Act of 1934,
and any and all amendments thereto, hereby ratifying, approving
and confirming all that any such attorney-in-fact may do by
virtue of these presents.
IN WITNESS WHEREOF, I have executed these presents this
3rd day of MARCH, 1995.
Robert G. Schwartz
DIRECTOR
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
I, the undersigned, do hereby make, constitute and
appoint Sandra T. Powell or, in her absence or inability to act,
John M. Richards or L. Pendleton Siegel, or any of them, my
attorney-in-fact for me and in my name, place and stead to
execute for me and in my behalf in each or any one of my offices
and capacities with Potlatch Corporation, as shown below, the
Annual Report on Form 10-K of Potlatch Corporation for the fiscal
year ended December 31, 1994 to be filed with the Securities and
Exchange Commission under the Securities Exchange Act of 1934,
and any and all amendments thereto, hereby ratifying, approving
and confirming all that any such attorney-in-fact may do by
virtue of these presents.
IN WITNESS WHEREOF, I have executed these presents this
3rd day of MARCH, 1995.
Charles R. Weaver
DIRECTOR
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
I, the undersigned, do hereby make, constitute and
appoint Sandra T. Powell or, in her absence or inability to act,
John M. Richards or L. Pendleton Siegel, or any of them, my
attorney-in-fact for me and in my name, place and stead to
execute for me and in my behalf in each or any one of my offices
and capacities with Potlatch Corporation, as shown below, the
Annual Report on Form 10-K of Potlatch Corporation for the fiscal
year ended December 31, 1994 to be filed with the Securities and
Exchange Commission under the Securities Exchange Act of 1934,
and any and all amendments thereto, hereby ratifying, approving
and confirming all that any such attorney-in-fact may do by
virtue of these presents.
IN WITNESS WHEREOF, I have executed these presents this
3rd day of MARCH, 1995.
Frederick T. Weyerhaeuser
DIRECTOR
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
I, the undersigned, do hereby make, constitute and
appoint Sandra T. Powell or, in her absence or inability to act,
John M. Richards or L. Pendleton Siegel, or any of them, my
attorney-in-fact for me and in my name, place and stead to
execute for me and in my behalf in each or any one of my offices
and capacities with Potlatch Corporation, as shown below, the
Annual Report on Form 10-K of Potlatch Corporation for the fiscal
year ended December 31, 1994 to be filed with the Securities and
Exchange Commission under the Securities Exchange Act of 1934,
and any and all amendments thereto, hereby ratifying, approving
and confirming all that any such attorney-in-fact may do by
virtue of these presents.
IN WITNESS WHEREOF, I have executed these presents this
3rd day of MARCH, 1995.
William T. Weyerhaeuser
DIRECTOR
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