<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
POTLATCH CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------------------
<PAGE> 2
[POTLATCH LOGO]
POTLATCH CORPORATION
ONE MARITIME PLAZA
SAN FRANCISCO, CALIFORNIA 94111
ANNUAL MEETING OF STOCKHOLDERS
MAY 16, 1996
------------------------
NOTICE AND PROXY STATEMENT
<PAGE> 3
POTLATCH CORPORATION
ONE MARITIME PLAZA
SAN FRANCISCO, CALIFORNIA 94111
March 27, 1996
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
which will be held on Thursday, May 16, 1996 at 11:00 A.M. at the St. Paul
Hotel, 350 Market Street, St. Paul, Minnesota.
The formal notice of the Annual Meeting and the Proxy Statement have been
made a part of this invitation.
After reading the statement, PLEASE MARK, DATE, SIGN AND RETURN, AT AN
EARLY DATE, THE ENCLOSED PROXY in the prepaid envelope to Harris Trust and
Savings Bank, our agent, to ensure that your shares will be represented.
The Board of Directors and Management look forward to seeing you at the
meeting.
Sincerely,
/s/ JOHN M. RICHARDS
JOHN M. RICHARDS
Chairman of the Board and
Chief Executive Officer
------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 16, 1996
The Annual Meeting of the Stockholders of Potlatch Corporation (the
"Company") will be held at the St. Paul Hotel, 350 Market Street, St. Paul,
Minnesota, on Thursday, May 16, 1996 at 11:00 A.M. for the following purposes:
1. To elect five Directors to serve until the 1999 Annual Meeting of
Stockholders.
2. To approve the Potlatch Corporation 1995 Stock Incentive Plan.
3. To ratify the selection of independent auditors.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 20, 1996 as
the record date for determining the stockholders entitled to notice of and to
vote at the Annual Meeting or at any adjournment thereof. A complete list of
stockholders entitled to vote will be available at the offices of Briggs and
Morgan, 2200 First National Bank Building, 332 Minnesota Street, St. Paul,
Minnesota, for ten days prior to the meeting.
/s/ BETTY R. FLESHMAN
BETTY R. FLESHMAN
Secretary
March 27, 1996
<PAGE> 4
March 27, 1996
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Potlatch Corporation, a Delaware corporation (the
"Company"), One Maritime Plaza, San Francisco, California 94111, of proxies in
the accompanying form to be used at the Annual Meeting of Stockholders to be
held on May 16, 1996, or at any adjournment thereof. The shares represented by
the proxies received pursuant to this solicitation and not revoked will be voted
at the Annual Meeting. A stockholder who has given a proxy may revoke it by
voting in person at the Annual Meeting, by giving written notice of revocation
to the Secretary of the Company or by giving a later dated proxy at any time
before voting. On the matters coming before the Annual Meeting as to which a
choice has been specified by a stockholder by means of the ballot on the proxy,
the shares will be voted accordingly. If no choice is so specified, the shares
will be voted FOR the election of the nominees for Director listed in this Proxy
Statement and FOR approval of the proposals referred to in items 2 and 3 in the
Notice of Annual Meeting and described in this Proxy Statement.
The close of business on March 20, 1996 has been fixed as the record date
for determining the holders of the Common Stock entitled to notice of and to
vote at the Annual Meeting. On such date the Company had 28,941,706 shares of
Common Stock outstanding and entitled to vote. As provided in the Company's
Restated Certificate of Incorporation (the "Charter"), a holder of Common Stock
will be entitled to four votes on each matter submitted to a vote of
stockholders for each share of Common Stock beneficially owned on March 20, 1996
which (i) has been beneficially owned continuously from and including March 1,
1992 or (ii) has been acquired pursuant to tax-qualified employee benefit plans
of the Company or the Company's dividend reinvestment plan. A stockholder will
be entitled to one vote per share for each share of Common Stock beneficially
owned on March 20, 1996 which does not meet one of the above criteria.
Stockholders who became beneficial owners of Common Stock within the last 48
calendar months (subsequent to March 1, 1992) will become entitled to four votes
per share with respect to each share held for at least 48 consecutive calendar
months (dating from the first day of the first full month on or after the date
the holder acquired beneficial ownership of such share) prior to the record date
for a stockholders' meeting. In addition, all stockholders are entitled to only
one vote per share on certain matters as specified in the Charter. It is not
anticipated that any such matters will be brought before this Annual Meeting.
Stockholders who own shares of Common Stock in "street" or "nominee" name
are presumed to be entitled to exercise one vote per share and must submit proof
of continued beneficial ownership in order to be entitled to four votes per
share. Such proof must consist of a written certification by the holder that
there has been no change in beneficial ownership of his or her shares for a
period of at least 48 consecutive calendar months as of the record date. The
required form for this certification is provided on the proxy card given to
stockholders who own shares of Common Stock in "street" or "nominee" name. The
Company reserves the right, however, to require additional evidence to determine
whether any such stockholder is entitled to four votes per share.
To transact business at the Annual Meeting, a quorum consisting of a
majority of the voting power of the Company's outstanding shares of Common Stock
and one-third of the total number of shares of Common Stock entitled to vote at
the Annual Meeting must be represented. Under Delaware law and the Company's
Charter and By-Laws, the aggregate number of votes entitled to
1
<PAGE> 5
be cast by all stockholders represented at the Annual Meeting is counted for the
purpose of determining whether there is a sufficient quorum. A stockholder is
deemed to be represented at the Annual Meeting if the stockholder is present at
the Annual Meeting in person or by proxy and has authority to vote on at least
one item.
The affirmative vote of a majority of the voting power present and entitled
to vote at this Annual Meeting is required for approval of any matter voted
upon. Abstentions have the same effect as negative votes. Votes withheld by a
stockholder and broker non-votes are not counted for purposes of determining
whether the item is approved.
A copy of the Company's 1995 Annual Report to Stockholders containing
financial statements for the year ended December 31, 1995 accompanies this Proxy
Statement.
The expense of printing and mailing proxy material will be borne by the
Company. In addition to the solicitation of proxies by mail, solicitation may be
made by certain Directors, officers and other employees of the Company in person
or by telephone or facsimile; no additional compensation will be paid for such
solicitation.
Arrangements will also be made with brokerage firms and other custodians,
nominees and fiduciaries to forward proxy solicitation material to certain
beneficial owners of the Company's Common Stock, and the Company will reimburse
such brokerage firms, custodians, nominees and fiduciaries for reasonable
out-of-pocket expenses incurred by them in connection therewith. The Company has
retained D.F. King & Co., Inc., to aid in the solicitation of proxies for a fee
estimated at $7,500 plus out-of-pocket expenses.
2
<PAGE> 6
ELECTION OF DIRECTORS
(PROPOSAL ONE ON THE PROXY CARD)
The Board of Directors unanimously recommends a vote FOR this proposal.
The Board of Directors is divided into three classes serving staggered
three-year terms. At the 1996 Annual Meeting of Stockholders, five Directors are
to be elected to serve until the 1999 Annual Meeting of Stockholders and until
their respective successors are duly elected and qualified or until the end of
the calendar year in which the Director attains the age of 72 as required by the
Company's By-Laws. All nominees for election are presently members of the Board
of Directors.
Directors are elected by a majority of the votes cast in the election. The
Board of Directors knows of no reason why any of the nominees for Director will
be unable to serve. In the event any of the nominees becomes unable or declines
to serve, the proxies may be voted for the balance of those named and for such
other nominee as the Board may select, or the Board may be reduced accordingly.
INFORMATION WITH RESPECT TO NOMINEES FOR ELECTION AND DIRECTORS CONTINUING IN
OFFICE
Following are the names and ages of the nominees for Director and of the
Directors continuing in office, their principal occupations or employment at
present and for the past five years, certain directorships held by each and the
year in which each became a Director of the Company:
Nominees for Election for a Three-Year Term Ending in 1999
Kenneth T. Derr(1)...........Mr. Derr, age 59, became a Director of the Company
in 1994. He is Chairman of the Board and Chief
Executive Officer of Chevron Corporation
(international oil company), San Francisco,
California. Mr. Derr is also a director of AT&T and
Citicorp.
Toni Rembe(2)(3).............Ms. Rembe, age 59, became a Director of the Company
in 1975. She is a Partner of Pillsbury Madison &
Sutro LLP (law firm), San Francisco, California.
Ms. Rembe is also a director of American President
Companies, Ltd., Pacific Telesis Group and
Transamerica Corporation.
Richard M. Rosenberg(1)(3)...Mr. Rosenberg, age 65, became a Director of the
Company in 1992. He is Chairman of the Board of
BankAmerica Corporation (bank holding company) and
Bank of America NT&SA (banking institution), San
Francisco, California. He served as Chief Executive
Officer of both companies from May 1990 to December
1995. He also served as President of both companies
from May 1990 to April 1992 and from October 1992
to August 1995. Mr. Rosenberg is also a director of
Airborne Express, Northrop Corporation and Pacific
Telesis Group.
Charles R. Weaver(4).........Mr. Weaver, age 67, became a Director of the
Company in 1987. He served as Chairman of the Board
and Chief Executive Officer of The Clorox Company
(household consumer products), Oakland, California,
from April 1986 through June 1992. Mr. Weaver is
also a director of Unocal Corporation.
(Notes are on page 5)
3
<PAGE> 7
William T. Weyerhaeuser(4)...Dr. Weyerhaeuser, age 52, became a Director of the
Company in 1990. He is a Clinical Psychologist in
Tacoma, Washington. He is also owner and Chairman
of the Board of Yelm Telephone Company, Yelm,
Washington. Dr. Weyerhaeuser is also a director of
Clearwater Management Company, Inc.
Directors Continuing in Office Until the 1997 Annual Meeting of Stockholders
Richard B. Madden(1)(2)......Mr. Madden, age 66, became a Director of the
Company in 1971. He served as Chairman of the Board
and Chief Executive Officer of the Company until he
retired in May 1994. Mr. Madden is also a director
of Consolidated Freightways, Inc., Pacific Gas and
Electric Company and URS Corporation.
Richard M. Morrow(4).........Mr. Morrow, age 70, became a Director of the
Company in 1990. He served as Chairman of the Board
and Chief Executive Officer of Amoco Corporation
(petroleum and chemical products), Chicago,
Illinois, from September 1983 through February
1991. Mr. Morrow served as Chairman of the Board of
Westinghouse Electric Corporation (electrical
equipment), Pittsburgh, Pennsylvania, from January
1993 through June 1993. He is also a director of
Marsh and McLennan Companies, Inc., Seagull Energy
Corporation and Westinghouse Electric Corporation.
John M. Richards(3)..........Mr. Richards, age 58, became a Director of the
Company in 1991. He is Chairman of the Board and
Chief Executive Officer of the Company and has
served in that capacity since May 1994. He served
as the Company's President and Chief Operating
Officer from May 1989 to May 1994.
Reuben F. Richards(3)(4).....Mr. Richards, age 66, became a Director of the
Company in 1974. He is Chairman of the Board of
Terra Industries Inc. (agriculture), New York, New
York and also Chairman of the Board, President and
Chief Executive Officer of Minorco (U.S.A.) Inc.
(natural resources), Denver, Colorado. He became
Chairman of Minorco (U.S.A.) Inc. in May 1990 and
its President and Chief Executive Officer in
February 1994. Mr. Richards served as President and
Chief Executive Officer of Terra Industries Inc.
from June 1983 to May 1991. He is also a director
of Ecolab Inc., Engelhard Corporation, Minorco and
Santa Fe Energy Resources, Inc.
Frederick T. Weyerhaeuser(4).Mr. Weyerhaeuser, age 64, became a Director of the
Company in 1960. He is Chairman of the Board and
Treasurer of Clearwater Management Company, Inc.
and Clearwater Investment Trust (financial
management companies), St. Paul, Minnesota.
(Notes are on page 5)
4
<PAGE> 8
Directors Continuing in Office Until the 1998 Annual Meeting of Stockholders
Richard A. Clarke(2).........Mr. Clarke, age 65, became a Director of the
Company in 1985. He served as Chairman of the Board
of Pacific Gas and Electric Company (public
utility), San Francisco, California, from July 1994
through June 1995. He also served as its Chief
Executive Officer from May 1986 through June 1994.
Mr. Clarke is also a director of BankAmerica
Corporation, Bank of America NT&SA, Consolidated
Freightways, Inc. and Pacific Gas and Electric
Company.
Allen F. Jacobson(3).........Mr. Jacobson, age 69, became a Director of the
Company in 1990. He served as Chairman of the Board
and Chief Executive Officer of Minnesota Mining and
Manufacturing Company (diversified manufacturing
company), St. Paul, Minnesota, from March 1986
through October 1991. Mr. Jacobson is also a
director of Abbott Laboratories, Deluxe
Corporation, Minnesota Mining and Manufacturing
Company, Mobil Corporation, Northern States Power
Company, The Prudential Insurance Company of
America, Sara Lee Corporation, Silicon Graphics,
Inc., U S West, Inc. and Valmont Industries, Inc.
George F. Jewett,
Jr.(1)(2)....................Mr. Jewett, age 68, became a Director of the
Company in 1957. He is Vice Chairman of the Board
of the Company.
Vivian W. Piasecki(1)........Mrs. Piasecki, age 65, became a Director of the
Company in 1992. She is a Trustee of the University
of Pennsylvania (educational institution),
Philadelphia, Pennsylvania. She is also Chairman of
the Board of Overseers for the University of
Pennsylvania School of Nursing and a Board Member
of the University of Pennsylvania Medical Center.
Mrs. Piasecki is also a director of First Fidelity
Bank, NA Pennsylvania Regional Board.
Robert G. Schwartz(2)(4).....Mr. Schwartz, age 67, became a Director of the
Company in 1973. He served as Chairman of the Board
of Metropolitan Life Insurance Company (life
insurance), New York, New York from February 1983
through March 1993 and was also its President and
Chief Executive Officer from September 1989 through
March 1993. Mr. Schwartz is also a director of
Ascent Entertainment Group, Inc., COMSAT Corp.,
Consolidated Edison of New York, CS First Boston,
Inc., Lone Star Industries, Inc., Lowe's Companies,
Inc., Metropolitan Life Insurance Company, Mobil
Corporation and Reader's Digest Association, Inc.
- ---------------
(1) Member of the Audit Committee
(2) Member of the Nominating Committee
(3) Member of the Finance Committee
(4) Member of the Executive Compensation and Personnel Policies Committee
5
<PAGE> 9
CERTAIN COMMITTEES OF THE BOARD OF DIRECTORS; MEETINGS
The Company has standing audit, compensation and nominating committees of
the Board of Directors.
Members of the Audit Committee are: Kenneth T. Derr, George F. Jewett, Jr.,
Richard B. Madden, Vivian W. Piasecki and Richard M. Rosenberg. The functions of
this Committee are to: receive from and review with the Company's independent
auditors the annual report of such auditors; review with the independent
auditors the scope of the succeeding annual examination; nominate the
independent auditors to be selected each year by the Company's Board of
Directors; review consulting services, if applicable, provided by the Company's
auditors and evaluate the possible effect on the auditors' independence of
performing such services; ascertain the existence of adequate internal
accounting and control systems; and review with management and the auditors
current and emerging accounting and financial reporting requirements and
practices affecting the Company. This Committee held two meetings during the
fiscal year ended December 31, 1995.
Members of the Executive Compensation and Personnel Policies Committee are:
Richard M. Morrow, Reuben F. Richards, Robert G. Schwartz, Charles R. Weaver,
Frederick T. Weyerhaeuser and William T. Weyerhaeuser. The functions of this
Committee are to: review annually and recommend to the Board of Directors the
level of total compensation of the Chairman of the Board; review annually the
recommendations of the Chairman of the Board concerning the salaries and
incentive awards of certain senior officers; administer the Company's stock
option plans and Management Performance Award Plan; and review and make
recommendations to the Board of Directors for changes in the Company's
compensation and benefit plans and practices. This Committee held four meetings
during the fiscal year ended December 31, 1995.
Members of the Nominating Committee are: Richard A. Clarke, George F.
Jewett, Jr., Richard B. Madden, Toni Rembe and Robert G. Schwartz. The functions
of this Committee are to make recommendations with respect to: the size of the
Board; nominees for election as Directors; nominees to serve on Committees of
the Board; and changes in compensation and retirement policy for Directors. This
Committee held four meetings during the fiscal year ended December 31, 1995. Any
stockholder may recommend nominees for Director to the Nominating Committee by
providing to the Secretary of the Company a written notice by the February 1
preceding the annual meeting of stockholders for which such nominee is to be
considered for nomination. The notice must include the full name, age, business
and residence addresses, principal occupation or employment of the nominee, the
number of shares of Company stock beneficially owned by the nominee, any other
information concerning the nominee that must be disclosed in proxy solicitations
pursuant to Rule 14(a) of the Securities Exchange Act of 1934 and a written
consent of the nominee to the nomination and to serve, if elected.
The Board of Directors held seven meetings during the fiscal year ended
December 31, 1995. Each of the Directors (except Vivian W. Piasecki) attended
75% or more of the aggregate number of meetings of the Board and of the
Committees on which such Director served in 1995.
6
<PAGE> 10
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth as of January 1, 1996 the number of shares
of Common Stock beneficially owned by each Director, the executive officers
listed in the Summary Compensation Table and by all Directors and executive
officers as a group, as reported by each person. Except as otherwise indicated,
each person has sole investment and voting power with respect to the shares
shown. Shares amounting to less than 1% of the class outstanding are noted by an
asterisk. The table also sets forth common stock units credited to accounts of
Directors who deferred all or a portion of their Directors' fees under the stock
units method, as of January 1, 1996.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP OF
COMMON STOCK
---------------------------- DIRECTORS'
NUMBER OF PERCENT OF DEFERRED COMPENSATION
SHARES(1)(2) CLASS COMMON STOCK UNITS
------------ ---------- ---------------------
<S> <C> <C> <C>
DIRECTORS
Richard A. Clarke.......................... 3,525 * --
Kenneth T. Derr............................ 500 * --
Allen F. Jacobson.......................... 1,000 * 4,350
George F. Jewett, Jr....................... 808,314(3) 2.8% --
Richard B. Madden.......................... 138,803 * --
Richard M. Morrow.......................... 500 * 4,534
Vivian W. Piasecki......................... 116,256(4) * 783
Toni Rembe................................. 2,987 * --
John M. Richards........................... 107,223 * --
Reuben F. Richards......................... 1,200 * --
Richard M. Rosenberg....................... 1,000 * 951
Robert G. Schwartz......................... 2,000 * 3,948
Charles R. Weaver.......................... 1,000 * --
Frederick T. Weyerhaeuser.................. 951,720(5) 3.3% --
William T. Weyerhaeuser.................... 1,016,661(6)(7) 3.5% 4,573
OTHER NAMED EXECUTIVE OFFICERS
George E. Pfautsch......................... 37,093 * --
Charles R. Pottenger....................... 47,090 * --
L. Pendleton Siegel........................ 71,309 * --
Thomas J. Smrekar.......................... 34,750 * --
Directors and executive officers as a group
(21 persons including those named
above)................................... 3,372,513 11.5% 19,139
</TABLE>
- ---------------
(1) Includes shares which may be acquired within 60 days pursuant to the
exercise of options, as follows: Mr. Madden, 113,700 shares; Mr. J. M.
Richards, 87,100 shares; Mr. Pfautsch, 25,300 shares; Mr. Pottenger, 37,600
shares; Mr. Siegel, 55,300 shares; Mr. Smrekar, 22,025 shares; and all
Directors and executive officers as a group, 365,725 shares.
(2) Includes shares owned by Directors and executive officers together with
their respective spouses as follows: Mr. Clarke, 3,525 shares; Mr. Madden,
10,456 shares; Mr. Pfautsch, 2,200 shares; and all Directors and executive
officers as a group, 16,181 shares.
(Notes continued on next page)
7
<PAGE> 11
(3) Includes 601,400 shares held by a trust of which Mr. Jewett is the trustee
and as to which he shares voting and investment power. Includes 129,864
shares held by a foundation of which Mr. Jewett is a trustee and as to which
he shares voting and investment power but disclaims beneficial ownership.
Includes 40,954 shares held by a revocable trust for the benefit of Mr.
Jewett and his wife and as to which he shares voting and investment power.
Includes 36,096 shares held by a revocable trust for the benefit of Mr.
Jewett's wife and as to which he shares voting and investment power but
disclaims beneficial ownership.
(4) Does not include 4,220 shares held directly by Mrs. Piasecki's husband. Also
does not include 17,020 shares held by trusts of which Mrs. Piasecki's
husband is a trustee and as to which he shares voting and investment power.
Mrs. Piasecki disclaims beneficial ownership of all shares described in this
footnote.
(5) Includes a total of 897,088 shares held by trusts of which Mr. F. T.
Weyerhaeuser is a trustee, as to 789,288 of which he shares voting and
investment power. Also includes 132 shares of which he shares investment
power only. Does not include 8,032 shares held directly by Mr. F. T.
Weyerhaeuser's wife. Mr. F. T. Weyerhaeuser disclaims beneficial ownership
of all shares described in this footnote.
(6) Includes 119,616 shares held by a holding company of which Dr. W.T.
Weyerhaeuser is Chairman of the Board and Chief Executive Officer and as to
which he has been authorized to exercise sole voting power and indirectly
shares investment power with others. Dr. W.T. Weyerhaeuser disclaims
beneficial ownership of these shares, except for his proportionate
beneficial interest of 569 shares.
(7) Includes a total of 857,411 shares held by trusts of which Dr. W. T.
Weyerhaeuser is a trustee, as to 37,300 shares of which he shares voting
power only, and as to 766,179 shares of which he shares voting and
investment power. Also includes 132 shares of which he shares investment
power only. Does not include 1,200 shares held directly by Dr. W. T.
Weyerhaeuser's wife. Dr. W. T. Weyerhaeuser disclaims beneficial ownership
of all shares described in this footnote.
8
<PAGE> 12
COMPENSATION OF DIRECTORS AND THE NAMED EXECUTIVE OFFICERS
Information is set forth on the following pages as to the compensation paid
or to be paid to, or deferred for the account of, the Directors and the Chief
Executive Officer and each of the four other most highly compensated executive
officers of the Company for services rendered to the Company and its
subsidiaries during 1995.
COMPENSATION OF DIRECTORS
Each Director of the Company who is not also an employee of the Company
receives an annual fee of $24,000. In addition, the Company pays each such
Director a fee of $1,200 for each meeting of the Board of Directors or a
committee of the Board attended in person or by telephone. Each committee
chairman receives an additional annual fee of $3,000. By making an advance
election, a Director may defer receipt of any or all of the Director's fees
payable. At the election of a Director, deferred amounts are credited with
interest or converted into common stock units which are credited with amounts
equal to dividends paid on the Company's Common Stock during the deferral
period. During 1995 an aggregate amount of $528,934 in fees was paid to
Directors or deferred on their behalf. Directors are also reimbursed for
reasonable out-of-pocket expenses incurred in attending Board and committee
meetings.
Under the Potlatch Corporation 1995 Stock Incentive Plan (the "1995 Plan"),
which is subject to approval by stockholders at the Annual Meeting, Directors
who are not employees of the Company ("outside Directors") each receive a
nonqualified stock option to purchase 1,000 shares of Common Stock in December
of his or her first year as a Director (or, in the case of Directors serving at
the time of the 1995 Plan's adoption, in December 1995). Each December
thereafter, each outside Director will also receive an additional
nondiscretionary option grant to purchase 500 shares. In December 1995, options
to purchase 1,000 shares of Common Stock at an exercise price of $41.25 per
share were granted to each outside Director. Such options will vest in two equal
annual installments commencing on the first anniversary of the grant date. Such
options will expire ten years from the date of grant unless earlier terminated
or exercised. See "Approval of the Potlatch Corporation 1995 Stock Incentive
Plan" on page 19.
The Company's Directors' Retirement Plan provides an annual benefit to each
Director of the Company who completes five years of service as an outside
Director. The annual benefit is equal to the amount of the regular annual
Directors' retainer fee in effect at the time the individual ceases to be a
Director and does not include supplemental fees for committee chairmanships,
attendance at or participation by telephone in meetings of Directors or any
committee of Directors, or reimbursement of expenses. The benefit continues for
the lesser of 10 years or the number of full years that the individual served as
an outside Director, but benefits may be paid at any time in a lump sum at the
discretion of the Board's Nominating Committee. In addition, benefits will be
paid in a lump sum if the Director's service terminates within three years
following a change in control of the Company or if the Director dies before all
or any required payments have been made.
9
<PAGE> 13
COMPENSATION OF THE NAMED EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES ALL
------------------- UNDERLYING OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS/SARS COMPENSATION(1)
- ---------------------------------- ----- -------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
John M. Richards.................. 1995 $508,850 $230,000 38,000 $21,372
Chairman of the Board and 1994 453,975 98,500 34,600 19,067
Chief Executive Officer 1993 385,600 135,300 30,000 16,195
L. Pendleton Siegel............... 1995 366,300 140,000 20,000 15,385
President and Chief Operating 1994 335,000 65,000 22,000 14,070
Officer 1993 279,000 82,100 20,000 11,718
Charles R. Pottenger.............. 1995 275,420 81,900 10,600 37,465
Group Vice President, Pulp and 1994 267,300 42,100 11,000 11,228
Paperboard 1993 233,500 69,500 12,500 9,807
Thomas J. Smrekar................. 1995 230,000 65,000 8,800 9,660
Group Vice President, Wood 1994 205,200 32,300 8,450 8,618
Products 1993 180,200 56,300 7,500 7,568
George E. Pfautsch................ 1995 214,950 63,900 7,000 9,028
Senior Vice President, Finance
and 1994 205,395 35,600 6,600 8,627
Chief Financial Officer 1993 190,185 56,600 7,000 7,988
</TABLE>
- ---------------
(1) This column represents matching Company contributions under the Salaried
Employees' Savings Plan. For Mr. Pottenger, includes $25,897 for moving
expenses reimbursed in 1995.
10
<PAGE> 14
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
---------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME GRANTED(2) FISCAL YEAR PER SHARE DATE VALUE(3)
- ------------------------------- ------------ ------------ ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
John M. Richards............... 38,000 12% $41.25 12-07-05 $274,000
L. Pendleton Siegel............ 20,000 7% 41.25 12-07-05 144,000
Charles R. Pottenger........... 10,600 3% 41.25 12-07-05 76,000
Thomas J. Smrekar.............. 8,800 3% 41.25 12-07-05 63,000
George E. Pfautsch............. 7,000 2% 41.25 12-07-05 50,000
</TABLE>
- ---------------
(1) All of these options were granted on December 7, 1995 with 50% of such grant
first becoming exercisable on December 7, 1996 and the remaining 50%
becoming exercisable on December 7, 1997. In the event of a "change in
control" of the Company, as defined in the option plans, the options granted
would become immediately exercisable in full and would include stock
appreciation rights. In general, a "change in control" occurs for purposes
of the option plans when (i) the Company ceases to be an independent
publicly owned corporation or sells or disposes of all or substantially all
of the assets of the Company, (ii) more than one-third of the incumbent
Directors of the Company neither were Directors three years earlier nor were
elected or nominated with the approval of a majority of the Directors then
in office who were Directors three years earlier, (iii) a person becomes the
beneficial owner of 20% or more of the Company's voting power pursuant to a
tender offer, or (iv) the Company dissolves, liquidates, or does not survive
a merger or consolidation.
(2) These grants include options under the 1995 Plan, which was approved by the
Board of Directors and is subject to approval by the stockholders at the
Annual Meeting, to purchase shares as follows: Mr. Richards, 18,410; Mr.
Siegel, 9,690; Mr. Pottenger, 5,130; Mr. Smrekar, 4,260; and Mr. Pfautsch,
3,390.
(3) This column has been calculated using the Black-Scholes option pricing
model, a complex mathematical formula, utilizing six different
market-related factors to estimate the value of stock options. These factors
are stock price at date of grant, option exercise price, option term,
risk-free rate of return, stock volatility and dividend yield. The
Black-Scholes model generates an estimate of the value of the right to
purchase a share of stock at a fixed price over a fixed period of time. The
actual value, if any, an executive may realize will depend on the excess of
the stock price on the date the option is exercised over the grant price, as
well as the executive's continued employment through the two-year vesting
period and the 10-year option term. The following assumptions were used to
calculate the Black-Scholes value:
<TABLE>
<S> <C> <C>
Stock price at date of grant = $41.25
Option exercise price = $41.25
Option term = 10 years
Risk-free rate of return = Based on rate for 10-year U.S. Treasury note
Company stock volatility = Based on prior three-year monthly stock prices
Company dividend yield = 4.02%
Calculated Black-Scholes
Value = $7.20 per option
</TABLE>
(Notes continued on next page)
11
<PAGE> 15
If the Black-Scholes option pricing model were applied to all outstanding
shares of the Company as of December 7, 1995, the date of grant, the
assumed increased present value for all stockholders would be approximately
$209 million. There is no assurance that the value received by the named
executive officers or the Company's stockholders will be at or near the
estimated value derived by the Black-Scholes model.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
SHARES AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
ACQUIRED ON VALUE -------------------------- -----------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- ----------- --------- ----------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
John M. Richards......... -- $ -- 87,100 55,300 $ 132,950 $60,550
L. Pendleton Siegel...... -- -- 55,300 31,000 114,263 38,500
Charles R. Pottenger..... -- -- 37,600 16,100 109,838 19,250
Thomas J. Smrekar........ -- -- 22,025 13,025 42,813 14,788
George E. Pfautsch....... -- -- 25,300 10,300 87,300 11,550
</TABLE>
- ---------------
(1) Based on the closing stock price in The New York Stock Exchange Composite
Transactions of the Company's Common Stock at December 31, 1995 of $40.00
per share.
EXECUTIVE COMPENSATION AND PERSONNEL POLICIES COMMITTEE REPORT ON EXECUTIVE
COMPENSATION
COMPENSATION POLICY
In order to attract, retain and reward a highly competent and productive
employee group, it is the policy of the Company that a total compensation
package will be provided that is competitive within the forest and paper
products industry, general industry and the geographic areas in which the
Company operates. This compensation package includes a mix of base salary,
short-term and long-term incentive opportunities and other employee benefits.
Changes in compensation are based on individual performance, the Company's
profit performance and the competitive marketplace. The Company intends to
qualify all compensation paid to its executive officers for deductibility under
the Internal Revenue Code's $1 million limitation. The Company believes the
compensation paid under the 1995 Stock Incentive Plan, subject to stockholder
approval at the 1996 Annual Meeting, and the Management Performance Award Plan
qualify for deductibility.
Executives receive a base salary and are eligible for awards under two
incentive plans, the Management Performance Award Plan (short-term) and a stock
incentive plan (long-term). Executive compensation is administered by the
Executive Compensation and Personnel Policies Committee of the Board of
Directors (the "Committee"). The Committee consists of the six outside Directors
named at the conclusion of this report.
COMPENSATION COMMITTEE RESPONSIBILITIES
The responsibilities of the Committee are:
- to review and recommend annually to the Board of Directors the level of
total compensation of the Chief Executive Officer. Factors evaluated in
the review are the Chief Executive Officer's individual performance, as
measured against written short-term and long-term
12
<PAGE> 16
objectives previously approved by the Committee, the achievement of the
annual corporate operating budget, Company performance compared to the
forest products industry and the competitive compensation levels for
comparable positions in the forest products industry and general
industry;
- to review annually with the Chief Executive Officer the individual
performance, base salaries and incentive awards of the four other most
highly compensated executive officers and certain other senior officers;
- to review and make recommendations on any new stock incentive plan for
the Board of Directors' approval prior to submission to stockholders for
their approval and to review and approve all grants made under stock
incentive plans;
- to establish the rules and regulations for the Management Performance
Award Plan, which is the Company's annual incentive plan ("bonus"), and
to administer the plan in accordance with such rules and regulations; and
- to review and make recommendations to the Board of Directors regarding
the adoption of or any material changes in the Company's compensation and
benefit plans.
The Committee periodically reviews the entire executive pay structure by
examining surveys of general industry and forest and paper products industry
information on base salaries and short-term and long-term incentives prepared by
an independent compensation consulting firm. These surveys include data from a
broad base of general industry companies and from a base of forest and paper
products companies. This latter base is broader than the S&P Forest Products
Index. General industry surveys are included in the review because the Committee
believes that the Company competes for executive talent against companies other
than those in the forest and paper products industry. The primary purpose of the
review is to insure that the Company's target and actual cash and incentive
compensation programs are consistent with competitive practice. The Committee
considers the median level of the market as competitive.
1995 COMPANY PERFORMANCE
During 1995, the Company earned $3.72 per share or a return on common
stockholders' equity ("ROE") of 11.8%. This compared to $1.68 per share and an
ROE of 5.3% in 1994. The Company's ROE of 11.8% was below the industry's ROE
performance of 20.3% in 1995, as measured by a sample of 17 major forest
products companies.(1)
1995 EXECUTIVE COMPENSATION
The Company's executive annual and long-term compensation consisted of base
salary, a cash payment under the Management Performance Award Plan and stock
option grants under the 1989 Stock Incentive Plan and the 1995 Plan, which is
subject to stockholder approval.
- ---------------
(1) The forest products industry base for ROE comparison purposes is comprised
of 17 major forest products industry companies. This base is larger and has in
the past created a more difficult ROE comparison than the S&P Forest Products
Index because it includes some additional companies which on average have
exceeded the ROEs of the companies included in the S&P's 13-company Forest
Products Index.
13
<PAGE> 17
BASE SALARY
The base salary structure is set at competitive levels. Competitive levels
are determined by analyzing independent, job-specific compensation surveys
which, depending on participation and on the position under review, cover
between 15 and 30 forest and paper products companies, many of which are in the
S&P Forest Products Index, and over 300 general industry companies. The
Committee considers the median level of the market as competitive. Any increase
in an executive's base salary is designed to recognize individual performance
against a written performance plan and is expected to fall within annually
established merit increase guidelines which are applicable to all salaried
employees and which are set vis-a-vis competitive practice. The written
performance plans of the executive officers contain specific measures, both
quantitative and qualitative, related to increased earnings, increased
productivity, improved safety performance, and compliance with environmental
requirements.
MANAGEMENT PERFORMANCE AWARD PLAN
The purpose of the plan is to provide an incentive to key employees
including the Chief Executive Officer and President who are in a position to
contribute to and therefore influence the Company's profit performance as
measured annually on an ROE basis. Payments under the Management Performance
Award Plan are based primarily on the Company's ROE measured against the ROE of
the forest products industry,(1) as described above, and the Company's
comparison of its ROE against the annual corporate operating budget. Equal
weight is given to both profit performance factors to derive an overall
performance modifier. In addition, awards can be modified based on individual
performance. No bonuses are recommended by the Committee unless a specified
return on common equity is achieved, and the Board can limit the amount or
change the time and form of payment should the actual bonus fund exceed 4% of
pre-tax earnings.
The incentive awards for 1995 for the executive officers named in the
Summary Compensation Table reflected the Company's ROE performance against the
annual operating budget, which had a positive effect on the awards, and the
Company's ROE performance against the forest products industry,(1) which had a
negative effect on the awards.
STOCK INCENTIVE PLANS
The purpose of both the 1989 and 1995 plans is to further align employees'
interests with the long-term performance of the business and thus, the long-term
interests of the stockholders. Grants are made to employees who have the
capacity to influence the business results. The target grant is based on
specific gain objectives by responsibility level as recommended by the Company's
independent compensation consulting firm. The objective is to provide a gain
potential at the median level of competitive practice as measured by a survey of
long-term incentive grant practices among major industrial companies. The number
of options actually granted is affected by individual performance against
performance plans and potential. As stock options are granted at 100% of the
fair market value of the Company's Common Stock on the grant date, the options
have no value unless the stock price appreciates in the future. Grants vest in
50% increments and are fully vested two years after the grant date. Vested
options may be exercised for cash or with shares of the Company's Common Stock.
Prior to December 1995, executive officers were granted stock appreciation
rights ("SARs") in conjunction with stock option grants.
- ---------------
(1) See note (1) on page 13.
14
<PAGE> 18
In arriving at each individual's 1995 award, the Committee took into
consideration actual individual performance against the annual performance plans
previously described and forecast of potential.
1995 CHIEF EXECUTIVE COMPENSATION
The compensation package of Mr. J. M. Richards consists of the same
elements as for the other officers named in the Summary Compensation Table,
specifically an annual base salary, participation in the annual incentive plan
and participation in the long-term incentive plan. In determining Mr. Richards'
base salary rate as Chairman and Chief Executive Officer, the Committee
considered chief executive officer pay information for approximately 25 forest
and paper products companies and over 200 general industry companies and the
Company's guidelines for all salaried employees, which resulted in a 3.0%
increase to his previous base salary rate. For 1995, Mr. Richards received an
incentive award under the Management Performance Award Plan of $230,000. This
award reflected the Company's ROE performance against the annual operating
budget, which had a positive effect on the award, and the Company's ROE
performance against the forest products industry,(1) which had a negative effect
on the award, as well as Mr. Richards' performance against his performance plan.
During 1995, Mr. Richards was awarded a grant of 38,000 stock options. In
arriving at this award, the Committee considered Mr. Richards' performance
against his performance plan and his potential.
THE EXECUTIVE COMPENSATION AND PERSONNEL POLICIES COMMITTEE MEMBERS
F. T. Weyerhaeuser, Chairman
R. M. Morrow
R. F. Richards
R. G. Schwartz
C. R. Weaver
W. T. Weyerhaeuser
- ---------------
(1) See note (1) on page 13.
15
<PAGE> 19
PERFORMANCE GRAPHS
FIVE-YEAR GRAPH
The following five-year graph shows the yearly change in the total return
on the Company's Common Stock as compared with the indicated indices for the
periods set forth. The total returns are determined based on the changes in the
prices of the common stocks and assume quarterly reinvestment of all dividends
based on an original investment of $100.
[FIVE-YEAR PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Potlatch Corporation.......................... $ 100 $ 137 $ 170 $ 180 $ 148 $ 165
S&P Forest Products........................... 100 121 142 157 163 179
S&P 500 Composite............................. 100 130 139 153 155 213
</TABLE>
16
<PAGE> 20
TWENTY-FIVE YEAR GRAPH
The Company believes long-term performance is also important to
stockholders. Accordingly, the following graph covering the past 25 years is
presented. The method of measuring performance is the same as that used in the
five-year graph except dividends are assumed to be reinvested annually instead
of quarterly. The Company selected the base period of 1970 because the S&P 500
return, the S&P Forest Products return and the Company's Common Stock return for
the first four years following that year were comparatively close. Therefore,
the base period selected has a smaller impact on the long-range returns.
[TWENTY-FIVE YEAR GRAPH]
COMPARISON OF TWENTY-FIVE YEAR CUMULATIVE RETURN
AMONG POTLATCH CORPORATION, S&P 500 INDEX AND S&P FOREST PRODUCTS INDEX
<TABLE>
<CAPTION>
Measurement Period Potlatch Corporation S&P Forest S&P 500 Index
- ------------------ -------------------- ---------- -------------
Products Index
--------------
<S> <C> <C> <C>
Measurement Pt. 12/31/70 $100 $100 $100
FYE 12/31/71 $92 $102 $111
FYE 12/31/72 $99 $118 $134
FYE 12/31/73 $105 $135 $114
FYE 12/31/74 $103 $100 $83
FYE 12/31/75 $213 $165 $116
FYE 12/31/76 $307 $216 $144
FYE 12/31/77 $264 $167 $133
FYE 12/31/78 $281 $166 $141
FYE 12/31/79 $296 $189 $169
FYE 12/31/80 $386 $237 $225
FYE 12/31/81 $319 $225 $212
FYE 12/31/82 $410 $263 $222
FYE 12/31/83 $440 $370 $320
FYE 12/31/84 $352 $389 $340
FYE 12/31/85 $479 $487 $449
FYE 12/31/86 $750 $650 $533
FYE 12/31/87 $760 $695 $569
FYE 12/31/88 $859 $750 $656
FYE 12/31/89 $1,048 $917 $860
FYE 12/31/90 $862 $837 $833
FYE 12/31/91 $1,177 $1,016 $1,083
FYE 12/31/92 $1,460 $1,198 $1,163
FYE 12/31/93 $1,543 $1,318 $1,279
FYE 12/31/94 $1,271 $1,374 $1,295
FYE 12/31/95 $1,420 $1,515 $1,775
</TABLE>
17
<PAGE> 21
OTHER EMPLOYEE BENEFIT PLANS
Pension Plan Table
The table which follows shows a schedule of estimated annual pension
benefits to be payable under the Company's Salaried Employees' Retirement Plan
(the "Retirement Plan") and Supplemental Benefit Plan at normal retirement date
to a person having the average annual earnings and years of credited service
shown.
<TABLE>
<CAPTION>
AVERAGE YEARS OF CREDITED SERVICE
ANNUAL --------------------------------------------------------
EARNINGS 15 20 25 30 35
- -------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 200,000...................... $ 42,932 $ 57,242 $ 71,553 $ 85,864 $100,174
400,000...................... 87,932 117,242 146,553 175,864 205,174
600,000...................... 132,932 177,242 221,553 265,864 310,174
800,000...................... 177,932 237,242 296,553 355,864 415,174
1,000,000...................... 222,932 297,242 371,553 445,864 520,174
</TABLE>
In calculating final average annual earnings, the Retirement Plan and the
Supplemental Benefit Plan recognize overtime, bonuses under the Management
Performance Award Plan and other salary- or sales-based performance incentive
payments paid or deferred after 1987, as reflected in the Summary Compensation
Table for the last three years. Bonuses are recognized in the year in which they
are paid. The benefits of participants who are required to retire at age 65 are
calculated as if they received a standard bonus under the Management Performance
Award Plan during each year after 1991 in their period of average annual
earnings.
The years of service used in calculating retirement benefits for Messrs.
Richards, Siegel, Pottenger, Smrekar and Pfautsch are 31, 17, 28, 22 and 33,
respectively. The 1995 compensation (including an assumed standard bonus)
covered by the Retirement Plan and Supplemental Benefit Plan was: Mr. Richards
$727,726; Mr. Siegel $510,800; Mr. Pottenger $368,975; Mr. Smrekar $301,820; and
Mr. Pfautsch $286,838. Benefits under the plans are computed as straight-life
annuity amounts and are not subject to reduction by Social Security or other
benefits.
Severance Program for Executive Employees. Under the Severance Program for
Executive Employees, participants who are terminated for reasons other than
misconduct, resign within two years after a material change in compensation,
benefits, assigned duties, responsibilities, privileges or perquisites, or
resign rather than relocate at the Company's request, are entitled to receive
severance pay of up to 12 months' base salary and benefits for the same period
of time under the Company's medical, dental, accidental death and dismemberment
and life insurance plans. They also receive unused and accrued vacation pay.
Participants who are terminated or resign in the foregoing circumstances
following a change in control of the Company are entitled to receive severance
pay of up to 2 1/2 times their base salary plus standard bonus, benefits for up
to 2 1/2 years under the Company's medical, dental, disability, accidental death
and dismemberment and life insurance plans, unused and accrued vacation pay, and
the value of their unvested benefits, if any, in the Savings Plan, Retirement
Plan and Supplemental Benefit Plan; provided that the total amount of all
benefits governed by the excess parachute payment provisions of the Internal
Revenue Code is limited if the participant would thereby receive a higher net
after-tax benefit.
18
<PAGE> 22
A change in control of the Company occurs when the Company ceases to be an
independent publicly owned corporation, disposes of substantially all its
assets, ceases to survive because of a dissolution, liquidation, merger or
consolidation, undergoes a substantial change in the composition of its Board of
Directors, or has 20% or more of its Common Stock acquired pursuant to a tender
offer. All principal officers, appointed vice presidents and certain other
designated employees are eligible to participate in the program.
CERTAIN TRANSACTIONS
Pillsbury Madison & Sutro LLP, of which Ms. Rembe is a Partner, provides
legal services to the Company.
BankAmerica Corporation, of which Mr. Rosenberg is Chairman of the Board,
and its subsidiaries provide commercial banking services and commercial paper
placement and agency services to the Company.
The Company purchases products from and has from time to time sold products
to Idaho Forest Industries, Inc., a corporation in which Mr. J. M. Richards has
an equity interest and of which Mr. Richards' brother, W. Thomas Richards, is
President and a director. In 1995 purchases by the Company from Idaho Forest
Industries, Inc. were approximately $11.6 million.
The Company and its subsidiaries engage in transactions from time to time
with several companies in which one of the Company's executive officers or
Directors or a member of his or her immediate family may have a direct or
indirect interest. All such transactions, including those described above, are
in the ordinary course of business and at competitive rates and prices.
Mr. F. T. Weyerhaeuser and Dr. W. T. Weyerhaeuser are first cousins.
APPROVAL OF THE POTLATCH CORPORATION
1995 STOCK INCENTIVE PLAN
(PROPOSAL TWO ON THE PROXY CARD)
The Board of Directors unanimously recommends a vote FOR this proposal.
On December 7, 1995, the Board of Directors unanimously approved the
Potlatch Corporation 1995 Stock Incentive Plan (the "1995 Plan") subject to
stockholder approval at the 1996 Annual Meeting. The Board of Directors believes
that stock options and other stock-based awards are desirable (1) as an
effective incentive for participating employees and Directors to use their
judgment, initiative and efforts to ensure the successful conduct of the
Company's business, (2) to further align such employees' and Directors'
interests with those of the Company's stockholders by providing an opportunity
to increase their stock ownership and (3) to encourage such employees and
Directors to remain in the service of the Company. On December 7, 1995, all
shares available for the grant of options under the Company's existing 1989
Stock Incentive Plan were granted. In addition, options to purchase 59,730
shares were granted under the 1995 Plan subject to stockholder approval.
Stockholder approval of the 1995 Plan will enable the Company to continue its
stock incentive program. The following summary of the principal features of the
1995 Plan is
19
<PAGE> 23
qualified by reference to the terms of the 1995 Plan, a copy of which is
available without charge from Betty R. Fleshman, Secretary, Potlatch
Corporation, One Maritime Plaza, San Francisco, CA 94111.
DESCRIPTION OF THE 1995 PLAN
The 1995 Plan is administered by the Executive Compensation and Personnel
Policies Committee (the "Committee"), which determines the employees to be
granted awards and the size of each award. Key employees (including officers) of
the Company and its subsidiaries are eligible to receive awards. In addition,
Directors who are not employees of the Company ("outside Directors") are
eligible for nondiscretionary awards of nonqualified stock options.
Approximately 150 employees are eligible to participate in the 1995 Plan, as
well as 14 outside Directors. The total number of shares of Common Stock which
may be issued pursuant to awards granted under the 1995 Plan is 1,700,000. Based
on the total number of shares subject to options granted in 1995 under both
incentive plans, the 1,700,000 shares reserved under the 1995 Plan represent
approximately five years of awards.
The 1995 Plan provides for the grant of awards to employees in the form of
nonqualified stock options ("NSOs") or incentive stock options ("ISOs"),
restricted stock or other types of incentive or performance stock-based awards.
Restricted stock and other stock-based awards to employees may be granted on
such terms as the Committee shall determine. At present, the Committee
contemplates that stock option awards under the 1995 Plan will be made solely in
the form of NSOs. However, future awards under the 1995 Plan may be in any form
authorized by the 1995 Plan, including issuing shares to satisfy all or part of
an award under the Management Performance Award Plan or to pay Directors' fees.
The option exercise price must be at least 100% of the fair market value of
the Company's Common Stock on the date of grant. Options granted under the 1995
Plan will not be assignable except by will or the laws of descent and
distribution. Employees' options may be made exercisable at such time or times
as are determined by the Committee. Each employee's option normally terminates
three months after termination of employment unless the reason for termination
is misconduct, in which case options cease to be exercisable at the time of
termination. Each option remains in effect for 36 months if the reason for the
termination is disability, death, or retirement under the Salaried Employees'
Retirement Plan. Options are exercisable after termination of employment only to
the extent vested on the date of termination. In no event may an option be
exercised more than ten years after the date of grant. The option exercise price
may be paid in cash or by the surrender of shares of the Company's Common Stock
owned by the individual exercising the option and having a fair market value on
the date of exercise equal to the option exercise price, or in any combination
of cash and shares equal to the option exercise price.
Options granted under the 1995 Plan which have been outstanding for six
months or longer become exercisable in full during any of the following periods:
(i) the 30-day period following the consummation of any transaction approved by
the stockholders of the Company in which it 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 Company's
assets; (ii) the 365-day period 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 (a) were Directors of the Company on a
20
<PAGE> 24
date three years earlier nor (b) are individuals whose election or nomination
for election as Directors was 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 approved such election or nomination; (iii) the 365-day period
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 "Exchange
Act")) that has acquired shares of Common Stock pursuant to a tender offer
subject to Section 14(d) of the Exchange Act becomes entitled to vote 20% or
more of the voting power of the Company; and (iv) the 30-day period prior to any
dissolution or liquidation of the Company or any merger or consolidation in
which it is not the surviving corporation, but not earlier than the date on
which any required stockholder approval is obtained. If an option is not
exercised during any 30-day period described in (i) or (iv) above, the option
will terminate at the close of business on the last day of the 30-day period;
provided that if the periods described in (i) and (iv) above are contiguous or
overlap, unexercised options will terminate at the close of business on the last
day of the second 30-day period. In addition, any option described in this
paragraph automatically includes a limited stock appreciation right ("SAR")
callable only under the circumstances and conditions described in (i) through
(iv) above and during the applicable period. In the case of SARs called during
either 30-day period described in (i) or (iv) above, the optionee will be
entitled to receive on exercise the amount of cash or shares with a fair market
value equal to the greater of (A) the value of the consideration the optionee
would have received in connection with such transaction as a stockholder of the
Company had the option been exercised prior to the consummation of the
transaction described in (i) or (iv) above, or (B) the value determined by the
Committee (as composed on the day preceding the date of consummation of the
transaction described in (i) or (iv) above), taking into consideration all
relevant facts and circumstances.
The 1995 Plan limits the aggregate number of shares that may be optioned or
awarded to any one employee in any single year to 60,000 shares. The maximum
value of ISO grants that vest in a calendar year is further limited to $100,000
each year for each employee.
Subject to stockholder approval, the 1995 Plan provides for the
nondiscretionary grant of NSOs for 1,000 shares to each outside Director as of
December 7, 1995. New outside Directors will each receive NSOs for 1,000 shares
on the date of the Board of Directors' December meeting in the year each such
Director is elected. Each December thereafter, each outside Director will
receive an NSO for 500 shares.
An outside Director's NSOs will become vested in 50% installments on the
first and second anniversaries of the date of grant if the outside Director's
service is continuous through such dates. Except as provided below, each NSO
terminates three months after termination of service as a Director unless the
reason for termination is cause (determined in accordance with the Charter) in
which case NSOs cease to be exercisable at the time of termination. Each NSO
remains in effect for 36 months after termination, if the termination is due to
retirement after five years of service as an outside Director or death. NSOs are
exercisable after termination of service as a Director only to the extent vested
on the date of termination. No outside Director's NSO will be exercisable more
than 10 years from the date of grant. Outside Directors' NSOs include SARs that
are exercisable only in the event of a change in control of the Company, as
described above.
The 1995 Plan provides for appropriate adjustment of the number of shares
available for issuance under the 1995 Plan, the maximum annual limit on
individual grants, the number of
21
<PAGE> 25
options automatically granted to outside Directors, the number of shares subject
to outstanding options and the exercise price of outstanding options in the
event of reorganizations, stock splits, combinations of shares, stock dividends
or other recapitalizations of the Company.
When an award granted under the 1995 Plan expires or terminates for any
reason, the number of unexercised or forfeited shares subject to the award may
again become available for grant.
The 1995 Plan will terminate on December 6, 2005. The Board of Directors
may at any time amend, suspend or discontinue the 1995 Plan, except that no
amendment may be made without the approval of stockholders which would increase
the number of shares subject to the 1995 Plan, change the designation of the
class of employees eligible to receive awards, reduce the exercise price at
which ISOs may be granted, remove the administration of the 1995 Plan from the
Committee or render any member of the Committee eligible to receive an award
while serving on the Committee, other than nondiscretionary awards to outside
Directors.
The following table provides information on the options that have been
granted under the 1995 Plan, subject to stockholder approval. Future grants to
employees are not determinable.
1995 PLAN BENEFITS
<TABLE>
<CAPTION>
NUMBER OF
NAME AND POSITION DOLLAR VALUE($)(1) SHARES
- ---------------------------------------------------------- ------------------ ---------
<S> <C> <C>
John M. Richards.......................................... 0 18,410
Chairman of the Board
and Chief Executive Officer
L. Pendleton Siegel....................................... 0 9,690
President and Chief Operating Officer
Charles R. Pottenger...................................... 0 5,130
Group Vice President,
Pulp and Paperboard
Thomas J. Smrekar......................................... 0 4,260
Group Vice President, Wood Products
George E. Pfautsch........................................ 0 3,390
Senior Vice President, Finance
and Chief Financial Officer
Executive Group(2)........................................ 0 45,730
Non-Executive Director Group(3)........................... 0 14,000
Non-Executive Officer Employee Group...................... 0 0
</TABLE>
- ---------------
(1) Based on the closing stock price in The New York Stock Exchange Composite
Transactions of the Company's Common Stock at March 1, 1996 of $41.25 per
share.
(2) Seven executive officers, including the five named above.
(3) Represents grants to current outside Directors in 1995. Each outside
Director will receive options to purchase an additional 500 shares of Common
Stock in each additional year of service as a Director.
22
<PAGE> 26
TAX EFFECTS
The Committee currently contemplates that awards under the 1995 Plan will
be made solely in the form of NSOs. The tax effects of NSO and ISO awards are
discussed below. The tax consequences of other awards under the 1995 Plan would
depend on the form and terms of such other award.
When an NSO is granted, the optionee realizes no taxable income as the
result of the grant. Upon the exercise of an NSO, the optionee must recognize
ordinary income in the amount of the difference between the option exercise
price and the fair market value on the date of exercise. Upon the subsequent
sale of stock acquired upon the exercise of an NSO, any gain or loss, based on
the fair market value of the stock on the date of recognition of ordinary
income, will be taxed as short-term or long-term capital gain or loss, depending
on the length of time the optionee has held the stock from the date of
recognition of income.
As to ISOs, the optionee realizes no taxable income upon either the grant
or the exercise of the option. If the optionee disposes of the stock acquired
upon the exercise of the option within two years from the date of grant or
within one year from the date of exercise (a "disqualifying disposition"), the
difference between the option exercise price and the fair market value on the
date of exercise (not to exceed the gain recognized on the sale) will be taxed
at ordinary income tax rates and any gain in excess of such amount will be
long-term or short-term capital gain, depending on the length of time the stock
was held by the optionee. If the optionee sells the stock acquired upon the
exercise of the option more than one year after the date of exercise and more
than two years after the date of grant, the difference between the option
exercise price and sales price will be taxed as a long-term capital gain or
loss.
In the case of ISOs, the spread between the option exercise price and the
fair market value of the stock on the date of exercise will be classified as an
item of tax preference.
The Company has no tax deduction with respect to the grant of an NSO or the
sale of stock acquired pursuant thereto. The Company does have a deduction equal
to the amount of ordinary income that the optionee is required to recognize as a
result of the exercise of an NSO. The Company has no tax deduction with respect
to the grant or exercise of ISOs or the sale of stock acquired pursuant thereto,
except to the extent that an employee recognizes ordinary income upon a
disqualifying disposition of such stock.
VOTE REQUIRED
Approval of the 1995 Plan will require the affirmative vote of a majority
of the voting power present in person or by proxy and entitled to vote at the
1996 Annual Meeting or any adjournment thereof.
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
(PROPOSAL THREE ON THE PROXY CARD)
The Board of Directors unanimously recommends a vote FOR this proposal.
KPMG Peat Marwick LLP and its predecessors, independent certified public
accountants, have been the auditors for the Company for 44 years.
23
<PAGE> 27
The Board of Directors has again selected KPMG Peat Marwick LLP to serve as
the Company's independent auditors for the year 1996. While it is not required
to do so, the Board of Directors is submitting to the stockholders the selection
of that firm for ratification in order to ascertain the stockholders' views.
Such ratification of the selection of KPMG Peat Marwick LLP will require a
majority of the votes cast by holders of Common Stock present or represented by
proxy at this Annual Meeting and entitled to vote thereat. If ratification is
not approved, the Board of Directors will reconsider its selection.
Representatives of KPMG Peat Marwick LLP are expected to be present at this
Annual Meeting and available to respond to appropriate questions. Such
representatives will have the opportunity to make a statement if they desire to
do so.
STOCKHOLDER PROPOSALS
To be considered for presentation at the 1997 Annual Meeting of the
Company's Stockholders, a stockholder proposal must be received at the offices
of the Company no later than November 27, 1996.
OTHER MATTERS
The Company's By-Laws limit the business that may be brought before an
annual meeting of stockholders to matters included in the notice of meeting,
matters otherwise properly brought before the meeting by the Board of Directors
and matters brought before the meeting by a stockholder provided that notice of
such matter has been received by the Secretary of the Company not less than 30
days nor more than 60 days prior to the meeting. Management knows of no other
business which will be presented to this Annual Meeting. If any other business
is properly brought before this Annual Meeting, it is intended that proxies in
the enclosed form will be voted in respect thereof in accordance with the
judgment of the persons voting the proxies.
Whether you intend to be present at this Annual Meeting or not, you are
urged to return your proxy promptly.
By order of the Board of Directors
/s/ BETTY R. FLESHMAN
BETTY R. FLESHMAN
Secretary
24
<PAGE> 28
ST. PAUL, MINNESOTA
DOWNTOWN MAP
(Map)
<PAGE> 29
PROXY PROXY
POTLATCH CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 16, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby authorizes JOHN M. RICHARDS, L. PENDLETON SIEGEL and
BETTY R. FLESHMAN, as Proxies with full power in each to act without the other
and with the power of substitution in each, to represent and to vote all the
shares of stock the undersigned is entitled to vote at the Annual Meeting of
Stockholders of Potlatch Corporation to be held on May 16, 1996, or at any
adjournment thereof.
IMPORTANT -- THIS PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE.
POTLATCH CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ALL ITEMS.
1. Election of Directors to serve until the 1999 Annual Meeting of Stockholders
- -- Nominees: Kenneth T. Derr, Toni Rembe, Richard M. Rosenberg, Charles R.
Weaver, William T. Weyerhaeuser.
FOR WITHHOLD FOR ALL
(Except Nominee(s)
written below)
/ / / / / /
______________________________________________________
2. Approval of the Potlatch Corporation 1995 Stock Incentive Plan.
FOR AGAINST ABSTAIN
/ / / / / /
3. Ratification of the selection of KPMG Peat Marwick LLP as Independent
Auditors.
FOR AGAINST ABSTAIN
/ / / / / /
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY WILL BE VOTED AS DIRECTED BUT IF NOT OTHERWISE DIRECTED,
FOR THE ELECTION OF FIVE DIRECTORS AND FOR PROPOSALS 2 AND 3.
Dated: _______________________________________, 1996
____________________________________________________
Signature
____________________________________________________
Signature
(Sign name exactly as imprinted hereon. For joint accounts, both owners should
sign. In signing as attorney, executor, administrator, trustee or guardian, give
full title as such. If signer is a corporation, give full corporate name and
sign by duly authorized officer, showing the officer's title.)
<PAGE> 30
PUTNAM DEFINED CONTRIBUTION PLAN
P.O. Box 9740
Providence, Rhode Island 02940-9740
P U T N A M I N V E S T M E N T S
March 27, 1996
Dear Participant of the Potlatch Savings Plan:
The Board of Directors of Potlatch Corporation is soliciting proxies to be used
at the Annual Meeting of Stockholders to be held on May 16, 1996 and any
adjournment thereof. Enclosed are Potlatch Corporation's Proxy Statement for
its 1996 Annual Meeting of Stockholders and a card on which you can indicate
your voting instructions.
The stock in your account under the Savings Plan is held by us as Trustee.
Please see the enclosed Confidential Voting Card for details on how your shares
will be voted. In accordance with the time-phased voting provision of Potlatch
Corporation's Restated Certificate of Incorporation, you are entitled to four
votes for each share in your account on the matters to be voted upon at this
year's Annual Meeting. The matters to be presented at the meeting are described
in detail in the attached Notice of Meeting and Proxy Statement.
Please mark your voting instructions on the enclosed card and date, sign and
return this card in the enclosed envelope. Your vote will be held in confidence.
Very Truly Yours,
Putnam Fiduciary Trust Company
[LOGO]
B O S T O N - L O N D O N - T O K Y O
<PAGE> 31
PUTNAM FIDUCIARY TRUST COMPANY, TRUSTEE:
POTLATCH CORPORATION
SALARIED EMPLOYEES' SAVINGS PLAN
CONFIDENTIAL VOTING INSTRUCTIONS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
You are authorized and instructed to vote all stock in my Accounts under the
Potlatch Corporation Salaried Employees' Savings Plan at the Annual Meeting of
Stockholders of Potlatch Corporation to be held on May 16, 1996, or at any
adjournment thereof.
1. ELECTION OF FIVE DIRECTORS TO SERVE UNTIL THE 1999 ANNUAL MEETING OF
STOCKHOLDERS:
<TABLE>
<S> <C>
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY to vote
(except as marked to the contrary below) for all nominees listed below
</TABLE>
Kenneth T. Derr, Toni Rembe, Richard M. Rosenberg, Charles R. Weaver, William T.
Weyerhaeuser
(INSTRUCTION:To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
-------------------------------------------------------------------
2. APPROVAL OF THE POTLATCH CORPORATION 1995 STOCK INCENTIVE PLAN:
/ / FOR / / AGAINST / / ABSTAIN
3. RATIFICATION OF THE SELECTION OF KPMG PEAT MARWICK LLP AS INDEPENDENT
AUDITORS:
/ / FOR / / AGAINST / / ABSTAIN
4. ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE SAID MEETING.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ALL ITEMS.
(Continued and to be signed on other side)
<PAGE> 32
POTLATCH CORPORATION
SALARIED EMPLOYEES' SAVINGS PLAN
CONFIDENTIAL VOTING INSTRUCTIONS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PLEASE MARK YOUR VOTING INSTRUCTIONS ON THE REVERSE SIDE OF THIS CARD. YOUR
SHARES WILL BE VOTED AS DIRECTED, BUT IF NOT OTHERWISE DIRECTED, FOR THE
ELECTION OF FIVE DIRECTORS AND FOR PROPOSALS 2 AND 3. IF YOU DO NOT
RETURN THIS CARD, THE TRUSTEE MUST VOTE YOUR PLAN SHARES IN THE
SAME PROPORTION AS VOTED BY OTHER PLAN PARTICIPANTS.
------------------------------------
(PLEASE SIGN EXACTLY AS NAME APPEARS
TO THE LEFT)
Dated: , 1996
<PAGE> 33
PUTNAM FIDUCIARY TRUST COMPANY, TRUSTEE:
POTLATCH CORPORATION
SAVINGS PLAN FOR HOURLY EMPLOYEES
CONFIDENTIAL VOTING INSTRUCTIONS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
You are authorized and instructed to vote all stock in my Accounts under the
Potlatch Corporation Savings Plan for Hourly Employees at the Annual Meeting of
Stockholders of Potlatch Corporation to be held on May 16, 1996, or at any
adjournment thereof.
1. ELECTION OF FIVE DIRECTORS TO SERVE UNTIL THE 1999 ANNUAL MEETING OF
STOCKHOLDERS:
<TABLE>
<S> <C>
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY to vote
(except as marked to the contrary below) for all nominees listed below
</TABLE>
Kenneth T. Derr, Toni Rembe, Richard M. Rosenberg, Charles R. Weaver, William T.
Weyerhaeuser
(INSTRUCTION:To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
-------------------------------------------------------------------
2. APPROVAL OF THE POTLATCH CORPORATION 1995 STOCK INCENTIVE PLAN:
/ / FOR / / AGAINST / / ABSTAIN
3. RATIFICATION OF THE SELECTION OF KPMG PEAT MARWICK LLP AS INDEPENDENT
AUDITORS:
/ / FOR / / AGAINST / / ABSTAIN
4. ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE SAID MEETING.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ALL ITEMS.
(Continued and to be signed on other side)
<PAGE> 34
POTLATCH CORPORATION
SAVINGS PLAN FOR HOURLY EMPLOYEES
CONFIDENTIAL VOTING INSTRUCTIONS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PLEASE MARK YOUR VOTING INSTRUCTIONS ON THE REVERSE SIDE OF THIS CARD. YOUR
SHARES WILL BE VOTED AS DIRECTED, BUT IF NOT OTHERWISE DIRECTED, FOR THE
ELECTION OF FIVE DIRECTORS AND FOR PROPOSALS 2 AND 3. IF YOU DO NOT
RETURN THIS CARD, THE TRUSTEE MUST VOTE YOUR PLAN SHARES IN THE
SAME PROPORTION AS VOTED BY OTHER PLAN PARTICIPANTS.
------------------------------------
(PLEASE SIGN EXACTLY AS NAME APPEARS
TO THE LEFT)
Dated: , 1996
<PAGE> 35
PROXY POTLATCH CORPORATION PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby authorizes JOHN M. RICHARDS, L. PENDLETON SIEGEL and
BETTY R. FLESHMAN, as Proxies with full power in each to act without the other
and with the power of substitution in each, to represent and to vote all the
shares of stock the undersigned is entitled to vote at the Annual Meeting of
Stockholders of Potlatch Corporation to be held on May 16, 1996, or at any
adjournment thereof.
1. ELECTION OF FIVE DIRECTORS TO SERVE UNTIL THE 1999 ANNUAL MEETING OF
STOCKHOLDERS:
<TABLE>
<S> <C>
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY to vote
(except as marked to the contrary below) for all nominees listed below
</TABLE>
Kenneth T. Derr, Toni Rembe, Richard M. Rosenberg, Charles R. Weaver, William T.
Weyerhaeuser
(INSTRUCTION:To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
-------------------------------------------------------------------
2. APPROVAL OF THE POTLATCH CORPORATION 1995 STOCK INCENTIVE PLAN:
/ / FOR / / AGAINST / / ABSTAIN
3. RATIFICATION OF THE SELECTION OF KPMG PEAT MARWICK LLP AS INDEPENDENT
AUDITORS:
/ / FOR / / AGAINST / / ABSTAIN
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ALL ITEMS.
(Continued and to be signed on other side)
<PAGE> 36
(Continued from other side)
THIS PROXY WILL BE VOTED AS DIRECTED BUT IF NOT OTHERWISE DIRECTED, FOR THE
ELECTION OF FIVE DIRECTORS AND FOR PROPOSALS 2 AND 3.
By signing below, the undersigned certifies that:
(i) there has been NO change in the beneficial ownership of shares
of Common Stock covered hereby from and including March 1, 1992; and
(ii) there has been a change in the beneficial ownership (such as a
purchase) of shares of Common Stock since that date.
If no certification is made, it will be deemed for purposes of this proxy that
there has been a change in the beneficial ownership of all shares of Common
Stock covered hereby subsequent to March 1, 1992.
<TABLE>
<C> <S>
DATED: ,1996
---------------------------------------------
---------------------------------------------
(SIGN NAME EXACTLY AS IMPRINTED HEREON. FOR
JOINT ACCOUNTS, BOTH OWNERS SHOULD SIGN. IN
SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, GIVE FULL TITLE AS SUCH.
IF SIGNER IS A CORPORATION, GIVE FULL
CORPORATE NAME AND SIGN BY DULY AUTHORIZED
PLEASE DATE, SIGN AND RETURN OFFICER, SHOWING THE OFFICER'S TITLE.)
</TABLE>
<PAGE> 37
[POTLATCH LOGO]
POTLATCH CORPORATION
One Maritime Plaza
PO Box 193591
San Francisco,
California 94119-3591
Telephone (415)
576-8800
March 27,1996
Dear Bank, Broker or Nominee:
Under the Charter of Potlatch Corporation, stockholders who were the
beneficial owners of shares of Common Stock on the record date for the upcoming
meeting of stockholders and who have owned such shares continuously from and
including March 1, 1992 will be entitled to exercise four (4) votes per share
for each such share upon submitting acceptable evidence of beneficial ownership
to the Company. Also under the Charter, stockholders who own shares of Common
Stock in "street" or "nominee" name or through a broker, clearing agency, voting
trustee, bank, trust company or other nominee are presumed to be entitled to
exercise one (1) vote per share for each such share. To become entitled to four
(4) votes per share, a stockholder must provide written proof that there has
been no change in the beneficial ownership of his or her shares from and
including March 1, 1992. Such proof must consist of a written certification in
the form provided on the proxy card.
In certain circumstances, the Company may rely on your representation with
respect to the beneficial owners of shares of Common Stock of Potlatch
Corporation held in your name who are entitled to exercise four (4) votes per
share, provided that such beneficial owners have completed and returned to you
for your records written certifications in the form provided on the proxy card
as to their beneficial ownership and you have forwarded a summary of such voting
information on the summary proxy card on the reverse side of this letter to
Potlatch Corporation or its agent. HOWEVER, THE COMPANY UNCONDITIONALLY RESERVES
THE RIGHT TO REVIEW EACH AND EVERY WRITTEN CERTIFICATION ON ANY PROXY CARD
COMPLETED BY A BENEFICIAL OWNER OF SHARES OF COMMON STOCK OF POTLATCH
CORPORATION TO DETERMINE WHETHER SUCH BENEFICIAL OWNER IS ENTITLED TO EXERCISE
THE CLAIMED FOUR (4) VOTES PER SHARE.
Very truly yours,
/s/ BETTY R. FLESHMAN
BETTY R. FLESHMAN
Secretary
<PAGE> 38
PROXY POTLATCH CORPORATION PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby authorizes JOHN M. RICHARDS, L. PENDLETON SIEGEL and
BETTY R. FLESHMAN, as Proxies with full power in each to act without the other
and with the power of substitution in each, to represent and to vote all the
shares of stock the undersigned is entitled to vote at the Annual Meeting of
Stockholders of Potlatch Corporation to be held on May 16, 1996, or at any
adjournment thereof.
<TABLE>
<CAPTION>
SHARES AS TO WHICH THERE
HAS BEEN NO CHANGE IN SHARES AS TO WHICH THERE
BENEFICIAL OWNERSHIP SINCE MARCH 1, HAS BEEN A CHANGE IN
1992 BENEFICIAL OWNERSHIP SINCE MARCH 1,
----------------------------------- 1992
-----------------------------------
(POST NUMBER OF SHARES
NOT NUMBER OF VOTES) (POST NUMBER OF SHARES
NOT NUMBER OF VOTES)
FOR WITHHOLD FOR WITHHOLD
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
1. ELECTION OF FIVE DIRECTORS TO SERVE UNTIL
THE 1999 ANNUAL MEETING OF STOCKHOLDERS:
K. T. Derr
---------- shs. ---------- shs. ---------- shs. ---------- shs.
T. Rembe
---------- shs. ---------- shs. ---------- shs. ---------- shs.
R. M. Rosenberg
---------- shs. ---------- shs. ---------- shs. ---------- shs.
C. R. Weaver
---------- shs. ---------- shs. ---------- shs. ---------- shs.
W. T. Weyerhaeuser
---------- shs. ---------- shs. ---------- shs. ---------- shs.
</TABLE>
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
2. APPROVAL OF THE POTLATCH CORPORATION
1995 STOCK INCENTIVE PLAN
------ shs. ------ shs. ------ shs. ------ shs. ------ shs. ------ shs.
3. RATIFICATION OF THE SELECTION OF KPMG
PEAT MARWICK LLP AS INDEPENDENT
AUDITORS
------ shs. ------ shs. ------ shs. ------ shs. ------ shs. ------ shs.
Post only record position. Do not tabulate votes.
</TABLE>
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ALL ITEMS.
THIS PROXY WILL BE VOTED AS DIRECTED BUT IF NOT OTHERWISE DIRECTED, FOR THE
ELECTION OF FIVE DIRECTORS AND FOR PROPOSALS 2 AND 3.
If the summary voting table above is not completed, it will be deemed for
purposes of this proxy that there has been a change in the beneficial ownership
of all Common Shares covered hereby subsequent to March 1, 1992.
Dated: , 1996
--------------------------------
--------------------------------
--------------------------------
(Sign name exactly as imprinted
hereon. In signing as attorney,
executor, administrator, trustee
or guardian, give full title as
such. If signer is a
corporation, give full corporate
name and sign by duly authorized
officer, showing the officer's
title.)
PLEASE DATE, SIGN AND RETURN
<PAGE> 39
PROXY POTLATCH CORPORATION PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby authorizes JOHN M. RICHARDS, L. PENDLETON SIEGEL and
BETTY R. FLESHMAN, as Proxies with full power in each to act without the other
and with the power of substitution in each, to represent and to vote all the
shares of stock the undersigned is entitled to vote at the Annual Meeting of
Stockholders of Potlatch Corporation to be held on May 16, 1996, or at any
adjournment thereof.
The Board of Directors unanimously recommends a vote FOR all items.
- -------------------------------------------------------------------------------
This proxy will be voted as directed but if not otherwise directed, FOR the
election of five Directors and FOR proposals 2 and 3.
If no certification is made, it will be deemed for purposes of this proxy that
there has been a change in the beneficial ownership of all shares of Common
Stock covered hereby subsequent to March 1, 1992.
(1) ELECTION OF FIVE DIRECTORS TO SERVE UNTIL THE 1999 ANNUAL MEETING OF
STOCKHOLDERS.
FOR WITHHOLD
all nominees listed below / / Authority to vote for all / /
(except as marked to the contrary nominees listed below
in the space provided)
Kenneth T. Derr, Toni Rembe, Richard M. Rosenberg,
Charles R. Weaver, William T. Weyerhaeuser FOR AGAINST ABSTAIN
--- ------- -------
(2) APPROVAL OF THE POTLATCH / / / / / /
CORPORATION 1995 STOCK INCENTIVE
PLAN:
(3) RATIFICATION OF THE SELECTION OF / / / / / /
KPMG PEAT MARWICK LLP AS
INDEPENDENT AUDITORS:
(4) IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE
UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING.
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
- ------------------------------------------------------------------------------
(i) there has been NO change in the beneficial ownership of ---------
shares of Common Stock covered hereby from and including
March 1, 1992; and
(ii) there has been a change in the beneficial ownership ---------
(such as a purchase of)
shares of Common Stock since that date.
PLEASE MARK ALL
- -------------- ----------- CHOICES LIKE THIS /X/
ACCOUNT NUMBER SHARES
SIGNATURE DATE
------------------------ ---------------
SIGNATURE DATE
------------------------ ---------------
<PAGE> 40
POTLATCH CORPORATION
1995 STOCK INCENTIVE PLAN
1. PURPOSE.
This Potlatch Corporation 1995 Stock Incentive Plan is intended to
provide incentive to employees and directors of Potlatch Corporation (the
"Corporation") and its eligible subsidiaries, to encourage proprietary interest
in the Corporation and to encourage employees and directors to remain in the
service of the Corporation or its subsidiaries.
2. DEFINITIONS.
(a) "Award" means any award of an Option, Restricted Stock or an Other
Share-Based Award under the Plan.
(b) "Board" means the Board of Directors of the Corporation.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the Committee appointed by the Board in
accordance with Section 4.
(e) "Common Stock" means the $1 par value common stock of the
Corporation.
(f) "Corporation" means Potlatch Corporation, a Delaware corporation.
(g) "Director" means a director of the Corporation.
(h) "Disability" means the condition of an Employee who is unable to
engage in any substantial gainful activity by reason
-1-
<PAGE> 41
of any medically determinable physical or mental impairment which can be
expected to result in death or which has lasted or can be expected to last for
a continuous period of at least 12 months.
(i) "Employee" means an individual (who may be an officer or a
Director) employed by the Corporation or a Subsidiary (within the meaning of
Code section 3401 and the regulations thereunder).
(j) "Exercise Price" means the price per Share of Common Stock at
which an Option may be exercised.
(k) "Fair Market Value" of a Share as of a specified date means the
closing price at which Shares are traded at the close of business on such date
as reported in the New York Stock Exchange composite transactions published in
the Western Edition of the Wall Street Journal, or if no trading of Shares is
reported for that day, on the next preceding day on which trading was reported.
(l) "Incentive Stock Option" means an Option described in Code section
422(b).
(m) "Misconduct" means that a Participant 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
-2-
<PAGE> 42
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.
(n) "Nonqualified Stock Option" means an Option not described in Code
section 422(b) or 423(b).
(o) "Option" means a stock option granted pursuant to Section 7 or
Section 10. "Option Agreement" means the agreement between the Corporation and
the Participant which contains the terms and conditions pertaining to such
Option.
(p) "Other Share-Based Award" means an Award granted pursuant to
Section 9. "Other Share-Based Award Agreement" means the agreement between the
Corporation and the recipient of an Other Share-Based Award which contains the
terms and conditions pertaining to the Other Share-Based Award.
(q) "Outside Director" means a Director who is not an Employee.
(r) "Participant" means an Employee who has received an Award or an
Outside Director who has received an Option.
(s) "Plan" means this Potlatch Corporation 1995 Stock Incentive Plan.
(t) "Purchase Price" means the Exercise Price times the number of
whole Shares with respect to which an Option is exercised.
(u) "Restricted Stock" means Shares granted pursuant to Section 8.
"Restricted Stock Agreement" means the agreement between the Corporation and the
recipient of Restricted Stock
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which contains the terms, conditions and restrictions pertaining to the
Restricted Stock.
(v) "Share" means one share of Common Stock, adjusted in accordance
with Section 13 (if applicable).
(w) "Stock Right" means a bookkeeping entry representing a right to
the equivalent of one Share.
(x) "Subsidiary" means any corporation in an unbroken chain of
corporations beginning with the Corporation if each of the corporations other
than the last corporation in the unbroken chain owns stock possessing 50% or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
3. EFFECTIVE DATE.
This Plan was adopted by the Board on December 7, 1995, to be
effective immediately, subject to approval by the Corporation's stockholders.
4. ADMINISTRATION.
The Plan shall be administered by a committee (the "Committee")
appointed by the Board, consisting of not less than two disinterested members.
The term "disinterested members" as applied to Directors shall include only
Directors who are not active Employees of the Corporation or of any of its
Subsidiaries, who are not eligible to receive discretionary Awards under
Sections 7, 8 and 9 of this Plan or under any other stock incentive plan of the
Corporation and who have not
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received such discretionary Awards for at least one year preceding appointment
as a member of the Committee. The Board may from time to time remove members
from, or add members to, the Committee. Vacancies on the Committee shall be
filled by the Board. The Board shall appoint one of the members of the
Committee as Chairman.
If any member of the Committee does not qualify as an "outside
director" for purposes of section 162(m) of the Code, Awards under the Plan for
the chief executive officer and the four most highly compensated officers of
the Corporation (other than the chief executive officer) shall be administered
by a subcommittee consisting of each Committee member who qualifies as an
"outside director." If fewer than two Committee members qualify as "outside
directors," the Board shall appoint one or more other members to such
subcommittee who do qualify as "outside directors" so that it will at all times
consist of at least two members who qualify as "outside directors" for purposes
of section 162(m) of the Code.
The Committee shall hold meetings at such times and places as it may
determine. Acts of a majority of the Committee at which a quorum is present,
or acts reduced to or approved in writing by a majority of the Committee, shall
be the valid acts of the Committee. The Committee shall from time to time at
its discretion make determinations with respect to Employees who shall be
granted Awards, the number of Shares or Share equivalents to be subject to each
Award, the vesting of Awards, the designation of Options as Incentive Stock
Options or
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Nonqualified Stock Options and other conditions of Awards to Employees.
The interpretation and construction by the Committee of any provisions
of the Plan or of any Award shall be final. No member of the Committee shall
be liable for any action or determination made in good faith with respect to
the Plan or any Award.
5. ELIGIBILITY.
Participants shall be such key Employees (who may be officers, whether
or not they are Directors) of the Corporation or of its Subsidiaries as the
Committee shall select, but subject to the terms and conditions set forth
below. In addition, all Outside Directors shall be Participants solely for
purposes of the nondiscretionary Awards described in Section 10.
(a) Ten Percent Stockholders.
An Employee who owns more than 10% of the total combined voting power
of all classes of outstanding stock of the Corporation, its parent or any of
its Subsidiaries is not eligible to receive an Incentive Stock Option pursuant
to this Plan. For purposes of this Section 5(a) the stock ownership of an
Employee shall be determined pursuant to section 424(d) of the Code.
(b) Number of Awards.
A Participant may receive more than one Award, including Awards of the
same type, but only on the terms and subject to the restrictions set forth in
the Plan. The maximum aggregate
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number of Shares or Share equivalents that may be subject to Awards to a
Participant in any calendar year is 60,000 Shares.
6. STOCK.
The stock subject to Options, Restricted Stock, or Other Share-Based
Awards granted under the Plan shall be Shares of the Corporation's authorized
but unissued or reacquired Common Stock. The aggregate number of Options,
Restricted Stock or Other Share-Based Awards issued under this Plan shall not
exceed 1,700,000 Shares. In the event that any outstanding Option under the
Plan for any reason expires or is terminated or any Restricted Stock or Other
Share-Based Award is forfeited, the Shares allocable to the unexercised portion
of such Option or the forfeited Restricted Stock or Other Share-Based Award may
again be subjected to Options, Restricted Stock or Other Share-Based Awards
under the Plan, provided that under the terms of the Award the Participant
received no benefits of ownership during the period the Award was outstanding.
However, if one Award is granted in tandem with another, so that the exercise
of one causes the other to expire, then the number of Shares subject to the
expired Award shall not be restored to the pool available for Awards.
The limitations established by this Section 6 shall be subject to
adjustment as provided in Section 13.
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7. TERMS AND CONDITIONS OF EMPLOYEE OPTIONS.
Options granted to Employees pursuant to the Plan shall be evidenced
by written Option Agreements in such form as the Committee shall determine,
subject to the following terms and conditions:
(a) Number of Shares.
Each Option shall state the number of Shares to which it pertains and
shall provide for the adjustment of such number in accordance with Section 13.
(b) Exercise Price.
Each Option shall state the Exercise Price, determined by the
Committee, which shall not be less than the Fair Market Value of a Share on the
date of grant.
(c) Medium and Time of Payment.
The Purchase Price shall be payable in full in United States dollars
upon the exercise of the Option; provided that with the consent of the
Committee and in accordance with its rules and regulations, the Purchase Price
may be paid by the surrender of Shares in good form for transfer, owned by the
person exercising the Option and having a Fair Market Value on the date of
exercise equal to the Purchase Price, or in any combination of cash and Shares,
so long as the total of the cash and the Fair Market Value of the Shares
surrendered equals the Purchase Price. No Share shall be issued until full
payment has been made.
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(d) Term and Exercise of Options; Nontransferability of Options.
Each Option shall state the time or times when it becomes exercisable.
No Option shall be exercisable after the expiration of 10 years from the date
it is granted. During the lifetime of the Participant, the Option shall be
exercisable only by the Participant and shall not be assignable or
transferable. In the event of the Participant's death, no Option shall be
transferable by the Participant other than by will or the laws of descent and
distribution.
Subject to the foregoing, beginning six months after the date of grant
the Participant shall have the right to exercise the Option (or to call the
related stock appreciation right as described in Section 7(i)) in whole or in
part:
(i) Within 30 days following the consummation of any
transaction approved by the stockholders of the Corporation in which
the Corporation will cease to be an independent publicly owned
corporation (including, without limitation, a reverse merger
transaction in which the Corporation becomes the subsidiary of another
corporation) or the sale or other disposition of all or substantially
all of the assets of the Corporation;
(ii) Within 365 days following 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
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(B) are individuals whose election or nomination for election as
Directors was 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 approved such election or nomination;
(iii) Within 365 days following the date on which any
"person" (as such term is used in sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "1934 Act")) that has
acquired Shares pursuant to a tender offer subject to section 14(d) of
the 1934 Act becomes entitled to vote 20% or more of the aggregate
voting power of the capital stock of the Corporation issued and
outstanding; and
(iv) Within 30 days prior to any dissolution or liquidation
of the Corporation or any merger or consolidation in which the
Corporation is not the surviving corporation, but not earlier than the
date on which any required stockholder approval is obtained.
If an Option is not exercised during any 30-day period described in (i) or (iv)
above, the Option shall terminate at the close of business on the last day of
the 30-day period; provided that if periods described in (i) and (iv) above are
contiguous or overlap, unexercised Options shall terminate at the close of
business on the last day of the second 30-day period. In the case of a stock
appreciation right called during either of the
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30-day periods described in (i) or (iv) above, "Fair Market Value" shall be the
greater of (A) the value of the consideration per share that the Participant
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 (i) or (iv) above, 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 (i) or (iv) above), taking into
consideration all relevant facts and circumstances.
(e) Termination of Employment Except Death.
In the event that a Participant who is an Employee ceases to be
employed by the Corporation or its Subsidiaries for any reason other than
death, such Participant shall have the right (subject to the limitations of
Section 7(d) above) to exercise the Option within three months after such
termination of employment (36 months in the case of Early, Normal or Late
Retirement under the Salaried Employees' Retirement Plan or Disability), to the
extent that, at the date of termination of employment, the Option had vested
pursuant to the terms of the Option Agreement with respect to which such Option
was granted and had not previously been exercised. However, if the employment
of a Participant is terminated by the Corporation or a Subsidiary by reason of
Misconduct, such Option shall cease to be exercisable at the time of the
Participant's termination of employment. The Committee shall determine whether
a Participant's employment is terminated by reason of Misconduct.
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In making such determination the Committee shall act fairly and shall give the
Participant an opportunity to be heard and present evidence on his or her
behalf.
For this purpose, the employment relationship will be treated as
continuing while the Participant is on military leave, sick leave or other bona
fide leave of absence (to be determined in the sole discretion of the
Committee, in accordance with rules and regulations construing Code section
422(a)(2)). Notwithstanding the foregoing, in the case of an Incentive Stock
Option, employment shall not be deemed to continue beyond the 90th day after
the Participant ceased active employment, unless the Participant's reemployment
rights are guaranteed by statute or by contract.
(f) Death of Participant.
If a Participant who is an Employee dies while in the employ of the
Corporation or a Subsidiary, the Option may be exercised (subject to the
limitations of Section 7(d) above) within 36 months after the Participant's
death by the executors or administrators of the Participant's estate or by any
person or persons who acquired the Option directly from the Participant by
bequest or inheritance, to the extent that, at the date of the Participant's
death, the Option had vested pursuant to the terms of the Option Agreement and
had not previously been exercised.
(g) Rights as a Stockholder.
A Participant or a transferee of a Participant shall have no rights as
a stockholder with respect to any Shares covered by
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his or her Option until the date of the issuance of a stock certificate for
such Shares. No adjustment shall be made for dividends, distributions or other
rights for which the record date is prior to the date such stock certificate is
issued, except as provided in Section 13.
(h) Modification, Extension and Renewal of Options.
Subject to the terms and conditions and within the limitations of the
Plan, the Committee may modify, extend or renew outstanding Options granted to
Employees under the Plan, or accept the exchange of outstanding Options (to the
extent not previously exercised) for the granting of new Options (at the same
or a different price). Notwithstanding the foregoing, however, no modification
of an Option shall, without the consent of the Participant, alter or impair any
rights or obligations under any Option previously granted under the Plan.
(i) Stock Appreciation Rights.
Each Option granted under the Plan shall include a stock appreciation
right which may be exercised only during the periods described in Section
7(d)(i) through (iv) and subject to the provisions of Section 7(d). During any
such period, the Participant shall have the right to surrender all or part of
the Option and to exercise the stock appreciation right (the "call") to obtain
payment of an amount equal to the difference obtained by subtracting the
aggregate Exercise Price of the Shares subject to the Option (or the portion of
such Option) surrendered from the Fair Market Value of such Shares on the date
of such surrender. The call of such stock appreciation
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right shall be subject to such limitations (including, but not limited to,
limitations as to time and amount) as the Committee shall deem appropriate.
The payment may be made in shares of Common Stock (determined with reference to
its Fair Market Value on the date of call), or in cash, or partly in cash and
in shares of Common Stock, at the discretion of the Committee, provided that
the Committee determines that such settlement is consistent with the purpose
set forth in Section 1. For all purposes under the Plan, the terms "exercise"
or "exercisable" shall be deemed to include the terms "call" or "callable" as
such terms may apply to a stock appreciation right, and in the event of the
call of a stock appreciation right, the underlying Option will be deemed to
have been exercised for all purposes under the Plan.
(j) Limitation of Incentive Stock Option Awards.
The aggregate Fair Market Value (determined as of the date the Option
is granted) of the stock with respect to which any Incentive Stock Options are
exercisable for the first time by a Participant during any calendar year under
this Plan and all other plans maintained by the Corporation, its parent or its
Subsidiaries shall not exceed $100,000.
(k) Other Provisions.
The Option Agreements shall contain such other provisions that are
consistent with the terms of the Plan, including, without limitation,
restrictions upon the exercise of the Option, as the Committee shall deem
advisable.
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8. RESTRICTED STOCK.
(a) Grants.
Subject to the provisions of the Plan, the Committee shall have sole
and complete authority to determine the Employees to whom, and the time or
times at which, grants of Restricted Stock will be made, the number of shares
of Restricted Stock to be awarded, the price (if any) to be paid by the
recipient of Restricted Stock, the time or times within which such Awards may
be subject to forfeiture, and all other terms and conditions of the Awards.
The Committee may condition the grant of Restricted Stock upon the attainment
of specified performance goals or such other factors as the Committee may
determine, in its sole discretion.
The terms of each Restricted Stock Award shall be set forth in a
Restricted Stock Agreement between the Corporation and the Employee, which
Agreement shall contain such provisions as the Committee determines to be
necessary or appropriate to carry out the intent of the Plan. Each Participant
receiving a Restricted Stock Award shall be issued a stock certificate in
respect of such shares of Restricted Stock. Such certificate shall be
registered in the name of such Participant, and shall bear an appropriate
legend referring to the terms, conditions, and restrictions applicable to such
Award. The Committee shall require that stock certificates evidencing such
shares be held by the Corporation until the restrictions lapse and that, as a
condition of any Restricted Stock Award, the Participant shall
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deliver to the Corporation a stock power relating to the stock covered by such
Award.
(b) Restrictions and Conditions.
The shares of Restricted Stock awarded pursuant to this Section 8
shall be subject to the following restrictions and conditions:
(i) During a period set by the Committee commencing with the
date of such Award (the "Restriction Period"), the Participant shall
not be permitted to sell, transfer, pledge, assign or encumber shares
of Restricted Stock awarded under the Plan. Within these limits, the
Committee, in its sole discretion, may provide for the lapse of such
restrictions in installments and may accelerate or waive such
restrictions in whole or in part, based on service, performance, a
change of control of the Corporation or such other factors or criteria
as the Committee may determine in its sole discretion.
(ii) Except as provided in this paragraph (ii) and paragraph
(i) above, the Participant shall have, with respect to the shares of
Restricted Stock, all of the rights of a stockholder of the
Corporation, including the right to vote the shares and the right to
receive any cash dividends. The Committee, in its sole discretion, as
determined at the time of Award, may provide that the payment of cash
dividends shall or may be deferred and, if the Committee so
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determines, reinvested in additional Shares of Restricted Stock to the
extent available under Section 6, or otherwise reinvested. Stock
dividends issued with respect to Restricted Stock shall be treated as
additional shares of Restricted Stock that are subject to the same
restrictions and other terms and conditions that apply to the shares
with respect to which such dividends are issued.
(iii) The Committee shall specify the conditions under which
shares of Restricted Stock shall vest or be forfeited and such
conditions shall be set forth in the Restricted Stock Agreement.
(iv) If and when the Restriction Period applicable to shares
of Restricted Stock expires without a prior forfeiture of the
Restricted Stock, certificates for an appropriate number of
unrestricted Shares shall be delivered promptly to the Participant,
and the certificates for the shares of Restricted Stock shall be
canceled.
9. OTHER SHARE-BASED AWARDS.
(a) Grants.
Other Awards of Shares and other Awards that are valued in whole or in
part by reference to, or are otherwise based on, Shares ("Other Share-Based
Awards"), may be granted either alone or in addition to or in conjunction with
other Awards under this Plan. Awards under this Section 9 may include (without
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limitation) Stock Rights, the grant of Shares conditioned upon some specified
event, the payment of cash based upon the performance of the Shares or the
grant of securities convertible into Shares.
Subject to the provisions of the Plan, the Committee shall have sole
and complete authority to determine the Employees to whom and the time or times
at which Other Share-Based Awards shall be made, the number of Shares or other
securities, if any, to be granted pursuant to Other Share-Based Awards, and all
other conditions of the Other Share-Based Awards. The Committee may condition
the grant of an Other Share-Based Award upon the attainment of specified
performance goals or such other factors as the Committee shall determine, in
its sole discretion. In making an Other Share-Based Award, the Committee may
determine that the recipient of an Other Share-Based Award shall be entitled to
receive, currently or on a deferred basis, interest or dividends or dividend
equivalents with respect to the Shares or other securities covered by the
Award, and the Committee may provide that such amounts (if any) shall be deemed
to have been reinvested in additional Shares or otherwise reinvested. The
terms of any Other Share-Based Award shall be set forth in an Other Share-Based
Award Agreement between the Corporation and the Employee, which Agreement shall
contain such provisions as the Committee determines to be necessary or
appropriate to carry out the intent of the Plan.
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(b) Terms and Conditions.
In addition to the terms and conditions specified in the Other
Share-Based Award Agreement, Other Share-Based Awards shall be subject to the
following:
(i) Any Other Share-Based Award may not be sold, assigned,
transferred, pledged or otherwise encumbered prior to the date on
which the Shares are issued or the Award becomes payable, or, if
later, the date on which any applicable restriction, performance or
deferral period lapses.
(ii) The Other Share-Based Award Agreement shall contain
provisions dealing with the disposition of such Award in the event of
termination of the Employee's employment prior to the exercise,
realization or payment of such Award, and the Committee in its sole
discretion may provide for payment of the Award in the event of the
Employee's retirement, Disability or death or the change of control of
the Corporation, with such provisions to take account of the specific
nature and purpose of the Award.
10. OPTION AWARDS TO OUTSIDE DIRECTORS.
(a) Initial Award Conditioned Upon Plan Approval.
Subject to the approval of the Plan by the stockholders of the
Corporation, each individual who is an Outside Director on
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December 7, 1995, shall receive a Nonqualified Stock Option for 1000 Shares as
of such date.
(b) Award Upon Election.
Each Outside Director who is elected by the Board to fill a vacancy on
the Board after December 7, 1995, shall receive a Nonqualified Stock Option for
1000 Shares on the date of the Board's regular meeting in December following
his or her election.
(c) Annual Awards.
Each Outside Director shall receive a Nonqualified Stock Option for
500 Shares on the date of the Board's regular meeting in December of each year
he or she serves as Outside Director, other than a year in which the Outside
Director receives an award under Section 10(a) or 10(b) above.
(d) Terms and Conditions of Options.
Each Nonqualified Stock Option granted pursuant to this Section 10
shall be subject to the following terms and conditions:
(i) The Exercise Price shall be the Fair Market Value of a Share
on the date of grant.
(ii) The Option shall become exercisable in 50% increments on the
first and second anniversaries of the date of grant, provided the
Outside Director has continuously been an Outside Director from the
date of grant until such time.
(iii) In the event the Outside Director terminates services as a
Director for any reason other than
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death, the former Director shall have the right to exercise the Option
within three months after such termination (within 36 months after
such termination in the case of retirement after five years of service
as an Outside Director) to the extent that, at the date of termination
the Option had vested pursuant to (ii) above and had not previously
been exercised. However, if the services of the Outside Director are
terminated by the Board for cause in accordance with the Corporation's
Restated Certificate of Incorporation, such Option shall cease to be
exercisable at the time of the Outside Director's termination of
services.
(iv) In the event the Outside Director's services terminate by
reason of death, the Option may be exercised within 36 months after
the Director's death by the executors or administrators of the
Director's estate or by any person or persons who shall have acquired
the Option directly from the Director by bequest or inheritance, to
the extent that, at the date of the Director's death, the Option had
vested pursuant to (ii) above and had not previously been exercised.
Except as specifically set forth in (i) through (iv) above, each Nonqualified
Stock Option granted pursuant to this Section 10 also shall be subject to all
of the terms and conditions set forth in Section 7, other than Section 7(h).
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11. OTHER PAYMENTS IN SHARES.
Shares may be issued under this Plan to satisfy the payment of all or
part of an award pursuant to the Potlatch Corporation Management Performance
Award Plan. In addition, all or part of any Director's fees may be paid in
Shares issued under this Plan. Any Shares issued pursuant to this Section 11
shall reduce the number of Shares authorized for Options, Restricted Stock or
Other Share-Based Awards under Section 6 but shall not be considered an Award
for purposes of the maximum grant limitation in Section 5(b).
12. TERM OF PLAN.
Awards may be granted and Shares may be issued pursuant to the Plan
until the termination of the Plan on December 6, 2005.
13. RECAPITALIZATION.
Subject to any required action by the stockholders, the number of
Shares covered by this Plan as provided in Section 6, the maximum grant
limitation in Section 5(b), the number of Shares covered by or referenced in
each outstanding Award, the number of Options to be granted to Outside
Directors under Sections 10(a) through 10(c) and the Exercise Price of each
outstanding Option and any price required to be paid for Restricted Stock or
Other Share-Based Award shall be proportionately adjusted for any increase or
decrease in the number of issued Shares resulting from a subdivision or
consolidation of Shares, the payment of a stock dividend (but only of Common
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Stock) or any other increase or decrease in the number of such Shares effected
without receipt of consideration by the Corporation or the declaration of a
dividend payable in cash that has a material effect on the price of issued
Shares.
Subject to any required action by the stockholders, if the Corporation
shall be the surviving corporation in any merger, consolidation or other
reorganization, each outstanding Award shall pertain and apply to the
securities to which a holder of the number of Shares subject to the Award would
have been entitled. Subject to the provisions of Section 7(d), 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 each outstanding Option and each nonvested Restricted Stock Award or
Other Share-Based Award to terminate, unless the agreement of merger,
consolidation or reorganization shall otherwise provide. In the event that the
Corporation undergoes a reverse merger transaction, the Participant shall be
entitled to receive the same consideration in such transaction with respect to
his or her Award (including, without limitation, cash) as other stockholders
are entitled to receive.
In the event of a change in the Common Stock as presently constituted,
which is limited to a change of all of its authorized shares with par value
into the same number of shares with a different par value or without par value,
the shares resulting from any such change shall be deemed to be the Common
Stock within the meaning of the Plan.
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To the extent that the foregoing adjustments relate to stock or
securities of the Corporation, such adjustments shall be made by the Committee,
whose determination in that respect shall be final, binding and conclusive,
provided that each Incentive Stock Option granted pursuant to this Plan shall
not be adjusted in a manner that causes the Option to fail to continue to
qualify as an incentive stock option within the meaning of section 422 of the
Code.
Except as expressly provided in this Section 13, a Participant shall
have no rights by reason of any subdivision or consolidation of shares of stock
of any class or the payment of any stock dividend or any other increase or
decrease in the number of shares of stock of any class or by reason of any
dissolution, liquidation, merger or consolidation or spin-off of assets or
stock of another corporation, and any issue by the Corporation of shares of
stock of any class or securities convertible into shares of stock of any class,
shall not affect the number or price of Shares subject to the Option.
The grant of an Option pursuant to the Plan shall not affect in any
way the right or power of the Corporation to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge or consolidate or to dissolve, liquidate, sell or
transfer all or any part of its business or assets.
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14. SECURITIES LAW REQUIREMENTS AND LIMITATION OF RIGHTS.
(a) Securities Law.
No Shares shall be issued pursuant to the Plan unless and until the
Corporation has determined that: (i) it and the Participant have taken all
actions required to register the Shares under the Securities Act of 1933 or
perfect an exemption from registration; (ii) any applicable listing requirement
of any stock exchange on which the Common Stock is listed has been satisfied;
and (iii) any other applicable provision of state or federal law has been
satisfied.
(b) Employment Rights.
Neither the Plan nor any Award granted under the Plan shall be deemed
to give any individual a right to remain employed by the Corporation or a
Subsidiary or to remain a Director. The Corporation and its Subsidiaries
reserve the right to terminate the employment of any employee at any time, with
or without cause, subject only to a written employment contract (if any), and
the Board reserves the right to terminate a Director's membership on the Board
for cause in accordance with the Corporation's Restated Certificate of
Incorporation.
(c) Stockholders' Rights.
A Participant shall have no dividend rights, voting rights or other
rights as a stockholder with respect to any Shares covered by his or her Award
prior to the issuance of a stock certificate for such Shares. No adjustment
shall be made for cash dividends or other rights for which the record date is
prior to the date when such certificate is issued.
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(d) Creditors' Rights.
A holder of an Other Share-Based Award shall have no rights other than
those of a general creditor of the Corporation. An Other Share-Based Award
shall represent an unfunded and unsecured obligation of the Corporation,
subject to the terms and conditions of the applicable Other Share-Based Award
Agreement.
15. AMENDMENT OF THE PLAN.
The Board may suspend or discontinue the Plan or revise or amend it
with respect to any Shares at the time not subject to Awards except that,
without approval of the stockholders of the Corporation, no such revision or
amendment shall:
(a) Increase the number of Shares subject to the Plan;
(b) Change the designation in Section 5 of the class of
Employees eligible to receive Awards;
(c) Decrease the price at which Incentive Stock Options may
be granted;
(d) Remove the administration of the Plan from the Committee;
(e) Render any disinterested member of the Committee eligible
to receive a discretionary Award under Sections 7, 8 and 9 while
serving on the Committee;
(f) Change the provisions of Section 10 more than once in any
six-month period, other than to comply with changes in the Code or the
rules thereunder; or
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(g) Amend this Section 15 to defeat its purpose.
16. APPLICATION OF FUNDS.
The proceeds received by the Corporation from the sale of Common Stock
pursuant to the exercise of an Option or the grant of Restricted Stock will be
used for general corporate purposes.
17. NO OBLIGATION TO EXERCISE OPTION.
The granting of an Option shall impose no obligation upon the
Participant to exercise such Option.
18. APPROVAL OF STOCKHOLDERS.
This Plan and any amendments requiring stockholder approval pursuant
to Section 15 shall be subject to approval by affirmative vote of the
stockholders in accordance with applicable law. Such vote shall be taken at
the first annual meeting of stockholders of the Corporation following the
adoption of the Plan or of any such amendments, or any adjournment of such
meeting.
19. LIMITATION ON PLAN PAYMENTS.
Any provision of the Plan to the contrary notwithstanding, payments or
transfers to a Participant under the Plan shall be limited to the amount (the
"Capped Amount") necessary to avoid characterization of any amount payable to
the Participant (including, but not limited to, amounts payable under the Plan)
as an "excess parachute payment" as defined in Code section
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280G, except in the event that the total amount that the Participant would
receive from all "parachute payments" as defined in Code section 280G, net of
all applicable taxes, including the excise tax that would be imposed pursuant
to Code section 4999, would exceed the Capped Amount, net of all applicable
taxes.
The determination of whether any amount would constitute an "excess
parachute payment" shall be made by the firm of independent certified public
accountants serving as the outside auditor of the Corporation as of the date of
the event specified in Section 7(d)(i) through (iv). In making such
determination, such firm may disregard any payments or benefits available to
the Participant under any contract, plan or program if the Participant
irrevocably elects to relinquish or not exercise such payments or benefits
before receipt of such payments or benefits. It is intended that payments
shall be made under the Plan whether or not the status of a particular payment
as an "excess parachute payment" has been finally determined by the Internal
Revenue Service or a court of competent jurisdiction.
20. WITHHOLDING TAXES.
(a) General.
To the extent required by applicable law, the recipient of any payment
or distribution under the Plan shall make arrangements satisfactory to the
Corporation for the satisfaction of any withholding tax obligations that arise
by reason of such payment or distribution. The Corporation shall not be
required
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to make such payment or distribution until such obligations are satisfied.
(b) Nonqualified Options.
The Committee may permit a Participant who exercises Nonqualified
Stock Options to satisfy all or part of his or her withholding tax obligations
by having the Corporation withhold a portion of the Shares that otherwise would
be issued to him or her under such Nonqualified Stock Options. Such Shares
shall be valued at their Fair Market Value on the date when taxes otherwise
would be withheld in cash. The payment of withholding taxes by surrendering
Shares to the Corporation, if permitted by the Committee, shall be subject to
such restrictions as the Committee may impose, including any restrictions
required by rules of the Securities and Exchange Commission.
21. EXECUTION.
To record the adoption of the Plan effective as of December 7, 1995,
the Corporation has caused its authorized officer to execute the same this
______ day of _______________, 1995.
POTLATCH CORPORATION
By
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